“The second tenant adopts, without exception, older engines that have been in service for about 10 years. This represents a higher risk for the OEM if it enters them into a comprehensive care contract,” says Seymour. This means an increase in PBH fees for the secondary tenant if they sign up for a similar structured agreement. Rubin adds that the lack of competition in a dominated OEM after-sales will be more of a problem for Secondtier Peder, wants more flexibility in their maintenance management. Several factors influence the demand for used aircraft, including: the price of fuel; Availability of the replacement engine Rental interests Maintenance costs OEM support; Availability of green-time engines and used service equipment (USM). Another problem is the ability or freedom to perform maintenance work without rigorous OEM control. It is important that the operation of mature and aging engines remains financially viable for air carriers, while many operators want new engines (EIS) to be able to transfer asset management risk to the OEM. “Replacing the LLP is the main driver of MRO`s costs, which is why, for example, a T-M contract operator must plan LLP costs during a heavy SV. While replacing LLPs is not preventable, there are alternatives to keep costs low: USM, low-cost repairs or even, in some cases, green time leasing,” Koppers says. It should be taken into account that if a total care contract contains reserves of LLP, it is likely that new materials will be used. It remains to be seen whether this will be the case for next-generation engines. LPLs are generally not part of a pbH agreement or comprehensive care.
This is another maintenance element that requires cash reserves when leased to a new taker. If an operator is wholly the owner of the aircraft, it is obviously free to decide whether the EFC reserves should be reserved for LPLs, and the dynamics are different. Given the current short lifespan of next-generation L.5 engines, LLP management will also be important for potential buyers of tire engines. They expect cash reserves to be established for the management of these LPLs if they are to be replaced. As part of this contract, RR provides significant follow-up support, from standard maintenance to performance restorations, repairs and overhauls. For engines registered at Total Care, a higher residual value is often offered. The operator perceives the added value offered by all the care, while there are few benefits for the owner. “OEMs are trying to respond more flexibly to the owner`s needs,” Seymour says. “RR`s OPERA and LessorCare initiatives are two recent examples. Payments can be used if the owner is suddenly exposed. In the end, the owner needs to see more money for Total Care to work both ways. Such initiatives are new: LessorCare was announced this year in response to growing concerns arising from the problems of remarketing aircraft (see Post Lease and Remarketing).