Dry leasing in aviation. "wet" and "clean" leasing. The most promising direction

The cost of airplanes and helicopters is very high. It can reach many tens or even hundreds of millions of dollars. Not all organizations can afford such purchases at their own expense. Most firms prefer to use the services of leasing companies.

Dear readers! The article talks about typical ways to solve legal issues, but each case is individual. If you want to know how solve exactly your problem- contact a consultant:

APPLICATIONS AND CALLS ARE ACCEPTED 24/7 and 7 days a week.

It's fast and FOR FREE!

concept

The word leasing can be translated as rent. Often, it means the possibility of obtaining machinery or equipment for rent with the right to further redemption into ownership or without it.

Aircraft leasing often provides for the possibility of obtaining not only an aircraft, but also the necessary infrastructure or equipment.

The lessee is offered the choice of purchasing a new or used aircraft or helicopter. At the same time, it is possible to get exactly the brand and model that the client needs.

Initially, aviation leasing services were used only by carriers who needed to expand or modernize their aircraft fleet. Today, this option is also used by firms that purchase an aircraft or helicopter for their own needs.

Important! Leasing an aircraft or helicopter is not available to private individuals.

Where to apply

A huge number of leasing companies operate on the market, which are often associated with the largest Russian or foreign financial institutions. But not everyone is engaged in aircraft leasing.

Each of the companies offers its own conditions, which the client must carefully study before signing the contract.

Consider what features you should pay attention to when applying for aviation leasing:

• the amount of the increase;
• maximum lease term;
• minimum and maximum advance payment;
• responsibilities for insurance and aircraft registration.

We present in the table the features of popular companies offering aviation leasing.

Types of aviation leasing

Aircraft leasing is developing faster than other areas due to the high cost of aircraft and the impossibility of acquiring equipment immediately into the ownership of most companies.

At the same time, aviation leasing differs significantly from other types of this service due to the peculiarities of the design of equipment and its registration, as well as the need for expensive regular maintenance.

Consider the main types of aviation leasing:

• operational;
• financial;
• returnable.

Video: Aviation finance

Operational

The option when a company leases an aircraft for up to 10 years is the most common in Russia. Short terms are convenient for lessees when updating the fleet of aircraft and helicopters.

Most Russian carriers take aircraft under the so-called "dry" leasing, i.e. leases it without crew and ground handling. In this case, the aircraft is operated under the lessee's certificate.

Businesses are often more comfortable with another special type of operational leasing - “wet”. In this case, the aircraft is transferred together with the crew and maintenance. Such leasing is typical for a period of 1 month to 2 years.

In operating leasing, great attention is paid to the selected aircraft or helicopter. Investors are interested in receiving liquid equipment as collateral with the possibility of re-leasing at the end of the contract.

Often, upon reaching a certain age, aircraft are sold, sometimes with the possibility of obtaining installment payments.

Financial

A cheaper alternative to operating leasing is financial leasing. Its feature is the long term of the agreement. At the same time, the lessee carries out all current operations for the operation and maintenance of the aircraft.

Technically, financial leasing is much more complicated. In this case, the aircraft or helicopter is purchased directly for the client and the lessor usually does not dispute his choice.

With financial leasing, there are increased requirements for the solvency of the lessee, since it is primarily considered as a form of long-term lending.

Usually, only large airlines that are able to answer for their debts can often take an aircraft on a financial lease. It is impossible to terminate such an agreement without paying heavy fines.

returnable

The practice of leaseback appeared relatively recently and has not received wide distribution in Russia. According to it, the company independently negotiates suitable delivery conditions with the aircraft manufacturer.

After signing the contract, the airline applies to the leasing company to transfer the rights to the ordered aircraft and receive financing. In return, the air carrier undertakes to rent the equipment on pre-agreed terms.

This practice is suitable mainly for large air carriers, which can thus receive significant discounts from the manufacturer, which are not available to most financial institutions, and obtain the desired equipment with exact matching of parameters.

Typically, leaseback is characterized by the features of financial leasing, ie. long term and transfer of ownership at the end of the contract. Although, in principle, operating leaseback is also possible.

Large air carriers arrange a leaseback competition between leasing companies. This allows you to get even more attractive conditions and gives the effect of double savings.

Benefits from acquiring aviation equipment on lease

Not all companies that need aviation equipment can afford to purchase it at their own expense. Loans for such amounts are also often unavailable due to the lack of a long-term positive credit history for young firms.

