Aircraft transfers were increasing and are now at all-time highs due to COVID-19 as airlines right size their operation for the ‘new normal’.
The effectiveness with which aircraft transfers are executed impacts sellers, buyers, lessors, and regulators. Poorly executed transfers can be costly for all parties involved and can negatively impact the buyer’s operation for months after an aircraft enters into service.
Five factors differentiate the successful operators who quickly and effectively enter aircraft into service and have them generating revenue.
THE VOLUME OF USED AIRCRAFT TRANSFERS IS SURGING
Between 2010 and 2020, more than 1,000 aircraft were delivered annually by Original Equipment Manufacturers (OEM), roughly half of which were leased. Almost one in five were OEM financed. This volume, and the popularity of leasing, created a sizeable and active used aircraft market for opportunistic airline operators. Right sizing fleets because of COVID-19 has resulted in a record number of sales and lease returns.
BUYER BEWARE - CONSIDERATIONS AND CONSEQUENCES
Transfers (from contract execution to aircraft in service) can take between 5 and 11 months for a single aircraft. Packages of aircraft, or contracts which initiate the transfer of multiple aircraft, can stretch the timeline significantly further. Variation in elapsed time of transfer can be a function of many variables, not all of which are predictable or within the control of the buyer. This, coupled with the need to surge with dedicated specialist resources for a defined period, is why many airlines contract out the process or engage support.
Executing a transfer involves fleet planning, revenue management, and the engineering organizations of both the buyer and the seller. How well a transfer is executed can have significant regulatory compliance implications for the specific aircraft being transferred and, in some instances the buyer’s entire fleet.
The risk of an extended transfer (delays) is generally borne by the buyer, or in the case of a lease return the lessee, but it can be mitigated. Friction between buyers and sellers is common and often related to universal complexity and pain factors which can be managed with proper planning and resourcing.
Focusing on the engineering perspective of a transfer, 5 steps follow a purchase decision and culminate in an aircraft’s entry into service.
In our experience multiple complexity factors must be considered during planning for a transfer:
- Fleet type not currently operated
- Fleet age
- Condition (new or used, operational history)
- Number of previous operators and location (US domestic with FAA certification, or international with/without FAA certification)
- Physical condition of the aircraft
- The quality and the format of the aircraft records (format of the data (Spec 2500), language, and completeness of the records)
We also observe the following pain factors as consistently impacting aircraft transfers:
- Physical condition relative to the contracted condition
- Differences in configuration (mods/ICAWs/program differences) of the acquired aircraft relative to the existing fleet
- Ops Spec, pre-coordinating with FAA for acquiring a used aircraft; coordinating ferry requirements
- Differences in maintenance programs
- Setup of data, inventory, supply chain, manuals, task cards, maintenance agreements, etc. (a byproduct of config work)
Individually and collectively these factors determine the transfer timeline. Having the experience and ability to assess, plan for and mitigate the consequences of these factors determines seller and buyer satisfaction and how quickly the aircraft is available to begin generating revenue.
For inductions of multiple used aircraft, the level of effort can be reduced by streamlining repeatable tasks e.g., the incorporation of operator’s technical manuals and the revision of maintenance work instructions. The incorporation process can be labored and challenging. Streamlining with signature requirements and revision controls applied to a block of aircraft reduces the impact on the program.
The level of effort for inductions of multiple aircraft from the same previous operator or leasing company can be reduced by streamlining how aircraft records issues are discovered and solutioned. This process enables the lessee/lessor to establish precedents in transfer agreements for follow on aircraft reviews and transfers.
WHAT DIFFERENTIATES SUCCESSFUL OPERATORS
The core competencies required to execute aircraft transfers are well established and embedded in most airlines. However, aircraft transfer programs are typically infrequent, have uncertain timing, and require a dedicated program manager and technical subject matter experts.
In our experience five factors differentiate the most successful transfers:
- How well the process is planned, documented, and estimated
- Use of tools, checklists, and metrics to monitor progress and identify process acceleration opportunities
- Experience with electronic data transfer including Spec 2500 and capacity to manage, clean, and interpret large volumes of data
- The ability to surge with dedicated experienced resources
- Experience with pain factors, their solutions, and a diversity of aircraft types and conditions
Ultimately, organizational structure and size will determine whether investments into these differentiators are made. For most airlines the preferred approach is to outsource the activity entirely, in part, or augment the team with external resources. This approach is proven to deliver aircraft into service in a safe, effective and timely manner and enables the maintenance and engineering organization to remain focused on safety and reliability.
HOW TO MANAGE THE RISKS
A poorly executed transfer can debilitate an operation. Issues can take months to surface, disrupt the flight schedule, add costs for accelerated surplus and hangar space, and impact customer satisfaction and regulator confidence. Ensuring all issues are discovered and remedied before technical acceptance will protect the integrity of the operation.
Operators acquiring used aircraft must:
- Ensure the transfer processes address the complexities and pain factors described
- Consider whether the organization is capable and has resources for the sustained surge effort
- Assess, realistically, whether they have full command of the five factors which determine the success
Any operator buying, leasing, or selling used aircraft should consider whether it has the capabilities, tools, resources, and experience on hand to complete a transfer in the shortest possible time.
SeaTec is an industry leader in Aircraft Transfers, Entry into Service, Lease Returns, and Technical Records, and actively participates in the ATA Aircraft Transfer Records Working Group.
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