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George Kleros

  • NAFA Administrator posted an article
    Nine Things to Know When Leasing an Aircraft see more

    NAFA member, George Kleros, Sr. Vice President, Strategic Event Management & Fleet Support at JSSI, shares information on aircraft leasing.

    When leasing an aircraft, what are your maintenance obligations during and at the end of the lease term to ensure that the returned aircraft maintains its value? 

    Focused on that residual value, the lessor will designate a qualified inspector or auditor to perform periodic records reviews and/or asset inspections, throughout the lease period. The intent is to verify the aircraft’s general condition and ensure it remains in compliance with lease requirements.

    After each check, the inspector will send the lessor a report with the graded condition of the aircraft and any specific findings. If anything can or might affect the residual value, you’ll be required to take corrective action to bring the aircraft into compliance.

    At term end, the lessor will conduct an “off-lease” inspection (similar to a pre-purchase inspection) at a factory-owned or authorized service center. All components and systems must be in full working order; or repaired if not. If the major components are near their life limit, you’d be responsible for covering these costs: either a pro-rated percentage based on time consumed, or 100% of the cost to overhaul if it’s close to the event.

    If the aircraft requires repairs for damage or corrosion, you are responsible for the repair cost. Once any repairs required by the lease are completed, any diminution in value due to damage history will be the lessor’s responsibility.

    So what can you do to preserve the value of the aircraft?

    Do …

    • Review the lease document fully to understand the operation, maintenance and return of the aircraft requirements. A good lease-return scenario always starts with a well-defined and documented set of return conditions. Ask questions for clarification prior to signing, to be sure you fully comprehend the broad scope of your obligations.
       
    • Keep the aircraft clean and polished to protect from corrosion and paint deterioration. Unprotected aircraft deteriorate faster than you might expect. The aircraft interior will be inspected for wear, cleanliness, and damage. The exterior will be checked for oil leaks, paint condition, and structural damage.
       
    • Store the records in a secure, dry, fireproof storage cabinet or safe. Damaged or missing records devalue an aircraft and will change residual value. The lessor will come out either annually or bi-annually to see the aircraft and review the records for accuracy and airworthiness.
       
    • Keep up with routine and scheduled maintenance tasks, even if the aircraft is not flying for extended periods of time.
       
    • Address interior and exterior wear items immediately. Waiting can compound the problem and cost more to correct.

    Don’t …

    • Assume the lease document allows for the aircraft to operate under different regulations or use than originally defined.  If the aircraft flies only for you under FAR Part 91 regulations, don’t move your aircraft into a for-hire Part 135 air-taxi arrangement without consulting the lessor; it may not be allowed.
       
    • Leave the aircraft outside. Store it in a hangar when not in use. Sun, humidity, and high temperatures deteriorate interiors and paint exterior, diminishing the residual value.
       
    • Let the aircraft sit inactive for long periods of time. Your aircraft still needs to be flown and systems exercised to keep systems lubricated and reduce risk for damage.
       
    • Ignore missing paint and erosion strips. This leads to corrosion and will be expensive to correct.

    The lessor always requires hull insurance at a specific dollar amount, and generally seeks high liability insurance limits.  If you acquire an hourly cost maintenance program (HCMP), it can help ensure that the aircraft meets return conditions. The lease should state clearly that the maintenance program was current at lease inception and that the HCMP will be transferred to the lessor. An HCMP is very desirable in a lease transaction. It helps preserve the aircraft’s residual value, and helps you avoid penalties and extra costs. 

    This JSSI article was originally published in Business Aviation Advisor November/December 2020.

  • NAFA Administrator posted an article
    Extended Downtime? How to Maintain Your Jet see more

    NAFA member, George Kleros, Sr. Vice President, Strategic Event Management & Fleet Support at JSSI, discusses COVID-19's impact on the economy, flight department extended downtime, and the maintenance needs of business aircraft.

    If you are one of the flight departments anticipating some extended downtime, following are some areas to give attention to regarding the day-to-day maintenance needs of your aircraft...

    As we begin to consider what the new normal entails on the other side of the coronavirus crisis, it’s clear this will not be an instantaneous recovery for Business Aviation. However, it’s unlikely we will see a return to what we experienced in 2009, one of the most difficult years our industry has ever faced.

    In recent weeks JSSI has been performing claims oversite for insurance underwriters in addition to appraisals, lease returns and aircraft default recoveries for financial institutions.

    Based on the cases we have seen so far, it is apparent that many similar issues that occurred in 2009 have resurfaced.

    For example, although they may not intend to immediately sell their aircraft, many owners have no plans to fly for the foreseeable future, and the overarching behavior at this time is to severely reduce expenses wherever possible.

    There are several important factors to consider when making the decision to cut operating costs and pause aircraft utilization. Here are five areas you should consider as part of financially responsible decision-making during a period of extended downtime.

    Aircraft Inactivity Choices

    When an aircraft sits unused, you have two choices:

    1. Exercise the aircraft, or
    2. Preserve the aircraft.

    In the short-term, exercising the aircraft is going to represent better value for money. Proper preservation of the engines, avionics, APU and airframe requires an extensive, labor-intensive process that involves special equipment to perform correctly.

    Furthermore, several preservation steps will need to reoccur periodically throughout the downtime for certain items.

