How do you manage the liability risks of operating a wet lease vs a dry lease?

Definition: In a wet lease, the lessor provides the aircraft, crew, maintenance, and insurance. Essentially, the lessor is responsible for almost all operational aspects of the aircraft. Liability Risks: Operational Control: Since the lessor maintains operational control, they bear a significant portion of the liability for incidents or accidents. Insurance Coverage: The lessor typically provides insurance, including hull insurance and third-party liability insurance. This ensures that in the event of an accident, the lessor’s insurance will cover the damages. Crew Liability: The crew provided by the lessor means any errors or negligence on their part fall under the lessor’s liability.

Propose hiring third-party technical monitoring services to oversee the lessee’s compliance with operational and maintenance standards throughout the dry lease. In a project involving the lease of multiple aircraft to an emerging carrier, we engaged a third-party firm to conduct independent inspections and monitor the aircraft’s condition. These inspections revealed issues with wear and tear that the lessee had not reported, prompting immediate corrective action. Third-party oversight provides an unbiased evaluation of the aircraft’s condition, ensuring that any risks to airworthiness or liability are addressed in a timely manner.

Definition: In a dry lease, the lessor provides only the aircraft, without crew, maintenance, or insurance. The lessee is responsible for operating the aircraft. Liability Risks: Operational Control: The lessee has operational control and, therefore, assumes most of the liability for the operation of the aircraft. Insurance Coverage: The lessee must obtain their own insurance, including hull and liability coverage. This shifts the responsibility for any damages or liability to the lessee. Crew and Maintenance: The lessee is responsible for providing the crew and maintenance. Any incidents resulting from these aspects fall under the lessee’s liability.

Liability Risks: Operational Control: The lessee has operational control and, therefore, assumes most of the liability for the operation of the aircraft. Insurance Coverage: The lessee must obtain their own insurance, including hull and liability coverage. This shifts the responsibility for any damages or liability to the lessee. Crew and Maintenance: The lessee is responsible for providing the crew and maintenance. Any incidents resulting from these aspects fall under the lessee’s liability.

Clear Contractual Terms: Clearly outline the responsibilities and liabilities of each party in the lease agreement. This includes specifying who is responsible for insurance, maintenance, and operational control. Insurance: Ensure adequate insurance coverage is in place. For wet leases, the lessor should have comprehensive insurance that covers the aircraft, crew, and third-party liabilities. For dry leases, the lessee should secure similar coverage. Training and Compliance: Regularly train and ensure compliance with aviation regulations and safety standards. This is crucial for minimizing operational risks.

Regulatory Compliance: Both parties must ensure compliance with local and international aviation regulations. Risk Assessment: Conduct thorough risk assessments before entering into a lease agreement to understand potential liabilities and take appropriate measures. Continuous Monitoring: Continuously monitor the operations and performance under the lease agreement to identify and mitigate any emerging risks promptly.

Compliance with aviation regulations is essential in both wet and dry leasing to prevent legal penalties or operational bans. Wet leasing demands lessor adherence & dry leasing places compliance on the lessee. While reviewing a wet lease for an international airline, I verified that the lessor adhered to global regulatory standards, ensuring uninterrupted international operations. In a dry lease with a regional airline, I guided the lessee through aviation regulatory frameworks Clearly defining ground operations and handling responsibilities minimises confusion, preventing legal disputes in case of damage or incidents. Wet leases generally include ground services from the lessor, whereas dry leases may require separate handling agreements.