Thanks to leasing, equipment can be obtained quickly enough without searching for various types of collateral and with a fairly small set of documents. In addition, operational leasing allows lessees not to worry too much about the residual value of the aircraft.

Leasing options are especially convenient for air carriers that have appeared on the market relatively recently and have not managed to achieve sufficient fame. The service allows you to quickly expand your presence in the market and quickly respond to its needs.

With operational leasing, a company can easily change aircraft every 5-7 years, and with financial leasing, get significant tax preferences and an optimal source of investment.

Requirements for the lessee

In most Russian companies, only professional air carriers can obtain aircraft equipment on lease. Although some companies are ready to lease and small aircraft.

Depending on the type of aircraft, the requirements for the lessee change. If a mainline aircraft is purchased, then it is available only to lessees with air operator certificates who have at least relative financial stability.

Commercial aircraft and helicopters are available to buyers even from medium-sized businesses. But a prerequisite will be the period of the company's activities for more than 1 year and the availability of profit.

Table. Requirements for the lessee.

aircraft requirements

Each leasing company has certain requirements for aircraft. They are significantly tightened under operating leases and are virtually absent under financial leases for large air carriers.

Table. Basic requirements for an aircraft

Peculiarities

A client who decides to purchase aircraft equipment on lease will have to put up with some features that are typical for this type of transaction. First of all, this is expensive insurance under the CASCO program.

It is often necessary to additionally transfer deductions to the lessor's reserve fund and actually carry out a major overhaul of the aircraft in case of its return.

Rising aviation fuel prices are forcing airlines to upgrade their aircraft fleet more actively. Accordingly, the situation in the aircraft leasing market is also changing - leasing companies need to be ready for changes and develop more flexible schemes, such as operating and leaseback.

In the global civil aircraft market, rapid changes are taking place - by the standards of this market - that will radically affect the closely related aircraft leasing market. Nearly two-thirds of the current aircraft fleet is expected to be decommissioned by 2022, according to forecasts. At the same time, the average growth of the fleet will be about 4% per year, that is, in nine years, a total of about 17 thousand aircraft with gas turbine engines will be delivered. The reasons for such significant changes are also connected with the changing economy of airlines, and above all with a sharp increase in the cost of aviation fuel. In 2011-2012, aviation kerosene rose in price by about 38%. This is forcing airlines to abandon morally - but not physically - obsolete aircraft with high fuel consumption and order new, high-performance machines. As a result, the average age of the world's aircraft fleet is decreasing, now it is 11.9 years, while three years ago it was 12.2 years.

Russian airlines are in the second wave of fleet renewal. The first massive update took place five or six years ago, when Soviet classic-generation aircraft were replaced with Western technology. Now, as in the whole world, there is a gradual renewal of the fleet for modern aircraft with higher fuel efficiency.

As airlines require a high level of flexibility in managing their aircraft fleet, it is becoming increasingly important to use various forms of leasing, especially operating leasing (in Russia it is officially called leasing) and various modified schemes.

As of the end of 2012, 54% of the passenger aircraft fleet (485 aircraft) were used by Russian airlines under leasing or lease agreements. The operating fleet of 40 Russian airlines, which operate approximately 99.8% of all air transportation in Russia, is 848 aircraft, of which 363 aircraft are owned by air carriers, 457 aircraft are leased, and 28 are leased. The five largest carriers have the following alignment. Aeroflot - 34 aircraft owned and 86 leased, Transaero - 9 aircraft owned and 82 leased, UTair - 85 aircraft owned, 21 leased, 7 leased, S7 Airlines - 38 aircraft leased, " Ural Airlines - 24 leased aircraft.

It can be said that, in general, the formation of the operating leasing market took place in Russia. Of course, not only airlines, but also foreign lessors and, to a lesser extent, Russian leasing companies took part in this formation. Nearly 30 foreign leasing companies provided Russian air carriers with 329 aircraft. The largest players in our market include ILFC - 77 aircraft leased, 4 more on order, GECAS - 75 aircraft leased, Cramington Aviation Ltd - 22 aircraft, AerCap - 20 aircraft, BBAM LLC - 20 aircraft, BOC Aviation - 14 aircraft.

