Next GenerationAircraft Asset Management

Training School, LondonOCT 21 & 22, 2008

Next GenerationAircraft Asset Management

Training School, LondonOCT 21 & 22, 2008

International Bureau of Aviation

Introduction

A little bit about me&

A little bit about IBA

ALAN MILESDIRECTOR – REGULATORY SERVICES& TRAINING

Next Generation

What is meant by the term“Next Generation Aircraft”?

New / Advanced Systems TechnologyImproved Fuel Efficiency & NoiseMSG-3 Maintenance Practices

Does this make a difference to Asset Management?

Asset Management

KEY QUESTIONS:What is Asset Management?How effectively can it be achieved?What tools are available?Does the process work in practice?

The CycleThe Cycle

Identify Opportunity

Due Diligence

Lease Negotiation

Delivery of AssetOn-going Asset

Management

Pre-return Process

New Lease Options

Redelivery or Refurbishment

The Cycle to prepare for??……..The Cycle to prepare for??……..

Identify Opportunity

Redelivery or Refurbishment

Due Diligence

Lease Negotiation

Delivery of Asset

Pre-return Process

New Lease Options

DEFAULT!!

IBA has experienced two extremes:

“Don’t annoy the Airline”

If they are paying the rent, leave them alone

“Always inspect – trust no-one”

Scan everything (100% back up)

Asset Management PhilosophiesAsset Management Philosophies

IBA general advice:

Consider track record and airline credit risk

Copy major check summaries and other key docs, C.of.A, ARC, Certificates, etc.

Produce a benchmark for future reference

First sign of trouble – get in to inspect, talk to the “shop floor”

Asset Management PhilosophiesAsset Management Philosophies

Types of SurveysTypes of Surveys

Initial (Baseline) Condition:Initial - either first asset inspection or with a new operatorSpecification update / tracking of modificationsMaintenance Schedule - MPD vs. Operator AMPLease covenantsRecordsWarrantiesPhotographsUtilisation / Operations Plan - can be combined with Commercial Assessment

Types of SurveysTypes of Surveys

Annual:Could be more frequent dependant upon asset / credit risk

Ideally coincident with major check - but large fleet may be sample basis

Maintenance Schedule proposed developments

Lease compliance

Records update

Photographs

Types of SurveysTypes of Surveys

Lessor Contribution:Dependant upon specific lease - maintenance reserves / AD cost sharing / Upsy–Downsy

Usually related to Major Airframe, Engine Refurbishment / LLP’s, Landing Gear and APU Overhauls

Review workscope - liaise as necessary

Review invoices

Types of SurveysTypes of Surveys

Incident Survey:Could be damage related

Aircraft and/or Engine incidents

Replacement policy

Damage threshold / assessment

Claim negotiation - long term vs. short term

Liaison with Manufacturer

Types of SurveysTypes of Surveys

Pre-return Survey:Establishing:

• Mismatch between likely condition and contracted return condition

• The guidelines and procedure for the return

Can start as early as 12 months prior to return

Key for the remarketing effort

Types of SurveysTypes of Surveys

Return Survey:

Content - almost a duplicate of the Initial Survey

Usually involves representation throughout the return check (check lease)

Requires a very experienced coordinator

Usually a sensitive period

Types of SurveysTypes of Surveys

Technical Support

Technical Support

Manufacturer Liaison

Regulatory Authority Liaison

Maintenance, Repair and Overhaul Liaison

Technical SupportTechnical Support

AircraftTransfersAircraft

Transfers

Transfer from one Aviation Authority to anotherCertification of componentsLifed parts traceabilityCountry specific orders / requirementsEASA / FAA most common issuesEquipment requirements:

safety itemsPTT - often interior/galley parts

ETOPS / Over-water issuesPresentation packs for authorities

Aircraft TransfersAircraft Transfers

Technical -Commercial

Interface

Technical -Commercial

Interface

Management Reports:Coupling the technical aspects to the value and remarketing implications

ReconciliationSettlementsNegotiationsExpert Witness TestimonyRepossessionRemarketing

Technical-Commercial InterfaceTechnical-Commercial Interface

Credit risk relatedUtilisation benchmarkInterestInflationDrawdown mechanismDEFINITIONS!!Ascertaining the “right” cost benchmarkUsed aircraft complications

Maintenance reserves vs. end of lease compensationMaintenance reserves vs. end of lease compensation

Legal and technical projectWhat is the asset?Where are the assets?Ferry Flight Maintenance releaseEvidence of conditionJurisdictionStorage and MaintenanceRemarketing

Contingency PlanningContingency Planning

Review of the last 5 years

The valuation of asset and lease

Is there evidence is that AM has worked, i.e.. added value?

Trading Aircraft with Leases AttachedTrading Aircraft with Leases Attached

Commercial Asset ManagementCommercial Asset Management

Minimising RiskMaximising Opportunity

Commercial Asset ManagementCommercial Asset Management

Thank YouANY QUESTIONS