Aircraft Lease Considerations

Aircraft leasing when considered from a high level can help to put understanding around the different requirements and conditions that any lease agreement will put in place.

The lease agreement is there to protect the asset value and also the lessor exposure should the unexpected happen to the lessee such as financial difficulties.

Initially the lease will progress from interest from a potential lessee and this interest is then formalised by a LOI (letter of Intent) before moving on to execute the lease itself.

The discussions during this initial stage will look to address many different topics and areas, but some of the key conditions include:

–         Length of the lease
–         Rent payments for the lease
–         Maintenance Reserve Funds MRF (these are supplemental payments to the rent which essentially mean that as the aircraft is utilised an according percentage of the estimated maintenance cost for that utilisation is also paid)
–         Deposit structure for the lease
–         Return conditions for the end of the lease
–         Insurance
–         Termination Clause(s)

As an aircraft life will typically see multiple lessee’s we have to be aware of this and as such the effect of this on the configuration and layout of the aircraft which is commonly changed to meet the next customers’ needs and to meet jurisdictional requirements.

These modifications are highly costly and time consuming so from a finance perspective the lease transition cost must be factored into deciding:

–         If the deal is viable
–         Determining the lease rates
–         Determining risk
–         Ability of customer to pay
–         How likely they are to be able to make lease obligations
–         What is lessor exposure

The above is some high-level considerations; there are of course multiple additional areas and topics for discussion.

Stay up-to-date with all our aviation news and information:

#ialta #aircraftmanagement #aircraftleasing #aircraftengineer #aircraftparts #aircraftengines #aircraftmechanic #onlinelearning #aircraftsales