The portfolio of the six largest Russian leasing companies consists of 131 leased and 313 ordered aircraft, the portfolio structure is presented in more detail in the table (note that the situation on the market is changing and some figures could change, but this table reflects the general structure).

Let us note a number of features of the Russian segment of aviation leasing. First of all, most of the companies involved in this business in Russia are universal: they work not only with aircraft, but also with other equipment. With the exception of Aviacapital-Service and Ilyushin Finance Co. (IFC), other lessors are also engaged in leasing of railway, automotive equipment, etc., and along with this, aircraft.

Banks are becoming more and more interested in this market, primarily state-owned banks, because they have access to cheap money, and moreover, they have more opportunities to reach out to international institutions. This prospect will remain until a certain period, however, until now, bank leasing structures have practically not had to deal with the procedures for the return of an aircraft and its secondary placement on the market (remarketing), and these are the most complex processes that require high technical qualifications and knowledge of the market, otherwise an aircraft as an asset can depreciate sharply and bring big losses.

Basically, the largest bank leasing companies - "VEB-Leasing", "VTB Leasing" and "Sberbank Leasing" financed the current needs of the market. When airlines, for one reason or another, could not obtain equipment under operational leasing, which is the most profitable, they went to Russian banks for financing for the acquisition, and such transactions were structured mainly through financial leasing. Therefore, the portfolio of bank leasing structures for 80-90% consists of foreign-made equipment purchased on the secondary market, including about half of the machines - large wide-body aircraft Boeing 777, 747 and 767.

In the assets of the IFC company, the vast majority of equipment is Russian aircraft, from new generation aircraft in the order portfolio of An-148, An-158 and MS-21, in addition, the company is negotiating with Sukhoi Civil Aircraft regarding the configuration of Sukhoi Superjet 100 aircraft, obtaining which are tentatively scheduled for 2015. In order to balance its portfolio, IFK signed a contract for Bombardier CSeries aircraft, which are expected to be placed on the foreign market.

Aviacapital-Service is a subsidiary of Rostec, its portfolio of orders is divided equally between Russian MC-21 aircraft and Boeing 737NG.

Aircraft leasing is a financial service for airlines, so lessors must skillfully and quickly adapt to their needs. In addition, the situation is complicated by the fact that, due to a number of regulatory reasons, the development of operating leasing in Russia is facing difficulties. In particular, the Law "On Leasing" does not provide for the concept of operational leasing (rent) at all.

However, the market is evolving and new schemes are being applied. For example, the IFK company, being one of the most prepared for changes in the market in terms of its financial and technical expertise, in a contract with the Angara airline took on the risks of maintaining the residual value of aircraft in a 10-12-year perspective - in fact, it turned out to be an operational leasing, legally packaged in financial. That is, the deal is structured in such a way that during the period of the contract the air carrier pays at the rates of operating leasing, almost not paying the main cost of the aircraft, the payment of which is attributed to the end of the contract; at this point, the contract can be extended or the aircraft will be sold at its residual value (abroad, such schemes are called balloon schemes, since the payment of the residual value at the end of the contract reduces the leasing rate and, like a balloon, pulls out the transaction).

VEB Leasing and Sberbank Leasing also approached the first operating lease contracts with SSJ 100 aircraft for UTair and Boeing 737NG for Transaero, respectively. A new word in the Russian aviation leasing market was the development of the so-called leaseback (in English - sale-leaseback; SLB). In an SLB deal, the airline that owns or has just ordered the aircraft sells the aircraft to a leasing company and then leases it back. SLB transactions are inherently very close to operating leases, since the airline does not own the aircraft in the same way, which gives it the flexibility to maneuver the fleet, and also increases its working capital by receiving funds from the sale of the aircraft to the lessor. This is a new product for Russia, but Aeroflot and Transaero already have SLB deals.

SLB deals are usually concluded for 10-12 years, which is somewhat longer than with a simple operating lease, but at the same time they are cheaper for the airline than financial leases. A relative measure of the cost of leasing is the so-called leasing factor (lease factor) - the value of the monthly leasing rate, expressed as a percentage of the price of the aircraft. With financial leasing, the characteristic value of the leasing factor is currently 1.1-1.2, with operating leasing, the airline, depending on its financial solvency, can achieve 0.8 and even 0.78. In SLB transactions, the characteristic leasing factor is 0.8-0.93, which is closer to operating leasing. It can be expected that leasing transactions under new flexible schemes will become more widespread.

