18 Mar 2021
AviTrader MRO's Keith Mwanalushi scrutinises aircraft redelivery scenarios to identify the conditions and considerations under a lease agreement and the challenges that exist in the current environment.
Keith Mwanalushi reports that for many MROs and aftermarket specialists the combination of travel restrictions and different quarantine requirements at different locations has produced a challenging environment for aircraft redeliveries. Martin Pankov, Head of Lease Redelivery Support at AJW Group sees that due to the uncertainty of flight profiles and when passengers will return to the air, AJW are seeing a brief pause in redelivery activities. “Given reduced air travel, lessors are unwilling to take back their assets and many airlines have instead negotiated low to no rent fees for the time the aircraft is grounded.”
Pankov observes the current focus continues to be on asset recovery and storage, as well as negotiations. “Lessees face manpower shortages and travel restrictions with large airlines using their leverage to negotiate out hence many open sale and lease back opportunities. Usually, early returns have significant financial implications for the lessee, as lessors do not need the assets presently.”
AJW are seeing a trend on buy-out deals for lease return conditions; “however, customers need to be cautious as we expect a drop in the fair market value of some components which will cause friction between lessors and lessees. AJW can assist both lessors and lessees to uncover and match to true market intelligence,” Pankov suggests.
In terms of redelivery conditions, clarity is paramount under a lease, in terms of the main obligations of the lessee and the lessor for the maintenance status of the aircraft. Typically, everyone wants to see the aircraft ready and cleared one C-check ahead but, in bulk aircraft deals with possible repossession and new startup relationships, at AJW they have seen significantly shorter periods, according to Pankov.
Pankov stresses that the records review is the most important task for each party implicated in the chain of events from lessee redelivery to lessor possession, to new lessee acceptance. He says the proper completion of the task by the lessee’s team gives precious time for the procurement and the onsite team to avoid unnecessary delay. “The lessor’s records team is equally important to avoid any undue financial exposure on the lessor’s side for any findings identified from the next lessee. Any gaps in the due diligence process may indeed devalue the asset or render a deal void, leaving the aircraft susceptible to further maintenance. The next lessee could also have exposure from improperly carried out records review during their operation or even at redelivery. We often find customers requiring immediate supply of parts that could have been properly planned in advance.”
AJW offer a full lease redelivery service ensuring that lease returns are managed effectively with cost transparency and comprehensive processes.
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