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Finance

Finance

Finance

GPS Aviation Library

A collection of articles designed to provide aviation acquisition related material. The main topics covered are airline start-up, aircraft purchase, aircraft leasing, air charter & aircraft funding

The focus of these articles is primarily targeted at the commercial regional and airliner market, but many of these principles can be applied to all types of aircraft acquisition. These pages are intended to guide the aviation newcomer through the decision process of aircraft acquisition, such as entrepreneurs looking to start an airline or just the curious! Therefore the aviation professional, well schooled in all aspects of aircraft procurement, may well find these articles of limited value.

We have now published a series of articles including Airline Start-up, Aircraft Purchasing, Leasing, Air Charter & Aircraft Funding.

These articles will be reviewed, amended & added to periodically, we welcome any constructive criticism of these articles, and if you have any relevant material that you would like to submit for inclusion please feel free to do so. Please ensure that you are the owner of any such material or have permission to republish it. GPS reserves the right to alter any such material as it deems necessary.

Airline Start-up

 

So you are planning to start a new airline?

Boeing 767

Before we start let's take a look at why new airlines fail. There are obviously many reasons why an airline fails but the two main reasons, and perhaps the ones that you have the greatest influence over, at least at the start, are your airline management team and capitalisation. These two elements are essential ingredients to get right if your airline is to succeed, if either item is lacking your are destined to failure!

So now we've got over the gloom & doom, what do you need to get going on this exciting and rewarding adventure?

  1. an idea / dream / vision / niche market
  2. solid aviation business plan
  3. experienced management team
  4. more than adequate funding
  5. certification
  6. aircraft selection
  7. suppliers

The Idea

If you are reading this page we can assume you already have this. It will no doubt change and develop over time but it's your starting point and the reason you have made this undertaking.

Business Plan

Unless you have unlimited resources, this document will be the most important element of your start-up. No business plan or a poorly written one will result in no focus, no investment and no airline!

A well written and presented business plan will attract interest from potential investors, members of your management team and suppliers (Aircraft Lessors, CAA/FAA, Airports etc.).

Management Team

Depending on your current experience and situation, you will need to gather an experienced management team, some you will bring on board straight away, others will join along the way.

As you are reading this we will assume your airline management experience is limited, therefore, you will need to bring someone in who will have the necessary experience to take your airline from an idea to take-off. Also, any potential investor may well want to impose their own personnel on you in exchange for their cash!

Start-up Funding

Unless you have unlimited funds you will need to find investors, which is a challenging undertaking. This is particularly true in today's market, where investors view the airline industry as a long-term high risk venture.

Once your business plan is ready, you have a only a small window of opportunity to raise the initial investment, especially if your target market is seasonal and operations need to start by a certain date. Otherwise, it could be another season before you start and by then another airline may have filled your market!

Where to find the money? This can be raised through different sources, such as investment houses, banks, government & local grants and individuals (wealthy ones of course!). An Initial Public Offering (IPO) should not be considered by a start-up airline. Try to keep the number of investors to a small group. To find out more about financing an Airline Start-up, aircraft purchase or business plan development please review our Airline Financing page.

A.O.C. Certification

Aviation certification - Air Operator's Certificate (AOC) - primarily exists to ensure that the methods and procedures undertaken by all operators of commercial aircraft meet minimum safety standards, as defined by each government Aviation Authority (CAA or FAA etc.).

You will need to contact your countries regulatory body to see what is required for your airline. Most countries require that a minimum safety, financial and ownership rules are met and adhered to. Certification can take between 9-18 months to achieve, from initial application to receiving certification.

Aircraft Selection

A major step in your aircraft selection process is identifying the needs of your intended routes (airfield characteristics, ETOPS etc.). Issues such as capacity (passenger & cargo), utilisation and range are all factors in your selection. In addition, engine type may also play a role in your airframe selection.

Another issues to take into consideration is regulatory, such as noise, airframe age and let's face it... certain types are just not welcome anymore!

Suppliers

Another important group that you may need to target your business plan towards are your suppliers... aircraft lessors and airport authorities. For other services you may need a line of credit, such as fuel suppliers, FBO stations, maintenance facilities etc.

Aircraft Purchase

 

Lockheed L1011

Welcome to GPS's aircraft acquisition pages, containing the largest collection of aircraft for sale, freely available anywhere on the Internet. As part of our growing GPS Aviation Library, we try to provide you with in depth information and tools to enable you decide if purchasing is your right option or to locate an aircraft that you require, whether you are looking for passenger or freighter aircraft configurations, you'll find them all here.

The articles presented in this section of the library are primarily targeted at acquiring commercial regional aircraft and airliners, but many of these principles can be applied to all aircraft acquisitions and aircraft types. These pages are intended to guide the aviation newcomer through the decision process of aircraft acquisition, such as entrepreneurs looking to start an airline or just the curious! Therefore the aviation professional, well schooled in all aspects of aircraft procurement, may well find these articles of limited value.

  1. Purchase / Lease or Charter an Aircraft?
  2. So now you have decided to purchase an aircraft
  3. Where to buy an aircraft

The GPS Search Engine has the largest database of aircraft available for sale on the Internet... Aircraft for Sale Listings

Purchase, Lease or Charter an Aircraft?

