phil seymour president ceo –iba group limited · aircraft operating leasing: valuation and...
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Aircraft Operating Leasing: Valuation and Maintenance Related Issues.
Phil SeymourPresident & CEO – IBA Group Limited
Aircraft Operating Leasing: Valuation and Maintenance Related Issues.
Phil SeymourPresident & CEO – IBA Group Limited
IATA Maintenance Cost Conference Miami 23rd September 2015
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The first choice aviation consultancy –
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Who do we think we are?
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With the increase in operating leasing what are theconsiderations for lessors and airlines with respect tovalues and maintenance issues.
What are the pitfalls to avoid at redelivery, that sooften become contentious.
The parties involved – why do problems occur. The AWG and IATA – leasing initiatives – a more
“sharing” community JV?
Agenda
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Operating Leasing – will grow......
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Operating Leasing – will grow.....
Shape of the market from Boeing CMO 2015….
Over the next 20 years 38,050 airplanes at more than $5.6 trillion
Aviation is becoming more diverse, approx. 40% of all new deliveries to Asia Pacific, 20% to Europe and North America…….
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Of the 38,000 aircraft that may be delivered at least 50% will be as operating leases and a further 20% will become sale/leaseback after delivery.
Operating leasing provides airlines with considerable flexibility – at a price.
Operating Leasing – will grow.....
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Operating Lease Cycle
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Aircraft Valuation – maintenance value
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
1 13 25 37 49 61 73 85 97 109 121 133 145 157 169 181 193 205 217 229 241 253 265 277 289
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Aircraft Valuation – base and market value
0%
20%
40%
60%
80%
100%
120%
0 5 10 15 20 25
Firm market
Soft market
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Whilst the aircraft is overall a depreciating asset, as the aircraft ages, maintenance condition and especially the engines become the value driver.
Maintenance costs and maintenance reserve – high degree of correlation but reserves are also negotiable in some cases Cash LC Compensation
Operating Leasing – maintenance aspect
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Operating Leasing – maintenance aspect
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More litigation – Market/Cycle related.
BBAM vs Air Asia ACG vs Olympic
Most common areas of dispute.
Aircraft Redeliveries – The Key Issues
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Aircraft Redeliveries – The Key Issues
The Aircraft
MRO
Current Lessee
The ideal simple process.....
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Aircraft Redeliveries – The Key Issues
The Aircraft
MRO
Current Lessee
Lessor
Future Lessee
Aviation Authority 1 (export C of
A)
Aviation Authority 2 (importing authority)
New Owner
What can happen.....
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Airworthiness Directives
Dirty Fingerprint
Records (DFR)
Compliance Date
Life Limited Parts
Back to Birth (BTB)
(defined term?)
DFR
Modifications
Certification/ source/manual
updates (WDM/IPC)
DFR
Most Common Areas of Dispute
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Repairs
Single File .v. Multiple locations
DFR
Engines
PMA and DER?
Shop visit reports/WPG definitions
Components
Time Remaining
Certification and Tags
Most Common Areas of Dispute
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Aircraft Physical Condition
Interiors:Lessors have plenty of scope to argue that condition is not wear and tear related. Relatively easy to
solve.
Exteriors:Similar to interiors but there is often better reference material to use e.g. AMM but we
have seen 1800 “defects” recorded by some lessors who really want to give a lessee a hard time.
Engines:Possibly the most
problematic as solving the problem can result in engine swaps or perhaps even a shop visit. The B’scope is usually the last event and can be the most
disruptive.
Most Common Areas of Dispute
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Industry initiatives
Aviation Working Group – mostly OEM and financiersIATA Aircraft Leasing Advisory Group – mostly airlinesand advisors
What is happening and will it help?
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IBA Group LimitedE‐Mail: [email protected]: IBA House, 7 The Crescent, Leatherhead, Surrey, KT22 8DY, United KingdomTelephone: +44 (0) 1372 224488 Facsimile: +44 (0) 1372 224489Website: www.ibagroup.com