The complex world of freighter aircraft leasing

Amazon's fleet took to the air via a complex series of leasing transactions.
Amazon’s fleet took to the air via a complex series of leasing transactions.

Today we begin a multi-part series on the increasingly complex world of freighter aircraft leasing. We start with a look at how leasing has evolved from a relatively straightforward agreement in which a company that owns an aircraft leases it to an airline, to the complex set of agreements exemplified by the operation of the Amazon Prime Air fleet.

It’s simple, right?

If you want to add another aircraft to your fleet, you can either buy it, or lease it. You do a few simple financial calculations, think a bit about how long you’re likely to operate the new plane and what you’ll do with it at the end of that time, and then decide – buy, or lease.

If only it were that simple.

Perhaps, decades ago, freighter leasing might have been a relatively straightforward decision, but it is far from that now. Aircraft finance has become fiendishly complex, and leasing has long since evolved into multiple, very different, alternatives. With all of those complexities and alternatives on offer in a world that now has almost 9,000 airlines and 400 lessors, the result is a tangle so Byzantine that unraveling it seems impossible.

However, if we leave the complexities of finance to the experts, and if we look only at those lessors that own freighter aircraft, and only at airlines that operate leased freighters, the tangle is considerably reduced. But before we get to a lessor-by-lessor and airline-by-airline analysis, we start with a look at the three main types of aircraft lease in use today.

Dry lease: This is the classic leasing agreement, in which a lessor provides an aircraft to an airline (the lessee). Just an aircraft. The airline is then responsible for putting that aircraft on its own operating certificate, providing crew and ground staff, and insuring, maintaining, and fueling the aircraft. Dry leases are usually long term – usually at least five years and sometimes as long as fifteen years, with a fixed monthly fee.

ACMI lease: “ACMI,” an acronym for Aircraft, Crew, Maintenance, and Insurance, is used to describe a lease arrangement that might be thought of as an extended charter agreement. The lessor in this case is an airline which provides not only an aircraft, but also the crew, and operates the aircraft itself (on its own certificate) on behalf of the lessee – which may be another airline, or, as is increasingly the case in the air freight world, a forwarder or charter broker. The lessor is also responsible for maintaining and insuring the aircraft, while the lessee is responsible for filling the plane with freight, determining routes and schedules, and for operating expenses such as ground handling, landing fees, and fuel. ACMI leases usually run for a term of one-to-three years, with the lessee guaranteeing payment for a minimum number of block hours per month, plus additional fees if the minimum block-hour level is exceeded.

CMI lease: Becoming increasingly popular, a CMI lease is like an ACMI lease without the “A”. That is, in a complete reversal of the classic dry lease, it is the lessee that provides the Aircraft, while the lessor provides the Crew, Maintenance, and Insurance. If recent CMI agreements are anything to go by, lease terms tend to be between five and seven years. And, oddly, CMI agreements are often combined with dry leases – Company A dry leases an aircraft to Company B, then Company B hands the aircraft back to Company A which then operates it for Company B.

If that sounds complicated, perhaps a few examples will help clarify things. We’ll use Atlas Air Worldwide Holdings (AAWW) in the examples, because it is involved in all three types of leasing, often both as lessor and lessee. AAWW is the parent of several airlines (Atlas Air, Polar Air Cargo, and Southern Air), and also owns a leasing company, Titan Aviation Leasing.

Another interesting twist on the whole leasing game has been pioneered by US-based Air Transport Services Group. ATSG is the parent company of two airlines (ABX Air and ATI) as well as leasing company Cargo Aircraft Management. Like Atlas, ATSG operates its own freighters (through its airline subsidiaries) for other carriers on an ACMI basis, operates freighters owned by other companies on a CMI basis, dry leases freighters to other carriers through its CAM subsidiary, and also uses the combination-of-lease-arrangements in its own 20-aircraft deal with Amazon (in fact, ATSG was the first aircraft provider/operator to work with Amazon).

But ATSG has also developed what it calls the “Wet-to-Dry” concept through another subsidiary, Airborne Global Solutions (AGS). Through AGS, an airline can transition through all the stages of the cargo game with minimal risk, starting with an ACMI lease (which, in the past, was often referred to as a “wet” lease) under which one of ATSG’s carriers operates a freighter on an ACMI basis. Then, when the lessee is ready to make the transition, it can transfer to a long-term dry lease through ATSG’s Cargo Aircraft Management unit. Maintenance of the dry-leased aircraft can be handled through Airborne Maintenance & Engineering Service (AMES, a large MRO, and yet another ATSG subsidiary).

The chart at right, based primarily on information from ch-aviation, shows our best guess at the freighter aircraft portfolios of lessors worldwide. As mentioned above, there are close to 400 companies in the business of leasing almost 12,000 turboprop and jet aircraft to commercial airlines. Of these, 104 – just over a quarter – own 589 freighters.

Of course, to get to those numbers, we had to make some assumptions, and set some criteria.

First, just what is a “lessor”? For purposes of this analysis, we include those companies that own aircraft, and dry lease them to airlines. This eliminates ACMI and CMI operators, as well as aircraft managers – companies which don’t own aircraft, but which manage aircraft on behalf of the owners.

Quite a few lessors both own aircraft and manage aircraft for others, and as well have some of their aircraft managed by other lessors.

Further, lessors often create special-purpose vehicles (SPVs) to handle the financing and leasing of small groups of aircraft, sometimes even a single aircraft, within their portfolios. It can sometimes be easy to treat an SPV as though it were a lessor in its own right, but we have tried to keep them subsumed within the parent lessor.

There are many ways one could try to separate the threads of this tangle, but in producing the chart, we have treated as a lessor only those companies that own and dry lease aircraft.

Second, regarding the lessors’ portfolios, again there are choices to be made. Our choice is to count only those aircraft currently owned, in freighter configuration, and either on lease or available for lease. We’ll use GECAS as an example here. GECAS, in its media releases, often refers to the fact that its Cargo Aircraft Group has “nearly 100 freighters.” But this includes not only freighters currently on lease to airlines, but also aircraft on order. Since GECAS has placed orders for 737-800 passenger-to-freighter conversions with both Aeronautical Engineers (up to twenty) and Boeing (five), and has agreed to a purchase-and-leaseback deal for five 777Fs with Korean Air, the in-service total – which is what we show – is considerably less than 100.

Likewise, GECAS has a 747-400BDSF and a 727-100F currently in storage. The 727 is almost certainly not going to fly again, so we do not include it in our total. The 747, on the other hand, could well see service again, so we do include it.

Obviously, this is a judgement that has to be made on a case-by-case basis, and while some cases, like the 727-100F, above, are clear-cut, others, like the 747-400BDSF, are not. Not all currently parked 747-400 freighters are going to fly again, after all.

Finally, lessors are generally averse to publicity and do not publish detailed fleet information. Nor do federally required ownership records provide much clarity, as often ownership will be held through a trustee – usually a bank. Likewise, carriers often choose to keep ownership of their aircraft under wraps. So, the original data from ch-aviation, and our interpretation of it will almost certainly be less than 100% accurate.

Tomorrow, we’ll continue our examination of lessors that operate freighters, then, in Part III, turn to the carriers that lease those freighters.

To learn more about what lies behind a lessor’s choice to become involved in the freighter market, join us at the Cargo Facts Symposium, in Miami 10 – 12 March, where Rich Greener, who leads GECAS’ Cargo Aircraft Group, will participate in a session devoted to freighter aircraft conversion. To register, or for more information, go to

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