Aircraft Leasing

Which aircraft leasing option is best? The answer, of course, is that every situation is different, and depends completely on the facts associated with your particular situation and needs. A good place to start is a thorough understanding of the subject at hand. This article will discuss the important points to consider when evaluating your aircraft needs. The costs and benefits of several different types of aircraft lease options will be discussed. The leasing or purchasing of aircraft is a very complex matter, and while this short article will not cover every tiny detail involved in such a decision, this discussion should lead to a better understanding of varying options available on the market today.

In most cases the leaser provides the plane, one or more flight crews’ salaries, maintenance, and insurance coverage on the hull and third party liability. Usually you (the lessee) are charged a set amount for each “block hour”. A block hour is defined as each hour that passes between the times the chocks come off the planes landing gear wheels to the time when the chocks go back on the plane’s landing gear wheels. There will be a set minimum number of block hours per month guaranteed. The guaranteed amount will be charged even if the plane is not used. Fuel, Landing, handling, parking, and storage are all paid by the lessee. HOTAC, crew expenses including meals, transportation, visa fees are also paid by the lessee. Lessee is also responsible for import duties, and local taxes where applicable on cargo. Insurance coverage on passengers, luggage, cargo, and in some cases “risk of war” insurance is all paid for by the lessee

The operating lease is one popular type of commercial aircraft leasing options offered today. Expenses can be deducted, because it is a lease in the traditional sense. There is a much shorter term obligation associated with an operating lease verses a finance lease or an off balance sheet loan. Depreciation benefits do not apply with an operating lease, because the lessee does not have ownership in the aircraft.

A capital finance lease allows the lessee to claim depreciation, because it has a purchase option at the end of the lease term. Interest payments can be deducted, but you cannot expense the full amount of the payments. The transaction is usually treated as a loan for accounting purposes.

The off balance sheet loan is somewhat like a hybrid of the previous two corporate aircraft leasing options discussed earlier. With an off balance sheet loan, depreciation can be deducted as if the lessee had ownership of the aircraft. It is treated as a lease for accounting purposes. All of the acquisition costs can be financed. There is an option to buy at the end of the lease term. Even if it is carefully structured, some accounts will not like this as a method to keep debt off the balance sheet.

There may be other options on today’s market, but the ones discussed above are the most popular types. Every company must consider all the facts of their own situation in order to make aircraft leasing decisions. After weighing the advantages and disadvantages of all the options available, you and your company will be flying high soon knowing that you made the right choice.