 

Well that's a very complex and personal decision. Choosing the incorrect finance structure for your aircraft purchase can be as difficult and costly as choosing an incorrect aircraft. Many factors influence the decision process but basically these can be broken down into three main areas:

  1. Aircraft Usage
  2. Organizational Structure
  3. Financial Status
Boeing 767
 

Aircraft Usage...

Outright Purchase: If you have the funds this is the least restrictive type of acquisition, as an aircraft owner only requires a guarantee of payment and is not necessarily interested in your business plan, financial history or organizational structure of your airline.

Charter: As your initial thoughts are towards purchasing an aircraft, charter is probably not a financially viable option. The exception to this would be if you do not hold, or have access to, an Air Operators Certificate (AOC) then you could conduct your flights under a public charter (full), please refer to the Organizational Structure section below for further details.

Leasing: The main alternative to outright purchase is either a lease purchase or a dry lease.

As described in our Aircraft Leasing Definition page, lease agreements of less than two years are usually conducted under an ACMI/Wet Lease agreement, over two years then it is more financially beneficial to either enter a dry lease / purchase agreement or purchase the aircraft outright.

ACMI is mainly used for seasonal fluctuations in aircraft capacity, as well as start-up airlines that feel it more beneficial to operate under this type of lease agreement, initially anyway (less than two years). Again, this should be seen more as short term option.

Financial Lease: There are two types of dry lease... Operational & Financial lease, it is the Financial lease that can have a Purchase option.

  1. at the end of the lease term the Lessee has the option to purchase the aircraft at an agreed price.
  2. the lease payments are more than 90% of the market value of the aircraft.
  3. the term of the lease is over 75% of the aircraft's usable life.

With finance lease the aircraft appears on the Lessee's balance sheet, as it is viewed as a purchase.

Chattel Loan: This is a form of outright purchase where a loan is provided for the purchase so ownership of the aircraft is transferred to the purchasing company and the financier simply takes a mortgage over it. This type of arrangement is commonly used when seeking ownership of the unit at the end of the finance term as a residual or balloon payment is not required. Under a chattel loan the aircraft appears on the company balance sheet as titled to the aircraft has been transferred.

Organizational structure...

In order to operate an aircraft you will require the infrastructure to do so, this may be in the form of experienced personnel, maintenance facilities etc. Without these resources you will need to consider alternative forms of aircraft acquisition, such as ACMI lease or a full charter program.

If your organization does not have, or access to, or does not intend to obtain an AOC then you cannot commercial operate an aircraft. As previously mentioned, in this situation flights can only be operated under a public charter contract. A third party airline or aircraft operator would perform the flights under their AOC and be responsible for all aspects of the flight. Tour operators and small start-up airlines may well use this option rather than going through the certification process prior to start-up. See our Aircraft Charter page for further details.

Financial status...

Boeing 737

Your major decision whether to purchase or lease an aircraft is to evaluate the financial situation of your airline, including any tax benefits available with either option. This process should be undertaken by your external accountant or adviser as an incorrect finance structure may be very costly to your business.

As previously mentioned for an aircraft purchase, an owner is not interested in your business plan, financial history or organisational structure of your airline, only in guaranteeing the receipt of your payment. Obviously, if you have a poor payment/credit history then this will be an issue. Having reputable bank guarantees and or sufficient cash deposits in place should be all that you require.

Financier: One of the most important aspects of purchasing an aircraft is also choosing the right financier. There are literally dozens of international and domestic aircraft financiers that all have varying interest rates, approval policies and terms and conditions. It's best to use a financier that understands the industry and the use of the aircraft to avoid conflicts.

Most main stream lenders have very similar interest rates and fees though they have very different terms and conditions. Some lenders will allow an aircraft to travel internationally others will only allow travel to certain countries or only domestically. Others will consider new ventures or businesses whose aircraft purchase is considered as a non core operating asset and some will not. It's important that you deal with the right financier first time as having the loan or lease declined for any reason can have a detrimental effect on you attempting to secure finance elsewhere.

Conclusion:

Cost of outright aircraft purchase can be restrictive to an airline that plans to start-up or expand it's fleet, a lease purchase agreement allows the cost to be spread across several years. Ensuring the right finance product and provider is quite difficult unless you've been through the process many times, even then it helps to have external assistance. Whether you are purchasing an aircraft for your business or for yourself, consider using an experienced aircraft finance broker. The time and money they will save you is well worth it.

If after reviewing the information here you are undecided whether you should purchase, lease or charter an aircraft then please visit our Leasing Aircraft, Aircraft Charter or Aircraft Financing Aviation Library pages for more details on these options.

So Now You Have Decided to Purchase an Aircraft?

 

After reviewing your aircraft usage, organizational structure & financial status, along with consideration for aircraft leasing and air charter, you have concluded that purchasing is your best option.

So what's the next step... well you now need to consider what purchasing options are available and which one is right for you, Outright or Lease Purchase. Next we will briefly discus the main options of both Outright and Lease Purchase. Choosing the incorrect finance structure for your aircraft purchase can be as difficult and costly as choosing the wrong aircraft.

Boeing 767
 

Outright Purchase:

For many airlines, especially start-ups, the lack of capital can be restrictive in acquiring modern aircraft (A320, B787, B747-400, B737NG etc.). Outright purchase is mainly the domain of larger airlines, major leasing companies and smaller airlines looking for older aircraft types, such as B727, MD83, B747-200, B737-300 etc.)

