IATA Aircraft Lease Guidance
Guidance Material for aircraft leasing Guidance Material for aircraft leasing
Guidance Material and Best Practices for Aircraft Leases●Airworthiness Authority StandardLessors typically define one of the major airworthiness authority standards (i.e. FAA or EASA) in the(re)delivery conditions. This helps to ensure that in the event of a default and early termination orrepossession, the Lessor can re-register the aircraft on a major register without facing significantbridging and recertification costs. However, the cost of compliance with an airworthiness standard of theLessee’s authority, particularly where requiring implementation of modifications or equipment, can oftenbe quite significant. The Lessee should therefore identify the differences between their localairworthiness authority standard versus the standard proposed for delivery in the LOI/lease agreement.Ideally, any differences should be eliminated or otherwise well negotiated and any material modificationor compliance costs should be shared by Lessor, but the Lessee must also consider the proposedairworthiness authority standards that will apply for redelivery.Besides the aforementioned requirements, several additional aspects could be mentioned in the deliveryconditions, such as the export certificate of airworthiness requirements, AD compliance, etc. All of theseshould be carefully considered by the Lessee.3.1.5 Legal Aspects for DeliveryIn addition to agreeing on the condition of the aircraft on delivery, it is also important to understand thedelivery timeframe and, given the complexity of the transition process and the numerous factors which cancontribute to delay, for the lease agreement to contemplate the possibility of delays beyond the scheduleddelivery date. The parties will typically agree to a scheduled delivery date which is capable of movementwithin a defined where “excusable delays” are permitted subject to an agreed “back stop” date beyond whichthe parties may have the ability to terminate, or to agree a further extension of the delivery period.The lease agreement will almost always be drafted in such a way that the Lessor shall not be liable for anydamages or losses incurred by the Lessee due to a delay in delivery of the aircraft. This is a common industrystandard. The rationale behind it is that the Lessor should not be responsible for delays caused by lateredelivery by the previous Lessee of the aircraft, as this is out of the Lessor’s control. However, a delay canalso be caused directly by the Lessor and it is therefore advisable to the Lessee to negotiate this carve out ofliability, in that the Lessor should at least be responsible for any damage caused by delays which are withinthe Lessor’s reasonable control.A Lessor will sometimes insist on distinguishing between major and minor discrepancies with regards todelivery of the aircraft, with minor defects consisting of easily resolvable issues which will not impact on thenormal operation of the aircraft by the Lessee. The rationale behind this is to avoid any delay with regards todelivery. Therefore, minor defects should not delay the aircraft and should be transferred into deliveryexceptions, and potentially post-delivery agreements. In most cases, major discrepancies will need to beresolved by the Lessor before the Lessee accepts delivery of the aircraft.The lease agreement will almost always specify that the Lessee will accept the aircraft in an ‘’as is, where is’’condition. This essentially means that the Lessee must take the aircraft in the condition it presently exists oras found on inspection immediately prior to purchase or lease, even if damaged or defective, without22 4 th Edition 2017
Deliverymodification and without any express or implied warranties. This term is consistent with the legal principle ofCaveat Emptor (“buyer beware”) and means that upon acceptance the Lessee assumes all risks relating tothe quality and condition of the aircraft. Any defects are which discovered after delivery are at the risk of theLessee, whether or not those defects were capable of discovery prior to delivery and the Lessee typically hasno basis for legal recourse to the Lessor or prior operator unless the defect was identified and formally notedin the acceptance documentation as an exception to Lessee’s acceptance of the aircraft.Therefore, it is important to note that the Lessee’s only protection with regards to the ‘’as is, where is’’concept is to thoroughly inspect the aircraft and associated records before delivery, and to make sure thatthe aircraft is not accepted if it does not meet the specified delivery conditions.3.2 Aircraft Acceptance and Audits ProcessKey aspects of both the physical inspection of the Aircraft and the review of technical records are outlinedbelow.3.2.1 Physical AcceptanceBefore the beginning of the delivery process, Lessee’s representatives should have a clear understanding ofthe contractual delivery condition and any inspection rights and protocols which have been agreed in thelease. It is recommended that the team responsible for negotiating and agreeing the lease provides a detailedbriefing to the delivery and acceptance inspection team. The Lessee should also ensure that the followingpractical aspects of the delivery arrangements are known:●●●●●●●●●●Location of the inspection and how to reach this place.Time frame required for visa documents and other travel permissions, if required?Which MRO (or airline) will perform the delivery check or another kind of maintenance agreed betweenLessor and Lessee, and whether this facility holds the relevant maintenance approvals.Can MRO facilitate the whole delivery team for the duration of the check required?Are communication means as scanners, printers, telephones, internet available at the facility?How the transportation of the Lessee inspectors will be organized between MRO facility and hotel?(Usually Lessee responsibility).Is there any limited access to the places where the aircraft and maintenance records are?Is permission required for photography at the maintenance facilityWhere is the location of the records and where is the aircraft? Both of them should be at the same place,or at maximum, short walking distance if practical.Project plan and timeline for the performance of the check and delivery process, including any keyinspection milestones (structural inspection, interior inspection, paint approval, demonstration flight,power assurance runs, borescope)4 th Edition 2017 23
- Page 1 and 2: Guidance Material and BestPractices
- Page 3 and 4: Table of ContentsList of Figures ..
