While aviation operating leases continue to provide impressive returns compared to other asset classes, few other assets are as complex or critical to maintain as aircraft and their engines. Inadequate or inefficient maintenance not only has serious implications for safety, but also impacts residual values and increases the risk of delay around future transitions.
Running an aircraft fleet requires three distinct skills-
Oversight of financial and legal processes: IBA is experienced at managing contracts, in particular balancing the requirement of the lease with the MPD. We also oversee the collection of critical receivables such as rent, reserves, deposits and letters of credit where appropriate.
Oversight of maintenance and utilisation: We gather and analyse maintenance and utilisation data to ensure the aircraft is being used and maintained as per the agreement. Such analysis can also provide early warning of potential issues because utilisation and maintenance can change when cashflow dries up. We also manage records. Full traceability is essential both for redelivery and remarketing. Reporting surrounding the financial and technical oversight process is undertaken on our own platform, or a platform selected by the client.
A proactive effort to optimise cost management: IBA’s new Maintenance & Cost Forecasting Solution IBA.MC is a unique cash and maintenance system designed to provide visibility of maintenance events and costs for all aviation assets within a portfolio. Accurate forecasting ensures sufficient cash flow to cover events such as airframe heavy checks, engine shop visits, LLP replacement, landing gear and APU overhaul. It also provides opportunities for the proactive management of maintenance exposures or the realisation of surpluses through trading, lease/ re-lease time, or part-out decisions.
When monitoring aircraft and engines we talk of building a moving picture. We combine the technical and regulatory aspects of lease management with commercial and externally-focused analysis to provide a comprehensive overview of how the aircraft is being utilised, and if the risk of grounding or default is increasing or decreasing.
Alongside utilisation rates, which is the key aspect to monitoring red-flags, other warning signs might include:
- Key staff changes
- Route changes and cancellations
- Records and maintenance systems issues
- Economic and regulatory changes
- Order deferrals
- Rumours of payment difficulties