Page 5: The lease cycle
At the outset, a new aircraft will be delivered to a customer in line with his specification requirements. Contractual management involves setting out detailed requirements for the way in which the customer will look after the aircraft in service, i.e. maintenance standards to be met and dealing with modifications that the customer may make to the aircraft.
Customer support from British Aerospace or another approved service provider is very important and involves providing the customer with technical advice, spares support and training to enable him to make the most effective use of the aircraft in service. Aircraft redelivery involves managing the return to British Aerospace of the aircraft at the end of its lease to a predefined set of conditions, e.g. the customer will often be obliged to return the aircraft in a similar condition as to when it was delivered, which may involve a period of maintenance and modification.
Lease negotiation means establishing a new lease for the aircraft, e.g. the existing customer may want to extend the period of the lease or alternatively, a new lease may be created with another airline. Specification negotiation involves establishing the way the aircraft will be presented for the new lease, e.g. an airline may require the aircraft to be fitted with a specific seating configuration, additional catering facilities, updated technical equipment etc.
Refurbishment will then be carried out by British Aerospace or a recommended maintenance facility. This is in order to modify the aircraft to meet the requirements of the customer who is taking out the new lease or purchasing the aircraft. The aircraft will then be ready for delivery and entry into service.
British Aerospace Asset Management has successfully overcome British Aerospace’s asset difficulties by a dynamic policy of leasing and selling aircraft. Since 1992 this policy has been a resounding success.
It is always important to measure business success by examining the relevant performance indicators. There are a number of appropriate statistics which highlight the effectiveness of British Aerospace’s successful asset management strategy. For example, in 1997:
- 12 British Aerospace 146 Regional jets were sold for cash - in total worth 105 million US Dollars.
- 31 British Aerospace 146 lease transactions were signed – worth 185 million US Dollars.
In the five years since its formation, Asset Management has effectively quadrupled the value of each lease by replacing the original short lease terms with average leases of five to seven years.