The Hindu Business Line : Wet lease for those wet behind the ears

Airline industry jargon can be notoriously difficult to understand. For instance, code shared flights aren't about secrets a la Da Vinci, as much as APEX fare isn't the highest. In all probability, you may toss in sleep if told about ghost seats, and be disappointed when free stopovers aren't enjoyable. Open jaw ticketing can make many a jaw drop, and yield management may remain as inscrutable as any other management term. And there are more, such as double booking, standby travel and tier pricing, which you can pick up on www.skitrips.net/faqs/

air/jargon.html.

However, a phrase that is missing on SkiTrips is `wet lease', that often pops up in news. `Pilot shortage leads Air India to seek wet-leases,' reads the headline of a Singapore-datelined report by Leithen Francis on www.flightglobal.com. "The national carrier is seeking up to four long-haul aircraft, two to be wet-leased for 11 months starting 1 October and two to be wet-leased for 21 months starting on October 1, according to details in a tender document posted on Air India's website," writes Francis.

Inability to get `enough captains' is the reason for `seeking wet-leases rather than dry-leases' informs a snatch, citing AI's spokesperson. If `wet lease' is airline-speak that makes you realise that you are wet behind the ears, or leaves you high and dry, here is a zero base to help.

A leasing agreement

"A wet lease is any leasing arrangement whereby a company agrees to provide an aircraft and at least one pilot to another company," defines Wikipedia. "A wet lease is typically utilised during peak traffic seasons or annual heavy maintenance checks, or to initiate new routes."

For starters, the FAA (Federal Aviation Administration of the US) defines an aircraft lease as "a contract by which one person grants the right of exclusive possession and use of a certain aircraft to another person for a specified period or a defined number of flights." Lease agreements can be dry, interchange, or wet.

In dry lease, the lessor agrees to provide an operator with an aircraft but no crew. "An interchange agreement is a form of a dry lease," explains www.faa.gov. "It permits one operator to dry lease an aircraft to another operator for short periods of time, thereby providing greater operational flexibility and use of large transport category aircraft by the operators." Interchange points are airports where an aircraft is transferred between the primary operator and the interchange operator.

"The transfer involves the replacement of the flight crew of one operator with the flight crew of the other operator."

On wet lease, there is a difference in definition between the FAA and the OST (the Office of the Secretary of Transportation in the US). The latter includes under wet lease `transactions commonly referred to as charters.' There is also the `damp' variety of lease, which happens when an air carrier provides less than an entire aircraft crew.

"Damp lease is a vernacular term once used in the UK meaning a wet lease with no fuel," states http://en.wikipedia.org. You may wonder if there are also soaked and soggy, drenched and dripping leases.

The Free Encyclopedia says that variations of a wet lease include `code share' arrangement (whereby `a flight operated by an airline is jointly marketed as a flight for one or more other airlines') and `block seat' agreement (that is, one airline selling seats under its own code in a different airline's cabin).

Wet lease is `basically ACMI (Aircraft, Crew, Maintenance & Insurance),' says www.globalplanesearch.com. "The period can go from one month to usually one to two years. Everything less than one month can be considered as ad-hoc charter." The site lists about 500 aircraft available on wet lease around the world.

One such is a 1997 Airbus A320, on offer at a monthly lease of $6,75,000. "Minimum utilisation: 250 block hours/month. Duration: minimum 6 months. Price per block hour: $2,700. Net/net including aircraft, crew flight deck + purser + maintenance and aircraft and third party liability insurance ONLY.

Cabin crew will cost extra per block hour," read the details on www.controller.com. Jagson Airlines has posted for `sale/lease/wet-lease' a 1983 Dornier on www.speednews.com, `the world's most comprehensive database of available commercial turboprop aircraft.'

The latest news report about wet lease is on www.qbr.com.au, and it is about Qantas' plans after increased fuel costs shaved off nearly a third of its profits.

The airline wants to establish a new subsidiary domestic airfreight business, called Express Freighters Australia.

"It will `wet lease' B737-300 aircraft to Australian air Express (AaE) under a 12-month contract," informs the story. "Qantas Engineering will carry out the conversion of the B737-300 aircraft for the new freight business at its Avalon base, as well as provide through-life maintenance and support for the aircraft."

Ina Paiva Cordle writes on www.miami.com about Chalk's International Airlines wishing to fly again `nearly eight months after its deadly seaplane crash.' It seems Big Sky Airlines would operate Chalk's flights, on a 19-seat Beech 1900 aircraft under a `wet lease' arrangement.

``It's not uncommon in the industry for carriers to contract with another carrier that has the proper certification and authorisation to conduct flights,'' is a quote of FAA spokeswoman Kathleen Bergen cited in Cordle's story.

Atlantic Airlines, a cargo operator based in the UK, wants to lease `five Fokker F27 freighters from Turkey's MNG Airlines,' informs David Kaminski-Morrow in a report dated August 8 on www.flightglobal.com.

The proposal to wet-lease Turkish turboprops is "a knock-on effect from long delays in securing certification of the E-Class cargo cabin conversion for the ATP."

Another bit of news in Morrow's story is about Pakistan International Airlines (PIA), "which was forced to ground its F27 fleet following a fatal crash last month."

PIA is said to be waiting for half-a-dozen ATR 42-500s it has on order; meanwhile, the airline is looking for `up to four ATR turboprops on short-term wet-lease,' for six to 12 months. A plight similar to that of Comair, or Chalk's. Wet lease agreements specify all the terms and conditions, right at the start, in the tenders. For example, when Government of Arunachal Pradesh floated a tender in February for `wet lease of one twin engine medium helicopter' (http://arun-aviation.nic.in), the 34-page document stated that the bidder would be responsible for "supply of aircraft, crew, complete maintenance including all inspections etc. with supply of spare parts, fuel, insurance, airport charges etc. with regard to operation of the helicopter".

Returning to the Air India story, one learns from the day's news how the `Maharajah' is getting ready to face competition, even as it has to return some of its leased aircraft. One option before AI is a wet lease of six Boeing 737-800 aircraft from its low-cost subsidiary, AI Express, which is scheduled to receive ten new Boeing 737 aircraft next year.

If the pay structures of the subsidiary are at a lower tier, economics of wet lease should work in favour of AI, while also helping it tide over the shortage of captains.

ZeroBase@TheHindu.co.in

D.Murali