How Leaseback Works

An aircraft leaseback arrangement is straightforward in concept: you own the aircraft, and a charter management company operates it on a charter certificate, selling flights to third-party passengers when you are not using it. Charter revenue is split between you (the owner) and the management company according to agreed terms.

The mechanics involve several components:

1. Management agreement: You enter into a management agreement with a Part 135 (FAA) or AOC (EASA) certificate holder who will operate your aircraft for charter. This agreement defines the revenue split, management fees, scheduling priority, maintenance responsibilities, and operating standards.
2. Charter operations: The management company markets your aircraft to charter clients, handles booking, dispatch, crew scheduling, and all operational aspects of charter flights. You receive your share of charter revenue, typically monthly.
3. Owner use: You retain priority access to your aircraft. Most agreements provide 24-72 hour booking priority — if you request the aircraft, charter bookings are not accepted for that period. Some programmes offer guaranteed availability with no blackout dates.
4. Cost allocation: Operating costs are typically allocated between owner use and charter use based on flight hours. Charter revenue offsets costs attributable to charter operations and contributes to fixed cost recovery.

Revenue Split Models

There are several common models for sharing charter revenue:

Percentage Split

The most common model. Charter revenue is split between the owner and the management company, typically 60-85% to the owner and 15-40% to the management company. The exact split depends on the aircraft type, utilization, and the management company's cost structure. Under this model, your revenue varies with charter activity — more flights mean more income.

Guaranteed Income

Some management companies offer a guaranteed minimum monthly income regardless of actual charter activity. This provides income predictability but typically results in a lower overall return than a percentage split in good market conditions. Guaranteed programmes are attractive to owners who prioritise financial certainty over maximum revenue.

Cost-Offset Model

Under this model, charter revenue first covers the aircraft's variable operating costs, then fixed costs, with any surplus shared between owner and operator. This approach ensures that charter operations never cost the owner money — the worst case is zero revenue, not a loss.

Financial Impact

The financial impact of a leaseback programme depends on the aircraft type, base location, availability, and market conditions. Realistic expectations for a well-managed leaseback programme:

• Light jets (Phenom 300, CJ4): Charter revenue can offset 25-40% of annual operating costs. Annual charter revenue: $200,000-$500,000 depending on utilization.
• Midsize jets (Challenger 350, Latitude): Revenue offset of 30-50% of operating costs. Annual charter revenue: $400,000-$900,000.
• Large cabin (G650, Global 6000): Revenue offset of 35-60% of operating costs. Annual charter revenue: $800,000-$2,000,000+.

These figures are illustrative and depend heavily on specific circumstances. Plane Selection provides detailed financial modelling for your specific aircraft and situation before you commit to any programme.

Aircraft Requirements

Not every aircraft is suitable for charter leaseback. Requirements typically include:

• Age and condition: Most charter operators prefer aircraft less than 15-20 years old with current maintenance, avionics, and interior. Older or higher-time aircraft may be accepted for specific market segments.
• Maintenance programmes: Enrollment in engine and APU maintenance programmes (JSSI, CorporateCare, MSP, etc.) is typically required for charter operations.
• Insurance: Charter operations require higher insurance coverage limits than private use. The management company typically arranges this, but the cost is passed to the owner.
• Regulatory compliance: The aircraft must meet all regulatory requirements for charter operations, including any required modifications, equipment, or certifications.
• Crew: Charter operations require crews that meet Part 135/AOC training and currency requirements. The management company typically provides crew or ensures your existing crew meets these standards.

Tax Implications

Charter leaseback programmes have significant tax implications that must be carefully considered:

• Business use: Charter operations establish the aircraft as a business asset, potentially qualifying for business-related tax deductions and depreciation
• Revenue recognition: Charter income is taxable and must be properly reported
• Expense deduction: Operating expenses attributable to charter use are generally deductible as business expenses
• Sales tax: Charter use may affect sales and use tax obligations, which vary by jurisdiction
• Depreciation: Business use through charter supports depreciation deductions that may not be available for purely personal use

We strongly recommend working with a tax professional experienced in aviation to evaluate the tax implications of any leaseback programme before entering into an agreement.

Selecting a Management Partner

The management company you choose will operate your aircraft, interact with charter clients, and significantly influence your experience as an owner. Key selection criteria include:

• Safety record and audit ratings (ARGUS, Wyvern, IS-BAO)
• Fleet size and composition (type-specific experience)
• Geographic coverage and market presence
• Revenue performance track record
• Transparency of financial reporting
• Maintenance management capabilities
• Quality of crews and training programmes
• Owner satisfaction references

Get a Leaseback Assessment

Considering a leaseback for your aircraft? Contact Plane Selection for a complimentary assessment. We will analyse your aircraft, location, and personal use requirements, model the financial scenarios, and recommend the best programme structure and management partners for your situation.