Lease Purchase:

There are two types of dry lease... Financial & Operational lease. A financial lease can have a purchase option included, with a balloon payment at the end of the lease term. Ownership and title remain with the Lessor until all payments have been made. Most small or start-up airlines will take this route, unless ACMI or a full charter program is preferable.

Financial Lease Definition:

Also known as a capital lease, is defined when one of the following conditions are met:

  1. at the end of the lease term the Lessee has the option to purchase the aircraft at an agreed price.
  2. the lease payments are more than 90% of the market value of the aircraft.
  3. the term of the lease is over 75% of the aircraft's usable life.
Lockheed L1011

With a finance lease the aircraft appears on the Lessee's balance sheet, as it is viewed as a purchase.

Chattel Loan: This is a form of outright purchase where a loan is provided for the purchase so ownership of the aircraft is transferred to the purchasing company and the financier simply takes a mortgage over it. This type of arrangement is commonly used when seeking ownership of the unit at the end of the finance term as a residual or balloon payment is not required. Under a chattel loan the aircraft appears on the company balance sheet as titled to the aircraft has been transferred.

Aircraft Funding: To find out more on aircraft funding (purchase or lease) or airline financing please take a look at our Aircraft Funding page.

 

Where to Source an Aircraft to Purchase?

 

There are many places you can source an aircraft to purchase:

  1. airlines
  2. aircraft operators
  3. dealer/brokers

One obvious place that brings them all together is right here on the Internet, as you can view most of the offerings from these sources here. GPS is one such source, through our own aviation experience, advertised aircraft listings and a network of aviation specialists, we can provide the expertise you need to make the right choice when it comes to aircraft sourcing.

Lockheed L1011
 

GPS Aircraft Acquisition & Marketing Services...

Provides services to purchase all types of commercial aircraft, from regional turboprops to multi-engine airliners, whether you are looking to purchase an aircraft or you have one to market, GPS is your honest and reliable source for all your purchasing/selling needs.

Aircraft for Sale...

Do you have aircraft available for sale that require additional marketing; we always have airlines looking to acquire aircraft? You can simply advertise your aircraft through GlobalPlaneSearch.com, or contact us directly for further information.

Aircraft Funding...

If you require finance to fund your next aircraft purchase / operating lease or airline start-up then, as with any major financial decision, the choice to lease or finance an aircraft should be made with the help of your professional accounting adviser. Once you've decided on the best option for your business situation contact an experienced, competent aircraft finance broker that can assist you further.

Aircraft for Lease

Lockheed L1011

An aircraft provided by a lessor to a lessee for a fixed period of time. The lessee obtains exclusive utilization of the aircraft in return for paying the lessor an agreed monthly rate... Learn more, see (Aircraft Leasing Definition) below.

Welcome to GPS's aircraft leasing pages, containing the largest collection of aircraft for lease, freely available anywhere on the Internet. As part of our growing GPS Aviation Library, we try to provide you with in depth information and tools to enable you decide if leasing is your right option or to locate an aircraft that you require, whether you are looking for passenger or freighter aircraft configurations, you'll find them all here.

The articles presented in this section of the library are primarily targeted at leasing commercial regional aircraft and airliners, but many of these principles can be applied to all types of aircraft acquisition. These pages are intended to guide the aviation newcomer through the decision process of aircraft acquisition, such as entrepreneurs looking to start an airline or just the curious! Therefore the aviation professional, well schooled in all aspects of aircraft procurement, may well find these articles of limited value.

Topics within this guide include leasing options, Lessor requirements and comparisons with other acquisition types, such as ad-hoc and full charter programs, as well as purchase.

  1. Lease / or Purchase Aircraft?
  2. So now you have decided to lease an aircraft
  3. Where to source an aircraft on lease
  4. Leasing Definition

The GPS Search Engine has the largest database of aircraft available for lease on the Internet... Lease Aircraft Listings

Aircraft Leasing Definitions:

Aircraft leasing can be very confusing to the uninitiated and if you are unfamiliar with the different types of leasing options available (i.e. ACMI, Dry, Wet and even Damp Lease), please review our Aircraft Leasing Definition page for some helpful in depth information. For the purpose of these articles ACMI (Aircraft, Crew, Maintenance & Insurance) & Wet Lease are viewed as the same type of lease and from here on out will be referenced as ACMI.

Lease, Charter or Purchase an Aircraft?

 

Well that's a very complex and personal decision. Many factors influence the decision process but basically these can be broken down into three main areas:

  1. Aircraft Usage
  2. Organizational Structure
  3. Financial Status
Boeing 767
 

Aircraft Usage...

As this page is dedicated to aircraft leasing we will quickly remove the Charter element out of our equation, if the frequency of flights is infrequent and the number of hours per month low (i.e. 150hrs for a B737NG) then rent, charter or use the airlines (if for personal usage). The exception to this would be that if you don't hold, or have access to, an Air Operators Certificate (AOC) then you could conduct your flights under a public charter, please refer to the Organizational structure section below for further details.

