Air Transport World

Airlines will find it tougher to pass deferred maintenance costs to lessors.

Airlines will find it tougher to pass deferred maintenance costs to lessors Miami--There's a tiger lurking in the underbrush. When it comes charging out many airlines could be severely mauled. The potential victims are airlines that have scrimped on overhaul and maintenance of their leased aircraft and the mauling would be in the form of millions of dollars of unanticipated maintenance costs.

For years airlines had grown accustomed to thinking of the lessors or financial institutions behind a lease as contented pussycats purring over the rich cream of regular payments and tax advantages. But these pussycats themselves have been mauled recently and are now ready to show their claws. In many cases, aircraft returned at the end of a lease or repossessed due to default have required so much work to get them back into saleable condition that prospective profits have been wiped out. The cream had turned sour. And not only lessors and other lenders have been mauled; airlines acquiring used aircraft from other carriers have also been hurt.

A typical lease contains words to the effect that the aircraft will be returned airworthy, have an "FAA or other certificate," and be in otherwise good condition aside from reasonable wear and tear. It also gives the lessor the right to inspect the aircraft during the lease to make sure it is being maintained properly.

A new look at costs

Until deregulation this generally worked out fine. Most airlines kept their aircraft in tip-top shape, not only mechanically but in the condition of the cabin interior and appearance as well. …

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