When a Dry Lease Isn’t Dry: How FAA Inspectors Really Judge an Aircraft Dry Lease
DISCLAIMER: This article is provided for informational and educational purposes only. We are not attorneys, and nothing here should be interpreted as legal advice. Aircraft dry leasing is highly fact-specific, and small details can materially affect legality and regulatory exposure. Every dry lease agreement and operational structure should be reviewed by a qualified aviation attorney familiar with FAA enforcement practices and Truth in Leasing requirements before being relied upon.
Dry leasing an aircraft is often described as a flexible alternative to charter, but in practice it is one of the most misunderstood structures in business aviation. Many operators are confident they are operating within the legal bounds of a dry lease. That confidence often fades once the FAA begins looking not only at the agreement itself, but at the pattern of how the aircraft is actually being used.
I have spoken with current and former FAA inspectors who spent years reviewing dry lease operations in the field. They are the ones who review the paperwork, walk through how flights are conducted day to day, and decide whether an operation holds together as a legitimate dry lease or starts to resemble something else. What follows reflects the patterns they see repeatedly when documents, control, and real-world conduct are compared.
A dry lease can be entirely legal. It can also drift into illegal charter territory without anyone intending for that to happen. The FAA does not evaluate dry leases based on intent or industry custom. Inspectors focus on who actually exercised operational control and whether the documentation and day-to-day conduct support that conclusion. When those two things do not align, the name on the agreement carries little weight.
At its core, a dry lease is a lease of the aircraft only. No crew is included, and no operational services are bundled into the agreement. The lessee becomes the operator for regulatory purposes and assumes responsibility for the flight operation. That responsibility includes selecting and employing or contracting pilots, deciding when and where the aircraft flies, and ensuring compliance with applicable FAA regulations. The lessor provides the aircraft itself and may retain certain non-operational responsibilities, including maintenance.
Maintenance control by itself does not determine operational control. In real-world operations, maintenance will always influence when an aircraft can fly because it must be airworthy before any flight occurs. The FAA understands that reality and does not view it as inconsistent with a dry lease. It is common and permissible for a lessor to retain maintenance control so long as that authority is tied to inspections, airworthiness determinations, and regulatory compliance rather than flight scheduling or business priorities.
Operational control is the line inspectors focus on most closely. It is defined as the authority to initiate, conduct, and terminate a flight. In a legitimate dry lease, that authority must rest with the lessee in practice, not only on paper. Once the aircraft is available from a maintenance standpoint, the lessee must be free to decide when, where, and how it is operated. If the owner, lessor, management company, or another third party schedules flights, directs pilots, or controls flight decisions, inspectors may conclude that operational control never truly transferred.
This is where exclusive and non-exclusive leasing becomes highly relevant. An exclusive dry lease, particularly one that is long-term, is generally easier to defend. When a single lessee has continuous access to the aircraft over months or years, employs or contracts its own crew, and conducts operations consistently under Part 91, the structure more clearly reflects a genuine transfer of control.
Non-exclusive dry leases receive far more scrutiny, especially when there are many of them. A lessor with one long-term lessee operating under a single dry lease presents a very different risk profile than a lessor with dozens of non-exclusive lessees cycling through the same aircraft. When an aircraft is subject to repeated short-term, non-exclusive leases, inspectors begin looking closely at whether the operation functions like charter, even if it is labeled otherwise.
That scrutiny increases when leases are created on a per-flight or per-trip basis. A pattern in which a new lease appears for each flight, each weekend, or each customer closely resembles the conduct described in AC 91-37B as a devious leasing scheme intended to evade applicable operating rules. Even if each individual lease appears compliant on its face, the cumulative pattern can undermine the entire structure.
Short-term dry leases are not prohibited, but they are harder to defend. When combined with non-exclusive use, repeated lessees, or management involvement that looks operational, inspectors often view them skeptically. Longer-term leases tend to demonstrate continuity of control, consistency of crew, and a clearer separation between ownership and operation. Duration alone does not determine compliance, but it strongly influences how the FAA views the arrangement.
Management companies frequently sit at the center of this analysis. Some offer services marketed as dry lease management but operate in a way that closely mirrors charter. Scheduling flights, assigning pilots, coordinating dispatch, and presenting the service as turnkey transportation may be convenient, but convenience does not equal compliance. Owners and lessors sometimes enter into these arrangements without realizing that the way the aircraft is actually being operated may not align with a true dry lease. The presence of a management company does not shield anyone from enforcement if operational control rests in the wrong place.
Pilot selection is often one of the fastest ways inspectors assess who is really in charge. It is common for an aircraft’s insurance policy to include pilots already approved by the underwriter, and it is permissible for a lessor or management company to direct a lessee to the insurance provider to obtain that information. What cannot happen is restricting the lessee from hiring a pilot who meets the insurance requirements. Many aircraft operate under open pilot policies that automatically cover any pilot meeting specified experience, training, and recency thresholds. The lessee remains responsible for confirming that any pilot they engage actually meets those requirements and for exercising employer or contractor authority over that pilot.
Truth in Leasing compliance is often where an FAA review begins. Under 14 CFR §91.23, the Truth in Leasing clause and related filing and notification requirements apply to leases involving U.S.-registered large civil aircraft. Those requirements do not apply by regulation to smaller aircraft. Even so, inspectors often treat compliance with §91.23 as a proxy for whether an operation understands and respects regulatory boundaries. When the rule applies and filings are missing, scrutiny tends to sharpen quickly. One former inspector described it bluntly: if the lease should have been filed with Oklahoma City and the oversight office did not know about it, the operation started the review at a disadvantage.
Whether or not §91.23 applies, inspectors still evaluate leasing arrangements under Part 91 and the guidance in AC 91-37B. They look at frequency, duration, exclusivity, crew relationships, management involvement, and whether the structure makes sense as a genuine private operation. A single long-term, exclusive lease with consistent operations tells one story. Numerous short-term, non-exclusive leases created flight by flight tell another.
Dry leasing can work well when it is approached deliberately and kept straightforward. The structure has to hold up on paper and in day-to-day operations, where decisions are made quickly and convenience is tempting.
Operators who stay out of trouble tend to follow a few consistent practices. They limit the number of lessees using the aircraft. They favor longer-term, stable arrangements rather than creating a new lease for each flight. They understand where management support appropriately ends and where operational control must remain with the lessee. When applicable, they treat Truth in Leasing filings as a prerequisite to flying, not an afterthought.
The FAA generally looks for clarity and consistency. Inspectors want to see that the leases, the flight activity, and the paper trail all tell the same story. When they do, reviews are usually uneventful. When they do not, questions follow quickly and scrutiny intensifies.
Most operators do not set out to run an illegal charter, and many genuinely believe they are in compliance. A simple test is often enough. If a third party regularly chooses the crew, schedules the flights, or can cancel a trip for reasons other than maintenance or airworthiness, operational control likely never left the owner. If those decisions rest clearly and consistently with the lessee, the structure is usually on solid ground. Even so, a review of the operation and the lease agreements by a qualified aviation attorney is always advisable for all parties. A few hours of legal review is almost always cheaper than defending an FAA enforcement action after the fact.