Seasonal variations in aircraft capacity (such as summer vs. winter or holidays like Hajj etc.) can obviously cause issues, either not enough planes in summer or too many planes in winter! One way to overcome the shortfall in aircraft during the peak seasons is to utilize an ACMI lease agreement for the extra aircraft. If the airline has too many aircraft, either owned or dry leased, then they can offer their surplus aircraft in their low season to another airline that is in peak season.

Evaluating new routes via an ACMI lease allows an airline to test these routes over a short period of time as to whether it is viable or not. Part of the evaluation will be the sizing and economics of the aircraft, after the lease the aircraft can be returned to the lessor, lease extended/converted to dry, or an alternative aircraft can be acquired via other options.

As described in our Aircraft Leasing Definition page, lease agreements of less than two years are usually conducted under an ACMI agreement, over two years then it is more financially beneficial to either enter a dry lease agreement or purchase the aircraft.

Organizational structure...

If your organization does not have, or access to, or does not intend to obtain an AOC then you cannot lease an aircraft for a commercial operation. As previously mentioned, in this situation flights can only be operated under a public charter contract. A third party airline or aircraft operator would perform the flights under their AOC and be responsible for all aspects of the flight. Tour operators and small start-up airlines may well use this option rather than going through the certification process before start-up. See our Aircraft Charter page for further details.

Financial status...

Boeing 737

Aircraft leasing can be very confusing to the uninitiated and if you are unfamiliar with the different types of leasing options available (i.e. ACMI, Dry, Wet and even Damp Lease), please review our Aircraft Leasing Definition page for some helpful in depth information. For the purpose of these articles ACMI (Aircraft, Crew, Maintenance & Insurance) & Wet Lease are viewed as the same type of lease and from here on out will be referenced as ACMI.

A major decision an aircraft Lessor makes when placing an aircraft leasing is to evaluate the risk factor! The two main types of leases (ACMI and Dry lease) have different risk factors. The owner/operator of an ACMI agreement retains control of the aircraft, and therefore, has more security over their asset than does the Lessor in a dry lease agreement as the Lessee has control of the aircraft throughout the dry lease period.

The Lessor of a dry lease agreement generally requires that the Lessee has a solid operating history, 3 years of positive financial statements and the sufficient funding, therefore, it can be difficult for an airline to lease an airplane without these requirements. In order for one to do so, the potential Lessee will need to provide the Lessor with a solid business plan, profile of the investors and senior management, and have clear proof of available funding. Please note that some Lessors may have different requirements.

Cost of purchasing an aircraft can be restrictive to an airline that wants to start or expand it's fleet, leasing allows the cost to be spread across several years. At the lease term the Lessee can either renew the lease or returned the aircraft to the lessor, to be replaced with more modern aircraft

Chattel Loan: This is a form of outright purchase where a loan is provided for the purchase so ownership of the aircraft is transferred to the purchasing company and the financier simply takes a mortgage over it. This type of arrangement is commonly used when seeking ownership of the unit at the end of the finance term as a residual or balloon payment is not required. Under a chattel loan the aircraft appears on the company balance sheet as titled to the aircraft has been transferred.

Conclusion:

If after reviewing the information here you are undecided whether you should lease, charter or purchase an aircraft then please visit our Purchase Aircraft, Aircraft Charter or Aircraft Financing Aviation Library pages for more details on these options.

So Now You Have Decided to Lease an Aircraft?

 

Lockheed L1011

After reviewing your aircraft usage, organizational structure & financial status, along with consideration for air charter and purchasing, you have concluded that leasing is your best option.

So what's the next step... well you now need to consider what leasing options are available and which one is right for you, ACMI or dry lease. Review our Aircraft Leasing Definition page to get an in depth assessment of each type. Next we will briefly discus the main options of both ACMI and the various types of dry lease.

 

ACMI:

Aircraft, Crew, Maintenance & Insurance is usually a short term leasing option, from a few months to 2 years. The aircraft remains on the Lessor's AOC throughout the lease term. Ideal option for testing route expansion, seasonal demand, scheduled/non scheduled maintenance (AOG) and start-up airlines.

The Lessor provides the Lessee with the aircraft(s), along with crew, maintenance and insurance on either a short and long-term contract. The Lessee absorbs marketing, direct operating expenses, such as fuel, landing, parking fees and ground handling, as well as bearing the commercial risk of load and yield.

The cost associated with an ACMI lease rate is usually expressed as a hourly block rate and the Lessee has to guarantee the Lessor a minimum number of hours per month. Other costs will include a deposit (usually equal to one month lease rate), aircraft positioning and any livery scheme the Lessee my wish to deck out the aircraft. These costs are open to negotiation.

Example ACMI lease first month costs:

  1. Example aircraft: Airbus A320.
  2. Lease rate, say US$2750 per block hour (chock-to-chock).
  3. 250 hours per month guaranteed.
  4. Minimum monthly lease rate: $2,750 * 250hrs = US$687,500 per month.
  5. Deposit (1 month lease rate) = US$687,500.
  6. Total US$1,375,000 plus positioning costs and livery.

What's included and not included in an ACMI lease?

Lease rate includes:

  1. Provision of Aircraft;
  2. Provision of sufficient flight crews and their associated salaries;
  3. Maintenance support, including provision of ground engineers;
  4. Aviation Third Part Liability Insurance;
  5. Crew scheduling;
  6. Operational flight plans.

