Aviation
Lease rate factor
Monthly aircraft rent as a share of the aircraft's value.
Last reviewedWhat does Lease rate factor mean?
The lease rate factor is the monthly rent on an aircraft operating lease divided by the value of the aircraft. Lessors use it to compare deals and returns. Example: a narrow-body aircraft worth 50 million leased at a lease rate factor of 0.7 percent pays rent of 350,000 a month, or 4.2 million a year. That is an 8.4 percent gross yearly return on the aircraft's value, before financing costs and depreciation. Factors are usually higher for older aircraft, because their value falls faster. Leasing lets airlines grow without buying aircraft, and lessors such as AerCap, SMBC Aviation Capital and Air Lease own a large share of the world's commercial fleet.
Where does it come up in case interview prep?
Related terms
- Asset-light modelGrowing a business without owning the heavy assets, by franchising, managing or leasing them.
- CASK (cost per available seat kilometre)Total airline operating cost divided by ASKs.
- Capex (capital expenditure)Spending on long-lived assets such as machines and buildings.
- Depreciation and amortizationSpreading the cost of a long-lived asset over its useful life.
- ASK (available seat kilometre)One seat flown one kilometre: the standard measure of airline capacity.
- RPK (revenue passenger kilometre)One paying passenger flown one kilometre: the standard measure of airline traffic.
- Load factorThe share of seats filled with paying passengers: RPK divided by ASK.
- Yield (airlines)Passenger revenue per revenue passenger kilometre: the average fare per kilometre.