In the global aviation industry, where aircraft acquisition costs can reach hundreds of millions of dollars, airlines must navigate a complex financial environment to grow and sustain operations. While outright purchase of aircraft was once the norm for major carriers, the increasing need for flexibility, cost efficiency, and fleet modernization has made aircraft leasing the dominant strategy in today’s market.
As of 2025, over 50% of the world’s commercial aircraft fleet is leased. From budget carriers operating small regional jets to flag carriers flying long-haul widebodies, leasing has become central to modern airline strategy. But what exactly is aircraft leasing, and why is it so critical to aviation today? This article offers an in-depth examination of aircraft leasing: its types, advantages, and how it supports the operational, financial, and strategic needs of airlines around the world.
🔧 What Is Aircraft Leasing?
Aircraft leasing is a financial and contractual arrangement in which an aircraft owner called the lessor provides an aircraft to an airline or operator known as the lessee for a specified period in exchange for agreed payments. The lessee gains the right to use the aircraft for commercial operations, while the lessor retains legal ownership.
Leasing enables airlines to expand or update their fleet without the massive upfront capital required to purchase new aircraft. These arrangements are structured in various ways depending on operational responsibility, duration, and financial treatment.
Aircraft leases fall broadly into two categories:
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Wet Leases, where the lessor provides the aircraft and operational services
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Dry Leases, where only the aircraft is provided
Each of these models has specific subtypes, benefits, and risks tailored to different airline needs.
✈️ Wet Lease (ACMI Lease)
In a wet lease, the lessor supplies the aircraft along with:
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Aircraft
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Crew
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Maintenance
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Insurance
This is often called an ACMI lease, where the lessor retains operational control, and the aircraft operates under the lessor's Air Operator Certificate (AOC). The lessee is responsible for additional costs such as:
Wet leases are generally short-term in nature, often lasting from a few weeks to a year. They are used in scenarios such as:
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Covering seasonal traffic spikes (e.g., Hajj, summer travel)
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Bridging capacity gaps during aircraft maintenance or delivery delays
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Testing new international routes before obtaining regulatory approvals
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Supporting start-up airlines before their own certification
Though wet leasing can be expensive, it allows airlines to operate immediately without the complexities of aircraft ownership or crew recruitment.
✈️ Dry Lease
In a dry lease, the lessor provides only the aircraft. The lessee must supply its own crew, maintenance, and insurance. Dry leases are typically used for medium- to long-term operations and are best suited to airlines with their own AOC.
Dry leases fall into two major subtypes:
🔹 Operating Lease
An operating lease is a short- to medium-term lease (typically 3 to 10 years) where:
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The aircraft remains on the lessor’s balance sheet
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The lessee treats the lease payments as operational expenses
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The aircraft is returned at the end of the lease term in a contractually defined technical condition
Operating leases are favored for their flexibility. Airlines can:
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Acquire modern aircraft without taking long-term financial risk
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Return or replace aircraft as fuel efficiency and technology improve
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Adjust fleet size and composition in response to market demand
This lease type is widely used by both legacy carriers and low-cost airlines looking to reduce capital exposure and keep fleets modern.
🔹 Finance Lease (Capital Lease)
A finance lease, also known as a capital lease, is structured to transfer most of the economic risks and benefits of ownership to the lessee. Key characteristics include:
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The aircraft is capitalized on the lessee’s balance sheet as a long-term asset
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The airline assumes responsibility for maintenance, insurance, and regulatory compliance
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The lease period often covers the majority of the aircraft’s useful life
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There is typically a purchase option at the end of the lease term
Finance leases are ideal for airlines that:
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Want long-term control of the aircraft without an outright purchase
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Prefer to capitalize the asset and gain tax advantages through depreciation
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Are confident in operating the aircraft for a full service life
However, this structure also transfers residual value risk to the airline—meaning if aircraft values drop, the lessee bears the financial impact.
💡 Why Airlines Prefer Leasing
Leasing offers a wide range of operational and financial advantages, making it an attractive model across various airline business types and markets.
✅ Capital Efficiency
Leasing reduces the need for massive capital investment. Airlines can preserve cash and avoid debt burdens associated with aircraft purchases, especially during growth phases or in times of economic uncertainty.
✅ Fleet Flexibility
Operating leases allow carriers to quickly scale up or down based on passenger demand, route expansion, or macroeconomic conditions. This was especially valuable during COVID-19 recovery, when many airlines downsized then rapidly re-expanded.
✅ Technology Access
Short-term leases allow airlines to periodically update their fleets with the latest generation aircraft, such as the Airbus A320neo or Boeing 787, which offer better fuel efficiency and lower carbon emissions.
✅ Risk Management
Leasing transfers residual value risk and technological obsolescence to the lessor. If aircraft values drop, or newer models become mandatory due to emissions regulations, the airline is less exposed.
✅ Operational Continuity
Wet leasing allows airlines to maintain schedules when facing unexpected fleet shortages due to maintenance delays, delivery disruptions, or certification barriers.
🌍 The Global Aircraft Leasing Market
Aircraft leasing is now a cornerstone of aviation finance. The world’s largest lessors include:
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AerCap – headquartered in Ireland
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SMBC Aviation Capital – backed by Sumitomo Mitsui Banking Corporation
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BOC Aviation – based in Singapore
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Air Lease Corporation – USA
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Avolon – another Irish-based giant
Ireland dominates the aircraft leasing sector due to its favorable corporate tax regime, experienced legal framework, and aviation-friendly business environment.
Leasing companies typically place bulk orders with Airbus and Boeing, benefiting from significant volume discounts. These aircraft are then leased globally, creating a secondary market that improves aircraft liquidity and enables smaller or emerging airlines to access modern fleets without placing new orders.
📑 Final Thoughts
Aircraft leasing has transformed aviation from a capital-heavy, asset-driven industry into a more agile and financially resilient sector. Whether through short-term ACMI arrangements or long-term finance leases, leasing offers airlines the tools to manage fleets in line with operational goals, market shifts, and strategic priorities.
As the industry continues to evolve driven by environmental regulations, fuel cost volatility, and emerging markets leasing will remain an essential enabler of airline success. From start-ups leasing their first jet to legacy carriers rotating fleets every few years, leasing ensures that airlines can fly smarter, leaner, and more competitively.
✈ For more in-depth aviation insights, stay connected with aviation2day. Your source for grounded knowledge in a dynamic industry.
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