Savings through LOI/Lease Contract Review
TES saved an operator over $11M through diligent review of LOI and Lease Agreements.
The Scenario
The operator had initiated an aggressive medium term growth plan for their fleet and had, to date, received numerous proposals from various aircraft Lessors for the anticipated introduction of the A320 aircraft type.
Across the various proposals received, many of the LOI and lease documents contained a wide variation in the lease terms. The operator understood the risks relating to engines from previous experience with TES successfully negotiating the lease terms for a different model of engine, however the operator was confused about which terms to accept based on their limited knowledge of this engine model.
TES’ Service
Following a review of the various LOI’s and lease agreements, and using TES experience of the engine model concerned, TES was able to advise the operator on the more favourable proposals and on the terms that required subsequent negotiation. Following a period of negotiation with the leasing companies, terms were agreed that presented both limited risk to the operator and reduced cash flow across the lease term.
The Outcome
As a result of the successful renegotiation of lease conditions by TES, a total of 6 shop visits were avoided, removing approximately $2M of identified cash shortfalls from the operator (cash shortfall identified after MR drawdowns). TES negotiation of the maintenance reserve rates to reflect actual engine CPH also resulted in a cash saving to the operator of $3.1M across a 5 year period (compared to the MR payments that would have been paid out using the pre-negotiated rate).