What is the main difference between a lease and a leaseback?

The correct distinction lies in the nature of the transactions involved in a lease and a leaseback. A lease is a contract that allows one party, the lessee, to use an asset owned by another party, the lessor, in exchange for payment. In aviation, this refers specifically to an agreement enabling someone to operate an aircraft without owning it outright.

In contrast, a leaseback involves two transactions: first, the ownership of the asset (e.g., an aircraft) is sold, and subsequently, the seller leases the aircraft back from the buyer. This arrangement allows the seller to retain the use of the aircraft while also freeing up capital that was previously tied up in ownership.

This fundamental difference highlights how a lease is primarily about usage rights without ownership change, while a leaseback involves both a transfer of ownership and an agreement to lease back the same asset, ensuring continued usage by the seller. Understanding this difference is crucial in various financing and operational contexts within aviation law.