Airlines rarely use one funding method for every aircraft. A delivery can be paid for with the airline’s cash, financed with a loan secured by the aircraft, placed with a lessor under a lease, or converted into cash through a sale-and-leaseback. Large fleets commonly combine these methods because each shifts cash needs, contractual obligations, accounting presentation, control and residual-value risk in a different way.
The label alone does not determine the economics or the accounting. “Lease” can describe materially different legal arrangements, and a sale-and-leaseback is not automatically a sale for financial-reporting purposes. The relevant contract, the applicable accounting rules and the airline’s credit and market access determine the result.
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Why a new aircraft needs a financing plan
Commercial aircraft require very large payments before and at delivery. An airline must decide how much of its own cash to commit, how much repayment capacity to preserve and who should bear the aircraft’s future-value risk. The decision is also affected by delivery timing, interest-rate and currency exposure, lender requirements, lease-return conditions and the airline’s ability to raise money in debt or leasing markets.
A single order book can therefore contain several structures. Lufthansa describes using unsecured corporate finance, specific aircraft-financing models and leases rather than relying on one source. The mix can change as aircraft are delivered, market conditions move or the airline’s balance-sheet priorities change.
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Buying with cash or borrowing through an aircraft loan
How an aircraft loan works
With a cash purchase, the airline pays the purchase price from available funds. That avoids scheduled principal and interest payments, but it uses liquidity that could otherwise support operations, maintenance, deposits, payroll or other investments. The airline also retains the aircraft and its future sale value.
Borrowing funds the acquisition while leaving the airline with repayment obligations, generally including interest. An aircraft loan may be secured by the aircraft, so the lender has rights in the collateral if the borrower defaults. Airbus says the aircraft generally serves as collateral when Airbus provides customer financing. The exact security package, amortization schedule, covenants, guarantees and recourse are contract-specific; not every aircraft loan is structured identically.
What the lender and airline record
For the airline, borrowed money creates a financial liability and the purchased aircraft is recorded as an owned asset under the applicable accounting rules. Principal must be repaid according to the financing documents, and interest and other financing costs affect cash flow and profit measures. Security documents can restrict additional liens, asset sales, fleet changes or other actions, depending on the covenant package.
Airbus’s 2024 statements describe loans and finance leases as financing in which a third party bears substantially all ownership risks and rewards; for the financing provider, the principal is recorded as a long-term financial asset. That description explains the provider’s accounting perspective, not a universal presentation for every jurisdiction or contract.
Manufacturer backstop commitments
Aircraft manufacturers can offer a backstop commitment when a customer places an order. Airbus describes this as a commitment to provide financing if the customer cannot secure enough funding when a payment is due. Such commitments can be transferred and generally include financial conditions. A backstop is therefore a contingent source of funding, not the same thing as a loan already drawn. The airline still needs to satisfy the stated conditions, and the eventual financing terms may differ from other market funding.
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Leasing: paying for the right to use an aircraft
Operating model
Instead of funding the purchase price itself, an airline can lease an aircraft from a lessor. The lessor may buy the aircraft directly from the manufacturer and lease it to the airline, or acquire it through a sale-and-leaseback. The airline makes contractual payments for the right to use the aircraft for a defined period and must comply with operating, maintenance, insurance and return requirements in the lease.
Leasing can reduce the cash required to acquire an aircraft at delivery, but it does not make the aircraft free. Lease rentals, deposits, maintenance reserves, transition costs and possible termination or return charges are contractual obligations. The airline also gives up some ownership economics and usually has less freedom to modify, sell or retain the aircraft indefinitely than it would as owner.
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Finance and operating classifications
Lufthansa’s disclosed policy classifies a lessor lease as a finance lease when it transfers essentially all risks and rewards associated with ownership. Otherwise, it classifies the lease as operating. That is a lessor policy disclosed under Lufthansa’s reporting framework; other jurisdictions and contracts can produce different conclusions.
For lessees within Lufthansa’s IFRS 16 policy, a lease liability is initially measured at the present value of lease payments and a right-of-use asset is recognized, subject to stated exceptions. The right-of-use asset is depreciated over the applicable period. This is why it is inaccurate to describe every airline lease as “off balance sheet.” The accounting depends on the rules, exemptions and detailed terms that apply.
