An Aircraft Owner's Guide to Aircraft Leasing

AOPA's An Aircraft Owner's Guide to Aircraft Leasing

Introduction

Leasing is one way to reduce the costs of owning an aircraft. A properly structured leaseback in the right market may help reduce the cost of your flying and earn you a profit.

The term leaseback originates from the days when aircraft dealers were located on practically every corner of the airport. In order to increase sales of new aircraft, dealers would entice prospective buyers with the idea of buying a new aircraft and then leasing it back to their fixed-base operator (FBO). The buyer would simply come up with a small down-payment, sign a contract with the FBO, and the revenue generated by the airplane would pay for itself and then some! Today, leaseback is used to mean leasing an aircraft to any customers who want to rent your aircraft. For the purposes of this booklet, we will use the term "FBO" to represent the organization that is leasing the aircraft from the owner.

A successful lease arrangement depends on many factors, including choosing the right FBO, aircraft selection, maintenance, your realistic expectations of the lease, and the terms of your lease contract.

The best way to think of the process may be to consider the "lease" just like starting a small business, since you're going into business to make a profit. And as you'll see later in this review, a proper business approach is necessary to satisfy the IRS.

Table of Contents

Articles from AOPA Pilot and AOPA Flight Training

Careers: Two engines, half price
Multiengine leasebacks
By Wayne Phillips
AOPA Flight Training, July 2004

Chances are that the very aircraft you flew on your way to FAA certificates and ratings were not owned by the flight school, but by one person or a group of private individuals. The school merely "borrows" that airplane for training or rental to certificated pilots for personal transportation. In what is historically known as a leaseback, the school or FBO leases the aircraft and markets and rents it; tends to maintenance, fuel, and other direct and indirect costs; and remits to the owner a residual percentage of the rental fees each month. In such a scenario, it is common for the renting agency to keep 40 to 45 percent of the hourly rental charge.

Pilot Counsel: Private vs. commercial operations
By John S. Yodice
AOPA Pilot, July 2003

Sometimes important law is made or interpreted in decisions of the National Transportation Board. Here is a decision that deals with the often-elusive line between private and commercial air operations.

State Rules: Aircraft sales and use taxes
By Patti Arthur
AOPA Flight Training, November 1998

If you're thinking about buying (or selling) an aircraft, take some time to learn a little about your state's sales and use tax system. The state sales and use tax system is complicated because each state has its own way of doing things. And when it comes to aircraft, matters can get particularly sticky because of an airplane's inherent mobility.

To Lease or Not To Lease: Can you make an aircraft work for you?
By Patti Arthur
AOPA Flight Training, July 1998

Aircraft leases can be rather confusing to the uninitiated. If you're an aircraft owner and you're thinking about leasing your aircraft to a flight school or other individuals, you should understand some basic rules and terminology. In addition, to avoid potential future problems you should speak with people who know about the leasing process. It's also important to find out what types of leasing activity the FAA sees as air chartering.

Aircraft Financing 101
There's More Than One Way To Buy
By Amy Laboda
AOPA Flight Training, July 1997

So you want to buy an airplane, but paying cash is out of the question.

The Inevitable — Taxes: An Overview Of State And Federal Pitfalls And Benefits
By Joanne M. Barbera
AOPA Flight Training, April 1997

Congratulations on your new aircraft! You're sure to enjoy it, but whether your aircraft is entirely yours or mostly the bank's, one thing is common to all — taxes. Many states tax the purchase of aircraft, parts, fuel, aircraft leasing, aircraft modification, and repairs. The federal government taxes fuel. Owning and operating an aircraft may also have federal income tax consequences. If you're a first-time owner, or thinking about becoming one, here's what you have to look forward to.


Updated Friday, June 18, 2004 12:14:55 PM