Alexey Sinitsky, editor-in-chief of the magazine "Air transport review"

Positioning of Russian leasing companies in the aircraft market

The total losses of Russian airlines in the first half of 2015 amounted to 28 billion rubles. Airline debts to lessors are mounting, and this could result in further problems for both parties.

Photo: Evgeny Biyatov / RIA Novosti

Aircraft for airlines are the main means of production. Since these are expensive assets worth many tens or even hundreds of millions of dollars, many airlines prefer or are forced not to acquire ownership of aircraft, but to lease them, financial or operational.

Financial leasing, with a number of reservations, is an installment sale, while during the leasing period the aircraft remains on the balance sheet of the leasing company, and upon completion it becomes the property of the carrier or is redeemed at the residual value. Operational leasing, also with a number of reservations, is the lease of an aircraft; at the end of its term, the aircraft continues to remain, as it was, in the ownership of the leasing company.

A financial lease is usually concluded for 15 years, and an operating lease is for five years. With operating leasing, the airline can reduce its costs by 15-20%, since it does not buy the aircraft. In general, this is a more flexible tool that allows airlines to more quickly maneuver their carrying capacity in the event of market changes.

And the stormy times are already here. Obvious problems with air carriers began a year ago. Previously, in 2012-2013, airlines had hoped for a demand growth of 12%, but at the end of 2014 they faced the problem of an overabundance of carrying capacities, and the almost two-fold depreciation of the ruble hit the economy of air transportation painfully. The total losses of Russian airlines in the first half of 2015 tripled compared to the same period of the previous year and amounted to 28 billion rubles. According to the Russian Association of Air Transport Operators (AET), airline direct costs increased by 25% over the period, with fuel costs up 17% and lease payments up 45%. “Lease payments are huge. Operating leasing can still be pulled, but it makes no sense to spend money on buying an aircraft, ”says the CEO of a small airline engaged in regional transportation, who wished to remain anonymous.

In general, relations between air carriers and leasing companies have become more strained. In the spring, seeing the problems of carriers, many lessors agreed to a restructuring of payments, that is, they allowed airlines to fly on credit in order to pay off their debts at the end of the high summer season. However, there are serious suspicions that even during the usually most profitable third quarter, many carriers failed to break even, and the fourth quarter will definitely be unprofitable. As a result, airlines' debts to lessors are growing, and this may result in further problems.

Operational advantage

“Operational leasing is more common for typical assets, since, for example, a unique object is more difficult to rent out and then return and transfer to another. And for cars, railway rolling stock and aircraft, this is quite a common situation, since each such asset is quite consistent with its type,” says Pavel Piskun, director of the international business development department at Sberbank Leasing.

In the case of aircraft, a certain role is played by the fact that they are operated according to strictly defined and strictly observed rules, the technical condition of the aircraft and all work with it is documented, so that the lessor always has a clear understanding of how his asset is operated, in what condition supported and what residual value it has.

As lessors admit, deals are becoming more risky nowadays, and here it is necessary to emphasize the fundamental difference between financial and operational leasing. In the first case, the main risks are concentrated on the lessee. As many large Russian leasing companies said some time ago, “we work only with reliable clients,” but the experience of Transaero Airlines showed that they were mistaken.

Most of the transactions were concluded under the so-called sale-leaseback scheme (SLB, Sale-Leaseback). In a typical SLB deal, the airline itself orders aircraft from the manufacturer according to its needs, makes all upfront payments, but when the delivery date approaches, sells the ordered aircraft to the leasing company and leases them from it. The company is usually selected based on the results of a tender - who will offer lower leasing rates. In fact, the role of the leasing company in the SLB deal is to attract the cheapest possible long-term loans, the leverage in such transactions reaches 90-95%. Not surprisingly, the subsidiaries of the largest Russian banks, which had good credit ratings and access to international financial markets, were able to make good progress in competition with foreign leasing companies.

SLB transactions are attractive when the market is stable, besides, with large volumes of financing, they have a small margin for leasing companies. At the same time, the financial reliability of the lessee airline is a fundamentally important criterion, because if the carrier turns out to be insolvent, cannot pay and returns the aircraft to the leasing company, it will have a serious problem in finding a new customer, and the aircraft at this time will stand and cause huge losses. Although the subsidiary leasing companies of Russian banks are gaining experience in remarketing aircraft in the secondary market, they still lack it. However, now, solving problems with Transaero aircraft, they are gaining this experience at an accelerated pace.

