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Resolutions Information

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Aircraft and Equipment Leasing

For the Caribex AirLease program please see

The Alternatives

The following will provide the prospective lessee with some insight into the requirements, difficulties and expenses involved in leasing valuable commercial aircraft.

The process begins with the lessee presenting a “lease- worthy” entity to the lessor(s) and secured parties. The following explains the meaning of “lease-worthy.”

What does it take to be considered lease-worthy? Essentially, and most importantly, the lessee’s financial statement has to be fully 100% transparent and needs to demonstrate that he has the financial resources to support the lease throughout the term. In the case of a start-up carrier, this means that he will need to provide the lessor with a professional business plan demonstrating exactly how the new carrier will earn sufficient revenues to sustain the lease payments and survive as a viable company.

Lessors do not want to and will not engage in risky enterprises. No one wants to go through the difficult and very expensive problems involved in re-possessing an aircraft, especially if it is parked in a foreign country.

The prospective lessee needs to demonstrate that he has the maintenance capability to support the aircraft as per the manufacturers MIP (maintenance inspection program). The lessee will have to have licensed and knowledgeable individuals on staff that have experience with the type and class of aircraft being considered. The maintenance facility will have to have the proper library, tooling and spares packages as well as the basic shop equipment such as tugs, GPU,s, work stands, ladders, etc. All new or overhauled spares need to be maintained in segregated storage and the avionics shelves need be air conditioned. The representative of the lessor will inspect these facilities and, from time to time throughout the lease, will check on  the aircraft and its records.

Maintenance, of course, can be contracted (out-sourced) to approved and properly licensed MRO’s (commercial maintenance facilities) but, the lessee will still be required to support or actually maintain the ship’s historical records and provide turn-around maintenance.

The lessee will have to demonstrate that his flight crew and cabin staff training program meets reasonable international standards and that his crews have the requisite experience to operate the lessor’s aircraft safely. The carrier will have to demonstrate that each and every destination also meet reasonable international standards as far as passenger and ramp security are concerned as well as having serviceable and safe navigational aids.

In short, the lessee has to demonstrate to the lessor that he is capable of operating and paying for the lessor’s aircraft in a reliable and professional manner meeting all international standards.

This process begins with the lessee cooperating fully with the lessor’s representatives and supplying the requested and required information. Often a verifiable banking reference is required and this should be from a prime money center bank.

Once satisfied that he is dealing with a lease-worthy client, the lessor will, in exchange for a relatively small security deposit, contract to lease his highly valuable aircraft. The Lessor will entrust the lessee with the aircraft secure in the knowledge that he will receive without fail each and every lease payment on time and in the full amount. The lessor also has to be assured that the lessee will maintain his valuable aircraft exactly as the manufacturer’s maintenance program specifies and that the aircraft will be returned under the terms of the lease as specified in the return provisions.  This generally means that the aircraft will be returned with a fresh heavy inspection and the engines and airframe reserves, if charged) will be paid up and fully accounted for.

Once the Lessor has agreed to provide the requested aircraft the lessee will be expected to inspect the aircraft to ensure that it meets the delivery conditions as expressed in the lease document. The lessee needs to carefully read and understand the documents return provisions as it is this section of the lease wherein many disputes arise that can be very costly for both parties often leading to claims that wind up being settled in court.

The lessee will be required to deliver “good funds” to the lessor at the finalization of the lease. The lessee and his attorneys should carefully read and understand every paragraph of the lease document. There is no such thing as “boiler-plate” in these documents.

The amount of the security deposit and the collection of reserves generally is determined by the “exposure” or risk the lessor believes may be associated with a particular lessee. The greater the risk, the larger the security deposit. Risk is determined by the Lessor who will evaluate the country where his aircraft will be based, the experience and business history of the client and the routes his aircraft will operate on.

In most cases, the lessee will be expected to fly the aircraft from wherever it may be located to it’s principal base.  The costs to do this as well as the costs of returning it are up to the lessee as well as the painting of the aircraft into his company livery and changing the interior configuration and placement of his required cabin and cockpit placards. The return provisions will generally specify that the aircraft be re-delivered (at lease termination) painted in “white-tail” with all the lessee’s nomenclature and exterior and interior markings removed.

Before movement, and at the transfer of the aircraft as specified in the lease document, the lessee will be expected to place the aircraft onto his fleet insurance program which must be underwritten by a Lloyds syndicate and will name the lessor and all secured parties as the loss-payees on the hull coverage and as ‘additional insured’ under the liability policy. Copies of the insurance certificates have to be provided the lessor in advance of and as a condition of receiving the aircraft.

Generally, the lessee will arrange with his staff to have the aircraft inspected by his national civil aviation authority and phased onto this national registry ( if necessary) before the delivery flight. The registry of the aircraft must match the licenses of the flight crew. The costs for the inspection trip by the lessee’s national civil aviation personnel will be at the accounts of the lessee.

Of course, it needs be mentioned that should the client not wish to become involved in the qualifying process described herein, there are two alternatives. 1) Simply buy the aircraft for cash in which case, nothing is required except the money and evidence that the buyer is approved by the selling entity’s national government. 2) ACMI: The lessee can simply wet lease the aircraft. This is a lease wherein the lessor is another carrier who provides the aircraft, crew, maintenance and insurance while the lessee pays for the fuel and all other considerations.

The lessee in this case, need only pay the round trip positioning plus one month lease rate in advance based on an hourly rate times a minimum number of guaranteed hours. In general, for a modern airliner, the minimum hours per month is approximately 250 to 350. There is far less exposure or risk in the ACMI (wet lease) than in a dry lease. In the event of a default, the lessor merely ceases flying the lessee’s routes, retains the deposit and returns the aircraft to his home base, thus greatly limiting his financial losses.

We hope that the above information will be of interest and provides some indication of the steps, requirements and alternatives involved in leasing large commercial aircraft.


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