What the lease contract controls
Lease documents commonly specify the aircraft configuration, permitted use, maintenance standards, insurance, records, reporting, default remedies and the condition in which the aircraft must be returned. Those requirements can matter as much as the headline rental. A lease that appears attractive on upfront cash may be less flexible if an airline expects to change its network, retire the aircraft early or make extensive cabin modifications.
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Sale-and-leaseback: turning an aircraft position into cash
The transaction sequence
In a sale-and-leaseback, the airline sells an aircraft—or, in some cases, an aircraft and associated delivery position or advance payments—to a lessor and immediately leases it back. The airline receives cash from the sale and continues operating the aircraft as lessee. The lessor becomes the contractual owner if the transaction qualifies as a sale, while the airline takes on lease payments and the obligations of the lease.
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- Set the purchase and lease terms. The lessor pays the agreed price, and the airline signs a lease specifying term, rentals, maintenance and return conditions.
- Transfer and fund. The sale proceeds provide liquidity to the airline; the lessor funds the acquisition and records its investment according to its accounting policy.
- Operate under the lease. The airline keeps operational use for the lease term but no longer holds the same ownership position and must meet the lease covenants.
Lufthansa’s 2024 example
Lufthansa reported €761 million of proceeds from sale-and-leaseback transactions in 2024. Its disclosure covered 15 passenger aircraft, with the aircraft leased back for six-year periods. Those figures describe Lufthansa’s reported transactions for that year; they are not an industry average, a standard lease term or a market rate.
Why “sale” must be tested for accounting
Lufthansa says it assesses whether a transfer qualifies as a sale using IFRS 15 criteria. If a sale occurs, the lessee derecognizes the transferred asset and recognizes a right-of-use asset. Any gain or loss is limited to the rights transferred to the buyer-lessor.
If the transfer does not qualify as a sale, the asset remains on the lessee’s books and the transfer price is recognized as a financial liability instead. Terms that are below or above market can also require accounting adjustments. Consequently, receiving cash from a transaction described commercially as a sale-and-leaseback does not by itself prove that the airline has removed the aircraft from its balance sheet or recognized a gain.
Comparing the three structures
The right comparison is contract-specific. The following framework shows what changes when the airline owns with cash or debt, leases from a lessor, or sells and leases back an aircraft.
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| Question | Cash or aircraft-backed borrowing | Lease from a lessor | Sale-and-leaseback |
|---|---|---|---|
| Cash needed at delivery | Cash purchase uses the full price; borrowing reduces the immediate cash outlay but may require equity, deposits or fees. | The lessor funds the acquisition; the airline pays rentals and any required deposits or reserves. | The airline receives sale proceeds, but commits to lease payments and transaction costs. |
| Payment obligation | Debt requires scheduled principal and interest; a cash purchase has no loan repayment. | Contractual rentals continue for the lease term, subject to the lease’s escalation and other provisions. | Lease rentals replace the ownership funding after the sale, with the exact obligation set by the lease. |
| Accounting presentation | The airline generally records an owned aircraft and borrowing liability when debt is used. | Presentation depends on the applicable rules and lease details; Lufthansa’s IFRS 16 policy recognizes a right-of-use asset and lease liability for lessee leases within its scope. | A sale must be assessed under the applicable rules. If it fails the sale test, the aircraft remains recognized and the proceeds are a financial liability. |
| Residual-value exposure | The airline generally retains future aircraft value risk and potential upside. | The lessor generally bears ownership and residual-value risk, although the airline can face return-condition costs and other contractual exposure. | The lessor takes ownership economics if there is a sale, while the airline remains tied to the lease and its return terms. |
| Security and covenants | Aircraft collateral, financial covenants and possible recourse shape lender risk and airline flexibility. | Lease covenants, maintenance requirements and default remedies govern use and return. | The sale documents and lease add obligations; restrictions depend on the negotiated structure. |
| Access to funding | Depends on the airline’s credit, collateral and debt-market conditions. | Depends on lessor capacity, aircraft demand and the airline’s ability to meet lease requirements. | Depends on lessor appetite, asset pricing and the airline’s ability to secure acceptable lease terms. |
Company disclosures do not provide a matched, same-aircraft comparison of loan pricing, lease pricing and sale-and-leaseback pricing. It is therefore not possible to state a universal cost ranking from these structures. Total financing and transaction costs, not just the first cash payment, should be compared.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How an airline evaluates a financing proposal
1. Map the delivery cash curve
The finance team first identifies deposits, progress payments, the final delivery payment, required reserves and expected operating cash. A structure that minimizes the final payment may still require substantial earlier deposits or fees. Timing matters because aircraft orders can span several years.
