ABSTRACT
This chapter describes the more technical aspects of leasing, differentiates between the different types of lease and indicates the advantages and disadvantages of each. The chapter focuses on aircraft, although there is no difference in principle with the arrangements for aircraft and any other asset. In 1980 the share of commercial jets owned or managed by operating lessors was around 4 per cent, climbing to almost 18 per cent in 1990, and to 28 per cent by 2004. A leveraged lease is one where the aircraft is acquired using a large amount of debt finance and a small amount of equity finance. Operating lease rentals vary quite significantly over the economic cycle, with lessors often accepting a short-term drop in monthly rentals to avoid re-marketing or even parking aircraft. An evaluation for a tax-paying lessee must take into account the delay between the payment of interest or rental and the cash benefit of tax relief.
