Effectively managing cash flow for maintenance management has now become a commercial imperative for airlines and aircraft operators, aviation consultancy IBA says.
In a release distributed today (Jan. 18), it says the effective management of maintenance is becoming increasingly critical not only for a percentage of total costs but also as a means of conserving asset value and generating a return on investment.
IBA says its research values the total maintenance reserves market at $22 billion with a projected annual expansion rate of between three to five per cent over the next decade, a period that will see the number of leased aircraft double. By 2027, the consultancy predicts the maintenance reserves industry will be worth in excess of $50 billion.
IBA says that such figures, along with lease rate factors standing at around 0.6% accounting for the overall economics of an asset’s lease, highlight the importance of maintenance reserve provision and indicate the extent to which efficient management of cash flow could benefit both operators and lessors.
Phil Seymour, CEO of IBA, believes accurate forecasting is one method that could help ensure sufficient cash flow is available to cover maintenance events such as airframe heavy checks, engine shop visits, LLP replacement, landing gear and auxiliary repair unit overhaul.
Having launched its own maintenance and cash flow forecasting tool IBA.MC last year, Seymour believes effective cost forecasting can provide a number of benefits.
“Cost forecasting can equally provide opportunities for the proactive management of maintenance exposure or the realization of surpluses through trading, lease and re-lease timing, or part-out decisions,” he says.
“A lessor receiving maintenance reserves enjoys considerable cash flow benefits and retains the ability to influence decisions that impact the useful economic life of an individual aircraft, so managing this process in a business that is set to double in the next ten years is crucial for all parties.”