For aircraft owners
Dry lease vs leaseback: the difference that decides everything
Both put your airplane to work. Only one of them leaves you holding the airplane. In a leaseback you hand it to a flight school and they operate it, price it, schedule it and choose who flies it. In a dry lease you lease it directly to pilots you approve, at a rate you set, and it stays your operation. The money differs. The control differs more.
The short version. A leaseback is a business arrangement with an operator: they take operational control, rent your airplane to their customers, and pay you an hourly rate that is lower than what the customer paid. A dry lease is a lease of the aircraft alone, with no crew and no services attached: the pilot leasing it is the operator for that flight, you keep the rate and the approval decision, and the airplane never becomes part of somebody else’s fleet.
The two, side by side
| Leaseback | Dry lease | |
|---|---|---|
| Who operates the airplane | The flight school or FBO. You lease it to them, they put it on their line and rent it to their customers. | Each pilot who leases it. They are the operator for their own flight, the same way a renter is responsible for a car. |
| Who decides the rate | They do. Your airplane is priced to fit their fleet and their market. | You do. You set the hourly rate, the minimums and what an overnight costs. |
| Who decides who flies it | They do. Anyone who meets their checkout standard flies your airplane, and you generally will not know them. | You do. Every pilot is approved by you against your insurance requirements before they can book. |
| When you want to fly it | You get in line on their schedule, and in a busy season your own airplane can be hard to get. | It is your airplane on your schedule. Your flying comes first and the rest of the week it earns. |
| What you are paid | An hourly rate they set, usually well under what the customer paid, with the difference covering their overhead and margin. | The full hourly rate you set, billed to the pilot who flew it. |
| Who pays for maintenance | You do, and you are largely a spectator to it. The work is scheduled by them, at their shop, on their timeline, and arrives as an invoice. | You do, and you choose the shop, the timing and what gets done. |
| What happens to your insurance | The airplane moves onto commercial use under their program, and your own policy changes to match. Ask your broker what that does to your premium. | The policy still has to be written for the use, with your lessees named or covered. It is a different conversation with your broker, and it is one you have directly. |
| How long you are committed | A term contract with the operator, and taking the airplane back mid-term is a negotiation. | Pilot by pilot. If somebody stops flying, or you want the airplane back, nothing structural has to be unwound. |
| What it demands of you | Very little week to week. You gave the work away along with the control. | Real work: approving pilots, watching the money, staying on top of maintenance. Software does most of it, but it is not passive. |
When a leaseback is the better answer
It genuinely is, sometimes, and anyone who tells you otherwise is selling. Take the leaseback if you want the airplane out of your life week to week and are willing to pay for that in rate and in control. Take it if your field already has a school with a waiting list and no airplanes, because their demand is real and immediate. Take it if the thought of approving pilots, chasing a late return or reading a maintenance quote makes you want to sell the airplane instead.
The dry lease is the better answer when you want to keep flying your own airplane on your own schedule, when you want the full rate rather than a share of it, and when you would rather know the four people flying it than not know the forty.
What people get wrong
- They are two names for the same thing
- They are opposites on the only axis that matters. A leaseback hands operational control to an operator. A dry lease keeps it with whoever is flying, which means the airplane never becomes part of somebody else’s business.
- A dry lease is the loophole version
- It is the older and plainer of the two. What gets people in trouble is calling something a dry lease while also supplying the pilot, the instruction or the dispatch — at that point it is not a dry lease any more, whatever the paperwork says. That is exactly why the lease comes from an aviation attorney and not from a template.
- A leaseback pays more because the school flies it more
- Sometimes it does. Compare the two on what reaches you per hour after their cut, not on hours flown, and then look at what the maintenance column did to the year.
- Either way it is passive income
- Neither one is. A leaseback is passive right up until the invoices and the squawks arrive. A dry lease is honest about the work from day one.
What we did with ours
We own N8366X, a 1961 Cessna 172C at Long Beach, and we put it on a dry lease rather than a leaseback. Since July it has flown 48.8 paid lessee hours across 13 flights, billed at $100 a Hobbs hour, and every one of those hours was billed to a pilot we approved. That is not a large number and we are not going to dress it up as one. It is a real one, from one airplane, and it is the number the whole model was proven on.
The full case study has the rest of it, including what we got wrong and had to undo.
One thing almost every page gets wrong
Search this subject and you will be told your dry lease needs a truth-in-leasing clause under 14 CFR 91.23, that you must mail a copy to the FAA and carry one aboard. Read the rule. It opens by applying to a lease or contract of conditional sale involving a U.S.-registered large civil aircraft, and “large” there means more than 12,500 pounds. A 172 is not a large civil aircraft. That section is not what governs your lease, and a page that tells you it does is describing somebody else’s airplane.
What actually decides whether your arrangement holds up is operational control: who chooses the pilot, who decides the flight happens, and whether the person leasing the airplane is really the one operating it. Supply the airplane and nothing else and you are on the plain side of that line. Start supplying the pilot or the instruction along with it and you are somewhere else entirely, whatever the document is titled. That is a question for an aviation attorney, and it is the reason your lease comes from one rather than from a template site.
Read it yourself, from the source
- 14 CFR 91.23, truth-in-leasing — the current text on eCFR, including who it applies to.
- NBAA on dry leasing — written for larger operations than yours, and still the clearest explanation of where operational control sits.
- AOPA on leasing your aircraft — the general-aviation view, closest to the airplane you actually own.
- FAA Chief Counsel legal interpretations — where the operational-control questions get answered in writing.
Before you do either one
Three people see this before it goes live, in this order: an aviation attorney who writes the lease and sends it to you directly, your insurance broker, because the use changes what the policy has to cover, and your CPA, because leasing an aircraft has sales, use and depreciation consequences that vary by state. We are none of those three and we do not pretend otherwise. What we do is the operating side: the rate, the approval gates, the software that bills every flight, and an honest read on whether your airplane and your field support any of it.
Find out what yours would do
The fit check is one scheduled hour on your airplane, your field and your numbers, followed by a written go or no-go. It is non-refundable, and it is credited in full if you go ahead.