Maintenance Reserves are monthly payments made by the airline to the lessor. The payments are often referred to as “Supplemental Rent” and belong to the lessor.
The accumulation of the funds is used to cover the costs of scheduled major maintenance events on Airframe, Landing Gear, Engines and APU. The table in our illustration gives an idea of typical MRF rates for a B737NG with CFM 56 engines installed.
The most common maintenance cost elements consist of ;
1. Labour and Material Costs – labour and material costs are the basic level at which maintenance cost data is collected and analysed.
2. Routine and Non-Routine Costs – Routine maintenance costs comprise of the labour and material associated with performing the scheduled maintenance tasks outlined in the airline’s Approved Maintenance Program (AMP).
3. Calendar Based Costs – are the costs that do not vary according to aircraft usage. 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 cost is those associated with the aircraft heavy structural checks and landing gear overhauls.
In our post earlier this week we talked about Aircraft Maintenance Planning Document – MPD;
All maintenance events are combined to form a program specific to each component and aircraft.
This process is recorded using a maintenance planning document (MPD), which contains all MRBR (maintenance review board report) minimum standards as well as any additional mandates for scheduled events.
In the example of B737NG the MPD might state a C-Check interval of 20 months. This means that operators must perform a C-Check every 20 months, regardless of whether it is operated or not. Likewise, other components have specially mandated maintenance intervals.
These intervals are used in the calculation of the MRF.
The calculation of Maintenance Reserves is a key negotiation point in every lease.
The calculation for Maintenance Reserve Rate = Cost of Maintenance event divided by the Interval between events.
Rates are typically stated in cost per month, per Flight Hour (FH) or per Flight Cycle (FC).
FHs = the actual number of hours flown by an aircraft over a specified time period from the moment the aircraft leaves the ground on take-off until the moment the wheels touch the ground on landing.
FC = a take-off and a landing.
At IALTA we dedicate a module to MRF in our current Technical Lease Training Programme and we look forward to offering a new Finance module in early 2022.
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