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Leasing is a great way to expand your flight school to meet demand without tying up capital, or locking your school into a purchase. Let’s face it, times are good right now, the pilot demand is going strong, but in good times it’s always wise to be prudent and to grow conservatively. For a flight school that maymean owning some aircraft, and leasing additional aircraft to meet today’s unprecedented need for commercial pilots. Leasing provides a way for flight schools to respond quickly to demand to increase your cash flow without forcing your business to accept a burdensome level of debt.
What is the difference between Leasing and “Leasebacks"?
We provide a simple aircraft Lease, which is very similar to what the airlines do with jets and jet engines, and what companies do with business jets and helicopters. The way it works is that the “Lessee”, in this case the flight school, is responsible for the fuel, maintenance and upkeep, and other costs like tie-down fees, taxes and avionics updates associated with operating the airplane, and they simply pay the “Lessor” a Lease rate that’s determined by an hourly charge and a minimum number of hours per month. The minimum hours per month is typically based on what the flight school has historically flown, and what they expect to fly going forward, and we work with schools to allow flexibility you can credit unused hours to the following month.
“Leasebacks” are typically entered into by new pilots who want an airplane and would like a tax write- off, but would like to defer some costs by having the airplane fly for a flight school.
There are tax issues associated with this type of relationship which are complicated and better left to tax professionals. Our experience is that this type of arrangement can create conflicts when a “Leaseback” owner might only want the flight school to fly a limited amount of hours, or may be critical of the typical wear and tear that can be expected with flight school use. It’s typical that the flight school ends up spending a great deal of energy and time managing the owners and “breaking the news” about maintenance charges rather than focusing on the flight students.
We focus on flight schools that want to maximize the use of their aircraft. In a typical Leaseback the owner often thinks of the aircraft as if it were his Ferrari, and conflicts can result when a flight school wants to fly the aircraft fifty to one-hundred hours a month. On the other hand with our leases we want you to make as much money on each aircraft as possible! We are looking for relationships with flights schools who see fifty hours per aircraft as a “slow month” and are targeting seventy-five to one-hundred hours a month. It has been our experience that for these exceptional flight schools leasing works very well, and is far more preferable than having to focus their attention on keeping individual “Leaseback” owners happy.
Isn’t Leasing more expensive than financing?
Of course when rates are low it can be possible to purchase and finance an aircraft for less than the cost of a lease. We typically recommend to our customers that in strong growth years when you have the credit available and the cash to cover a 25% downpayment it makes sense for a school to try to purchase one aircraft a year and lease additional aircraft to increase their cash flow, meet above average demand and grow their business. In this way leasing becomes a powerful tool to put an impressive fleet of aircraft on your flight line without having to put down 25% down-payments on new or used airplanes. This also provides a hedge against unexpected events that could lead to a drop in pilot demand. Unfortunately, we have been around long enough to see wars and global conflicts, the banking crisis, spikes in the price of oil, and other unexpected economic events lead to a crash in the demand for pilots. In these times the ability to simply give back an aircraft at the end of the lease term can be a blessing.