What Is a Dry Lease Agreement

„The parties intend this agreement to constitute a `dry` operating lease. Upon each use by the Renter, the Renter has ownership, command and operational control of the aircraft, flight crew and maintenance; provided that, during any reserved use of the aircraft by the Lessor or any other Lessee, the Lessor or another Lessee, as the case may be, has the management and operational control of the Aircraft. „Operational Control“ means, in accordance with 14 C.F.R. § 1.1 and the FAA Guidelines, the exercise of authority over the initiation, operation or termination of a flight. The lessee shall exercise full control over the operational phases of the aircraft which require aviation knowledge for all flights under this Agreement. Landlords and tenants can be wet-lease partners. You can sign an agreement in which the lessor delivers aircraft to tenants on a wet-lease basis. In addition, a rental company may lease the same aircraft to multiple wet-lease partners who share the same aircraft. A dry lease for private aircraft is subject to fewer operating restrictions and is governed by Part 91 of 14 C.F.R. In the case of dry leasing, an aircraft owner or lessor leases an aircraft to an unmanned lessee or operator. Neither the landlord nor the tenant must be in possession of a charter certificate.

In a dry lease situation, the tenant provides its own crew and exercises operational control over its flights. The lessee can operate the aircraft without meeting many of the most restrictive and costly requirements that apply to charter service. In addition, federal excise duty is generally not payable on lease payments from the tenant to the landlord (although sales tax is often levied on these payments), which is another advantage over charter service. For these and other reasons, we often find customers who want dry rental contracts. If the provisions of the Truth in Lease Act of Section 14 C.F.R. § 91.23 apply to the lease, the lease must include a truth clause in the lease, be sent to the FAA within 24 hours of its execution, and be carried on board the leased aircraft at any time. The parties must take the utmost care to verify and comply with the Truth in Leasing Act and any other provisions applicable to aircraft dry leases. Leasing transfers ownership of the aircraft without transferring ownership. A dry lease provides an aircraft, but the rental company does not provide a crew. (A lease that includes the crew is called a „crewed lease“ and requires a commercial certificate from the FAA – unless expressly approved under FAR 91 501 or FAR 91 321.) While these distinctions may seem simple, the meaning of „who has operational control,“ as defined in 14 CFR 1.1, leaves room for interpretation. As the FAA explains, „Determining in any situation whether the landlord or tenant exercises operational control requires consideration of all relevant factors present in each situation.

The terms of the lease itself are important, but as they may not reflect the true situation of 2/10/16 AC 91-37B 4, actual agreements and responsibilities need to be looked at very carefully. Read on to learn more about wet leasing versus dry leasing and how we offer aircraft financing solutions. If you already have a ground crew or can hire one inexpensively, you may prefer a crewed lease. It differs from a wet lease only in that you have to provide the ground staff. Wet leases are more popular in Europe. Before subletting a leased aircraft to a third party, the lessee needs the permission of the principal owner. In the case of several tenants, the insurance and tax consequences must be carefully coordinated. The choice between wet rental and dry rental depends on your needs. In a dry lease agreement, the owner of the aircraft makes the aircraft available to the unmanned lessee. Neither the landlord nor the tenant needs to be in possession of an air carrier licence, although an air carrier may be a landlord or tenant under a dry lease. In general, dry leases last two years or more.

Of course, each contract is individual and can set periods of less than two years. Longer periods for dry leases make sense for tenants who have the necessary infrastructure. It is important to understand the difference between wet leases and dry leases, as each situation has distinct obligations and regulatory requirements. Failure to comply with the legal requirements applicable to the chosen rental structure can cause problems for both the landlord and the tenant. With dry leases, legal ownership remains in the hands of the lessor, while the lessee operates the aircraft with his own crew. Also in dry leases, the tenant is responsible for the ground staff and other workers. In addition, the lessee must register the aircraft on its own Air Operator Certificate. Typically, a dry lease lasts two years or more.

Since the renter provides the crew, he has full control over the flight experience. Understanding the differences between dry leases, wet leases, and sale-leaseback agreements isn`t just about choosing the option that best suits your business needs. Each lease agreement comes with its own regulatory requirements and obligations. Since the Federal Aviation Administration (FAA) takes a close look at each agreement, it`s important to consider all aspects of a lease agreement before proceeding. If you want to have minimal operational responsibility for the aircraft, you want a wet lease. You are only responsible for fuel, airport fees, taxes and duties. The rental company pays for almost all other costs, including the aircraft, crews, insurance and maintenance. Of course, a wet lease requires higher monthly payments to reimburse the landlord for their costs. With a wet lease, the landlord controls the passenger experience.

Therefore, the tenant must meet certain truth requirements in the lease. It must send a copy of the dry lease of a large aircraft to the FAA Aircraft Registry within 24 hours. In addition, the tenant must notify their district office of the flight standards prior to commissioning. There are many situations in which an operator wishes to make his aircraft available to a third party. As a rule, this can be achieved via a non-exclusive dry rental contract. In order to avoid an illegal „fake dry lease“ between the parties, it is important that the lessor does not provide or even arrange pilots for the use of the aircraft by a lessee. The FAA has determined that if the lessor (or affiliate) employs the pilots hired by the tenant, it is in fact a wet lease. Renting an airplane is an alternative to buying an airplane. According to the current outlook for Boeing`s aircraft financing market, leasing accounts for 40% of commercial aviation operations. When you rent an aircraft, you have the right to use the aircraft for a certain period of time. They make monthly lease payments that you can spend immediately.

At the end of the lease, return the aircraft to its owner, the lessor. You can also buy the aircraft after the lease expires. As the aircraft leasing market continues to mature, innovative models connect customers with tailor-made solutions tailored to their business needs. But when you think of aircraft leasing, it`s important to start with the three predominant models: wet leasing, dry leasing and leasebacks. The renter is responsible for fuel, airport fees, taxes and duties. Typically, you`ll see crewed leases during peak months, heavy maintenance schedules, or when new routes are introduced. Wet leases can allow you to fly to countries where you are prohibited from operating. You can also complete the service if your capacity decreases. When reviewing a lease agreement, the FAA will look beyond actual written agreements to determine the relationship between the parties. .