Aircraft Lease Agreement: Definition & Sample

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What is an Aircraft Lease Agreement?

An aircraft lease agreement is a contract between the aircraft owner and the lessee. The leasing company, typically airlines, provides payments for the use of airplanes. However, it’s important to note that even if someone owns their airline, they may still lease planes from other companies because of costs associated with owning an aircraft.

A typical aircraft lease agreement will include provisions such as a description of the leased property, terms and conditions, and what happens in the event of a default. The contract will also outline when either party decides to dissolve the lease.

Common Sections in Aircraft Lease Agreements

Below is a list of common sections included in Aircraft Lease Agreements. These sections are linked to the below sample agreement for you to explore.

Aircraft Lease Agreement Sample

AIRCRAFT LEASE AGREEMENT

AIRCRAFT LEASE AGREEMENT (“Agreement” or “Lease”) made and dated for reference as of the 17 th day of January 2007, at Carlsbad, California.

W I T N E S S E T H:

Lessee has requested Lessor to provide, and Lessor is willing to provide the aircraft described in Appendix A annexed hereto for the purpose of leasing the same to Lessee for the Term identified in Section 1.

Lessee shall lease the described aircraft from Lessor pursuant to and upon the terms, conditions and provisions of this Agreement.

The parties hereto covenant and agree as follows:

The following terms, whenever used in this Agreement will have the following meanings, unless otherwise required by context:

“ AIRCRAFT ” means the one (1) Canadair Ltd. Challenger CL600-2B16 Airframe, bearing manufacturer serial number 5111 and FAA Registration Number N502HE, as more fully described in Appendix A , along with the Engines, the Manuals and Technical Records, and the Parts, or one or more of the above as required by context.

“ ENGINES ” means two (2) General Electric CF 34 Engines, bearing manufacturer serial number 350421 on the left engine and 350402 on the right engine.

“ FLIGHT HOUR ” shall mean each hour elapsing from the moment the wheels of the Aircraft leave the ground on take off to the moment when the wheels of the Aircraft touch ground on landing. For the purposes of all calculations under this Agreement measured in Flight Hours, such hours including fractions thereof shall be measured in tenths of an hour.

“ HANGAR ” means the aircraft hangar owned by Lessor and located at Palm Springs International Airport, Palm Springs, California, subject to change if approved in writing by Lessee.

“ MANUALS AND TECHNICAL RECORDS ” means all records, manuals, technical data, logs and other materials and documents in relation to the Aircraft, as shall be required by the Aviation Authority or by applicable law to be kept or maintained in relation to the Aircraft.

“ PARTS ” means all components, Engines, instruments, accessories, furnishings, and other equipment of whatever nature.

“ RENT COMMENCEMENT DATE ” means the date rent initially starts on the Aircraft, as identified in “Lease Payments,” Section 4.

“ TOTAL LOSS ” with respect to the Aircraft, Airframe or any Engine shall mean any of the following events with respect to such property:

A Total Loss with respect to the Aircraft shall be deemed to have occurred if a Total Loss has occurred with respect to the Airframe.

1. TERM OF LEASE .

This Agreement is for both the Aircraft and the Hangar. Subject to Lessee’s execution and delivery of the Acceptance Certificate attached hereto as Exhibit B, this Agreement will commence immediately on delivery of the Aircraft to Lessee by Lessor on January 22, 2007. The Agreement will remain in effect until the 31 st day of December, 2011, unless otherwise terminated under the terms of this Agreement (the “Term”). Either Lessor or Lessee shall have the right to terminate this Agreement at any time upon not less than ninety (90) days prior written notice; provided that such termination shall not affect either party’s obligations hereunder for any period prior to such termination including, without limitation, any party’s maintenance obligations set forth in Section 7.

2. NATURE OF LEASE .

The parties acknowledge and agree that it is their intent that this Lease be treated as a “true lease” for Federal income tax purposes.

3. LESSOR’S WARRANTIES .

a. Except as otherwise provided herein, the Aircraft is leased to Lessee hereunder “AS IS, WHERE IS” and Lessor does not make or give any warranties as to the Aircraft, its airworthiness, design, fitness or condition, or as to any other matter or thing whatsoever except for warranty of right of quiet enjoyment, and all warranties are, to the extent permitted by law or otherwise provided herein, hereby expressly excluded, except Lessor represents and warrants that it has the legal right to lease the Aircraft hereunder, that the entering into and performance of this Agreement by Lessor do not conflict with any contract or agreement to which Lessor is a party or by which it or its properties are bound or affected, and that this Agreement is in compliance with all applicable federal and state laws with respect to the status of Lessor in its capacity as owner/lessor of the Aircraft and in its status as operator of the Aircraft when the Aircraft is in the operational control of Lessor, its affiliates or agents as contemplated in Section 4(d).

b. Except as otherwise expressly provided in this Agreement, Lessor shall not be liable to Lessee for any loss, cost, damage, or expense of any kind or nature, caused directly or indirectly, by the Aircraft or the use or maintenance thereof, or by any interruption of service of whatsoever and howsoever caused, other than interruption of right of quiet enjoyment.