Working under the operating lease scheme transfers risks from the client's solvency to the quality and liquidity of the asset, that is, the aircraft. This, of course, imposes increased requirements on the level of competence of the leasing company - market and technical, in order to solve the problem of aircraft remarketing as soon as possible.

In Russia, the Ilyushin Finance Co. (IFC) leasing company has traditionally worked according to this business model, which itself buys aircraft for subsequent placement on the market. IFC has a smaller volume of transactions compared to the largest leasing companies, as it deals exclusively with aircraft equipment and is the largest in this leasing segment in Russia. The company has its own marketing and technical service specialists. Through this approach, the IFC can rely more on aircraft as financial assets, and not just on the reliability of airlines as payers.

"Wet" leasing

Typically, operating leasing means the so-called dry (dry) leasing - the airline leases the aircraft, but at the same time provides it with its own crew, maintenance and insurance. Another option - "wet" leasing - is still banned in Russia (this is a legacy of the early 1990s, when it was easier to ban than to regulate), but it has spread all over the world. In this case, the airline rents the aircraft together with the crew, and the lessor is also responsible for the technical condition of the aircraft and insurance. This is the most flexible type of leasing, which allows airlines to very quickly, within the season, increase their carrying capacity or, conversely, temporarily get rid of the excess.

The "wet" leasing scheme can be used to promote the new Russian regional aircraft Sukhoi Superjet 100 (SSJ 100) on the world markets. Since this is a new product on the market, an interested foreign airline can take a few aircraft from the Russian carrier Red Wings and test them in their own conditions on their route network. For Red Wings, the aircraft lessor will be IFC, which promotes the SSJ 100 on the world market.

“Currently, commercial negotiations are underway on this topic with airlines from Cambodia and Laos, it is necessary to finally agree on the numbers,” says IFC CEO Alexander Rubtsov. — We also met with three or four companies from Iran who want to get the SSJ 100 on a “wet” lease. And if this country opens up for deliveries, I think that we will definitely transfer several cars to Iran.”

Another promising area of ​​IFC's work in the world market is the leasing of the latest Canadian regional aircraft Bombardier CSeries CS300. “The winner is the one who takes the new generation aircraft, because they provide a qualitative leap in their efficiency,” says Alexander Rubtsov.

During the Dubai Air Show in early November, IFC signed a letter of intent to lease two CS300s, which will be delivered to the customer under a financial lease in the second half of 2016. The parties agreed to conclude a firm contract by December 1, 2015, but the name of the customer was not disclosed at the time the issue went to print.

So the changed realities are forcing IFC to develop new types of leasing, in particular “wet” leasing, since this option is the most attractive marketing tool for carriers who can check whether they like the aircraft before ordering more of these machines. Quite a bold step, given that none of the Russian leasing companies have done this before. But in difficult times, you have to invent non-standard approaches.

What is "wet" leasing in aviation? What is it for? We will answer these and other questions in the article. Aviation leasing refers to the version of leasing that is used to purchase and operate steel birds and their associated equipment and infrastructure. This discipline combines the systems of project royalties and marine leases.

Operating lease

It is known that "wet" leasing is an integral part of the operating one. airlines and manufacturers use several different systems for the supply of aircraft for rent. Two of them are basic: financial leasing and operational leasing.

Commercial aircraft are often leased through Commercial aircraft sales and leasing (CASL), the two largest of which are GE Capital Aviation Services (GECAS) and International Lease Finance Corporation (ILFC).

Operating leases are usually short-term. It lasts less than ten years, which makes it attractive when the liner is needed to launch a project (firm) or trial expansion of an official transporter.

Due to the short term of the operating lease, the airliners are protected from wear and tear. This point in most countries is the most important due to the frequently modified laws regarding the environment and noise. And what about the states where airlines are less creditworthy (for example, the countries of the former USSR)? Here, operating leasing is the only way to purchase an aircraft for an airline.

In addition, it gives the company flexibility: it becomes able to manage the composition and size of the fleet, reduce and expand it in accordance with demand.

