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Aircraft leases are used by and other aircraft operators. Airlines lease aircraft from other airlines or leasing companies for two main reasons: to operate aircraft without the financial burden of buying them, as well as to provide temporary increase in capacity. The industry has two main leasing types: wet-leasing, which is normally used for short-term leasing, and dry-leasing which is more normal for longer-term leases. The industry also uses combinations of wet and dry. For example, when the aircraft is wet-leased to establish new services, then as the airline's flight or cabin crews become trained, they can be switched to a dry lease. In some markets, there may also be hybrid models, such as with crew provided by lessees.
Having an aggressive growth mandate, more aggressive, smaller entrants have overpaid for many of their assets in the sale and leaseback market and are then undercharged on lease rates in order to win the business, with lower maintenance reserves and return conditions: lease-rate factors have fallen to 0.6% per month (% per year), even reaching 0.55% (% per year).
Despite Air Berlin and Monarch Airlines bankruptcies, their leased aircraft have been rapidly placed at "normal market rates" due to traffic growth as global revenue passenger kilometers are up by 7.7% over one year through September 2017, and Airbus struggles to deliver A320neos due to engine supply delays.
In 2007, Beijing allowed Chinese banks to start leasing units, and nine Chinese lessors were part of the 50 largest in 2017, led by ICBC leasing in the top ten, having the value of their managed fleet grew by 15% since 2016. In a few cases, Chinese lessors forgot they had to get secondary leases and missed the redelivery timing, stranding aircraft for a few months.
Rentals are often anchored to LIBOR rates. A320neo and B737 MAX 8 lease rates are $20-30,000 higher than their predecessors: by 2018, a B737-8 can be leased for slightly more than $385,000 per month and a 12 year term with a good credit can be lower than $370,000 per month for an A320neo (0.74% of its around $49 million capital cost), generating $53 million of revenue and over $8.5 million in an end of lease compensation for maintenance, while still being worth $20 million.
Airlines which cannot afford a good deal on factory direct aircraft or carriers who prefer to maintain flexibility can lease their aircraft with an operating lease or a finance lease.
They can also be considered a form of charter whereby the lessor provides minimum operating services, including ACMI, and the lessee provides the balance of services along with flight numbers. In all other forms of charter, the lessor provides the flight numbers. Variations of a wet lease include a code share arrangement, a block seat agreement, and a capacity purchase agreement.
Wet leases are occasionally used for political reasons. For instance, EgyptAir, an Egyptian government enterprise, for many years was not allowed to fly to Israel under its own name, as a matter of government policy. Hence Egyptian civilian flights from Cairo to Tel Aviv, required to exist under the terms of the Egypt–Israel peace treaty of 1979, were operated by Air Sinai, which wet-leased from EgyptAir to circumvent the political issue. In 2021, Egypt changed its policy and EgyptAir started operating flights to Israel under its own banner.
The global wet lease market is projected to grow from US$7.35 billion in 2019 to US$10.9 billion in 2029, a compound annual growth rate (CAGR) of 4.1%.
A dry-lease arrangement can also be made between a major airline and a regional airline, in which the major airline provides the aircraft and the regional operator provides flight crews, maintenance and other operational aspects of the aircraft, which then may be operated under the major airline's name or some similar name. A dry lease saves the major airline the expense of training personnel to fly and maintain the aircraft, along with other considerations (such as staggered union contracts, regional airport staffing, etc.). FedEx Express uses an arrangement of this type for its feeder operations, contracting to companies such as Empire Airlines, Mountain Air Cargo, Swiftair, and others to operate its single and twin-engined turbo-prop "feeder" aircraft in the US. DHL Aviation has a joint venture in the United States with Polar Air Cargo, a subsidiary of Atlas Air, to operate their domestic deliveries.
Aircraft financing is a $140 billion industry, dominated by Ireland due to the rise and collapse in 1992 of pioneer Guinness Peat Aviation (GPA), of which the former executives manage the largest lessors: Aengus Kelly is the CEO of AerCap, the world's largest, Domhnal Slattery heads the third largest, Avolon, and Peter Barrett runs the fourth, SMBC Aviation Capital while the second largest, GECAS, formed from the hulk of GPA.
| + 2017 Top 20 operating lessors by Fleet & Backlog, number of aircraft in 2015 |
| 305 |
| 168 |
| 44 |
| 8 |
| 36 |
| 20 |
| 54 |
| 9 |
| 29 |
| 53 |
| 12 |
| 32 |
| 59 |
| 3 |
| 11 |
| 4 |
| 14 |
| 18 |
| 13 |
| 11 |
Lessors have a preference for narrowbodies over widebodies due to more remarketing opportunities and the substantial reconfiguration time and cost a larger aircraft requires. Reconfiguring an Airbus A330-300 can cost $7 million and even more for a Boeing 777-300ER or an Airbus A380: introducing IFE - $1.5 million ($5,000 per seat), replacing business seats - $1.5 million ($30,000 each), replacing economy seats - $1 million ($5,000 each), a new lavatory or galley - $100,000, moving a monument - $35,000, class dividers - $50,000, passenger service units - $9,000 per passenger, sidewall panels - $6,000 each, updating the IFE database - $125,000, repainting the aircraft - $100,000, engineering costs - $100,000.
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