Redelivery Management and Technical Aspects of Leases Oisn Murray - - - PowerPoint PPT Presentation
This image cannot currently be displayed. Redelivery Management and Technical Aspects of Leases Oisn Murray - Head of Technical and Asset Management Agenda Ag Le Lease Agreement Technical Considerations Ma Maintenance Overv rview
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Oisín Murray - Head of Technical and Asset Management
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Wh What you are paying for
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Define Specification
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Define Configuration
Ma Maintenance provisions
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Lessee is approved by local CAA
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Lessee MRO’ O’s are FAA/EASA approved
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No P PMA pa parts or D DER r repa pairs
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Lessor annual inspection rights
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Workscopes iaw OEM recommendations
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Lessor approval required for major repairs
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Lessor representation during repairs requiring MR drawdown
$43MM Aircraft $45MM Aircraft
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Re Redelivery Conditions
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FAA/EASA compliant
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Defined Redelivery process
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Engine substitution rights
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Bridge maintenance to to OEM standard or next lessee requirements
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Minimum condition for component conditions
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LLP Back to Birth
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Detailed list and format for technical documents
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Non I n Inc ncide dent nt/Accide dent nt statement nt, PMA and nd DER r repa pair s statement nts
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Maintenance Compensation mechanisms
Current Redelivery Conditions are the next Lessee’s Delivery Conditions
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Aircraft Maintenance is heavily regulated by
<The Manufacturer <The Manufacturer’s Aviation Authority <The Operator’s Local Aviation Authority
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Manufacture rers rs pro roduce Ma Maintenance Planning Document (MP MPD) which advises Opera rators rs and Au Authorities the recommended practices and intervals when maintaining an aircraft
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Local Aviation Authority Approval is required for an Operator’s Approved Maintenance Pr Program (AMP) P)
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Operators AMP’s can follow exactly the OE OEM’s MPD or can be customised to accommodate sp specific local regulatory requirements
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Requests to customise an AMP beyond Local Authority regulatory requirements must be made to to th the Local Auth thority ty and must t be supporte ted by substa tanti tiati ting reliability ty data ta
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Maintenance pra ractices and interv rvals have evolved due to the use of newer r technologies, gr greater availability of reliability data, better analysis of that data and with a focus on costs wh while at the same time increasing safety
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Less requirement for Hard Time inspections and more On Condition monitoring versus pr previous us pr practice
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During the lease term the lessee is responsible for all maintenance performed on the aircraft
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Includes Airframe Daily (A) Checks, C-ch check cks and Heavy Maintenance ce (D) ch check cks and Engine, AP APU and LG Overhauls
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Lessees source and contract with the Maintenance providers
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Lessees ensure that chosen maintenance providers are suitably qualified often time with su superior qualifications s needed for Lesso ssor reimbursa sable maintenance eve vents
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Commitment to keeping the aircraft airworthy and maintaining the records i) in English and ii) ii) in in accordance wit ith their ir Avia iatio ion Authorit ity approvals ls
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Lessee is not allowed to undertake any modifications that would materially devalue the ai aircraf aft
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Lessee provides monthly update on the aircraft utilisation and maintenance status and ma makes the aircraft available for inspection by the lessor at least once a year
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Redeliver the aircraft from its next C-ch check ck bridged to the OEM’s MPD. All co components ca capable of operating for at least a C-ch check ck interval before next maintenance ce
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During the lease term if the lessee pays the lessor maintenance reserves then the lessor is obliged to to reimburse lessee for such qualifying mainte
t clearly identi tifies
< What events a lessee can claim reimbursement for < What as a minimum needs to be performed during each event to qualify for reimbursement < Lessors right in advance to review and approve the workscope being proposed < Lessors right to oversee the maintenance being performed < The maximum amount available to lessee for such maintenance < Lessor contribution amounts above the lessee paid maintenance reserves if applicable < What is not reimbursable during a qualifying maintenance event (FOD, QEC, Transportation,
inbound engine tests)
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Lessor monitors the monthly utilisation reports to
< Accurately invoice monthly maintenance reserves < Ensure that aircraft and engines continue to operate and are not grounded for an unknown
reason
< Better track the maintenance status and forecast upcoming maintenance events
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Lessors or its agents perform physical and record inspections to
< Validate the maintenance status of the aircraft < Ensure records are being kept at a suitable standard < Identify for lessor and lessee potential issues during redelivery process
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Maintenance Reserves a are p payments based on the u utilisation of the aircraft made by by the he lessee to the he lessor to pr provision n for the he co cost of signi nifica cant nt fut utur ure aircr craft ma maintenance events.
