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Column

Dry and Wet Leasing

can Propel Global

Aviation Sector to

New Heights

midst spirited competition in the aviation sector, air-
lines have an opportunity to flourish by streamlining
debt settlements, bolstering cash reserves, and culti-
A vating financial agility through aircraft leasing which is
a practical solution for sustainable growth. By adopting leasing, Jaideep Mirchandani,
they unlock the potential for dynamic fleet expansion without the Group Chairman of Sky One FZE
being overwhelmed by financial burdens. Numerous airlines have
already reaped the benefits of this strategy, solidifying the case
for its effectiveness in achieving essential objectives.
from manufacturers through diverse financing
Airlines can efficiently manage their fleet and save costs by options, including credit. As regular payments
adopting aircraft leasing. This approach involves a straight- are made, the aircraft becomes the property
forward contract between the lessor (the one providing the of the airline. Meanwhile, in the world of air-
airplane) and the lessee (the airline leasing and using the aircraft). craft leasing, a lessor agrees to provide the
Essentially, the lessor offers the airplane for a defined period airplane to the lessee, which in this context
while receiving regular rental payments in exchange. The aircraft is the airline, for a predetermined period. The
leasing market in fact is projected to experience substantial airline pays a fixed amount, either monthly
growth, as reported by analytical firm, The Business Research or annually, to operate the jet under its own
Company, with an estimated increase from US$162.50 billion livery until the lease term expires.
in 2022 to US$178.31 billion in 2023. The market’s compound
annual growth rate (CAGR) stands at an impressive 9.7 percent. The leasing approach provides significant
financial benefits to airliners, granting them
The future growth will be driven by surging demand for air travel. great flexibility in managing expenses related
Recent data from International Air Transport Association (IATA) to the purchase of aircraft, which typically form
reveals promising trends in the airline industry’s financial outlook. a major part of their overall costs. Another
Net profits are projected to soar to US$9.8 billion in 2023, sur- advantage lies in its time-saving aspect. While
passing the previous forecast of US$4.7 billion made in December the process of manufacturing and delivering
2022. Anticipated total revenues are expected to experience jets can be laborious, leasing allows airliners
robust 9.7 percent year-over-year growth, reaching US$803 bil- to swiftly adapt to market trends and pursue
lion. Notably, this marks the first time since 2019 that industry sudden expansions. Nonetheless, the decision
revenues are set to exceed the US$800 billion milestone (2019: between ownership and leasing depends on
US$838 billion), indicating a strong recovery from the impacts various factors such as market trends, service
of the COVID-19 pandemic. frequency, company size, capacity, and the
country of operation.

Leasing vs Ownership: There are two types of leasing arrangements
Before exploring the potential of leasing, it is essential to exam- in aviation: wet leasing and dry leasing, each
ine the distinctions between aircraft leasing and ownership. carrying distinct characteristics and serving
Airlines attain ownership of aircraft by purchasing them directly specific purposes.

ASIAN AIRLINES & AEROSPACE JULY - SEPTEMBER 2023 | 29