Aircraft Leasing and Installation of Loan or 3rd Party Components. 

If you lease an aircraft, then you are making a legal agreement with the lessor, and they of course will want to maintain their asset and always have financial security of the asset. It means that the aircraft leasing agreement will have conditions for the installation of loan or 3rd Party components. 

This can be a challenge in certain circumstances such as a leased aircraft for example where the title engine needs to be overhauled and the aircraft needs to continue in operation. For this to occur it means the engine must be removed (the title engine that came with the lease) and another engine must be installed. This engine being installed may well be a loan engine or a pool engine for example, meaning it does not belong to the lessee and it might also not be owned by the lessor of the aircraft. 

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Aircraft Leasing and Repossession Clause Awareness

We have seen before how the aircraft lease is a document aimed at maintaining asset value and ensuring lessor has limited financial liability.
A key part of that protection comes from how we deal with an event in which the lessee defaults (does not make a payment based on the agreed payment schedule).
The contract can hold clauses that clarify and state what and how the event might be dealt with in the event of an occurrence. The easiest way to illustrate this is to consider a section of the lease agreement and note that this is a limited and isolated section only, it is not a complete example of protections, but an example to illustrate the point.

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Topics to consider for structural repairs

The leasing of an aircraft is a complex topic and an even more complex and very comprehensive review of the aircraft itself and the associated records.

While all the review is important, some areas have more potential impact than others due to their ability to impact cost or timelines significantly. Consider an out-of-date life vest Vs an engine that has damage revealed on a borescope inspection; of course, it is easy to see how one can be addressed with a small cost and time impact, and the other can have a significant impact on both.

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Aircraft Leasing and the Impact of Definitions on lease return.

Aircraft that are leased are done so as an investment for a return; this is important to always consider during a lease review as we have noted in prior posts –an airworthy aircraft might not necessarily meet lease return conditions.

To illustrate this,we can consider an aircraft that is leased for 6 years to IALTA Airlines –at delivery the aircraft will be maintained under an AMP (Approved Maintenance Plan) as per the Continued Airworthiness Management Organisation (CAMO) requires it and the National Aviation Authority (NAA) also.

The airline CAMO will over time change the maintenance plan, they may change it on induction to the fleet –this is called a bridging check when we transition from one maintenance plan to another. Often some additional tasks are required as the intervals between when they are required have changed on them.

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Aircraft Lease – Conditions and Requirements for repairs

The aircraft lease document is going to be complex and comprehensive in its content; it is aimed at always protecting asset value and the lessor.
When we read the lease document it is very important to not only understand the return conditions relating to a topic or condition; we need to understand first the definitions as this can change a simple term such as “Acceptable Repairs” into a conditional statement which we must evaluate and always consider.
We can consider an example here of how a term such as “Acceptable Repairs” might be defined in the below example –note how there are conditional statements about being flush, their inspection requirements, and documentation. You can see how a simple term now carries means we must apply against all “repairs” that we carry out before we even consider the repair conditions for return.

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