An “End of Lease Financial Adjustment” is a tool that can be used at the end of a lease period during the hand back process.
It is driven by an evaluation against the lease return conditions; is the aircraft being returned in a condition that is the same as when received, in a better condition or worse condition.
This consideration is not just cosmetic and includes evaluation of multiple factors such as LLP (Life Limited Part) remaining life or any other conditions that stipulate remaining life and or conditions of installation.
Typically, then there are different types of end-of-lease payment structures such as:
One option is known as “Mirror-In / Mirror-Out” – A mirror adjustment be one-way or two ways.
One way is where the Lessee is required to pay an adjustment when a certain maintenance event is returned with less time remaining than at delivery.
A two-way mirror whereby lessor may have to pay the lessee if a certain maintenance event is returned in better condition than at delivery.
This can also be referred to as an “Upsy – Downsy”.
Another option is “Zero-Time or Full-Life” – This is when the lessor receives payment for time used since last overhaul or since new.
As this is like a one way mirror it can also be referred to as an “Upsy”.
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