A wet lease is a leasing arrangement whereby the lessor (one airline or aircraft operator) provides an aircraft, complete crew/only cockpit crew, maintenance, and insurance (hull and third party liability) to the lessee (another airline or aircraft operator), which pays by hours operated. The term ACMI is an acronym signifying the four main elements of a wet lease which are; Aircraft, Crew, Maintenance and Insurance.
Commercial Aircraft Operators can resort aircraft leasing in order to obtain newer aircraft models, fleet flexibility to initiate new routes or aircraft types, flexibility to increase or decrease capacity quickly, no residual value risk, lower cash outlays to preserve working capital.
1. Short Term Wet Lease
Turkish Civil Aviation Act numbered 2920, 5431, Regulations and Instructions of Ministry of Transport regarding Aircraft Leasing are the fundamental basis for aircraft leasing between domestic and international aircraft operators. In this regard, international aircraft operators are able to lease an aircraft from a local aircraft operator within the conditions of:
- Lessee and lessor should hold a valid operating license and lessee, international aircraft operator, should be licensed by a civil aviation organization which is a member of ICAO
- Wet leased aircraft shall be airworthy during the leasing period
- An authorization of the wet leased aircraft owner shall be stated on financial leasing agreement regarding wet leased aircraft which imported by financial leasing and registered to Turkish Civil Aircraft Register
- Short term wet lease agreement should include the course line/route, flight/operation dates, and division of liability between parties regarding technical, operational and insurance liabilities.
- Insurance certificates for both parties shall be issued in order to comply with liability provisions stated on the short term wet lease agreement. In addition, it shall be determined on the agreement that the certificates aforementioned shall be valid for leasing likewise.
In practice, short term wet leasing agreements enter into force without permission of Directorate General of Civil Aviation. Notwithstanding, a chart should be filled and submitted in order to inform Directorate General of Civil Aviation about the wet leasing agreement. Although the provision aforementioned provides convenience for lessee and lessor, it is limited for operations up to 72 hours flight per month. In the event of a short term wet lease agreement for operations exceed 72 hours per month, it shall be deemed as a regular wet lease agreement and be included to the terms and conditions of wet lease agreements and requires permission from General Directorate.
In the context of Turkish Civil Aviation Act, managing directors of the aircraft operators (lessor-lessee) shall be responsible from the accuracy, validity and up-to-datedness of documents regarding aircraft wet leasing. For the wet lease and short term wet lease operations; technical, operational and other administrative liability of the operation shall be rely on lessor of the wet leased aircraft during the leasing period and commercial responsibility shall be rely on lessee. These provisions shall be determined on the leasing agreement.
In addition to the liabilities of wet leasing parties, Turkish Civil Aviation Act regulates a requirement in order to notify passengers about the wet leased aircraft. In this context, local aircraft operator, which lease aircrafts from another local aircraft operator or international operator, shall be required to inform its passengers as soon as possible or at least before on board about the de facto operator, which is in fact the lessor operator.
On the other hand, short term wet lease shall be possible to a local aircraft operator for permission granted flights only. In addition, lessor operator should be operating the wet leased aircraft for minimum one year and the wet leased aircraft should hold the noise certificate which complies with the standards of ICAO Appendix16 /3, 4, 5, 6, 7, 8, 11.
2. Wet Lease
According to Turkish Civil Aviation Act, general wet lease agreement requires the approval of Directorate General, which shall be valid for maximum 6 months, in order the operate wet leased aircraft. The application shall be made 30 days before the operation date, to obtain the approval proving all the necessary documents to the Directorate General.
The lessor shall remain as the operator of the leased aircraft providing that all duties and responsibilities are effective, which are stated on its operation license. Operation of the wet leased aircraft, crew training and competency, maintenance of the wet leased aircraft and all other responsibilities shall be born by the lessor. Lessee shall solely take the commercial responsibility and this subject matter shall be stated explicitly on the wet leasing agreement. However, the number of wet leased aircrafts of lessee can not be more than the number of its fleet. All the necessary technical and operational controls shall be made by the local operator. Moreover, in case of a loss of the standards determined by Directorate General, the wet lease agreement shall be canceled.
In conclusion, wet lease (ACMI) agreements, which regulated by Turkish Civil Aviation Act and its Instructions, are ideal and convenience for startup airlines, new route studies, seasonal or sudden demand peaks. In addition, it is possible to say that wet lease agreements also fulfill the interim needs created by long term fleet expansion plans whilst maximizing market share in the immediate term.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.