IATA Aircraft Lease Guidance

Pre-Delivery
●
●
Fixed cost
Flexible cost
An overview of the different maintenance reserve events, in combination with the different types, is provided
below Table 1.
Fixed
Cost
Variable
Cost
Fixed Interval
●
Engine LLPs
● Airframe Heavy Maintenance
Checks
●
Landing Gear Overhaul
Variable Interval
●
●
Engine Performance Restoration
and Overhaul
APU Overhaul
Table 1.
Different Types of Maintenance Reserves
Maintenance reserves accumulate, in relation to a specified future maintenance event for a particular item of
equipment, and can usually be accessed to cover the cost of that event when it occurs, whether during the
present lease term, in which case the Lessee would seek reimbursement from the relevant reserve account
for qualifying maintenance, or during a future lease term with another operator, where maintenance reserves
paid by a previous Lessee and held by Lessor might translate to a corresponding Lessor contribution. On this
basis, the cost of such an event will be distributed pro rata over the interval to the various users and if the
reserve rate has been optimized to match the cost of the maintenance event, the exposure to any shortfall in
reserve funds to cover the maintenance event will be minimized.
As detailed in the example below, the heavy maintenance visit (HMV) for an Airbus A320 has an interval of six
years. If the first Lessee operates the aircraft for a period of four years, maintenance reserves will have
accumulated over the full lease period. The remaining two years of maintenance reserves are accumulated by
the second Lessee, who operates the aircraft for an additional four years as explained in Figure 4. When the
six year check occurs, Lessee 2 will have access to a Lessor contribution relating to the period of utilization
by (and reserves collected from) Lessee 1, as well as access to reimbursement from airframe reserves paid by
Lessee 2 during the elapsed lease period. From a Lessor’s perspective, the maintenance reserves provide
security to reduce Lessor’s maintenance cost exposure in an event of default. From Lessee’s perspective,
maintenance reserves represent an additional cash flow burden during the lease term, but can also be helpful
in creating an enforced provisioning of funds to cover maintenance costs during the lease period, and
reducing the cash flow impact of infrequent, high cost maintenance events which can stretch the financial
capacity of smaller operators in particular.
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