A lease agreement will specify what maintenance events are to be covered through payment of reserves and for which the lessee may draw down against the accrued amounts. Areas of maintenance typically covered by reserves are as follows:
. Airframe Heavy Structural Inspections
. Landing Gear Overhauls
. Engine Performance Restoration
. Engine Life Limited Parts (LLPs)
. Auxiliary Power Unit (APU) Restoration
Prior to a qualifying event, the workscope and estimated cost for each notional maintenance event shall be agreed by Lessor and Lessee, and both Lessor or Lessor’s representative(s) shall be entitled to observe such work and shall be provided with copies of pertinent documents detailing the scope of work.
After the work is performed the lessee pays the maintenance provider and then claims a reimbursement from the lessor out of the accumulated reserve account. Repayment takes place only if payment into the reserve account is fully up to date, and only up to the total value of the specific reserve account ; if the cost of work exceeds the total in the specific reserve account, the excess cost is the responsibility of the lessee.
The contractual position relating to maintenance reserve is always a subject of intense negotiation. Many airlines have sufficient credit stature that their prominence in the marketplace means they can reject paying maintenance reserves. On the other hand, lessors will show less flexibility for weaker credit lessees and require these operators to pay maintenance reserves.