End of Lease Repair option

[joefremont]

On dealing with bankrupt airlines I have occasionally seen instances where an airline has leased an aircraft, crashed it, then at the end of the lease they pay for a D-Check and pays to transfer it back. Sometimes those are older aircraft where the price of a C or D check may be more than the value of the aircraft.

So here is my idea, at the end of the lease there would always be two options.

1 - Pay for any repairs and transfer back
2 - Forfeit the deposit and buy the aircraft for its list price.

The system would automatically choose whichever option is cheaper.

Right now at the end of the lease they owning airline automatically gets there money even if the leasing airline does not have it, there probably be some logic on what to do if that happens, maybe no repairs but a loan is created to keep track of the fact the leasing VA ows the other money.

Just a wild idea, thoughts?

[Cat]

I'm not sure how the bankruptcy thing even works. I assume you have already liquidated the bankrupt airline in question's assets? If they blew threw their $25 million start up cash so quickly ... wow Perhaps you now need "credit checks" for airlines wanting to lease planes to assure they have the funds available?

I never realized VA's could even operate in the red. But with the current system of airlines offering aircraft for lease and having no say in who leases them, I think the mothership - FSAirlines needs to eat the cost of fixing planes from bankrupt companies as FSAirlines is the "broker". It is not the owner of the aircraft's fault for offering aircraft to the FSAirlines "Lease Pool".

How does a company survive bankruptcy? Or don't they?

[joefremont]

I guess there are two points that are really separate,

first is what if an aircraft lease repair is more than the AC is worth,

and the second is what if the leasing VA does not have the money to repair/transfer at the end of the lease.

Here is how I described bankruptcy in the load system description.

At some point in the life of the loan, the borrowing airline or fleet may not have enough v$ to make the loan payment, at this point the loan will become 'default' status and will be paid when the VA/Fleet has enough to make the payment. At that point several things can happen:
After 24 hours the VA will go into 'Insolvent' status and certain financial restrictions will go into effect to prevent the abuse of the airlines assets.
After 48 hours if Finance by Fleet is active, that feature will be turned off to allow all the VA's assets to be used to pay the loan.
After 7 Days the VA will go into 'Bankrupt' status, the VA will essentially be locked and it will be up to an FSA Administrator to resolve the situation. The administrator can sell any asset, forgive loans and in the worst case can liquidate or dissolve the airline.

[Cat]

ahhh thanks, I looked for that thread but couldn't seem to find it.

Regarding cost over value - if the status is so low the value is low as well, won't the aircraft owner then be hosed out of the difference from what they paid originally if the bankrupt airline is allowed to buy it at the low value price? I think leasee's should be required to repair the aircraft before turn in and not be allowed a shortcut way out by taking the owner's airplane at less than fair market value. otherwise you may get cheaters who intentionally crash leased aircraft to buy them on the low as the lowball price plus repair at a discounted facility may be cheaper than one on the Trader List, while leaving the original airplane owner 1 aircraft short and not enough funds to replace it.

[joefremont]

No they would have to pay the 100% price of the aircraft, but I just did the numbers on one of my DC-10-30's.

At 100% the value is 70.000.000 v$
D-Check price is 100,987,380 v$

So if the leasing VA was to wait until the lease ran out and repaired it they would save about 30% by paying the book value, but if they repaired it at a maintenance center they would still be better off.

Never mind.

[Cat]

LOL you are now starting to sound like me, talk yourself out of your own idea? so been there and done that.