Lease rate excludes:

  1. fuel and oil;
  2. aircraft landing, handling, navigation and terminal charges;
  3. passenger and cargo handling;
  4. airport taxes, all passenger related taxes and security taxes;
  5. aircraft parking and ground security;
  6. ramp services including towing, push-back, de-icing, nitrogen and oxygen services;
  7. all dry goods, including but not limited to head rest covers, airsickness bags, blankets and pillows;
  8. ATC fees and all international route charges;
  9. catering for passengers and crew;
  10. cabin cleaning and water services;
  11. aircraft interior deep cleaning and exterior cleaning;
  12. airport security passes and permits, if required;
  13. over-flight permits;
  14. custom taxes, immigration and inspection fees, import and export duty's;
  15. landing and traffic permit and slots;
  16. ID tickets (S1) on Lessee's route for Lessor's crew, or crew change (proceedings) all travel cost that will be charged to Lessee;
  17. hangar space when and where required by the Lessor for proper maintenance of the aircraft;
  18. crew and mechanics accommodation (min 3 star, single rooms), with breakfast & laundry;
  19. transportation of Lessor's crew and mechanics between hotel and airport;
  20. office space including telephone, fax, email;
  21. spare parts facilities (storage) including air conditioning;
  22. one van for transportation of mechanics and parts;
  23. insurance - passengers, baggage, mail, cargo and war risk insurance;
  24. any additional cost reference to insurance coverage will be on Lessee's account;
  25. any and all other reasonable direct operating costs, incurred in the performance of the flights whether or not listed above.

Dry Lease:

The basic aircraft without insurances, crew, maintenance etc. Usually aircraft offered on dry lease are owned by leasing companies and banks. A dry lease requires the lessee to place the aircraft on it's own AOC and provide aircraft registration, crew, maintenance and insurance. A typical dry lease starts from two years onwards and bears certain conditions as far as depreciation, maintenance, insurances etc. are concerned. There are two types of dry lease... Operational & Financial lease.

Operational Lease:

Boeing 737

Medium to long-term option, generally a lease term that is short compared to the economic life of the aircraft being leased. An operating lease is commonly used to acquire aircraft for a term of 2-7 years. With an operating lease the aircraft doesn't appear on the Lessee's balance sheet.

Financial Lease:

Also known as a capital lease, is defined when one of the following conditions are met:

  1. at the end of the lease term the Lessee has the option to purchase the aircraft at an agreed price.
  2. the lease payments are more than 90% of the market value of the aircraft.
  3. the term of the lease is over 75% of the aircraft's usable life.

With finance lease the aircraft appears on the Lessee's balance sheet, as it is viewed as a purchase.

Chattel Loan: This is a form of outright purchase where a loan is provided for the purchase so ownership of the aircraft is transferred to the purchasing company and the financier simply takes a mortgage over it. This type of arrangement is commonly used when seeking ownership of the unit at the end of the finance term as a residual or balloon payment is not required. Under a chattel loan the aircraft appears on the company balance sheet as titled to the aircraft has been transferred.

Where to Source an Aircraft on Lease?

 

Boeing 767

There are many places you can source an aircraft to lease:

  1. aircraft leasing & management companies
  2. airlines
  3. aircraft operators
  4. dealer/brokers

One obvious place that brings them all together is the Internet, as you can view most of the offerings from these sources here. GPS is one such source, through our own aviation experience, advertised lease listings and a network of aviation specialists, we can provide the expertise you need to make the right choice when it comes to aircraft sourcing.

Aircraft Funding...

Do you require funding for aircraft operating lease / purchase or airline start-up? Please take a look at our Aircraft Funding or Airline Start-up pages.

Aircraft to Lease...

Do you have aircraft available for lease that require additional marketing; we always have airlines looking to acquire aircraft? You can simply advertise your aircraft through GlobalPlaneSearch.com, or contact us directly for further information.

Aircraft Lease Definition

 

Boeing 767

As provided by GlobalPlaneSearch.com (GPS), this definition is a helpful guide to different types of aircraft leasing options. After reading each section you will find a link utilising our search engine to locate aircraft listings by lease type or...

View all available Aircraft for Lease.

ACMI - Aircraft, Crew, Maintenance & Insurance

The LESSOR provides the aircraft, one or more complete crews (flight deck, cabin attendants and engineers) including their salaries but usually not their daily allowances, all maintenance for the aircraft and insurance, which usually includes hull and third party liability. The LESSOR will charge for the block hour (choc off to choc on) and depending on the aircraft type, sets a minimum guaranteed block hours limit per month. If the airplane flies or not, the LESSEE must pay the amount for the minimum guaranteed block hours. The period can go from one month to usually one to two years. Everything less than one month can be considered as ad-hoc charter.

The LESSEE has to provide all fuel, landing/handling/parking/storage fees, crew HOTAC including meals and transportation as well as visa fees, import duties where applicable, as well as local taxes. Furthermore, the LESSEE has to provide passenger/luggage and cargo insurance and in some cases need to cover the costs for War Risk.

The LESSEE has also to pay the over flight/navigation charges. This point can be a bit complicated. When flights are operating they use a flight number, which is issued to airlines by the ICAO. In order to cover the costs of air traffic control services, states over flown will send a bill to the owner of the flight number, which can be readily identified by its code. The aircraft owner will probably have a code, but will not want to use it because he will end up paying the bills. Therefore, an ACMI lease requires that the LESSEE provide his own flight number, so that the bills can be directed to him. Thus, an ACMI lease can usually only take place between two ICAO member states airlines unless other arrangements have been made between LESSOR and LESSEE.

