Aircraft Lease Terminations and Recovery

When a lease agreement matures, there are generally two options. One option is to renegotiate and extend the current lease agreement. The second option is to terminate the lease, recover the collateral and attempt to re-market the equipment either by an outright sale or a new lease.

The recovery process involves obtaining all maintenance and flight records. Often times the operator of an aircraft will have more than one maintenance location, and it becomes very important to travel to all the maintenance operations facilities to ensure that all the maintenance records are recovered.

A physical audit of the aircraft and its equipment also needs to be conducted to ensure that all the equipment subject to the lease agreement is recovered, such as engines, avionics, cabin seats, and so on.

Airlines use a parts pooling theory in order to maximize the aircraft utilization of the fleet. This process allows for a part or component to come off of one aircraft for maintenance or overhaul, and after overhaul, it will go on whatever aircraft needs the component next.

Most lease agreements provide that at the termination of the agreement, all the original components be back on the subject aircraft.

 

It is very important for the recovery to be conducted by an experienced professional. Often times, after a recovery by someone with little or no experience, it is found that many of the records are for the wrong aircraft or component. Sometimes very important records are lost forever. This can result in unnecessary and costly maintenance, overhauls and inspections.

The ultimate goal here is to recover the aircraft, assess the aircraft maintenance and cosmetics, and comply with whatever maintenance functions are required as quickly as possible, and get the aircraft on the market and disposed of either by an outright sale or a lease agreement with another operator.

Our expertise and experience in this area has been a valuable asset for the lending institutions.

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