Airlines frequently lease-in aircraft when they don’t have sufficient capacity to operate all the services they would like to with their own aircraft. This might be very short-term, e.g. to operate one or two flights when aircraft are unserviceable or are delayed down route, or longer-term, e.g. to introduce new routes or to meet seasonal demand. EU regulations require such arrangements to be approved by the competent authority (e.g. the CAA) and place obligations and restrictions on how and when the competent authority can issue such approvals. The intention of these regulations is to ensure that EU airlines operate to EU safety standards, even when the aircraft they operate belong to someone else; also to provide some protection to EU operators against foreign (i.e. non-EU) competition.
Types of lease
When only an aircraft is leased, and the company receiving the aircraft provides crew, this is known as a dry lease. In this case, the lessee (receiving the aircraft) is the aircraft operator, and the aircraft operates under the lessee’s Air Operators Certificate (AOC). When the aircraft is leased with crew, this is known as a wet lease. The operator is the ‘lessor’ (providing the aircraft and crew), and the aircraft operates under the lessor’s Air Operators Certificate (AOC).
Before leasing an aircraft, a commercial air transport operator must provide their competent authority (e.g. the CAA) with all the details of the proposed lease (except the financial arrangements). The competent authority’s action depends on the type of lease proposed.
If a European operator proposes to wet lease-in an aircraft from a ‘third country operator’ (that is, an operator from a non-EASA State), then the lessee needs to demonstrate to the authority that the lessor will operate to EU safety standards. This means that the lessee needs to arrange for an audit of the lessor and provide the authority with the results of that audit. The authority will also verify that the lessor has a valid AOC and does not appear on the EU’s safety list (the list of airlines banned from operating in the EU).
Within Europe, if the wet lease is from another EASA state, then the regulations do not explicitly require the lessor to conduct an audit; nevertheless, the authority must issue an approval, so some authorities require operators to follow specific procedures.
The UK CAA requires operators to audit all potential lessors.
In the case of a dry lease-in, the aircraft will be operated under the lessee’s AOC; the operational standards will be the same as for any other EU operation. The priority for dry-leasing is to ensure that the aircraft meets the same airworthiness requirements as EU-registered aircraft and carries all necessary equipment. For dry lease-in and dry lease-out, the authority will need to ensure that it is clear which competent authority is responsible for the oversight of those airworthiness standards.
If an aircraft being leased-in is registered in a ‘third country’ (i.e. a non-EASA State), the authority will again check that the aircraft is not on the EU safety list. The lessee will need to demonstrate that the EU airworthiness standards will be applied and that the aircraft is fitted with the instruments and equipment required by EU operational rules. For a dry lease to be approved, the lessee will also need to demonstrate no suitable EU-registered aircraft were available. The lease can only be approved for a limited time (no more than seven months in any 12 months).
When searching for aircraft to lease in an airline will look for operators that have suitable aircraft available and then negotiate details such as the price. A broker may be involved. If a lease is agreed upon before an audit has been conducted, there will be problems if there are audit findings or the authority doesn’t issue approval.
An operator can develop a ‘white list’ of potential suppliers (lessors) to avoid these problems. Potential lessors are audited periodically and, provided they meet the required standards, enter into a ‘framework contract’ with the airline seeking capacity (lessee). The framework contract can be approved in advance by the authority leaving the lessee free to ‘shop around’ among the ‘white listed’ operators when a need for extra capacity arises.
If an operator needs to lease in capacity at short notice and does not have a ‘whitelist’, it may be difficult to arrange the necessary audits before the lease starts.
What's in it for the operator
All of this can seem like ‘red tape’, especially if you are an operator with an urgent need for extra capacity, but it all makes good business sense. You spend a lot of time and effort making sure that your aircraft and crew meet the standards that your customers expect. If you’re putting your customers on someone else’s aircraft, you will want to be satisfied that that aircraft and its crew will meet at least the same standard.
But who has the time?
If you need to lease in aircraft, it’s probably because you have a lot on. It can be challenging to find the extra time to follow a ‘white list’ process. You could end up missing out on valuable business opportunities.
We can help
If you need to develop a ‘white-list’ and be ready to make the best leasing deal when the need arises, then McKechnie Aviation can work with you to do this. We can develop a process in accordance with the regulations, any additional requirements imposed by your authority and your own business needs. We can conduct audits on your behalf and provide an objective, independent report. Based on this report, you might be able to show the authority that the potential lessor meets the necessary requirements, you might ask the lessor to correct some issues, or you might decide to walk away.
If you have a short-term need and don’t have a white list in place, we can usually arrange an audit at short notice.