View all available aircraft under ACMI Lease.

Wet Lease

Over the years aircraft leasing has gone through many changes and so today the terminology may not always reflect the service provided. In the UK for instance, Wet lease use to mean, quite logically, 'including fuel'. To our knowledge, generally only a charter service will include fuel in the price. Today, ACMI, Damp and Wet Lease are interchangeable and a rate quoted will usually not include cabin crew (except for the legal requirement of a supervising purser).

Damp Lease

Is similar as ACMI and Wet leasing, however the term usually meant 'without cabin crew' (in some countries it was referred to as Wet Lease 'without fuel'). Under Damp lease, the LESSEE will provide the cabin crew. This can only be done if the cabin crew receives SEP (Safety and Emergency Procedures) training by the LESSOR, in order to be acquainted with the differences of the aeroplane. Nevertheless, the Lessor will provide a supervising cabin purser. This term is not often referred too these days, the term ACMI now covers this.

Dry Lease

Is the lease of the basic aircraft without insurances, crew, maintenance etc. Usually dry lease is utilized by leasing companies and banks. A dry lease requires the LESSEE to put the aircraft on his own AOC and provide aircraft registration. A typical dry lease starts from two years onwards and bears certain conditions as far as depreciation, maintenance, insurances etc. are concerned. This depends on the geographical location, political circumstances etc.

There is generally two types of dry lease, an Operating Lease and a Finance Lease.

Operating Lease: generally a lease term that is short compared to the economic life of the aircraft being leased. An operating lease is commonly used to acquire aircraft for a term of 2-7 years. With an operating lease the aircraft doesn't appear on the LESSEE's balance sheet.

Finance Lease: also known as a capital lease, is defined when on of the following conditions are met:

  1. at the end of the lease term the LESSEE has the option to purchase the aircraft at an agreed price.
  2. the lease payments are more than 90% of the market value of the aircraft.
  3. the term of the lease is over 75% of the aircraft's usable life.

With a finance lease the aircraft appears on the LESSEE's balance sheet, as it is viewed as a purchase

View all available aircraft under Dry Lease.

Aircraft for Charter

 

Air Charter Definition:

Generally there are four types of Aircraft Charter... Air Taxi, Ad Hoc, Frequent Membership and Full (Public) Charter.

  1. Air Taxi, although not new, is now expanding with the advent of new generation Very Light Jets (VLJ's) coming to the market, such as the Eclipse 500, and new emerging start-up Air Taxi companies, offering "Per-Seat, On-Demand jet services", such as Florida based DayJet™. Air Taxi services are targeted more at the business road user rather than the established charter market, offering to get you between non-serviced airports, either by purchasing a single seat or charter the entire aircraft (typically 3-5 seats).
  2. Ad hoc Air Charter refers to the renting of an entire aircraft by an individual, group, corporation etc. on an ad hoc basis that have specialised itineraries (i.e. one return flight), rather than purchasing individual aircraft seats or a more long term option - aircraft leasing.
  3. Frequent Charter Membership is for those that have a higher occupancy demand and require aircraft on short notice. They also don't have the high outlay of a Fractional Ownership
  4. Full (Public) Charter is the long term renting of an entire aircraft, usually undertaken by Tour Operators, that require aircraft on a seasonal basis but don't have the required infrastructure to operate their own aircraft.
Lockheed L1011

Welcome to GPS's aircraft charter pages, containing the largest collection of aircraft for charter, freely available anywhere on the Internet. As part of our growing GPS Aviation Library, we try to provide you with in depth information and tools to enable you decide if air charter is your right option or to locate an aircraft that you require, whether you are looking for passenger or freighter aircraft configurations, you'll find them all here.

The articles presented in this section of the library are primarily targeted at chartering business and commercial aircraft but many of these principles can be applied to all types of aircraft acquisition. These pages are intended to guide the aviation newcomer through the decision process of aircraft acquisition, such as entrepreneurs looking to start an airline or just the curious! Therefore the aviation professional, well schooled in all aspects of aircraft procurement, may well find these articles of limited value.

Topics within this guide include charter options, Operator's requirements and comparisons with other acquisition types, such as aircraft leasing & purchase.

  1. Charter / Lease or Purchase Aircraft?
  2. So now you have decided to Charter an aircraft
  3. Where to source an aircraft on Charter

The GPS Search Engine has the largest database of aircraft available for Charter on the Internet... Charter Aircraft Listings

Charter, Lease or Purchase an Aircraft?

 

Well that's a very complex and personal decision. Many factors influence the decision process but basically these can be broken down into three main areas:

  1. Aircraft Usage
  2. Organizational Structure
  3. Financial Status
Boeing 767
 

Aircraft Usage...

Purchasing: As your intended usage is limited and you probably lack the required infrustructure, owning your own aircraft is not a realistic proposition.

Leasing: The main alternative to charter an aircraft is an ACMI/Wet Lease.

As described in our Aircraft Leasing Definition page, lease agreements of less than two years or on a seasonal basis are usually conducted under an ACMI/Wet Lease agreement. As ACMI is mainly used for seasonal programs, as well as start-up airlines that feel it more beneficial to operate under this type of lease agreement, initially anyway.

