Discover more about how business aircraft short-term leases work, and who they suit the best. Gerrard Cowan shares insights from the industry’s top experts.
Short-term aircraft leases can be a good option for aircraft owners in a range of scenarios. But how can you ensure it’s the right move for your needs, and what are the important questions to ask?
There is no uniform definition of a short-term lease, according to Forrest Owens, Founder of Aviation Legal Counsel and a board member at the Global Licensed Aircraft Dealer Association (GLADA). However, he usually considers a lease to be ‘short-term’ when the timescale involved is around a year or less in duration.
If operated under Part 91 regulations, they should be ‘dry’ leases, he notes, meaning only the aircraft is provided, with the lessee responsible for providing the fuel, crew, and so on. The lessee must assume ‘operational control’ of the aircraft, with short-term leases for large aircraft subject to ‘Truth in Leasing’ requirements.
In the US, a permitted 'wet lease' - in which the lessor also provides crew etc - is a charter arrangement under FAR Part 135.1 According to Owens, short-term leases can be motivated by a range of factors, including seasonal travel needs, enabling increased travel during peak business seasons or events without the capital commitment necessary for aircraft ownership.
The arrangement could also provide flexibility for short-term projects, perhaps for businesses expanding into new regions or markets.
There could be a range of financial motivations, Owens adds. For instance, leasing costs can be categorized as operational expenses, which may offer tax advantages compared to owning an aircraft. While depreciation is often a motive for aircraft ownership, not all taxpayers can take full advantage, he notes.
Leasing could also help with balance sheet optimization, keeping the aircraft off the balance sheet and improving financial ratios like debt-to-equity.
“During the financial crisis of 2008 and for a few years thereafter, it was routine for companies to seek to shift aircraft off their balance sheets so that their company would not ‘own’ an aircraft,” Owens notes. “However, the C-suite executives still wanted the advantages which private aircraft provide.”
More broadly, the approach can help operators avoid a long-term financial commitment. Short-term leases are less financially constraining, allowing owners/operators to avoid large capital outlays or extended lease obligations.
“I have had numerous clients pursue a short-term lease arrangement for an aircraft for a discrete period or project,” Owens says, adding that for others, a short-term lease might offer the ability to ‘try before you buy’.
“Aircraft operators/lessees lease to evaluate the suitability of a specific aircraft model or configuration before committing to a purchase.”
This article was originally published by AvBuyer on January 20, 2025.