Depreciation

Under operating leasing, aircraft equipment is not depreciated in full during the lease period. At the end of its term, it can be rented out again or returned to the owner. On the other hand, the residual value of the aircraft at the end of the lease is important to the owner. The owner may request that the returned equipment undergo maintenance (for example, C-check) in order to hasten the transfer to the next operator. Just like in other leasing areas, a security (guarantee) deposit is often required in air rent.

How does "wet" leasing work in Russia? In an operating lease, the delivery period for aircraft is no more than seven, sometimes ten years. The customer must pay leasing payments monthly, their amount depends on the term of the contract.

special form

So, what is "wet" leasing? This is a special type of operating room, when the aircraft is leased along with the crew. That is, when an aircraft, its crew, insurance (ACMI) and maintenance are entrusted by one airline (lessor) to another or another type of business acting as an air travel intermediary (lessee), paying administration by the hour.

The tenant supplies fuel, the payments also include taxes, airport charges, any other duties, and so on. His flight number applies. "Wet" leasing, as usual, lasts from 1 to 24 months. A shorter lease is treated as a short-term charter flight on behalf of the client.

Practice

"Wet" leasing (wet leasing) is usually used during the peak seasons of transportation or when opening new flights, or during mass annual inspections of the technical situation. Airliners obtained through this type of lease can fly in countries where lessees are prohibited from operating.

This discipline can also be a form of charter whereby the lessor provides basic work services, including ACMI, and the lessee balances the assistance received against flight numbers. In all other forms of charter, the lessor also issues flight numbers. Various wet leasing options can also be code-shared with seat reservations.

Political reasons

Wet leasing is a great tool. It may be used for political reasons. For example, EgyptAir, an Egyptian state-owned company, cannot carry passengers to Israel under its own name due to the policy of its state. As a result, Air Sinai manages the flights of this country from Cairo to Tel Aviv. To evade this political issue, it is it that provides the "wet" lease to EgyptAir.

In the UK, this discipline is called the operation of an aircraft under the air operator certificate (AOC) of the lessor.

Qualities

What else is good about “wet” aircraft leasing? It consists of mandatory maintenance of equipment, its repair, insurance and other operations for which the lessor is responsible. At the request of the tenant, in addition to these services, the owner can train qualified personnel, engage in marketing, supply raw materials, and so on.

The subject of this type of leasing is most often complex specific devices. Wet leasing in most cases is used either by their manufacturers or wholesalers. Banks and financial institutions rarely resort to this type of transactions, as they do not have the necessary technical base at their disposal.

In practice, there are many forms of leasing agreements, but they cannot be considered as separate types of lease transactions.

Rental forms

"Wet" leasing involves many different nuances. In international practice, the following forms of lease transactions have become the most common:

• In accordance with the leasing to the “Supplier”, the seller of the equipment also turns into a lessee, as in a return transaction. But the leased property is not used by him, but by another tenant, whom he must find and hand over to him the object of the contract. Sublease is a mandatory condition of such contracts.
• Leasing "Standard" provides for the sale of the object of the transaction to a financing organization, which, through its leasing companies, rents it to consumers.
• With a renewable form, the agreement provides for the periodic replacement of equipment at the request of the tenant with newer models.
• General leasing is the right of the tenant to increase the list of equipment received without concluding new contracts.
• Joint-stock (group) leasing - leasing of large objects (towers, ships, aircraft). In such transactions, several enterprises act as the owner of the equipment.
• Contract leasing is a special form of leasing, in which the tenant is provided with complete fleets of cars, tractors, road construction and agricultural machinery.
• When a lessor receives a long-term loan from one or more creditors for up to 80% of the leased assets, a leveraged lease occurs. Here, the creditors are large investment and commercial banks that own impressive resources attracted for a long time. Leasing transactions are financed by banks through a loan or purchase of liabilities.

These are just the most popular forms of leasing contracts. In practice, a combination of different forms of agreements is possible, which increases their number.

commercial aircraft

And yet, why is aviation leasing necessary? It is used because of the high cost of airliners. For example, Boeing 737 Next Generation in 2008 cost about 58.5-69.5 million dollars. It is used by Ryanair and Southwest Airlines. In general, few airlines can afford to pay for their fleet in cash, as they have low profit margins.