Air Charter: Generally speaking, there are four types of Aircraft Charter... Air Taxi, Ad Hoc, Frequent Membership and Full (Public) Charter.

If your planned usage is only an odd flight or a few hours a month then an ad hoc charter or an Air Taxi is the recommended route for you, especially if you are travelling between non-serviced airports.

On the other hand, if your requirement requires higher utilization then you should consider a Frequent Membership Charter program, of which there are many.

If your requirement requires a much higher utilization, as would a Tour Operator or a start-up airline, without an AOC, then you should consider conducting your flights under a public charter.

Organizational structure...

In order to operate an aircraft commercially you will need the infrastructure to do so, this may be in the form of experienced personnel, maintenance facilities etc. Without these resources you will need to consider a full charter program or ACMI lease.

If your organization does not have, or access to, or does not intend to obtain an AOC then you cannot commercial operate an aircraft. As previously mentioned, in this situation flights can only be operated under a public charter contract. A third party airline or aircraft operator would perform the flights under their AOC and be responsible for all aspects of the flight. Tour operators and small start-up airlines may well use this option rather than going through the certification process prior to start-up.

Hawker 850XP

Financial status...

Chartering an aircraft is generally more expensive than other options but our decision to charter in more due to convenience, limited utilization, regulations, organizational structure and so forth.

Conclusion:

Cost of chartering an aircraft can be restrictive but due to the limitations mentioned above, it can offer many benefits over traditional airlines and other leasing options.

If after reviewing the information here you are undecided whether you should charter, purchase or lease an aircraft then please visit our Purchase Aircraft and Leasing Aircraft Aviation Library pages for more details on these options.

So Now You Have Decided to Lease an Aircraft?

 

Lockheed L1011

After reviewing your aircraft usage, organizational structure & financial status, along with consideration for air charter and purchasing, you have concluded that leasing is your best option.

So what's the next step... well you now need to consider what leasing options are available and which one is right for you, ACMI or dry lease. Review our Aircraft Leasing Definition page to get an in depth assessment of each type. Next we will briefly discus the main options of both ACMI and the various types of dry lease.

 

ACMI:

Aircraft, Crew, Maintenance & Insurance is usually a short term leasing option, from a few months to 2 years. The aircraft remains on the Lessor's AOC throughout the lease term. Ideal option for testing route expansion, seasonal demand, scheduled/non scheduled maintenance (AOG) and start-up airlines.

The Lessor provides the Lessee with the aircraft(s), along with crew, maintenance and insurance on either a short and long-term contract. The Lessee absorbs marketing, direct operating expenses, such as fuel, landing, parking fees and ground handling, as well as bearing the commercial risk of load and yield.

The cost associated with an ACMI lease rate is usually expressed as a hourly block rate and the Lessee has to guarantee the Lessor a minimum number of hours per month. Other costs will include a deposit (usually equal to one month lease rate), aircraft positioning and any livery scheme the Lessee my wish to deck out the aircraft. These costs are open to negotiation.

Example ACMI lease first month costs:

  1. Example aircraft: Airbus A320.
  2. Lease rate, say US$2750 per block hour (chock-to-chock).
  3. 250 hours per month guaranteed.
  4. Minimum monthly lease rate: $2,750 * 250hrs = US$687,500 per month.
  5. Deposit (1 month lease rate) = US$687,500.
  6. Total US$1,375,000 plus positioning costs and livery.

What's included and not included in an ACMI lease?

Lease rate includes:

  1. Provision of Aircraft;
  2. Provision of sufficient flight crews and their associated salaries;
  3. Maintenance support, including provision of ground engineers;
  4. Aviation Third Part Liability Insurance;
  5. Crew scheduling;
  6. Operational flight plans.

Lease rate excludes:

  1. fuel and oil;
  2. aircraft landing, handling, navigation and terminal charges;
  3. passenger and cargo handling;
  4. airport taxes, all passenger related taxes and security taxes;
  5. aircraft parking and ground security;
  6. ramp services including towing, push-back, de-icing, nitrogen and oxygen services;
  7. all dry goods, including but not limited to head rest covers, airsickness bags, blankets and pillows;
  8. ATC fees and all international route charges;
  9. catering for passengers and crew;
  10. cabin cleaning and water services;
  11. aircraft interior deep cleaning and exterior cleaning;
  12. airport security passes and permits, if required;
  13. over-flight permits;
  14. custom taxes, immigration and inspection fees, import and export duty's;
  15. landing and traffic permit and slots;
  16. ID tickets (S1) on Lessee's route for Lessor's crew, or crew change (proceedings) all travel cost that will be charged to Lessee;
  17. hangar space when and where required by the Lessor for proper maintenance of the aircraft;
  18. crew and mechanics accommodation (min 3 star, single rooms), with breakfast & laundry;
  19. transportation of Lessor's crew and mechanics between hotel and airport;
  20. office space including telephone, fax, email;
  21. spare parts facilities (storage) including air conditioning;
  22. one van for transportation of mechanics and parts;
  23. insurance - passengers, baggage, mail, cargo and war risk insurance;
  24. any additional cost reference to insurance coverage will be on Lessee's account;
  25. any and all other reasonable direct operating costs, incurred in the performance of the flights whether or not listed above.

