Sofema Aviation Services (SAS) www.sassofia.com Considers the key aspects of a successful Lease Negotiation.
Introduction
All sides will agree that a failed agreement is akin to a disaster and whichever side comes off worse there are no winners. There are several situations to consider:
- Leasing a New Product
- Lease Transition (2 Lessees & 1 Lessor)
- End of Lease No Transition
Any mismatch in Delivery Timing will have financial repercussions with all parties potentially exposed for example the new lessee may not be willing to take delivery as per the Lessor agenda.
Two Sides & Two Objectives
Aircraft Delivery timing is a primary consideration with the returning lessee wishing to terminate as soon as practicable to stop paying rent and to go “off risk” for the aircraft.
For its part the lessor wants the new lessee to take delivery as seamlessly as possible so that the new lessee starts paying rent and goes “on risk” for the aircraft.
Consider the lessee who is taking delivery of an aircraft that they typically plan to use for several years.
- Major Lessee concerns relate to maintenance costs & extended downtime, the mitigation is to focus on maximizing the pre-delivery inspections and to seek out delivery condition discrepancies. (Note – Every discrepancy becomes an opportunity)
- Major Lessor’s concerns relate to elements which are outside of the direct control of the lessor:
o Material & Parts Provisioning
o Availability of MRO services
o Potential for Delay due to Issues & Findings During e Major Maintenance Input suppliers, an engineering firm, the airframe manufacturer, and/or an MRO
o To manage both the returning lessee and the new lessee to avoid a gap in registration, insurance rent, and risk allocation
The Danger of Over Promising and Under Delivering
- For each delivery commitment by the lessor:
o Requires a corresponding return commitment from the returning lessee
o Or confirmation from the lessor’s tech team that the delivery commitment is not an issue
o Any Miss match should be flagged for resolution
Note – The choice of wording is important and should match between the delivery and return conditions (exactly) to avoid any miss interpretations.
- Maintenance Intervals should be clearly stated and referenced by Calendar / Hrs / Cycs / Landings.
Building Conditions which can be Reasonably Met
The language to be used should focus on Compliance with EASA and the need to be acceptable to the next operator.
Ensure the Conditions are going to be achievable example a requirement that no part be older than the airframe is not achievable within the context of EASA compliant operations as non-life-limited parts are not tracked for hours.
Next Steps
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Aircraft Delivery, Aircraft Lease, Aircraft Leasing, aviation, Aviation Leadership, EASA, Leadership Training, Negotiation Skills, SAS blogs, SAS training courses
