An operating lease allows a business to use a business jet for a defined period without taking ownership. At the end of the lease, the aircraft is returned to the lessor. Operating leases can offer lower monthly payments than ownership finance and may provide off-balance-sheet treatment under certain accounting standards, making them attractive for corporate users.
What is an operating lease?
Under an operating lease, you pay to use the aircraft for a defined period (typically 3–7 years) and return it at the end. The lessor retains ownership and residual value risk. Payments are typically lower than equivalent loan repayments because you are not paying down the full cost of the aircraft.
Who offers operating leases on business jets?
Global Jet Capital is the most active operating lessor in the business jet market. A small number of other international lessors (TVPX, ORIX Aviation) may also offer leases on specific types. UK clearing banks do not typically offer true operating leases on business jets.
Accounting treatment - IFRS 16
Under IFRS 16 (effective from 2019), most leases are recognised on the balance sheet as a right-of-use asset and a lease liability. True operating lease off-balance-sheet treatment is only available for short-term leases (under 12 months) or low-value assets. For a business jet, expect balance sheet recognition.
Return conditions
Operating leases typically specify the condition in which the aircraft must be returned - usually in a defined maintenance state (C-check complete, engines within specified hours of overhaul). Failure to return the aircraft in required condition results in a cash payment to the lessor. Maintenance reserves are typically held during the lease to fund end-of-lease requirements.