Wet-lease vs. Dry-lease Aircraft

If you are an avid traveler, you have likely flown on a wet-leased aircraft. This is because some commercial airlines are wet-leasing aircraft for some of their flights. But, what does that mean?

Wet Lease Aircraft

Leasing is a widespread term when acquiring a vehicle. When leasing a car, you get everything except for a driver and the fuel required for the time you use it. Now, if you were to wet-lease the same car, you would be getting something more like an executive transportation service. Depending on the leasing company, the wet-lease would also include a driver, the fuel, and maybe other commodities.

So, how does this look like in the aviation industry?

What is wet lease in aviation?

According to the Federal Aviation Administration (FAA), a wet lease in aviation is “any leasing arrangement whereby a person agrees to provide an entire aircraft and at least one crew member.” Also, the leased aircraft will be covered by the leasing company with maintenance service and insurance. The airlines that wet-lease aircraft only have to worry about fuel and airport fees.

Whether it is a private jet charter or an airline, the primary purpose of fly services is to move passengers from one point to their destination. However, being an aircraft owner is not always the best option for some air travel companies. Buying a new aircraft can put a lot of pressure on both the finances and the operations of an air carrier.

What are the main difficulties of buying an aircraft?

Some of the most significant difficulties of an aircraft purchase include, but are not limited to:

• High capital expenditure (CapEx).
• Long waiting time. Manufacturers such as Airbus and Boeing usually have backlogs that go upwards of two years.
• Time and effort to find the cabin crew.
• Increased costs, especially coming from the maintenance of the aircraft.

Therefore, to avoid the issues described in the list above, it is familiar to wet-lease instead of buying. When wet leasing, the CapEx is reduced since the lessee is not actually buying the aircraft. This also results in the lessee aircraft capacity being increased on an almost immediate basis since the lessor usually can provide the aircraft at short notice depending on the aircraft type required.

Other aspects make wet-leasing important. Let’s take a closer look at them.

Wet Leasing: Why is it important?

Wet leasing is essential for the air travel industry. Big carriers such as United Airlines in the United States and Qatar Airways in the Middle East may have smooth operations even in peak traffic seasons. Still, other airlines may need wet leases to ensure smooth operations during these times. And even big carriers may need leasing in more specific situations.

There may be political circumstances that prevent a particular air carrier from operating flights to a specific destination. For example, in 2017 – Bahrain, Egypt, Saudi Arabia, and the UAE cut ties with Qatar for political reasons, making it impossible for Qatar Airways to fly to those countries. Another example is Israel not allowing EgyptAir to fly to their territory. Here, wet leasing is a solution, so Air Sinai wet-leased EgyptAir flights to cover that route.

Also, wet leasing is essential for governments and airlines in case of unexpected events or testing new routes. The air carrier may operate with aircraft leasing to avoid losing flight operations due to fleet grounding, which usually happens because of safety reasons or when unplanned maintenance is needed. This happened to Norwegian, an airline that saw a whole 787 Dreamliner fleet grounded and decided to wet lease as a solution to cover that unavailable capacity.

In short, the importance of wet-lease aircraft can be summarized by pointing out the main advantages.

Main advantages of wet lease

While you may have noticed some of them, here’s a shortlist of the main advantages of wet-lease aircraft:

• CapeEx reduction
• Additional capacity for the lessee almost immediately.
• Eliminating direct operating costs that are usually the responsibility of the lessor, depending on the leasing arrangements.
• No need for the lessee to recruit its own crew.
• Flexibility to match demand during peak traffic seasons.
• Reaching geographical location that may be restricted.

Of course, there are other ways for leasing companies to do business. One of them is dry leasing. Let’s dig deeper into the details of this alternative for aircraft lessors and the lessee.

Dry Lease

A dry lease is similar to a wet lease because there is no actual purchase. In a typical dry lease, the lessor provides the aircraft for the lessee to carry out the flight operation. So, what is the difference, you may wonder.

What is a wet lease vs dry lease?

The main difference between wet and dry leases lies in the operational control of the flight. While the lessor maintains operational management in a wet lease, in a dry lease arrangement, the lessee has complete control of the flight. This also means the lessor does not provide a flight crew and has no responsibility on other duties such as maintenance and insurance procurement as it happens in a wet-lease.

Given those differences, a dry lease is usually a better option for big airlines that already have their own crew and ground staff to operate the flight and ensure proper servicing. This said, although not as obvious as it may be with wet-leasing, there are numerous reasons for airlines to opt for dry leasing.

Main advantages of dry leasing

These are the main advantages of dry leasing:

• Air carrier certificate is not a requirement for neither the lessor nor the lessee although the FAA may deem a dry lease as a wet lease in disguise and require the certificate.
• The lessee has full control over the customer experience by putting it in the hands of its own crew and ensuring that crew is well trained
• The aircraft is available almost immediately.

The global wet lease market

This is a market that has grown rapidly in recent years. And with the pandemic, many airlines saw their aircraft fleets and crew grounded for a very long time, making this business even more attractive.

In other words, any air lease corporation would want to have its market share, and we could see more aircraft providers rising to the occasion in the near future.