Tim Hogard wrote:
A friend and I are considering buying a plane that will be on
leaseback to a flight school.

I was wondering if the days of the "Wet Rates" are numbered with
fuel cost going up so high. As far as I can tell, renting planes
with fuel goes back to well before the '70s and I was wondering
what other systems have been tried? Based on a rate of fuel being
$1.25 a liter it looks like fuel will cost more for a year than an
engine and when your talking about planes that are worth less than
2x of the price of an engine, that messes up the economics.

What are the options for lease back that doesn't turn into
a fuel price gamble?

I don't think it too much difference one way or the other to the owner, but
there are some tradeoffs. Choose your poison.

Wet rate:
- you either need to pad your rates to cover potential cost increases, or make
frequent adjustments to your rental rate.
- you have to deal with fuel receipts for away-from-base fuel purchases.
- your renters have no incentive to conserve fuel.
- you might be able to negotiate a fuel discount since the handling is simpler
for the FBO (all the fuel billing goes to one place).

Dry rate:
- you need to establish a protocol for rental returns, like "always return it
full".
- you have to put up with complaints "it wasn't full when I got it".
- harder to accomodate a renter who wants partially filled tanks to provide
more carrying capacity.
- your renters have no incentive to keep the mixture rich enough to preserve
your expensive engine.