Aviation Lease Considerations – Why Aircraft Redeliveries Can be Extremely Expensive?

Forthcoming Training Notification

Managing Aircraft Lease Agreements and Maintenance Reserves – 3 Days – Bangkok, Thailand 9 am to 5 pm from November 25th to November 27th 2019

Sofema Aviation Services www.sassofia.com looks at lease returns and potential financial exposure.

Introduction

It is a reality that unfortunately aircraft end of lease returns can be extremely expensive for the Lessee!

How Expensive? – well for a narrow body (737 / A320) the average cost is in the region of $ USD 2,000,000.

Here is the wakeup call because this does not have to be so, the Lessee’s / Operators CAMO has the potential to manage the Technical Records in such a way to reduce the exposure to the minimum possible.

However, it is important for the Operator / Lessee to fully engage with this exposure and to take a range of mitigations which protect the integrity of the financial exposure related to the lease

Considering the Primary elements which become the focus during the lease return.

a) Performance Obligations - Here the focus is on demonstrating to the lessor that the satisfactory operation of the aircraft and all systems as well as the Engines Performance are in compliance with the terms and conditions of the lease.

b) Physical requirements – Here we need to submit to a physical assessment of the condition of the aircraft structure as well as an assessment of the physical condition of the principal airframe Components, Engines, Landing Gear, other systems, and especially the cabin interior.

c) Certification requirements – Here the focus is to ensure ongoing compliance with all local regulatory authority requirements (Export C of A) and to ensure full compliance with the next lessee’s regulatory requirements.

d) Technical Records requirements – Here we face the challenge of ensuring a viable and satisfactory audit of all Continuing Airworthiness and other Aircraft records. The important thing to note here is that we are not just focusing on compliance with EASA (for example) but to ensure full compliance with the terms and conditions set forth by the lessor.

Where do the unforeseen costs arise?

a) Airframe

Missing component release requiring re-certification can cost in the region of USD $ 500,000

Landing Gears Back to Birth Issues can typically cost between 250K USD$ and 350K

Repair Issues typically due to problems with certification can cost between 100K USD & 250K USD

Modification and Supplemental Type Certificate Issues typically average out at 100k USD (including other issues with certification as well as Burn Certification.

b) Engines

Engines are an extremely high-value product and “Back to Birth” issues typically cost between USD $ 50,000 to 500,000 / Engine

Engine Performance Shortfalls can cost in excess of USD $ 200,000 / Engine

APU Performance Shortfalls can cost up to $ 200,000

Sofema Aviation Service www.sassofia.com and Sofema Online www.sofemaonline.com offer regulatory and vocation training both online and within the classroom environment. for details or enquiries please email office@sassofia.com or online@sassofia.com