Leasing

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 then this is known as a dry lease. In this case the lessee (receiving the aircraft) is the aircraft operator and the aircraft operates in accordance with the lessee’s Air Operators Certificate (AOC). When the aircraft is leased with crew then this is known as a wet lease. The operator is the ‘lessor’ (providing the aircraft and crew) and the aircraft operates in accordance with the lessor’s Air Operators Certificate (AOC).

Authority requirements

Before leasing an aircraft, a commercial air transport operator must provide their Competent Authority (i.e. the ‘CAA’) with all the details of the proposed lease (except the financial arrangements). The action that the Competent authority has to take then depends on the type of lease proposed.

Wet Lease

If an 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 ‘safety list’ (the list of airlines banned from operating into the EU).

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, for example, requires operators to audit all potential lessor’s. The ‘Basic Regulation’ requires that certificates issued by any Member State should be recognised by all States so an Authority must apply the same requirements regardless of which state issued the potential lessor’s AOC (no ‘discrimination on the basis of nationality’).

Dry Lease

In the case of a dry lease-in the aircraft will be operated under the lessee’s AOC so 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) then 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 also that the aircraft is fitted with the instruments and equipment required by EU operational rules. In order for a dry-lease to be approved the lessee will also need to demonstrate that there were no suitable EU-registered aircraft available and the lease can only be approved for a limited period of time (no more than seven months in a any 12 month period).

White List

When searching for aircraft to lease-in an airline will look for operators that have suitable aircraft available and will then negotiate details such as the price. A broker may be involved. If this process is concluded before the audit has been conducted and before the Authority looks at the application for approval, then there will be problems if the result of the audit is negative or if the Authority doesn’t issue approval. In order to avoid these problems operator can develop a ‘white list’ of potential suppliers (lessors). These potential lessors are audited on a periodic basis and, provided that 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 Competent Authority leaving the lessee free to ‘shop around’ among the ‘whitelisted’ 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’ in place, then it may be difficult or impossible to arrange for 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 going to put your customers on someone else’s aircraft, then 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, then it’s probably because you have a lot on. It can be difficult 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 Competent Authority and your own business needs. We then 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 you don’t have a white list in place then we can usually arrange an audit at short notice.

For a discussion about your needs please get in touch.