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Guidance Material and Best Practices for Aircraft Leases Effective May 2017

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Guidance Material and Best Practices for Aircraft Leases Effective May 2017 Guidance Material and Best Practices for Aircraft Leases Effective May 2017 4th Edition NOTICE DISCLAIMER. The information contained in this publication is subject to constant review in the light of changing government requirements and regula- tions. No subscriber or other reader should act on the basis of any such information without referring to applicable laws and regulations and/or without taking appropriate professional advice. Although every effort has been made to ensure accuracy, the International Air Transport Association shall not be held responsible for any loss or damage caused by errors, omissions, misprints or misinterpretation of the contents hereof. Furthermore, the International Air Transport Association expressly disclaims any and all liability to any person or entity, whether a purchaser of this publication or not, in respect of anything done or omitted, and the consequences of anything done or omitted, by any such person or entity in reliance on the contents of this publication. © International Air Transport Association. All Rights Reserved. No part of this publication may be reproduced, recast, reformatted or trans- mitted in any form by any means, electronic or mechanical, including photocopying, record- ing or any information storage and retrieval sys- tem, without the prior written permission from: Senior Vice President Safety and Flight Operations International Air Transport Association 800 Place Victoria P.O. Box 113 Montreal, Quebec CANADA H4Z 1M1 Guidance Material and Best Practices for Aircraft Leases ISBN 978-92-9229-594-3 © 2017 International Air Transport Association. All rights reserved. Montreal—Geneva Table of Contents List of Figures ............................................................................................................................................................. vii List of Tables .............................................................................................................................................................. ix Abbreviations .............................................................................................................................................................. xi Scope ............................................................................................................................................................. xv Introduction ............................................................................................................................................................ xvi Section 1— Background ................................................................................................................................................ 1 1.1 Maintaining Asset Value .............................................................................................................................................................2 1.2 Common Misunderstandings ...................................................................................................................................................2 1.2.1 Back-to-Birth Traceability .................................................................................................................................................. 3 1.2.2 Repairs ......................................................................................................................................................................................... 4 1.2.3 Records Presentation ........................................................................................................................................................... 5 Section 2— Pre-Delivery .............................................................................................................................................. 6 2.1 Letter of Intent ................................................................................................................................................................................. 6 2.2 Representations and Warranties ............................................................................................................................................ 7 2.3 Conditions Precedent .................................................................................................................................................................. 8 2.4 Insurance ........................................................................................................................................................................................... 9 2.4.1 Hull Insurance .......................................................................................................................................................................... 9 2.4.2 Liability Insurance ................................................................................................................................................................. 10 2.5 Payment and Security ................................................................................................................................................................ 10 2.5.1 Security Deposit ......................................................................................................................................................................11 2.5.2 Commitment Fee ....................................................................................................................................................................11 2.5.3 Rent .............................................................................................................................................................................................. 12 2.5.4 Supplemental Rent or Maintenance Reserves (if applicable) ......................................................................... 12 2.5.5 Maintenance Reserve Deposit ........................................................................................................................................ 15 2.5.6 End of Lease Compensation ............................................................................................................................................ 15 2.5.7 Letter of Credit ........................................................................................................................................................................ 16 2.6 Cape Town Convention ............................................................................................................................................................. 16 Section 3— Delivery .................................................................................................................................................... 18 3.1 Delivery Conditions ...................................................................................................................................................................... 18 3.1.1 Technical Aspects for Delivery ....................................................................................................................................... 18 3.1.2 Delivery of New Aircraft ..................................................................................................................................................... 19 3.1.3 Delivery of Used Aircraft ................................................................................................................................................... 20 4th Edition 2017 i Guidance Material and Best Practices for Aircraft Leases 3.1.4 Typical Delivery Conditions for Used Aircraft ........................................................................................................ 20 3.1.5 Legal Aspects for Delivery ................................................................................................................................................22 3.2 Aircraft Acceptance and Audits Process ......................................................................................................................... 23 3.2.1 Physical Acceptance .......................................................................................................................................................... 23 3.2.2 Delivery Schedule ................................................................................................................................................................ 24 3.2.3 Delivery Maintenance Check ......................................................................................................................................... 25 3.2.4 Records Acceptance .......................................................................................................................................................... 25 3.2.5 Demo Flight/Borescope .................................................................................................................................................... 27 3.2.6 Inspection ................................................................................................................................................................................ 29 3.2.7 Inspection Report ................................................................................................................................................................. 30 3.2.8 Certificate of Acceptance ................................................................................................................................................. 32 3.3
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