Well that's a very complex and personal decision. Many factors influence the decision process but basically these can be broken down into three main areas:
As this page is dedicated to aircraft leasing we will quickly remove the Charter element out of our equation, if the frequency of flights is infrequent and the number of hours per month low (i.e. 150hrs for a B737NG) then rent, charter or use the airlines (if for personal usage). The exception to this would be that if you don't hold, or have access to, an Air Operators Certificate (AOC) then you could conduct your flights under a public charter, please refer to the Organizational structure section below for further details.
Seasonal variations in aircraft capacity (such as summer vs. winter or holidays like Hajj etc.) can obviously cause issues, either not enough planes in summer or too many planes in winter! One way to overcome the shortfall in aircraft during the peak seasons is to utilize an ACMI lease agreement for the extra aircraft. If the airline has too many aircraft, either owned or dry leased, then they can offer their surplus aircraft in their low season to another airline that is in peak season.
Evaluating new routes via an ACMI lease allows an airline to test these routes over a short period of time as to whether it is viable or not. Part of the evaluation will be the sizing and economics of the aircraft, after the lease the aircraft can be returned to the lessor, lease extended/converted to dry, or an alternative aircraft can be acquired via other options.
As described in our Aircraft Leasing Definition page, lease agreements of less than two years are usually conducted under an ACMI agreement, over two years then it is more financially beneficial to either enter a dry lease agreement or purchase the aircraft.
If your organization does not have, or access to, or does not intend to obtain an AOC then you cannot lease an aircraft for a commercial operation. As previously mentioned, in this situation flights can only be operated under a public charter contract. A third party airline or aircraft operator would perform the flights under their AOC and be responsible for all aspects of the flight. Tour operators and small start-up airlines may well use this option rather than going through the certification process before start-up. See our Aircraft Charter page for further details.
Aircraft leasing can be very confusing to the uninitiated and if you are unfamiliar with the different types of leasing options available (i.e. ACMI, Dry, Wet and even Damp Lease), please review our Aircraft Leasing Definition page for some helpful in depth information. For the purpose of these articles ACMI (Aircraft, Crew, Maintenance & Insurance) & Wet Lease are viewed as the same type of lease and from here on out will be referenced as ACMI.
A major decision an aircraft Lessor makes when placing an aircraft leasing is to evaluate the risk factor! The two main types of leases (ACMI and Dry lease) have different risk factors. The owner/operator of an ACMI agreement retains control of the aircraft, and therefore, has more security over their asset than does the Lessor in a dry lease agreement as the Lessee has control of the aircraft throughout the dry lease period.
The Lessor of a dry lease agreement generally requires that the Lessee has a solid operating history, 3 years of positive financial statements and the sufficient funding, therefore, it can be difficult for an airline to lease an airplane without these requirements. In order for one to do so, the potential Lessee will need to provide the Lessor with a solid business plan, profile of the investors and senior management, and have clear proof of available funding. Please note that some Lessors may have different requirements.
Cost of purchasing an aircraft can be restrictive to an airline that wants to start or expand it's fleet, leasing allows the cost to be spread across several years. At the lease term the Lessee can either renew the lease or returned the aircraft to the lessor, to be replaced with more modern aircraft
Chattel Loan: This is a form of outright purchase where a loan is provided for the purchase so ownership of the aircraft is transferred to the purchasing company and the financier simply takes a mortgage over it. This type of arrangement is commonly used when seeking ownership of the unit at the end of the finance term as a residual or balloon payment is not required. Under a chattel loan the aircraft appears on the company balance sheet as titled to the aircraft has been transferred.
If after reviewing the information here you are undecided whether you should lease, charter or purchase an aircraft then please visit our Purchase Aircraft, Aircraft Charter or Aircraft Financing Aviation Library pages for more details on these options.