LESSOR LEASES THE AIRCRAFT TO LESSEE HEREUNDER “AS IS” AND “WHERE IS”, AND NEITHER LESSOR NOR ANY SUCCESSOR IN INTEREST THERETO, BY ASSIGNMENT OR OTHERWISE, SHALL BE DEEMED TO HAVE MADE OR TO MAKE AND BY ACCEPTING THE AIRCRAFT HEREUNDER LESSEE HEREBY WAIVES, RELEASES AND RENOUNCES ANY RIGHTS PREMISED UPON OR ANY RELIANCE UPON ANY REPRESENTATIONS, WARRANTIES, LIABILITIES OR GUARANTEES OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE WITH RESPECT TO THE AIRCRAFT, AIRFRAME, ANY ENGINE, PART OR OTHER THING DELIVERED, LEASED, OR TRANSFERRED HEREUNDER, INCLUDING BUT NOT LIMITED TO: (A) AIRWORTHINESS, CONDITION, VALUE, TITLE, DESIGN, OPERATION, MERCHANTABILITY, COMPLIANCE WITH SPECIFICATION, CONSTRUCTION, PERFORMANCE OR FITNESS FOR USE; (B) THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE; (C) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT; (D) THE QUALITY OF THE MATERIAL OR WORKMANSHIP; OR (E) (i) ANY LIABILITY ARISING IN TORT OR CONTRACT, EXPRESS OR IMPLIED; (ii) ANY OBLIGATION OR LIABILITY ARISING FROM NEGLIGENCE, STRICT LIABILITY, OR PRODUCTS LIABILITY; (iii) ANY IMPLIED WARRANTY ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE; OR (iv) ANY LOSS FROM INTERRUPTION OF USE, LOST PROFITS, LOST BUSINESS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES. LESSOR HEREBY WAIVES, RELEASES AND RENOUNCES ANY CLAIMS FOR LOSS FROM INTERRUPTION OF USE, LOST PROFITS, LOST BUSINESS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF LESSOR’S RIGHTS TO USE THE AIRCRAFT DURING THE TERM OF THIS AGREEMENT.

4. LEASE PAYMENTS .

a. Lessee shall pay Lessor rent in the amount of $30,000, such first payment being due on January 22, 2007 and subsequent rent payments being due on the equivalent day of each succeeding month until the end of the Term.

b. On or before the 10th day of each calendar month, Lessee shall provide Lessor with a written statement setting forth the number of Flight Hours for which the Aircraft has been used by Lessee and Lessor, respectively, during the immediately preceding calendar month.

c. All Rent payable under this Lease shall be paid in the full amount required to be paid hereunder without regard to any Tax, fines, levies or charges whatsoever and paid in U.S. dollar funds consisting of lawful currency of the United States of America that shall be immediately available at Lessor’s U.S. bank account.

d. As additional Rent hereunder, subject always to Lessee’s prior right to use of the Aircraft, Lessor shall be entitled to use the Aircraft for Lessor’s purposes during the Term of this Agreement. If Lessor desires to use the Aircraft, it shall give Lessee as much advance notice of such usage as is practicable. Provided that Lessee is not using the Aircraft for its purposes, Lessee shall make the Aircraft available for Lessor’s use. Lessor and Lessee acknowledge, agree and understand that when Lessor is using the Aircraft for Lessor’s purposes, Lessor shall be completely responsible for and in control of the Aircraft and Lessee shall not be responsible for and not in control of the Aircraft. To the extent that Lessor chooses to use flight crews employed by Lessee when Lessor is using the Aircraft, the flight crews will report to and take directions exclusively from Lessor and, in all events, shall comply with the applicable Federal Aviation Regulations. At such times as Lessor uses the Aircraft, Lessor shall comply with the provisions of Sections 6(d) and 6(e) as if it were the “Lessee” and shall comply with the provisions of all insurance policies maintained by Lessee pursuant to Section 8. At such times as Lessor uses the Aircraft, Lessor shall be responsible for all variable costs in connection with the operation of the Aircraft, including, but not limited to, fuel, landing fees, “Smart Parts” fees, maintenance service plan fees, hangaring fees, catering, crew travel and quartering, flight telephone and expendable supplies. The Lessor and Lessee will execute a delivery receipt in the form attached hereto as Appendix C when Lessor uses the Aircraft and returns the Aircraft to Lessee. With respect to operation of the Aircraft by Lessor, its affiliates or agents, if the Lessee, its officers, directors, shareholders, employees, agents or representatives (“Lessee Parties”) shall suffer any Claims (as defined in Section 6(m)) that are not covered by insurance or warranty or are not attributable to normal or customary operation of the Aircraft or which are attributable to Lessor’s breach of its obligations under this Lease, Lessor shall hold the Lessee Parties harmless with respect to such Claims.

