IATA Aircraft Lease Guidance

Guidance Material and Best Practices for Aircraft Leases
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In case the airline prefers a pay per event type of agreement but desires increased cost predictability, a
process of internal accrual should be adopted, based on the rates and coverage of the maintenance
agreement in place.
4.4.2 Entry/Exit Options and Number of Shop Visits
Rates that are offered by the OEM are conditional upon specific operating conditions, maintenance practices
and the hardware standard of engines. It is therefore not always possible to just enter additional engines into
an all-inclusive agreement with the OEM. For new engines, this is not a problem, but if the airline wants to
add used engines into the agreement, then it becomes a lot more complicated. If the parameters of the
engines to be added are significantly different from the assumed parameters, the airline will need to do a
qualifying shop visit on the relevant engines before they are included into the OEM agreement. Such
qualifying shop visits will usually be charged on time and material basis and are usually significantly more
expensive than the airline is accustomed to.
Rates that are offered by the OEM are also conditional upon a certain volume of engines expected to be
refurbished and on whether it is the 1st, 2nd, 3rd or subsequent performance restoration shop visit. It is
therefore not always possible to remove engines from the agreement at any time. An airline could well end up
in a situation whereby they have decided to remove an aircraft from the fleet early but they are still obliged to
send the engines for a performance restoration shop visit under the OEM agreement. On the other hand, a
lease may have been extended but the OEM agreement for the relevant engines will expire if the maximum
number of shop visits is reached.
Options to address these issues with an OEM maintenance contract:
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The issues explained could potentially be addressed by a tripartite or Lessor controlled agreement with
the OEM. If the Lessor has an agreement with the OEM in place that is not linked to a specific operator,
or allows for a set of different types of operations, adding or removing engines from that same Lessor
should be transparent for the airline. Of course this would have to apply to all Lessors the airline is
leasing aircraft from, which is very rarely the case.
Ideally there should be no limitations on the number of shop visits, or they should be well defined by the
airline based on their fleet planning, lease agreements and desired flexibility/coverage. In other words,
the airline should advise the OEM what coverage they require over the term of the agreement.
The airline should negotiate flexibility into the agreement to cover for unexpected changes in fleet
planning or operational parameters. If no or limited flexibility is achieved, there should be a clear
mechanism on how the airline can remove/add engines to the agreement in terms of additional
payments or extra shop visits as required.
If there is a limitation on the number of performance restoration shop visits, the airline needs to review
their fleet planning and budget for any additional shop visits that would be required to meet redelivery
conditions but are not covered by the OEM agreement.
OEMs have started providing airlines with tools to minimize the issue of maintenance practices on used
engines being added to the agreement. In doing so OEMs are certifying engines to OEM standards and
52 4 th Edition 2017