    At some point, there will be a need to fly the aircraft again, or there may be an opportunity to sell the asset which will require a quick turn to return to airworthiness.

    The process to take an aircraft out of preservation is equally extensive and requires additional labor hours because of all the operational checks involved. The complex process makes sense if you plan to store the aircraft for more than six months, but it is not cost-effective for anything less than that.

    In addition, taking steps to exercise the aircraft will help ensure all systems are working correctly and any issues can be addressed as and when they are discovered, not at the last minute.

    Inspections Remain Necessary

    When an aircraft is parked, it is obviously not accumulating hours or landings. This means hourly or landing-driven inspections are no longer accomplished because they are not due.

    Despite this, it is still highly recommended to keep up with all scheduled calendar inspection events. These are in place for several important reasons, including to control corrosion and keep parts lubricated to prevent future damage.

    The inspection of particular areas of the aircraft at specific intervals is pre-determined by OEM engineers and is based on their findings that a potential issue is most likely to surface within that period. Timely corrective action will allow for the issue to be resolved as efficiently as possible.

    It should also be noted that performing inspections too early might mean missing an underlying problem that is not yet serious enough to be detected and treated. 

    Waiting until the next time the inspection is required may then put you past the critical point, ultimately requiring extensive repairs and special engineering that may contribute to a loss in aircraft value.

    On the other hand, choosing to push the inspection out beyond the scheduled time could lead to the same scenario and extensive damage being incurred from not addressing the problem sooner. This is especially true for aircraft that spend most days outside on the ramp.

    It is therefore highly important to follow the Chapter 5 calendar schedule and always remain within the designed inspection schedule for your specific aircraft.

    Click here to read the full article.

    This article was originally published by AvBuyer on May 11, 2020.

  • NAFA Administrator posted an article
    Return to Lender see more

    NAFA member, George Kleros, Senior VP, Strategic Fleet Management and Fleet Support for Jet Support Services, shares nine things you need to know when leasing an aircraft.

    When leasing an aircraft, what are your maintenance obligations during and at the end of the lease term to ensure that the returned aircraft maintains its value? 

    Focused on that residual value, the lessor will designate a qualified inspector or auditor to perform periodic records reviews and/or asset inspections, throughout the lease period. The intent is to verify the aircraft’s general condition and ensure it remains in compliance with lease requirements.

    After each check, the inspector will send the lessor a report with the graded condition of the aircraft and any specific findings. If anything can or might affect the residual value, you’ll be required to take corrective action to bring the aircraft into compliance.

    At term end, the lessor will conduct an “off-lease” inspection (similar to a pre-purchase inspection) at a factory-owned or authorized service center. All components and systems must be in full working order; or repaired if not. If the major components are near their life limit, you’d be responsible for covering these costs: either a pro-rated percentage based on time consumed, or 100% of the cost to overhaul if it’s close to the event.

    If the aircraft requires repairs for damage or corrosion, you are responsible for the repair cost. Once any repairs required by the lease are completed, any diminution in value due to damage history will be the lessor’s responsibility.

    So what can you do to preserve the value of the aircraft?

    Do …

    • Review the lease document fully to understand the operation, maintenance and return of the aircraft requirements. A good lease-return scenario always starts with a well-defined and documented set of return conditions. Ask questions for clarification prior to signing, to be sure you fully comprehend the broad scope of your obligations.
    • Keep the aircraft clean and polished to protect from corrosion and paint deterioration. Unprotected aircraft deteriorate faster than you might expect. The aircraft interior will be inspected for wear, cleanliness, and damage. The exterior will be checked for oil leaks, paint condition, and structural damage.
    • Store the records in a secure, dry, fireproof storage cabinet or safe. Damaged or missing records devalue an aircraft and will change residual value. The lessor will come out either annually or bi-annually to see the aircraft and review the records for accuracy and airworthiness.
    • Keep up with routine and scheduled maintenance tasks, even if the aircraft is not flying for extended periods of time.
    • Address interior and exterior wear items immediately. Waiting can compound the problem and cost more to correct.

    Don’t …

    • Assume the lease document allows for the aircraft to operate under different regulations or use than originally defined.  If the aircraft flies only for you under FAR Part 91 regulations, don’t move your aircraft into a for-hire Part 135 air-taxi arrangement without consulting the lessor; it may not be allowed.
    • Leave the aircraft outside. Store it in a hangar when not in use. Sun, humidity, and high temperatures deteriorate interiors and paint exterior, diminishing the residual value.
    • Let the aircraft sit inactive for long periods of time. Your aircraft still needs to be flown and systems exercised to keep systems lubricated and reduce risk for damage.
    • Ignore missing paint and erosion strips. This leads to corrosion and will be expensive to correct.

    The lessor always requires hull insurance at a specific dollar amount, and generally seeks high liability insurance limits.  If you acquire an hourly cost maintenance program (HCMP), it can help ensure that the aircraft meets return conditions. The lease should state clearly that the maintenance program was current at lease inception and that the HCMP will be transferred to the lessor. An HCMP is very desirable in a lease transaction. It helps preserve the aircraft’s residual value, and helps you avoid penalties and extra costs. 

    This article originally appeared in Business Aviation Advisor on November 3, 2020.