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They are normally paid monthly in arrears and are component specific covering
<Airframe Heavy Checks <Engine Overhaul <APU Overhaul <Landing Gear Overhaul
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Why collect Maintenance Reserves
<Security to protect asset value and maintain lessor exposure <Means to monitor lessee contract compliance <Positively influence maintenance workscope
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¤ Maintenance Reserve Alternatives
<Cash Maintenance Reserves <Letter of Credit <Lease end adjustments <Half life adjustments
¤ Maintenance Reserve rates are calculated by dividing the predicted event cost
by the event interval. We customise for variations in
<Flight profiles <Operating environment <Aircraft age
¤ Annual Escalation
<Normal range 2.5% - 3.5% for Airframe, Landing Gear and APU <Engine Overhaul and LLP should be higher (OEM annual escalation)
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A330 Maintenance Intervals (Months) B787-8 Maintenance Intervals (Months)
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20 40 60 80 100 120 140 160 3Y 12Y Eng PR Eng LLP LG OH APU OH
A320 Maintenance Intervals (Months) B737 Maintenance Intervals (Months)
20 40 60 80 100 120 140 160 8Y 10Y 12Y Eng PR Eng LLP LG OH APU OH 20 40 60 80 100 120 140 160 6Y 12Y Eng PR Eng LLP LG OH APU OH 20 40 60 80 100 120 140 160 6Y 12Y Eng PR Eng LLP LG OH APU OH
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Aircraft Maintenance Intervals vary little between Narrow Body and Wide Body aircraft
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A330 Maintenance Costs (US$ K) B787-8 Maintenance Costs (US$ K)
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1000 2000 3000 4000 5000 6000 7000 8000 9000 3Y 12Y Eng PR Eng LLP LG OH APU OH
A320 Maintenance Costs (US$ K) B737 Maintenance Costs (US$ K)
500 1,000 1,500 2,000 2,500 3,000 8Y 10Y 12Y Eng PR Eng LLP LG OH APU OH 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 6Y 12Y Eng PR Eng LLP LG OH APU OH
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Aircraft Maintenance Costs vary significantly between Narrow Body and Wide Bo Body
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A330 Monthly Maintenance Reserves (US$)
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A320 Monthly Maintenance Reserves (US$)
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Co Costs are validated by
< Review of claims lessor has had to date < Cross check with OEM advisories < Review of reserves rates when looking at
lease portfolio purchases
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Ra Rates are subject to annual review and es escalation
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En Engine Overhaul and LLP generally count for be between n 75% and nd 80% of mont nthl hly Ma Maintenance Reserv rves
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OE OEM Flight Hour Agreements eliminate the En Engine Overhaul cash component from monthly ma maintenance reserve cash flows collected by le lessor
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Le Lessee Maintenance Reserve claims normally tr trail completi tion of th the work betw tween th three to to si six months s as s MRO’s s are sl slow to issu ssue complete fi final invoices
Maintenance Events Interval limit Event Cost Rate Monthly Airframe Structural Inspections 72 months 900,000.00 $ 12,500.00 $ $ 12,500.00 Airframe Structural Inspections 144 months 900,000.00 $ 6,250.00 $ $ 6,250.00 Landing Gear Overhaul 120 months 350,000.00 $ 2,916.67 $ $ 2,916.67 APU Overhaul 8,000 hours 350,000.00 $ 43.75 $ $ 10,937.50 Engine Overhaul 18,000 hours 2,300,000.00 $ 127.78 $ $ 63,888.89 Engine LLP Replacement 20,000 cycles 2,500,000.00 $ 125.00 $ $ 62,500.00 Total $ 158,993.06 Maintenance Events Interval limit Event Cost Rate Monthly Airframe 6Y 72 months 1,800,000.00 $ 25,000.00 $ 25,000.00 $ Airframe 12Y 144 months 1,650,000.00 $ 11,458.33 $ 11,458.33 $ Landing Gear Overhaul 120 months 1,000,000.00 $ 8,333.33 $ 8,333.33 $ APU Overhaul 15,000 hours 750,000.00 $ 50.00 $ 16,666.67 $ Engine Overhaul 20000 hours 7,000,000.00 $ 350.00 $ 233,333.33 $ Engine LLP Replacement 15000 cycles 6,883,950.00 $ 458.93 $ 61,190.67 $ Total 355,982.33 $
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Maintenance Reserve balances for Wide Body aircraft can be well above $25MM MM
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Be Best Practices
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Clearly define qualifying maintenance
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Lessor approval for reimbursable wo workscopes
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Modular approach to engine reimbursement
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Lessor attendance at repair facilities during maintenance
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Good communication to forecast timing of maintenance and reimbursement
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Annual review of rates
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Aircraft sp specific accounts s and component sp specific su sub-ac accounts
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No c co-mi mingling even across same me lessee fleet
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Annual review of accounts s with reconciliation as s needed
En End of life assets
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Retain Maintenance Re Reserves in lieu of Re Return Conditions.