- Page 5 and 6: Table of Contents4.4 Engine Power b
- Page 7 and 8: Table of ContentsAnnex X: LLP Back-
- Page 9 and 10: List of FiguresFigure 1. Document S
- Page 11 and 12: List of TablesTable 1. Different Ty
- Page 13 and 14: AbbreviationsACACMIADAIRAMCAMMAMOCA
- Page 15 and 16: AbbreviationsIPCLDNDLLPLOCLOILOPALR
- Page 17 and 18: ScopeIATA’s ‘Guidance Material
- Page 19 and 20: IntroductionIATA recommends a proce
- Page 21 and 22: Section 1—Background1Background2P
- Page 23 and 24: Backgrounddetermined period. As a r
- Page 25 and 26: Backgroundthe repair is within SRM
- Page 27 and 28: Pre-Deliveryin certain circumstance
- Page 29 and 30: Pre-Deliverylimit, however it will
- Page 31 and 32: Pre-DeliveryThe net lease is often
- Page 33 and 34: Pre-Delivery●●Fixed costFlexibl
- Page 35 and 36: Pre-Deliveryreserves rates depends
- Page 37 and 38: Pre-DeliveryAs of July 2015, sixty-
- Page 39 and 40: Deliveryredelivery conditions of th
- Page 41: DeliveryOther items, such as wheels
- Page 45 and 46: Deliveryand registration process in
- Page 47 and 48: Deliveryimportant, as the continuou
- Page 49 and 50: Delivery3.2.6 InspectionDuring the
- Page 51 and 52: DeliveryooooGear TSN / CSN at Overh
- Page 53 and 54: Deliveryminimum standards set by IC
- Page 55 and 56: Deliveryimporting states recognize
- Page 57 and 58: DeliveryIn Europe, under EASA rules
- Page 59 and 60: Deliveryspecial procedures, phraseo
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- Page 63 and 64: Section 4—Operations1Background2P
- Page 65 and 66: OperationsFor maintenance reserve c
- Page 67 and 68: OperationsIt is advisable to the Le
- Page 69 and 70: Operations4.2.7 Other Important EoD
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- Page 73 and 74: Operationspractices; for example th
- Page 75 and 76: Operations4.5 Engine SubstitutionIf
- Page 77 and 78: RedeliveryA specific example of one
- Page 79 and 80: Redelivery●Project plan issued -
- Page 81 and 82: RedeliveryoLessor or Lessor represe
- Page 83 and 84: Redeliveryincludes a “redelivery
- Page 85 and 86: Redeliverythe redelivery of the Air
- Page 87 and 88: Redeliveryrecovery plan. Lessee Pro
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Guidance Material and Best Practices for Aircraft Leases
●
Airworthiness Authority Standard
Lessors typically define one of the major airworthiness authority standards (i.e. FAA or EASA) in the
(re)delivery conditions. This helps to ensure that in the event of a default and early termination or
repossession, the Lessor can re-register the aircraft on a major register without facing significant
bridging and recertification costs. However, the cost of compliance with an airworthiness standard of the
Lessee’s authority, particularly where requiring implementation of modifications or equipment, can often
be quite significant. The Lessee should therefore identify the differences between their local
airworthiness authority standard versus the standard proposed for delivery in the LOI/lease agreement.
Ideally, any differences should be eliminated or otherwise well negotiated and any material modification
or compliance costs should be shared by Lessor, but the Lessee must also consider the proposed
airworthiness authority standards that will apply for redelivery.
Besides the aforementioned requirements, several additional aspects could be mentioned in the delivery
conditions, such as the export certificate of airworthiness requirements, AD compliance, etc. All of these
should be carefully considered by the Lessee.
3.1.5 Legal Aspects for Delivery
In addition to agreeing on the condition of the aircraft on delivery, it is also important to understand the
delivery timeframe and, given the complexity of the transition process and the numerous factors which can
contribute to delay, for the lease agreement to contemplate the possibility of delays beyond the scheduled
delivery date. The parties will typically agree to a scheduled delivery date which is capable of movement
within a defined where “excusable delays” are permitted subject to an agreed “back stop” date beyond which
the parties may have the ability to terminate, or to agree a further extension of the delivery period.
The lease agreement will almost always be drafted in such a way that the Lessor shall not be liable for any
damages or losses incurred by the Lessee due to a delay in delivery of the aircraft. This is a common industry
standard. The rationale behind it is that the Lessor should not be responsible for delays caused by late
redelivery by the previous Lessee of the aircraft, as this is out of the Lessor’s control. However, a delay can
also be caused directly by the Lessor and it is therefore advisable to the Lessee to negotiate this carve out of
liability, in that the Lessor should at least be responsible for any damage caused by delays which are within
the Lessor’s reasonable control.
A Lessor will sometimes insist on distinguishing between major and minor discrepancies with regards to
delivery of the aircraft, with minor defects consisting of easily resolvable issues which will not impact on the
normal operation of the aircraft by the Lessee. The rationale behind this is to avoid any delay with regards to
delivery. Therefore, minor defects should not delay the aircraft and should be transferred into delivery
exceptions, and potentially post-delivery agreements. In most cases, major discrepancies will need to be
resolved by the Lessor before the Lessee accepts delivery of the aircraft.
The lease agreement will almost always specify that the Lessee will accept the aircraft in an ‘’as is, where is’’
condition. This essentially means that the Lessee must take the aircraft in the condition it presently exists or
as found on inspection immediately prior to purchase or lease, even if damaged or defective, without
22 4 th Edition 2017
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