The Impact of Lack of Planning During Aircraft Lease Returns

Does this issue concern you as an operator?  Most receive penalties during an Aircraft Lease Return and for some, it is “Major League”

Sofema Aviation Services looks at the potential exposure when Lessees fail to plan effectively.

Managing Aircraft Lease Agreements and Maintenance Reserves – 3 Days – Bangkok, Thailand November 25th to November 27th 2019

The Majority of issues encountered during the redelivery process can be traced to poor planning on behalf of the lessee – the costs can be dire. However, the reality is that it is well within the remit of all lessee’s to manage astutely the entire lease return process and to protect what would otherwise be a significant and unnecessary expenditure!

How confident are you in your overall lease management awareness?

Sofema Aviation Services is presenting a 3-Day training at our partner training facility in Don Muang Bangkok – Placing your core team on this training could be the best decision you make.

If the lessee begins the redelivery process too late, the chance of the aircraft being returned on time and on cost rapidly diminishes, unfortunately, many companies take a soft route and let this story unfold with costly consequences.

Where are the biggest costs during a lease return?

It may not surprise you but the single item which typically incurs the greatest cost during a lease return. Such costs can easily run into the 100’s of Thousands of USD. Of course, this does not have to be so!

Case Study Airline X Lessor Y

An Airline which had several aircraft to return as part of a new equipment acquisition essentially took the view that they were technical compliant with the regulations and everything was “hunky-dory”.

It was not…….

Even the lease return conditions had not been shared with the relevant engineering team & business areas!

No additional time was planned over and above the normally expected “C” check and there was no lease return project manager assigned.

The result was the entire project was saddled with months of delay additional lease payments and a myriad of unbudgeted and unexpected costs and of course litigation.

The extended downtime had a “knock-on” effect which led to several aircraft being grounded as they had run out of hours.

In one case the engine did not meet the return conditions (as a result of not monitoring minimum return lease obligations) resulting in a protracted delay and a several million dollar shop visits!

Note – Not carrying out timely end of lease surveys can impact the lead time required to obtain the spares necessary to bring the condition up to the lease return standard. (In particular when related to cabin spares and materials where the lead time can be very long.)

Further Considerations and Issues

a) Not carrying out Borescopes on the Engines and APU, in general, creates an additional exposure which could again bring significant unbudgeted costs to the project.

b)  Documentation Issues sit very much at the top of the list of end of lease anomalies. Often related to repair documentation in particular connected with the repair certification, material certification and full traceability.

c)  Back to birth traceability of components fitted (not available outside of Life Limited Parts (LLP) within the EASA jurisdiction).

d)  Parts Manufacturer Approved (PMA) parts are usually precluded within the terms of the lease so can create multiple issues if they have been installed on the aircraft.

e)  Within the FAA jurisdiction, Designated Engineering Representative (DER) repairs can be an issue, pay particular attention to the certification and acceptance into EASA as well as the terms of the Lease Contract.

f)   The process of gathering together and accepting the aircraft technical records can take from a few weeks to several months. If there are gaps or disconnects then the costs can grow quite rapidly.

Final Note

Not appreciating the volume of work and time required to comply with the end of lease conditions is a common error which is made by the lessee.

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