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Engine and Component exchanges
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Fly to expiration
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OE OEM’s have ve entered maintenance market aggressive
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Fixed price maintenance
¤ Long term agreement ¤ Peace of mind ¤ Residual value protections
Agreements can be
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Term based
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Event based
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Cradle to grave
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Paid monthly
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Paid at maintenance event OEM agreements include
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GE / CFMI: On OnPoint
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Honeywell: MCA
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Rolls Ro Royce – To Total Care / OPERA
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IAE: Flight Hour Agreement (FHA)
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¤ Lessor preference is to collect cash:
¤ Complexity where “Power by the Hour” Agreements are in effect:
¤ End of life
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Commence Final Records review Aircraft exits service and starts Redelivery Check Redelivery Technical Acceptance Preliminary Lessee meeting and Budget Preparation Deregister and Export Aircraft to new lessee’s jurisdiction Preliminary Aircraft Physical and Records inspection Review of key redelivery documents and identifying potential issues Final Physical review commences, next lessee modifications incorporated if applicable
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Lease Returns and Transitions are a cross function and resource intensive process. The Transaction Ma Management Depart rtment and the Technical Depart rtments are re most involved
Review of Lease return requirements and forecast upcoming maintenance
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Lease terminates with lessee Lease commences with next lessee 12 months 9 months 60 Days 30 Days 0 Days +0 Days Delivery Technical Acceptance +0 Days Work with Aviation Authorities for both the Exporting and Importing jurisdictions Review of key redelivery documents and identifying potential issues Next lessee Authority and CAMO reps on site 10 Days Next operators authority and lessor airworthiness representative review aircraft condition and records to facilitate import to next jurisdiction
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During Redelivery Lessor has the right to
< Physically inspect the aircraft < Physically inspect technical documents < Observe the ongoing redelivery maintenance being performed
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Ai Aircraft Physical Inspection
< Perform Nose to Tail inspection, internally and externally looking for physical damage or excessive wear < Ensure aircraft has at a minimum installed all contracted equipment < Participate in redelivery demonstration flight < Perform Engine and APU borescope inspections < Confirm aircraft is physically airworthy and meets specified lease return conditions
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Ai Aircraft Records Inspection
< Confirm aircraft specification matches the contractual specification (Thrust, MTOW) < Review maintenance historical records to confirm levels of previously performed work < Cross check aircraft physical condition with documented physical condition < Confirm aircraft conforms to regulatory and airworthiness requirements < Ensure documents package has all that is needed and is presented in a manner to facilitate aircraft transfer to foreign
jurisdiction Re Redelivery Ri Risks are many but rigorous Physical and Re Records Inspections should help minimisie potential issues. Oftentimes the e bi biggest impe pedi diment nt to timely trans nsition n can n be be ine nexpe perienc nced d count unterpa parties
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Lease End Costs tend to have a predictable fixed cost element associated with effecting the redelivery and a variable cost as associat ated with tran ansitioning the ai aircraf aft to the next user
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Redelivery costs are usually a function of the size of the aircraft with Wide Body aircraft costing more than Narrow Body ai aircraf aft, estimat ated costs ar are:
< Narrow Body - $225K < Wide Body - $300K
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Transition Costs vary depending on
< Size of the aircraft < Age of the aircraft < Aircraft configuration < Next Lessee jurisdiction < Next Lessee modification requirements < Location of MRO performing modifications < Time between redelivery from returning lessee and delivery to next lessee < Storage period during transition
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Transition Costs with no modifications required
< Narrow Body - $100K < Wide Body - $150K
¤ Transition with large amount of modifications required can have very significant costs
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