PBH – Power By The Hour

One phrase you might have heard a lot more recently regarding lease types is “power by the hour” or PBH.

This kind of lease is a little different in that the lessor provides the asset on a fixed cost base. This fixed cost is typically driven per flight hour, or a calendar period such as monthly.

This is important at the moment as many airlines are struggling and without income, the expensive lease costs could mean companies are no longer viable. This benefits no one; the lessor does not want the expense of a repossession and subsequent management of an aircraft in a market when they aircraft will not have a customer.

A solution is a transition to PBH – the maintenance, storage and insurance are all paid by the lessee saving the lessor expense if they were to repossess the asset. The lessee now only pays the “rent” when the aircraft is operated.

Advantages of this type of lease for a lessee can include the avoidance of maintenance reserves, along with not being responsible for the maintenance driven by AD compliance or Life Limited Parts for example.

This in turn means these are disadvantages for a lessor – PBH is a short-term solution that avoids lessor costs such as repossession, reconfiguration, finding new customers and the ongoing day to day storage and maintenance costs.

When a lessee recovers and continues to operate the asset as usual PBH is not a good long term solution as issues such as maintenance reserves will create an issue over a long term.

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