Forecasting Maintenance Reserve Contributions

A significant portion of the global fleet of commercial aircraft are leased. Many of these leases entail Maintenance Reserve requirements. In such cases, Lessee-Operators are to periodically contribute towards future major scheduled maintenance events during the lease term.

These contributions are often in the form of cash, and are accumulated in an 'MR' account, usually an overseas bank account held by the Lessor. Movement of funds into and out of this account is (and should be) tightly governed by the provisions in the Lease Agreement, in particular those provisions pertaining to the Maintenance Reserve.

The Maintenance Reserve ("MR") is a concept successfully implemented by the global community of Lessors. This concept has gradually become an accepted market practice in the decades since its mooting.

This concept arose after episodes in the past where the Lessor took possession of the aircraft in an (unplanned) premature termination of the lease with the state of the aircraft (in maintenance terms) being different from that planned at the scheduled expiry of the lease. A long drawn repossession timeline, particularly if the case is an un-remedied default by Lessee makes this more likely and acute.

To bring the aircraft back into a maintenance status that would be acceptable to the next Lessee or new owner (if the aircraft is to be sold), the Lessor ends up spending out of pocket with no timebound, effective recourse to the previous Lessee. It is important to understand that the cost of maintenance during the lease term is with the Lessee.

Forecasting contributions to the MR account is a recurring and important facet of Aircraft lease and maintenance planning, for both the Lessee and the Lessor.

Below is a brief presentation (video) that may help in this endeavor. For our registered members, further presentations on this and related airline planning and management topics are available in our Forum/Groups section.

Comments, queries and feedback are welcome.