Special Reports: Aircraft Leasing
Hidden costs of second time around aircraft leases
November 1st 2015
Handing back an aircraft to a lessor for re-delivery to a new airline can be far more expensive than airlines expect, a study by the International Bureau of Aviation (IBA), revealed. Read More »
IBA, which provides business analysis to the aviation industry, said it has examined typical key re-delivery conditions and estimated each re-delivery of a single aisle aircraft at eight years old added approximately US$1.65 million to the maintenance costs of an airline over and above the basic Maintenance Planning Document (MPD) requirements. The figure can be higher than $3 million for a twin aisle aircraft, IBA said.
“Operating Leasing added costs to the overall mix because airlines must provide aircraft in a condition that generally supersedes ‘airworthiness-only’ standards for re-use at time of re-delivery for the next operator,” it said.
IBA’s chief executive, Phil Seymour, said its maintenance cost benchmarking exercises, combined with its own studies, showed the true overall MRO spend is greatly increased from the basic requirements that are driven by the OEM (original equipment manufacturer) MPD.
“Maintenance tasks are brought forward during the redelivery phase so the airline meets the commercially negotiated conditions for redelivery. It is inevitable these tasks, as well as observations made by lessors’ representatives at the redelivery, add to the scheduled maintenance costs. The financial impact can be significant and often not visible until it is too late.”
Airlines are learning the hard way to adapt to the redelivery business, said Seymour. “Taking staff away from their day jobs that are focused on keeping the fleet flying and complying with regulatory issues is totally different to the approach and organization required for re-delivery of an aircraft,” he said.
IBA found the costs of re-delivery to a typical European airline for labor alone were $150,000 per re-delivery, in addition to other maintenance costs. Lessors faced similar costs because they had to locate their staff on-site during re-delivery periods.
“A high level of subjectivity remains around decisions about ‘condition’ and what is fair wear and tear, as well as differences in opinion over what constitutes adequate back-to-birth records and repair and modification files. The older the aircraft is, the more likely disputes will arise. There have been several cases of litigation over the re-delivery process, which caused hundreds of thousands of potential costs to become multi-million dollar issues,” Seymour said.
