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What is a typical broker's fee percentage for arranging an ACMI (wet) aircraft lease for an airline?
Based on triangulated data, the median broker's fee is about 650 USD per flight hour or around 10%. No data, however, is available on the broker's fee for ACMI (wet) aircraft lease. Fees are based on value of transactions and companies encourage clients to contact them directly for quotations. Fees may either be flat or commission- based on revenue, again depending on complexity. Most companies, however, still use percentages to guide the negotiation for the broker's fee. These guidelines typically begin higher at around 10% and decrease as the value increases to as low as .5%.
DEFINITIONS
This research and resulting calculations uses the IATA’s definition of wet lease, which is as follows: “A lease where the Lessor provides an Aircraft with Crew, Maintenance, and Insurance also known as ACMI. The aircraft is operated under the AOC of the Lessor”. A wet lease is distinct from a dry lease, which is: “A lease where the Lessee provides crew, maintenance and insurance. The aircraft is operated on the AOC of the Lessee.”
AirlineBasics interprets the definition in layman’s terms stating, “In an ACMI lease you hire an aircraft which is ready to fly on your routes. You sell the tickets, you brand the flight (in flight magazines, food on board, etc.) and that’s it. The company from which you lease the aircraft needs to do the rest. “The rest” in this case means anything from flight planning and crew rostering to ensuring proper maintenance is being performed.”
BROKER’S FEES METHODOLOGY
The broker's fee percentage for arranging an ACMI (wet) aircraft lease is open to negotiation. Many brokers’ fees today employ a flat rate and fees vary based on the complexity of the search and the value of the transaction, although our findings indicate the broker’s fee for the median transaction is about 10%. This is to say that some brokers are paid more and are more valuable to the company.
Some companies, however, still model broker’s fees on a percentage of the contract value. For example, USA Aircraft Brokers states their “typical fee structure, as a guide” is: 10% of the selling price, if 50,000 USD or less, 8.5% on contracts valued 50,000–200,000 USD, 7.5% on contracts valued 200,000-500,000 USD, and 6% on contracts valued over 500,000 USD. They also state, however, that “fees can always be negotiated with the owner”, meaning the broker’s fee likely does not fit as neatly into these percentages as it would appear.
Some companies state a minimum commission. Aircraft Sales, for example, states on their website that their brokers’ minimum commission is 3,500.00 USD. Flymail also uses percentages as a guide for broker’s fees. Their guidelines are:
"For aircraft up to 200,000.00 USD a fee of 8 percent of the selling price will be charged to the seller for brokering your aircraft.
For aircraft over 200,000.00 USD a 6 percent fee is charged for brokering your aircraft.
For multi-million dollar aircraft to act as a buyer’s agent or broker the fee is between .5 percent up to 3 percent (of actual sale price of aircraft) depending on price of aircraft, amount of work involved, and other responsibilities written into the agreement."
WET LEASE REVENUE
Based on triangulated data, the median broker's fee is about 650 USD per flight hour or around 10%. The revenue for fiscal year 2016-2017 for wet leasing, assuming all revenue is from commercial jet short term lease brokering, is 20,515,440 GBP or 26,901,896.47 USD. The median cost to operate a midsize aircraft is 6,000 USD. A company’s revenue from aircraft wet lease is 9,100,000 USD for 1702 hours or 5,346 USD per hour. The difference between the two (median cost to operate a midsize aircraft — company’s revenue from aircraft wet lease) would be around 650 USD or around 10%, which we can assume to be the broker’s fee. When triangulated, the broker’s fee resembles a broker’s commission on sales which would fall between 1-10% depending on value of transaction. The true value is likely less than 10%, since the amount (median cost to operate a midsize aircraft — company’s revenue from aircraft wet lease) does not include other costs such as operating or miscellaneous costs.
The number of in-flight hour and jets is not publicly available, therefore more specific figure cannot be triangulated further. According to AirPartner.com’s annual report, 82% of the company’s revenue comes from brokering. Of that, 57% of brokring deals involve commercial jests, which include short term aircraft leasing services. Beyond that, however, the company does not report the specific breakdown of short term leasing. No answer could be triangulated further.
OPERATING COSTS
The operating costs of the jets stipulated in the ACMI (wet) aircraft lease for an airline is situated between 5,000 USD to 7,000 USD per hour. According to Business jet Traveler (BJTonline), “for a long time, the rule of thumb was 1% of the aircraft’s value per month.” Due to the cost of funds being so low, however, “most monthly operating lease rates are well below 1% per month, especially for long-term leases of new or near-new aircraft, and sometimes as low as 0.4%”.
CONCLUSION
In conclusion, the media broker's fee is about 650 USD per flight hour or around 10%. This fee, however, is highly variable. Most companies state the fee will be negotiated with the terms of the contract. They do provide guidlines that place brokers' fees anywhere from 8% to .5%, with the percentage having an inverse relationship to contract value.