Wet Lease Agreement Meaning
Sometimes aircraft owners will pay the price of their aircraft in order to maximize the use of the aircraft and recover some of their costs. Unfortunately, aircraft owners and operators are often confused by the difference between “wet” and “dry” leasing. Here`s a hint: it`s not about fuel. In general, the aircraft can be used in the very short term, sometimes even three hours, to meet short- to medium-term transportation needs. This means that it is mainly wet leasing aircraft that are leased by airlines and governments. As we have seen at Norwegian, several wet leasing aircraft were hired to cover their fleet capacity when their 787 Dreamliner fleet was grounded. A wet lease is an agreement under which the lessor agrees to make one or more cabin crew members available to the taker. In addition, as part of this agreement, the leaser is also responsible for the greater maintenance of the aircraft and the assurance that may be required to operate the equipment. Leasing: can also be called capital leasing and is based on one of the following conditions that are met. Understanding the differences between dry rental, wet leasing and back leases is more than just choosing the option most suited to your business needs. Each lease has its own regulatory requirements and obligations. Since the Federal Aviation Administration (FAA) carefully reviews each agreement, it is important to consider all aspects of a lease before moving forward.
As part of the lease, the aircraft is considered an asset and therefore appears in the taker`s balance sheet. The obvious positive of a wet leasing must be much less worrying. The leasing company has a crew, AOC and everything necessary to start the flight almost immediately. The flight is carried out under the flight numbers of the customer airline and charged by the passenger rental company in loading hours, unlike airfares for passengers. One of the key issues that distinguishes a dry water lease is “who has operational control” in the sense of 14 CFR 1.1. In a “wet” leasing situation, the owner retains operational control of all flights, as the leaseholder provides both aircraft and crews. In a “dry” rental situation, the tenant makes his own crew available and the tenant exercises operational control of his flights. A dry lease taker may operate under 14 CFR Part 91 and is not required to meet many of the more restrictive and costly requirements of Parts 121 or 135. And the state excise duty is not payable on the sums the lesseer pays to the lessor, although VAT is often levied on the leasing rate. These benefits are considerable for private operators. However, they must also be weighed against the responsibilities and potential responsibilities that accompany the operational control of a 14 CFR Part 91 dry rental business.
Airlines that cannot afford to do good business with direct factory aircraft or airlines that wish to maintain flexibility can lease their aircraft using a lease or financing lease. They may also be considered chartered by the lessor who provides minimum operating services, including the ACMI, and where the lessor provides the service report as well as the flight numbers.