Operating Leases

Operating Leases range in term from 3-8 years and the aircraft are usually returned to the lessor at lease expiration. Individually tailored to the customer’s needs, operating leases provide airlines the flexibility to introduce new aircraft types into their fleet and immediately increase or reduce capacity as needed. Such leases also afford customers the opportunity of fully financing the aircraft without having to provide the initial capital required in a purchase. These are crucial advantages in today’s rapidly changing aviation market, which is driven by a surplus of aircraft, up and down cycles, new aircraft types and passengers who are increasingly conscious of product quality and on board comfort.

An additional benefit to choosing an operating lease is the off-balance-sheet accounting treatment. Due to the fact that the lessor assumes the residual value risk of the aircraft at return, the airlines may concentrate on new investments, fleet planning and future markets.

Finance Leases

Finance leases range in term from 8-12 years. The residual value control remains to some degree with the airline lessee, usually through the use of a fixed price purchase option. While an aircraft under an operating lease is generally returned to the lessor, the finance lease is structured such that the title of the aircraft passes to the airline following lease maturity.

Thus, the airlines are essentially viewed as having acquired the equipment, and the leasehold asset and liability are recorded on the airline lessee’s balance sheet. Airlines may take additional advantage of the tax benefits, e.g. depreciation of the interest component of the periodic lease rental payments and the aircraft asset itself.

Sale-Leaseback

A sale-leaseback provides you with a cash infusion and helps improve your balance sheet.