e. Lessee’s and Lessor’s obligations hereunder shall be absolute and unconditional and shall not be affected or reduced by any circumstances including, without limitation: (i) any set-off, counterclaim, recoupment, defense, or other right that Lessee may have against Lessor or any person for any reason whatsoever except for breach of warranty to include but not limited to Lessee’s right of quiet enjoyment; (ii) any defect in the airworthiness, condition, design, operation, or fitness for use of, or any damage to or loss or destruction of, the Aircraft, unless such defect in title actually or effectively prevents Lessee’s viable and efficient commercial use of the aircraft; (iii) any interruption or cessation in the use or possession of the Aircraft by Lessee or Lessor or availability thereof to Lessee or Lessor for any reason arising out of or related to an act or omission of Lessee, or any person other than Lessor or entities acting through Lessor; (iv) any insolvency, bankruptcy, reorganization, or similar proceedings by or against Lessor or Lessee; (v) any other circumstances or happening of any nature whatsoever, similar to any of the foregoing; or (vi) any Taxes, it being the express intention of Lessor and Lessee that amounts payable hereunder shall be payable hereunder in all events unless the obligation to pay the same is terminated pursuant to the express provisions of this Lease. To the extent permitted by applicable law, Lessee hereby waives any rights it may now have or that may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Lease except in accordance with the terms hereof. Notwithstanding the provisions of this Section 4(e), Lessee shall otherwise have the rights and remedies provided for in this Lease against Lessor, provided that said rights shall not be asserted in an action to enforce this Lease in violation of the terms of this Lease.

f. Lessee and Lessor acknowledge that the rentals payable pursuant to Section 4(a) were determined based upon an assumed average annual usage by Lessee of 300 Flight Hours. Lessee and Lessor agree to negotiate in good faith an adjustment to such rentals in the event that Lessee’s aggregate usage from the commencement of this Agreement through the end of any calendar year exceeds 120% of the product of 300 Flight Hours times the number of years elapsed since the commencement of this Agreement.

5. RETURN OF AIRCRAFT .

Upon the termination of this Agreement, Lessee shall return the Aircraft to Lessor at such location in the continental United States as may be mutually agreed upon by Lessor and Lessee, in the condition described in Appendix D.

The Aircraft shall be equipped and in the same configuration as it was on delivery. All Manuals, Logs and Technical Records will be current and accurate with respect to the period of this Agreement. All modifications, alterations, and additions made to the aircraft during the Lease will be removed at Lessee’s expense, except for those made pursuant to an Airworthiness Directive or service letter or bulletin issued by the Airframe or Engine manufacturer, and except for those designated by Lessor, with agreement of Lessee, to remain as part of the Aircraft.

Lessor will issue a certificate of acceptance once the conditions of this section have been complied with to the reasonable satisfaction of Lessor.

6. LESSEE’S COVENANTS .

Lessee covenants with Lessor:

a. That the Aircraft was selected by Lessee and that it is of a make, size, design and capacity desired by Lessee for the purposes intended by Lessee.

b. To keep and maintain the Aircraft in a fully operative and airworthy condition in conformity with any requirements or airworthiness directives which may from time to time be made by the manufacturers of the Aircraft, and in conformity with all applicable laws, orders, rules, regulations, and directives of governmental departments, boards or authorities, relating to the maintenance or storage of the Aircraft. Maintenance costs and costs of complying with any airworthiness directives shall be borne by Lessee and Lessor as provided in Section 7 hereof.

c. That, at Lessor’s risk and expense, Lessor or its agent shall have the right at all reasonable times and on reasonable notice to fully inspect the Aircraft and any parts thereof, and any documents relating thereto to determine the condition of the Aircraft, and to further determine whether or not Lessee is performing according to the covenants and conditions herein contained.

