Imagine you’re an engine leasing company. You lease an engine to an operator and require that it be insured against loss on an agreed value basis1. You are sole loss payee and a contract party on the lessee’s policy. The engine is financed so the agreed value is set at or above the outstanding loan amount. Because of where the engine is in its life cycle, that value is higher than its current market value. Lo and behold, the engine ingests a bird on take-off and is declared a total loss. You request payment of the agreed value from the… Read more

I spoke recently at a conference where the following question was raised: Should a lessor care whether the same engines installed on the aircraft at delivery are returned at the end of a lease? There was disagreement on the panel and in the context of exploring how lessees and lessors can strengthen relationships, perhaps this is an issue ripe for review. The Lessor’s Perspective — What’s Mine is Mine: Lessors are primarily concerned with value preservation and predictability. Well crafted maintenance and recordkeeping requirements and return conditions provide insurance against receiving a boat anchor at return and an engine that… Read more

Miami’s “Corrosion Corner” is getting busier. In January, the FAA’s new rules addressing widespread fatigue damage (WFD) in aging aircraft became effective. Drafted as amendments to Parts 25, 26, 121 and 129 of the U.S. Federal Aviation Regulations (FARs), the FAA has effectively set “soft” life limits for aircraft. While these regulations only effect U.S.-registered aircraft, it is expected that EASA and other regulators will follow suit. The issue of WFD gained widespread attention in April 1988 when the upper fuselage of an Aloha Airlines 737 separated in flight. While not caused exclusively by fatigue, the era of increased scrutiny… Read more

The FAA has been a registry of convenience for years. A reliable filing system and well-established regulations and guidelines help to make it a model for the world. As a result, owners, operators and financiers have consistently chosen to register aircraft in the US, even if they never set wheels on US soil. And while only US “citizens”1 may register aircraft in the US, through trusts2 created with the statutory and regulatory blessing of the FAA, non-US citizens have been regularly able to facilitate US registration without difficulty for many years. The U.S.-based owner trust satisfies the citizenship requirement that… Read more

Eyjafjallajökull?? At least you can pronounce volcano — and what it spewed has been nothing less than a huge pain in the ash for the industry. Operators, particularly in Europe, have been critical of the EU airspace closure following the eruption of Iceland’s sleeping volcano. Fear of immediate and catastrophic engine failure, among other things, was the justification. Such fear, while well-grounded, may have been misplaced in this instance. And while damage to the airframe and its component systems is a concern, volcanic ash probably has the potential to cause more expensive damage to an aircraft’s engines. Eager to resume… Read more

You leased an aircraft or engine and the lessee hasn’t paid in weeks, or months. Promises to pay and various payment plans yield little if any benefit. The lessee uses the equipment for free as its value continues to decline. You need to take action. Litigation is an option, but with bankruptcy, or worse, liquidation looming, more urgent action is required. Plus, once debtor proceedings are started you can’t act without relief from the automatic stay. Another option is self help. In the U.S., the Uniform Commercial Code (UCC)1 permits a lessor, without judicial process, to repossess leased equipment or,… Read more