There are instances when an airline will lease an aircraft from another airline. If only the aircraft is provided, and the lessee supplies its own crews, maintenance and insurance for the aircraft it is also called a dry lease.
Whether an aircraft is leased from a leasing company or an airline, in Canada, a leased aircraft will normally have to be registered in the name of the lessee. There are instances where Transport Canada will allow the leased aircraft to remain registered under the name of the lessor, even when it is foreign registered. These conditions are listed under CAR 203 which limits the number of aircraft in the lessee's fleet that remain registered in the name of the lessor, and the length of time such aircraft can remain registered under the name of the lessor. There are also several other conditions including a very important one which states that the crews flying the aircraft must be employees of the lessee. I'll get to why that is important later. Here the appropriate CAR:
In the United States, there have been court cases to determine whether a lease was a wet lease or a fry lease. Here is why. When a lessee dry-leases an aircraft from an airline, and then contracts out pilots from that same airline to fly the dry-leased aircraft, it looks like a wet-lease in disguise. The FAA calls such leases "Sham Dry-Leases".203.03 (1) No person who is not the registered owner of an aircraft shall operate the aircraft as part of a leasing operation without an authorization issued pursuant to subsection (2) unless
(d) the crew members of the aircraft are employed by the lessee
https://www.conklindd.com/Print.aspx?hid=1184
http://www.faa.gov/about/office_org/hea ... nson-2.pdf“Sham” Dry Lease – would be an example of someone trying to confuse the issue as to who has control of the aircraft. The typical case is where the lessor is providing the aircraft under a dry lease and is also providing the crew under a separate agreement. Another example would be where the lessor is leasing you the aircraft, but you have to get your crew from the lessor or a specified source. In both cases the plane and the crew are too closely connected. In the case of a “sham” dry lease or “damp” lease the FAA may take the position that the lessor should hold a commercial operating certificate.
It is specifically to avoid muddying the waters between a real dry-lease and a wet-lease disguised at a dry-lease, that in Canada, the CAR require that when a aircraft is dry-leased and remains registered in the name of the lessor, the crew members of the aircraft must be employed by the lessee.Whether the crew is truly independent and the lease arrangement is a dry lease would be determined on a case-by-case basis. See Legal Interpretation to Douglas; Legal Interpretation to Fabian (stating that a pattern of evidence may show a wet lease exists if parties are "acting in concert" to furnish an aircraft and crew). As such, the answers to your questions, discussed below, would inform whether the lease agreements in your scenario constitute a dry or wet lease.
Last year, Sunwing dry-leased five B-737-800s from Thomson and these aircraft remained on the UK registration as allowed by CAR 203. However, in violation of CAR 203.03 (1) (d), Thomson Airways, the owner of the five aircraft, also provided the crews to fly these same aircraft to Sunwing. The aircraft and the crews are very closely connected in this case. I don't think that FAA would have accepted such a cozy arrangement south of the border.
To make matters worse in Canada, the Thomson pilots who, although they were in possession of Canadian work permits, allowing them to "Work" for Sunwing, acted just like Wet-Lease pilots, as they continued, while flying for Sunwing, to be employed by Thomson Airways, continued, as Wet-Lease pilots to collect their pay in the UK, and as Wet-Lease pilots, failed to apply for SIN and declare their Canadian income to the CRA.
Let's see if this year, our Transport Canada Inspectors will straighten this mess out.
