IBA examines maintenance reserves market

Eleanor Steed
By Eleanor Steed January 22, 2018 17:45

IBA examines maintenance reserves market

As preferences for aircraft leasing develop further, management of maintenance becomes even more critical as both a percentage of total costs and as a means of conserving asset value and return on investment. As a result, IBA suggests that the need to manage cash flow and exposure has now become a commercial imperative for airlines and operators.

In a time when the lease rate factors are at or around 0.6% the overall economics of the lease – including proper assessment of the redelivery conditions/end of lease compensation and/or maintenance reserves, become even more essential.

IBA’s industry research concludes that the total maintenance reserves market represents a $22 billion industry that will continue to expand over the next decade at a rate of 3-5% per annum, while the total number of leased aircraft is expected to double. IBA estimate that by 2027, the maintenance reserves business will be worth more than $50 billion per annum.

Such figures highlight the importance of maintenance reserve provision and indicate the extent to which efficient management of cash flow could benefit both operators and lessors.

According to Phil Seymour, CEO of IBA, accurate forecasting can help to ensure that there is sufficient cash flow to cover maintenance events such as airframe heavy checks, engine shop visits, LLP replacement, landing gear and APU overhaul. “Cost forecasting can equally provide opportunities for the proactive management of maintenance exposure or the realisation of surpluses through trading, lease/re-lease timing, or part-out decisions,” he says.

Eleanor Steed
By Eleanor Steed January 22, 2018 17:45