2. Test repayment capacity and flexibility
For debt, the airline models principal, interest, refinancing and covenant headroom. For leases, it models rentals, escalation, maintenance reserves, return costs and early-termination consequences. The analysis should include weaker traffic or higher fuel costs, because fixed obligations remain when revenue falls.
3. Review accounting and reported leverage
Management should determine whether the arrangement creates debt, a lease liability, a right-of-use asset, an owned aircraft or a combination. The accounting conclusion can affect leverage ratios, earnings patterns, asset turnover and covenant calculations. A transaction should not be selected on the assumption that a commercial label guarantees a desired balance-sheet result.
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4. Allocate aircraft-value risk
An owned aircraft leaves the airline exposed to future market value, remarketing and disposal timing. A lease transfers much of that ownership risk to the lessor but introduces return-condition and contractual risks. In a sale-and-leaseback, the airline monetizes an asset or delivery position and gives up ownership upside while retaining operational use for the lease term.
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5. Check legal, tax and cross-border effects
Aircraft transactions can involve multiple jurisdictions, currencies and registries. Tax treatment, insolvency protections, security perfection, export-credit support, registration rules and governing law can alter the outcome. These issues require transaction-specific advice; a headline financing type does not establish the applicable rules.
What company disclosures show—and what they do not
Airbus reported gross customer-financing exposure of US$0.3 billion (€0.3 billion) at 31 December 2024, compared with US$0.4 billion (€0.3 billion) for 2023. This is Airbus’s own exposure, not the total amount of aircraft financing available worldwide.
SMBC Aviation Capital reported US$5 billion of long-term leases agreed in its fiscal year 2024: US$3.5 billion represented aircraft bought directly from manufacturers and US$1.5 billion represented sale-and-leaseback transactions. Those amounts describe one lessor’s activity, not the industry total or a benchmark for what an airline should pay.
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“We operate in a cyclical industry and we closely monitor financial, geopolitical and macroeconomic developments.” — Aisling Kenny, Chief Financial Officer, SMBC Aviation Capital, Annual Report and Accounts 2024, Financial Review.
Airbus also commented in 2024 on sustained liquidity and market appetite for aircraft financing and sale-and-leaseback opportunities. That is dated company commentary, not an independent current measure of market capacity or pricing.
Common mistakes when interpreting aircraft finance
- Calling every lease off balance sheet. Lessee accounting can recognize both a right-of-use asset and a lease liability.
- Assuming sale-and-leaseback always creates a sale. The transfer must satisfy the applicable sale criteria; otherwise the asset and a financial liability remain recognized.
- Comparing only the upfront cash payment. Rentals, interest, fees, maintenance reserves, deposits, return costs and residual-value exposure determine total economics.
- Treating one company’s figures as market averages. Lufthansa’s €761 million, Airbus’s financing exposure and SMBC Aviation Capital’s lease volume are issuer-specific disclosures.
- Assuming collateral and covenants are standardized. Security, recourse, amortization and restrictions vary by contract and borrower.
- Ignoring access to capital. A structure that works for a highly rated airline or a large lessor may be unavailable or more expensive for a weaker credit.
Bottom line
Airlines finance new aircraft with a portfolio of cash, borrowing, leases and sale-and-leasebacks. Loans preserve ownership but create repayment, collateral and covenant obligations. Leases reduce the need to fund the purchase price directly but create rental and return commitments, with accounting determined by the applicable rules and terms. Sale-and-leasebacks raise cash while preserving use of the aircraft, yet they transfer ownership economics and may or may not qualify as a sale for accounting purposes. The sound choice depends on total cost, delivery cash, accounting, flexibility, aircraft-value risk, contractual protections and the airline’s access to funding—not on a universally superior structure.
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