IATA Aircraft Lease Guidance

Guidance Material and Best Practices for Aircraft Leases
hour rates are obviously based on a certain expected time between shop visits. The longer the time between
shop visits, the higher the cost of a performance restoration shop visit and the higher the margins for the
OEM. Hence, it is in the OEM’s interest to have a long time between shop visits so that their margins are
maximized.
It is also in the airline’s interest to have a long time between shop visits because this reduces the amount of
shop visits, operational disruptions and cost of ownership. However, for the airline it is also very important to
have some flexibility so that it can optimize its operations and fleet planning. This can get very complicated in
the case of large fleets with high frequency deliveries and several different leases attached to them.
The airline needs to take into account an optimum spare engine level and shop visit turnaround time
constraints, which will ultimately determine how much stagger is required in the removal program. This
stagger has to be communicated to and accepted by the OEM. Assuming stagger is within reason, the OEM
is not expected to raise much of an issue on this, but stagger flexibility has to be addressed in the agreement.
The airline needs to take into account lease redelivery conditions. The moment of lease return and the
requirements at lease return may require an engine performance restoration shop visit well before the engine
is actually due for a shop visit for technical reasons. This issue is specific to certain leases and airline fleet
planning and is much harder, if not impossible to accept from an OEM point of view.
The airline needs to take into account possible changes in fleet planning. If a lease is terminated early,
performance restoration shop visits may be required early as well. If leases are extended, performance
restoration shop visits may need to be added or occur later than planned.
Options to address these issues with an OEM maintenance contract:
●
●
●
●
●
Agreements that have no performance restoration shop visits pricing based on flight hour rates should be
fully flexible. When pricing is based on fixed price or not to exceed price, it should not matter when the
shop visit actually occurs and therefore the airline should have full flexibility to decide when a
performance restoration shop visit is due, assuming slots are available at the shop.
If pricing is based on flight hour rates then there must be stagger flexibility. In addition the airline should
assess its own fleet planning and lease conditions and verify where lease redelivery requirements may
conflict with OEM agreement conditions for engine removal. Most of the time the OEM agreement will
only accept an engine removal for performance restoration when the engine has actually run out of
performance or is unserviceable due to hardware condition/LLP time expired.
It is possible to request a threshold as to when engines can be removed for a performance restoration
shop visit, regardless of actual performance/hardware condition. This will likely increase pricing, so it
needs to be reviewed carefully.
Another consideration is asking the OEM for an optional pricing for lease return shop visits. This could be
on fixed price / not to exceed basis or on an escalated flight hour rate.
The airline may come up with a long term plan or different scenario plans and share them with the OEM
as a basis for pricing. However, this can be quite difficult for new engine designs where there is no
experience with time on-wing, and for airlines that have very dynamic fleet planning.
54 4 th Edition 2017