Aircraft Leasing – Maintenance Reserve Fund & Letters of Credit

IALTA

The maintenance reserve fund we have seen in the prior posts is a benefit to the lessor in that it
affords them financial security and reduces their financial exposure to an asset.

The maintenance reserve fund is an agreed sum of money paid alongside the lease cost for “renting”
the aircraft based on the future maintenance costs during your operation period.
It can mean that you are now paying a lease cost for the rent of the aircraft and a maintenance
reserve fund alongside this, which can be called supplemental rent. While you can claim back the
money paid into a reserve fund based on maintenance carried out, there is a lot of finance tied up in
such an operation.

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Aircraft Leasing & Maintenance Reserve Funds

A large amount of the world’s aircraft is leased for operation; this is due to many factors including
costs associated with an outright purchase. If you lease an aircraft out then the cost of that asset you will want to be retained to the highest value so you have a viable asset that you can lease multiple times, convert or sell in the future.
In order to maintain the value of the asset we have a lease agreement and conditions for return and
conditions provided initially.

The lessee will then pay an agreed amount in “rent” while they lease the aircraft.
Aircraft maintenance is mandatory and can also be expensive, to this end we need to consider how
we mitigate risk of exposure to this. What happens if a major check is due after 24 months of
operation and the lessee goes bankrupt 22 months in – this could leave a large check to be
performed with no finding for it.

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What are OOPs, SRT, SSI’s, CMR when it comes to performing a Last Done Next Due (LDND) review?

Last Done Next Due (LDND) review

Whether you are performing a technical records review on behalf of a lessor/owner or an airline
redelivering or accepting delivery of a previously leased aircraft or working as a CAMO engineer
reviewing a set of records on an aircraft coming out of storage, the review of the Airworthiness
Directives (AD’s) for compliance, the Hard Time (HT) component lists and the Last-Done-Next-
Due (LDND) are all an integral part of your role.

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Aircraft Leasing & Maintenance Reserve Funds.

Aircraft Leasing & Maintenance Reserve Funds.

A large amount of the world’s aircraft is leased for operation; this is due to many factors including costs associated with an outright purchase.

If you lease an aircraft out then the cost of that asset you will want retained to the highest value so you have a viable asset that you can lease multiple times, convert, or sell in the future.

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Aircraft Records & Component Type / Requirements for Lease Return.

Aircraft Records & Component Type / Requirements for Lease Return.

The aircraft is comprised of many components and maintaining the serviceability of the components on an ongoing basis is carried out with an approved maintenance plan. While this plan will maintain airworthiness for the aircraft – a lease can be a little more restrictive.

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