Commercial steel birds are purchased by airlines through more sophisticated financing and leasing techniques (leveraged and borrowed). The most popular schemes for allocating commercial aircraft are financial and operating leasing, secured loans. An example of a wet lease agreement can be obtained from any relevant firm. There are other options for paying for aircraft:

• bank loan or financial lease;
• real money;
• operating lease and sale or finance lease;
• manufacturer support;
• tax leasing;
• EETCs (Equipment Certificate of Trust).

These schemes primarily relate to tax and accounting. They include interest, depreciation of tax deductions and operating costs, which can reduce the tax liability for the financier, operator and lessor.

Private airliners

Leasing to purchase a private jet is identical to a car loan or mortgage. The basic transaction for a corporate or small personal aircraft can be made in this way:

• the borrower provides basic data about the expected aircraft and about himself to the lender;
• the lender finds out the price of the aircraft;
• the lender searches for the property by the ship's registration number to find problems in ownership;
• the lender prepares materials for the transaction: a security agreement, from a third party (if the borrower turned out to be less creditworthy).

At the conclusion of such a transaction, credit documents are drawn up, the right of ownership and funds are transferred.

Modern airplanes and helicopters are expensive. For example, the list price of a new, modern Boeing 737 MAX reaches $129.9 million. If you want to organize a small airline that has at least 5 such aircraft in the state, the business owner will have to pay almost 650 million dollars. Therefore, many global air carriers use aircraft leasing.

What is aviation leasing

Aircraft leasing as a financial service can be compared with leasing or lending for the purchase of aircraft, which are the main means of providing the service. It all depends on the terms of the concluded agreement, which may involve both the lease of an aircraft with a subsequent purchase, and without it.

Distinctive features of leasing agreements in aviation is the ability to get all the necessary infrastructure, equipment and even pilots along with the aircraft. Contracts are concluded both for completely new aircraft and for those that were in operation with other air carriers.

Operating leasing and its types

There are two main types: operating and financial leasing. Operating lease agreements are concluded for up to 10 years and are optimal when launching a new airline or expanding the air carrier's route network to new destinations for which there is no business data yet. Another advantage of such agreements is that airlines can quickly expand and reduce their fleet based on demand and flight occupancy.

An important aspect of such contracts is the incomplete depreciation of equipment and after the end of the lease period, the aircraft can be returned to the lessor. Or the lease term can be extended. Russia is characterized by contracts for up to 7-10 years.

Wet leasing

Wet leasing is a type of agreement in which the aircraft itself, the full crew, maintenance and insurance are leased. In this case, the end user of the aircraft usually pays for this service using an hourly rate. Such contracts are concluded for a period of 1 to 24 months. As a rule, wet leasing is used during peak loading, the opening of new routes, or when the main aircraft of the lessor are undergoing major maintenance checks and repairs.

A variation called wet or wet leasing is different in that the lessee himself provides the cabin of the aircraft with flight attendants. Mainly used in the UK.

Dry leasing

Roughly speaking, the lessor provides a naked aircraft without registration, insurance, maintenance, crew and other things necessary for operation. Such contracts are usually concluded for a period of 2 years and include certain maintenance obligations.

financial leasing

Financial leasing (aka capital) - occurs according to the scheme when the lessor acquires an aircraft through a combination of collateral and financing by issuing new shares, and then leases it to the operating company. The operating company can receive the aircraft automatically after the expiration of the contract, or buy it back at the residual value. In Russia, the term of such contracts, on average, is 15 years, and the advance payment is up to 10%.

Alternatives: other ways to acquire aircraft

In addition to the common classical schemes of operational and financial leasing, there are alternative ways to acquire an air fleet:

1. Operating lease + sale or leaseback.
2. Bank loan or financial lease.
3. Cash (buyer's own funds).
4. Credit for the export of a guaranteed loan.
5. tax lease.
6. Producer support programs (usually national).
7. Trust (trust) certificate for equipment.

Leasing companies: who provides the service?

There are a large number of leasing companies, both Russian and foreign, on the world market. As a rule, they are all associated with large financial groups and banks. About 45% of the world's air fleet is leased. We present some of them in the table.

Video interview

Andrey Lipovetsky, Ilyushin Finance Co. Short interview 2018.

Financial conditions

We have provided financial terms from three major Russian companies so that you can evaluate the financial component of transactions.

System Leasing 24 (VTB Group) enters into agreements on the conditions presented in the table.

Alfa-Leasing (Alfa-Group) offers the conditions indicated in the table below.

Standard conditions for MKB-Leasing: