Heard the term “supplemental rent” before and wondered what it means? “Supplemental Rent” is a term often used to describe “Maintenance Reserve Funds” (MRF).
The payments are made along side the lease cost to the lessor and will accumulate over time toward scheduled major maintenance events on the airframe, engines or landing gear for example.
These funds are paid overtime with the lease cost to the lessor and then when a major maintenance event occurs the lessee can claim those funds back to cover the cost of the maintenance required.
Common examples of what the fund can be used for including:
– Labour and Material Costs – this is the basic level at which maintenance cost data is collected and analysed.
– Routine and Non-Routine Costs –this is the labour and material associated with performing the scheduled maintenance tasks outlined in the Approved Maintenance Program (AMP).
– Calendar Based Costs – (time driven and not by utilisation). They are typically determined as annual costs and allocated on an hourly basis to the aircraft according to the number of hours flown.
The largest calendar-based costs are those associated with the aircraft heavy structural checks or landing gear overhauls.
Maintenance Reserve Funds help the lessor protect the asset in the event of an asset being returned early or the lessee going into administration for example – the lessor has a reserve to maintain the aircraft, so their exposure is limited financially.
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