Thu Jun 14, 2018 12:25 am
When an aircraft comes off lease, the leasor should receive end of lease (EOL) payments for accrued maintenance and inspections, an external repaint and interior refurbishment, compensation for damage/abnormal wear, excess hours and cycles, and a raft of other amounts covered in side agreements to the main lease.
Some leasees will negotiate a discount on the end of lease payments, in return for signing a new lease on a new aircraft, or extending an existing lease on another aircraft from the same leasing company, or.....................
Some will undertake EOL work inhouse, because they can do so, at lower cost than in original agreement.
Some are even smarter. They will store your end of lease aircraft for free, thereby deferring any EOL action and payments until the leasor determines it's future (and then they will do the work inhouse), with some even accessible for use on an 'on demand (pay by the hour) basis'.
The waters are muddied, because compensation, almost certainly including buybacks (pre-agreed trade in prices with nominees) and cash occurred early in their lives.
In normal circumstances, the leasor weighs up the desirability of scrapping versus continued operation - sale or another lease.
Very tempting to scrap, because a prospective buyer or new lease customer will do the maths, and want a big chunk of the EOL payment for a re-paint, new interior, cockpit upgrade, training contribution and lease payment holiday.
Increasingly more profitable for the leasor to pocket the lot, part the big ticket items, and let a specialist do the rest. Ideally there is a discreet time separation, and a few changes of ownership, to preserve / protect the tax status of the previous lease and settlements, which is why some aircraft seem to park awaiting their future, when in fact it's already known.