Wet Lease, Dry Lease: The Aircraft Terms Everyone Pretends To Understand

One of the ways an aircraft owner can generate revenue to offset ownership costs and make up for low utilization is to lease their aircraft to a third party. The leased aircraft can be used by that third party for private flights or, if certified as a commercial operator, air charter flights. Leasing transfers possession of the aircraft to the lessor without transferring the ownership. 

The type of lease will determine who has liability and operational control, as well as the charter fares. With non-exclusive leases, for example, the owner can furnish an aircraft to more than one lessee simultaneously, with operational control switching between the lessor and each lessee on a flight-by-flight basis. 

There's no limit on the number of parties with which an aircraft may be leased. What's more, some lease contracts permit the lessee to sublet the aircraft to yet another operator. Unfortunately, the same aircraft being used by multiple operators has led to safety issues, operational control questions, and accident liability confusion.

Dry Versus Wet

Leasing contracts typically are arranged as “dry” or “wet.” Under a dry lease, an owner of an aircraft supplies only an aircraft. The lessee is responsible for the crew, maintenance, insurance, and other necessary support services. As such, the lessee (individual or operator) has operational control of flights and the accompanying risks.

For example, Heather owns an aircraft. She provides it to Chad, who may use it to sell charter flights under the terms of a dry lease. Chad pays a fee to operate the aircraft to provide charter lift, but is responsible for providing the crew, maintenance and insurance.  Ordinarily, this lease option requires the lessor to have a commercial operating certificate from the FAA. 

Alternatively, a wet lease is an agreement in which a lessor provides or arranges for crew, insurance and maintenance. This lease option also requires the lessor to have a commercial operating certificate from the FAA. In this scenario, Chad pays one fee to operate the aircraft, and virtually everything is included (possible additional costs could be things like deicing, fuel, and catering).

Exceptions to both the dry and wet lease commercial certification requirements include fractional operators, such as NetJets, who fly aircraft for their shared owners under non-commercial regulations.

Wet-leased aircraft charter passenger fares are much higher than dry-leased rates because the lease includes aircraft, crew, maintenance, and the costs of overflight and airport fees, insurance, ramp fees, taxes, and other expenditures. A wet-lease also means operational control of the flight lies with the owner (lessor), releasing the charter operator (lessee) from any safety or operational responsibility. 

With a dry lease, the operator or lessee can potentially spread the fixed aircraft costs over many hours by using his or her own crew and maintenance, which can be cheaper per hour. But if you are not experienced and knowledgeable when it comes to aircraft charter, this is a risky decision.

Be vigilant. An owner that claims to be dry leasing its aircraft is violating FAA regulations if that owner provides or arranges for even one of the required crew or any other necessary support services.