A service lease is an arrangement where the owner and lessor of the equipment maintains and services the asset and allows the asset operator operational flexibility by permitting the pick-up and drop off of equipment through the lease term. A service lease is much more expensive than a nonservice lease, under which the lessee is responsible for the maintenance, insurance and taxes as well as all other costs incurred in operating the equipment, and can be either a tax or nontax lease. Service leases are common in the transportation sector in the form of the wet lease of aircraft or time charter of marine vessels.
A typical aircraft lease is a wet lease, where the asset owner provides the aircraft, one or more complete crews (flight deck, cabin attendants and engineers) – including their salaries – as well as the maintenance and insurance necessary for the lessee to operate the aircraft, usually for a lease period of one to two years. The lessee does not take possession of the vessel, but provides in-flight services, fuel, navigation and airport fees, cargo insurance and, occasionally, insurance coverage for war risk. Similar to a wet lease, aircraft under a damp lease is provided with maintenance and insurance to the aircraft operator, but without cabin crew.
| Components of ACMI-Block Hour Rate | |||
|---|---|---|---|
| The Aircraft Lease | |||
| Aircraft crew to perform the flight schedule | |||
| Maintenance according to the maintenance program of lessor, including a line maintenance engineer | |||
| Costs of insurance that are for account of the lessor | |||
| Taxes levied on the net income of lessor | |||
| Depreciation and interest to the aircraft | |||
| Source: Denim Air | |||
A time charter is a contract between the registered or legal owner (lessor) of a marine vessel (ship, boat) and the time charterer (lessee) for a specified period of time under which the owner is responsible for crewing, maintenance and insurance of the vessel while the time charterer selects the ports, pays for the fuel, port and agency costs, the costs of dealing with the cargo and the charter hire. The time-charter hire is a specified amount, usually per day and payable monthly or semi-monthly in advance, for the charter and bunkers used by the ship. The lessee does not take possession of the vessel.