d. To operate the Aircraft at all times in conformity with all the applicable laws, orders, rules, regulations, and authorities, domestic or foreign, and in conformity with any limitations or restrictions of performance which may from time to time be recommended by the manufacturers of the Aircraft, and within the geographical limitations on operations of the Aircraft pursuant to applicable policies of insurance maintained by Lessee.

e. To permit the Aircraft to be operated only by certified pilots employed by Lessee or contracted by Lessee and who hold valid and subsisting licenses or permits appropriate to their duties, and who have at least the minimum total pilot hours required by any policies of insurance on the Aircraft.

f. Not to use or operate the Aircraft or permit it to be used or operated illegally or contrary to any applicable laws, regulations, orders, rules or directives of any power or government or agency thereof having jurisdiction, and to indemnify and hold Lessor, harmless from and against any and all actions, precautions, administrative proceedings or similar assertions or threats in any way arising out of the custody, use or operation of the Aircraft during the Term of this Agreement and, subject to Lessee’s reasonable contest rights, to assume liability and pay for any and all transgressions, defaults, fines, penalties or forfeiture incurred, suffered or assessed against Lessor or the Aircraft during the Term of this Agreement together with all legal fees, costs and expenses incidental to the foregoing to the complete exoneration of Lessor.

g. Not to sublease or otherwise transfer possession of the Aircraft or any Engine to any Person, provided that, so long as no Event of Default shall have occurred and be continuing, Lessee may, upon notice to Lessor deliver possession of the Airframe or any Engine to the manufacturer thereof for testing or other similar purposes or to any FAA-approved repair facility reasonably acceptable to Lessor for service, repair, maintenance or overhaul work of the Airframe or any Engine or any part thereof or for alterations or modifications in or additions to the Airframe or any Engine to the extent required or permitted by the terms of this Lease.

h. To keep the Aircraft free and clear of all seizures, security interests, forfeitures, liens, claims, privileges, debts, taxes, charges, pledges or encumbrances of any nature whatsoever applicable to any occurrence during the Term of this Agreement.

i. That if for any reason any part of the Aircraft is replaced with a similar part, or any part or attachment is added thereto, no matter by whom manufactured, the part so replaced or added shall at once become the property of Lessor, to the same extent as all the original parts of the Aircraft, and with the same rights and powers of Lessor in all respects as if such part had been one of the original parts thereof, and any such part added will be supported by complete records back to the original manufacture date. Any new part placed on the Aircraft shall be free of liens and shall be of same value and utility as the part being replaced.

j. Subject to Lessee’s reasonable contest rights, to pay, when due, all license fees and other fees and assessments necessary for the securing of licenses, certificates of registration and certificates of airworthiness and other similar permits for the operation of the Aircraft during the Term of this Agreement, and further, to pay, when due, all taxes, fees, assessments or other levies now and hereafter imposed by any provincial, federal or local government upon the Aircraft, or upon the leasing, use or operation thereof (but not on the income of Lessor), whether assessed to Lessor, or to Lessee; provided that upon payment of such fees, assessments, taxes or levies, Lessee will promptly deliver the receipts for such payments to Lessor, and that if Lessor pays any sum or sums constituting an obligation of Lessee under this Agreement, then the amount of such payments shall be reimbursed on demand.

k. Subject to Sections 4(d) and 7 hereof, to furnish at its own cost and expense all fuel, lubricants, and other material necessary for the operation of the Aircraft, pay all maintenance, storage, hangar (other than home base hangaring), landing, airport and customs charges and fees and all other charges of operation, maintenance (except as otherwise provided herein), or storage of the Aircraft.

l. To assume custody of the Aircraft and full responsibility for its operation and maintenance during the Term. In the event of a failure of any component (to include but not limited to any Engine), it is the responsibility of Lessee to remove, repair and re-install such item. Subject to Section 7 hereof, if any Engine or other major component becomes non-repairable for any cause, it will be replaced with a replacement of equal value and utility with the same or improved performance ability the original, all with records traceable back to manufacture, with clear warranty title in Lessor.

