Excess spending on aircraft redeliveries has increased since 2016, chiefly due to engine costs, according to IBA. In a recent survey of 140 respondents, about evenly split between lessors and lessees, IBA found that the redelivery process is still not started early enough; records and engines are causing problems; and there are major concerns about resources, liquidity and returns.
The primary reasons for late redeliveries include unscheduled repairs and failed borescope inspections, cited by 28% of respondents, and initial underestimation of redelivery efforts, also cited by 28%. Next comes late engagement, at 20%, and technical teams preoccupied with flying, not returning, cited by nearly 15%. Bringing up the rear as causes of late action were contract disagreements, bad communication and other causes.
IBA researchers were encouraged by more awareness among lessees of the efforts required than in previous surveys and by decreasing disagreement over contracts. There apparently has been improvement in contract drafting since 2016. More lessee demands are being met, for example, requiring lessors to ensure conditions of interior configuration. And top-tier lessees have been able to negotiate diluted conditions, much less than half-life in some cases.
Less positively, “engagement is still taking place too late,” IBA notes. The organization recommends engaging on options at least 15 months out, and earlier if possible.
Records were a challenge for 60% of respondents and engines for 28%. Nearly 60% of lessors felt lessees often engaged too late in the redelivery process.
In 2018, MROs were flagged as a bottleneck by 19% of respondents, while MROs often say they are engaged too late by the lessees. Several MROs said they are frustrated when returning lessors wanted last-minute changes to meet next lessees’ requirements.
IBA’s top recommendations are to plan earlier, hire or outsource to plug manpower gaps, engage with the other side to build rapport. and run through all lease-return clauses to identify potential problems.