Understanding Aircraft Leasing Terms: Dry Lease, Wet Lease, Damp Lease and Aircraft Acquisition Process.

Introduction

The aviation industry is a complex web of regulations, operations, and financial transactions. Aircraft leasing is a crucial aspect of this industry, allowing airlines to access aircraft without the upfront capital expenditure of buying them. In this article, we will delve into three common types of aircraft leasing terms: Dry Lease, Wet Lease, and Damp Lease. Additionally, we will explore the process by which operators inquire about leasing aircraft, the typical documents submitted to lessors, and the financial transactions managed via escrow.

Understanding Aircraft Leasing Terms

Dry Lease:

A Dry Lease is an agreement where an aircraft is leased without any accompanying crew, maintenance, or insurance. In essence, the lessee (the operator) acquires the "bare" aircraft and is responsible for all operational aspects. This type of lease offers greater flexibility and control to the lessee.

Wet Lease:

A Wet Lease involves not only the aircraft but also the crew, maintenance, and insurance. The lessor (the owner of the aircraft) provides a complete package, making it a turnkey solution for the lessee. Wet leases are often used for short-term needs or to fill gaps in an airline's capacity.

Damp Lease:

Damp Leases fall between Dry and Wet Leases. In a Damp Lease, the lessor provides the aircraft and maintenance and but not the crew and insurance. This type of lease is less common but can offer cost savings compared to a Wet Lease. On some cases on a Damp lease operations the lessor will provide the limited crew to be integrated with lessee crew for operations however this is deemed on the negotiation deal.

The Process of Inquiring About Aircraft Leasing

Operators typically follow a structured process when inquiring about leasing an aircraft:

1. Define Requirements:

The operator identifies its specific needs, including the type and size of aircraft, lease duration, and any additional services required (crew, maintenance, etc.).

2. Market Research:

The operator conducts market research to identify potential lessors. This can involve reaching out to leasing companies or utilizing online platforms that specialize in aircraft leasing listings.

3. Submitting an Inquiry:

Once potential lessors are identified, the operator submits an inquiry, detailing its requirements. This inquiry may include information about the operator's financial stability, operations, and any existing fleet.

4. Negotiation:

Both parties engage in negotiations to determine lease terms, including the lease rate, lease duration, and any additional services provided.

Documents Typically Submitted to Lessors

When pursuing an aircraft lease, operators commonly provide the following documents to lessors:

1. Financial Statements:

Proof of the operator's financial stability and ability to meet lease payments.

2. Operator Certificate:

Documentation confirming the operator's legal status and compliance with aviation regulations.

3. Business Plan:

An outline of the operator's business strategy and how the leased aircraft fits into its operations.

4. Insurance Coverage:

Evidence of the operator's insurance coverage, especially in the case of Dry or Damp Leases where the lessee is responsible for insurance.

Financial Transactions via Escrow

Escrow accounts play a crucial role in aircraft leasing transactions. The process typically involves these steps:

1. Agreement:

Once lease terms are agreed upon, an escrow agreement is established, specifying the conditions under which funds will be released.

2. Escrow Agent:

An independent escrow agent is chosen to hold the funds on behalf of both parties. This ensures neutrality and fairness.

3. Funding:

The lessee deposits the agreed-upon funds into the escrow account. These funds are usually sufficient to cover lease payments and any other agreed-upon expenses.

4. Release of Funds:

Funds are released from the escrow account to the lessor according to the terms of the agreement. This may include periodic lease payments, security deposits, or other financial obligations.

5.Aircraft Delivery:

Once the lessor provides the aircraft and all necessary documents, the escrow agent releases the funds to the lessor. This ensures that the operator's financial interests are protected until all terms are met.

General Summary

In a general summary , aircraft leasing is a multifaceted process with various options and considerations. Whether it's a Dry Lease, Wet Lease, or Damp Lease, operators and lessors navigate this industry with careful planning, documentation, and financial management, often relying on escrow services to facilitate smooth?transactions.

Reference Resources

To further explore aircraft leasing and related topics, refer to the following resources:

1. Aviation Lease & Finance Company (ALAFCO): https://www.alafco-kw.com/

2. International Society of Transport Aircraft Trading (ISTAT): https://www.istat.org/

3. Federal Aviation Administration (FAA) - Aircraft Leasing: https://www.faa.gov/aircraft/air_cert/aircraft_certification/aircraft_lease/