m. Subject to Section 4(d), Lessee agrees to indemnify, reimburse, and hold harmless Lessor and its successors, assigns, agents, employees, officers, directors, shareholders, servants and representatives (the “Indemnified Parties”) from and against any and all claims, damages, losses, liabilities, demands, suits, judgments, causes of action, legal proceedings, penalties, fines, other sanctions, and any costs and expenses in connection therewith, including reasonable attorney’s fees and expenses (any and all of which are hereafter referred to as “Claims”) arising from or relating to death or injuries to any Persons whomsoever (including without limitation Lessee’s employees) and for loss of or damage to any property whatsoever that in any way arises during the Term or which may result from or arise out of or in relation to (i) the ownership, manufacture, purchase, delivery, redelivery, lease, possession, return, import, export, disposition, use, maintenance or operation of the Aircraft either in the air or on the ground; or (ii) any defect in the Aircraft arising from the material of, or any article used therein, or from the design, testing or use thereof or from any maintenance, service, repair, overhaul or testing of the Aircraft; or (iii) any infringement of any patent; or (iv) this Lease or any other transaction, approval or document contemplated hereby or given or entered into in connection herewith; provided, however , that upon payment in full to any party indemnified hereunder of any indemnities contained in this Section 6(m) by Lessee, Lessee shall be subrogated to all rights and remedies that such indemnified party may have against any manufacturers, suppliers, overhaul agencies, sellers and/or prior lessees (and similar parties) of the Aircraft and provided, further , that Lessee shall not be required to indemnify any of the Indemnified Parties against Claims arising out of such Indemnified Party’s willful misconduct or gross negligence or arising out of operational control of the Aircraft by Lessor, its affiliates or agents pursuant to Section 4(d). Notwithstanding the preceding sentence, nothing contained herein is intended to invalidate, prejudice or otherwise compromise, Lessor’s rights and benefits under the insurance required in this Lease or affect Lessor’s ability to obtain the benefits of such insurance. Lessee shall have the right to control the defense of any claims, subject to indemnification hereunder so long as no Event of Default is continuing. No settlement of a Claim shall be made or be binding upon any party unless both Lessor and Lessee approve such settlement in writing, such consent not to be unreasonably withheld or delayed. Lessor shall notify Lessee of any such Claim promptly after becoming aware thereof.

Lessee hereby waives, and releases the Indemnified Parties from, any Claims of Lessee now or hereafter existing for or on account of or arising out of or in any way connected with injury to or death of personnel of Lessee, or loss or damage to property of Lessee, or the loss of use of any property, in each case that, after the delivery of the Aircraft to Lessee, may result from or arise in any manner out of or in relation to the ownership, leasing, use, or operation of the Aircraft (other than operational control of the Aircraft by Lessor, its affiliates or agents), either in the air or on the ground, or which may be caused by any defect in the Aircraft from the material of, or any article used therein or from the testing of the Aircraft regardless of when such defect may be discovered, whether or not the Aircraft is at the time in the possession of Lessee, and regardless of such location of the Aircraft at any such time.

The indemnities contained in this Section 6(m) shall continue in full force and effect notwithstanding the expiration of the Term with respect to the Aircraft or other termination of this Lease and are expressly made for the benefit of the Indemnified Parties and shall be enforceable by the Indemnified Parties directly.

n. To make rental and any other payments required by this Agreement when due.

o. To keep complete, accurate, and current technical records of all flights and maintenance of the Aircraft in English in accordance with applicable rules and regulations of the FAA. The records shall be available for inspection by Lessor at any reasonable time, and become the property of Lessor upon return of the Aircraft.

p. To maintain all insurance required by this Agreement, and notify Lessor of any lapse, cancellation, or material adverse change in the insurance coverage.

q. Lessee shall not knowingly use or permit the use of the Aircraft for the carriage of any goods, materials or items of cargo that could reasonably be expected to cause damage to the Aircraft or that would not be adequately covered by the insurance required by this Agreement.

a. With respect to all routine maintenance, based on an annual accounting of routine maintenance costs incurred during each calendar year, Lessee and Lessor shall proportionately share the costs of such maintenance based upon the number of Flight Hours that each has used the Aircraft during such calendar year.

b. With respect to all scheduled heavy maintenance (including 60 month inspections and 6,000 hour overhaul of the Engines), Lessee and Lessor shall proportionately share the costs of such maintenance based upon the number of Flight Hours that each has used the Aircraft since the last corresponding heavy maintenance visit (including for the purposes of this Section 7(b) any Flight Hours flown by Lessor and Lessee prior to the commencement of this Agreement).

c. Except as provided in Section 4(d), with respect to unscheduled maintenance, the costs of which are not covered by warranty or insurance, Lessee and Lessor shall proportionately share the costs of such maintenance based upon the number of Flight Hours that each has used the Aircraft (including for the purposes of this Section 7(c) any Flight Hours flown by Lessor and Lessee prior to the commencement of this Agreement).

d. With respect to the costs of compliance with any airworthiness directive applicable to the Aircraft, Lessee shall bear the costs of such compliance if the cost of such compliance does not exceed $50,000. If the cost of such compliance exceeds $50,000, Lessee and Lessor shall each bear 50% of the total cost of the compliance with such airworthiness directive.