Many companies find it more advantageous to purchase aircraft rather than to create a lease arrangement. However, should their objectives change, aircraft owners can become lessees through a sale-leaseback arrangement.Under a sale-leaseback arrangement, the aircraft owner sells the aircraft to the lender or lessor who then immediately leases the aircraft back to the original owner.
Many lessors and lenders are willing to modify the terms of an aircraft lease to suit the specific needs and objectives of each client. Instead of thinking in terms of a particular type of lease, such as an operating lease or an off-balance sheet loan, it may be more helpful to think in terms of the features you desire in the lease. Below are questions to ask yourself about features that may be negotiable and some of the ways that one feature may impact another.
There are many ways to lease aircraft. The type of lease you need depends upon the needs and capabilities of your company. Here are a few examples along with some of the advantages and disadvantages of each.Operating leaseUnder a standard operating lease, the lessor will be owner of the airplane. However, the rent payments likely will be reduced to offset the tax advantages retained by the lessor.
Aircraft leasing is an alternative to purchase that may provide advantages to some companies. Whether it’s right for your company depends upon the specific needs and capabilities of the company.Control versus flexibilityIf you own the aircraft, you may have virtually complete control over its use. Depending upon the resale market for the aircraft and how long you are willing to hold it, you may be building equity. However, there is less flexibility with ownership.
Asset securitization segregates the assets to be securitized from the business of the securitization’s sponsor (the Originator) by transferring them to a special purpose vehicle (SPV), often a trust. The trustee of the trust usually subcontracts the administration and servicing of the securitized assets back to a subsidiary of the originator of the asset pool or a third-party provider.