Dry Lease:

The basic aircraft without insurances, crew, maintenance etc. Usually aircraft offered on dry lease are owned by leasing companies and banks. A dry lease requires the lessee to place the aircraft on it's own AOC and provide aircraft registration, crew, maintenance and insurance. A typical dry lease starts from two years onwards and bears certain conditions as far as depreciation, maintenance, insurances etc. are concerned. There are two types of dry lease... Operational & Financial lease.

Operational Lease:

Boeing 737

Medium to long-term option, generally a lease term that is short compared to the economic life of the aircraft being leased. An operating lease is commonly used to acquire aircraft for a term of 2-7 years. With an operating lease the aircraft doesn't appear on the Lessee's balance sheet.

Financial Lease:

Also known as a capital lease, is defined when one of the following conditions are met:

  1. at the end of the lease term the Lessee has the option to purchase the aircraft at an agreed price.
  2. the lease payments are more than 90% of the market value of the aircraft.
  3. the term of the lease is over 75% of the aircraft's usable life.

With finance lease the aircraft appears on the Lessee's balance sheet, as it is viewed as a purchase.

Chattel Loan: This is a form of outright purchase where a loan is provided for the purchase so ownership of the aircraft is transferred to the purchasing company and the financier simply takes a mortgage over it. This type of arrangement is commonly used when seeking ownership of the unit at the end of the finance term as a residual or balloon payment is not required. Under a chattel loan the aircraft appears on the company balance sheet as titled to the aircraft has been transferred.

Where to Source an Aircraft to Charter?

 

Hawker 850XP

There are many places you can source an aircraft to charter:

  1. charter/aircraft operators
  2. charter brokers
  3. airlines

One obvious place that brings them all together is the Internet, as you can view most of the offerings from these sources here. GPS is one such source, through our own aviation experience, advertised charter listings and a network of aviation specialists, we can provide the expertise you need to make the right choice when it comes to aircraft sourcing.

Aircraft Funding...

Do you require funding for aircraft operating lease / purchase or airline start-up? Please take a look at our Aircraft Funding or Airline Start-up pages.

Aircraft to Charter...

Do you have aircraft available for charter that require additional marketing; we always have airlines looking to acquire aircraft? You can simply advertise your aircraft through GlobalPlaneSearch.com, or contact us directly for further information.

Aircraft Funding / Airline Financing

 

Do you require aircraft funding, finance for airline start-up or airline expansion?

The most common methods of financing the purchase of an aircraft are through Direct Purchase, with Bank Finance or through an Operating Lease.

Direct Purchase Arrangement

Under a direct purchase arrangement the airline purchases the plane direct from the manufacturer or vendor, using a secured mortgage loan or structured finance lease. The amount of the advance for the aircraft can vary up to 90% depending on the airline and its available capital. These loans are generally structured with a term up to 12 years with mortgage style amortization and either fixed or floating interest rates. It's quite common for several lenders to work in a syndicate to provide larger loan packages.

There are several advantages and disadvantages with direct purchase of an aircraft, they include:

Main Advantages:

  1. Airline builds up equity in the aircraft as it pays down the mortgage or finance lease
  2. The airline is the owner of the aircraft and so can modify it to its own exact requirements
  3. As the owner of the aircraft the airline is able to gain significant taxation benefits in most countries

Main Disadvantages:

  1. The is subject to residual value risk at the end of the term
  2. Less flexible method of ownership when compared to an operating lease
  3. Heavily weighs down a company's balance sheet which may affect other banking covenants

Operating Lease

When acquiring an aircraft on an operating lease the airline signs a contract which allows it use of the aircraft for a specified period, for a set specified payment. This payment is known the 'rental'. Payment of this rental grants the airline the use of the aircraft, not the ownership. The entity that leases the aircraft to the airline is the owner of the unit retains title to it after purchasing it from the manufacturer. Leases are usually put in place for shorter terms than a finance contract, generally 3-7 years for narrow body aircraft and possibly longer for wide body units. At the end of the lease the airline simply returns the aircraft to the owner or can make an offer to purchase it.

In most cases the airline will be required to provide 3 months rental as a security deposit, which is returned to the airline once the lease is complete, provided the aircraft is returned in proper order. Monthly rental costs vary depending on market demand for aircraft though average approximately 1% of the new purchase cost of the unit.

As with bank finance operating leases come with advantages and disadvantages, namely:

Main Advantages:

  1. Reduction in initial capital requirements
  2. Residual value risk is eliminated as it stays with the owner of the aircraft
  3. The liability stays off balance sheet, having less impact of banking restrictions

Main Disadvantages:

  1. All equity built up in the unit is retained by the Lessee owner
  2. Generally smaller tax advantages are available
  3. Owner of the aircraft may impose onerous restrictions on its use

General Requirements

Boeing 767

The general requirements to finance an aircraft include your company's last 3 years accountant prepared financials, evidence of capital and detailed business profile. If you're attempting to start an airline the most important item you require is a fully detailed business plan and corresponding financial model. Without this you're business won't get off the ground.

As with any major financial decision the choice to lease or finance an aircraft should be made with the help of your professional accounting adviser. Once you've decided on the best option for your business situation contact an experienced, competent aircraft finance broker that can assist you further.