Aircraft is an Asset that consists of hundreds of mechanical components and each flight has to comply with many legal requirements. When the Asset is leased to a Lessee, then the Lessor needs to monitor the state of the Asset constantly for the evaluation of various administrative aspects. It thus raises the importance of Aviation Asset management.
What is Aviaton Asset Management?
Aviation Asset management is a method to manage an aircraft’s mechanical state, services, costs and related regulations throughout its lifecycle (from acquisition to final disposition). The owner (Lessor) and operator (Lessee) of the Asset are both responsible to manage the Asset. But the approach to perform the same can be distinct for each party. This difference occurs because the purpose of using the Asset is different. While the Lessee is managing the Asset for generating revenue, the Lessor manages the Asset to ensure that its commercial value is secured.
The Asset management method from the Lessor’s end can be divided into various sub-processes.
- Technical records audit periodically
- Lease Management
- Continuous Airworthiness Management
- Performance Restoration
- Aircraft Asset appraisal & value optimization
Periodic records audit: to comply with Aviation Regulations & investigate potential risks
Frequent records audit can help the Lessor get a real-time discernment of the current state of the Asset. Efficient records management assists in complying with the Regulatory requirements. Updated technical records can also prevent unpredicted airworthiness compliance issues during aircraft returns as they can affect the Asset’s value.
Lease Management: to avoid complexities in the lease agreement
There are many types of leases in the aviation industry, such as wet leases, damp leases, and dry leases. The requirements of the lease, methodology of taxation, and revenue collection primarily depend on the lease type. Moreover, lease accounting standards are revised from time to time, ending in inappropriate financial statements. Thus, it raises the need for efficient lease management; otherwise, it can significantly impact the financial reports.
Continuous Airworthiness Management: to comply with Airworthiness Directives
Continuous Airworthiness Management Program (CAMP) can help generate a logbook with all the maintenance schedules and technical information. It can help in tracking all the critical aircraft requirements as these can be necessary for the Lessor for administrative tasks.
Performance restoration with maintenance reserves: to keep a check on the creditworthiness of the Lessee
The majority of operating leases consist of managing the ongoing costs associated with aircraft to meet the regulated standards. The Lessee needs to develop and invest in the maintenance program until the termination of the lease agreement. If the Lessee fails to pay for the same (partially or entirely), it may lead to huge risk for the Lessor. To avoid such a situation and secure the creditworthiness of Lessees, Lessors plan an independent credit provision called Maintenance Reserves. Maintenance Reserves are periodic payments from the Lessee towards the cost for performance restoration. It ensures that the value of the Asset can be optimized as much as possible.
Aircraft Asset appraisal & value optimization: to analyze Asset’s value
Lessors take a high risk for Asset acquisition and are constantly surrounded by financial dilemmas related to their Asset’s valuation after the termination of its lease. For the Asset valuation, they need to analyze the value according to the market standards laid down for the same. Thus, they may take the help of aircraft appraisers to get an aircraft appraisal document (as per the ISTAT standards). This document can affect the aircraft’s market price and help get a detailed estimation of other related values.
Thus, we can clearly say that it is important to manage the Asset on real-time basis. It helps the Lessors gain all the information related to their Asset that may affect their operations. AirFleet Managers help the Lessors in the process of Asset Management. You can contact us for our assistance.