Aircraft transitions and repossessions: The hidden challenges facing lessors in 2025
Rob Watts leads the consulting team at ACC Aviation, delivering market-leading aircraft transaction solutions for investors, lenders, lessors, and operators globally. He has proven experience in developing and leading aviation businesses, is adept in strategic and financial planning, aircraft and business valuation, and in delivering high-value consultancy services. Rob regularly advises aviation lenders, lessors, investors, and operators, and is a regular speaker at leading aviation events, including Airline Economics and Airfinance Journal events, where he covers topics related to aircraft valuation, financing, and asset management.
Challenges in aircraft transitions and repossessions
At the recent Airline Economics conference in London, senior experts from aviation law, consulting and leasing gathered to debate the challenges facing aircraft transitions and repossessions. Rob Watts, Director of Consulting at ACC Aviation, moderated the session and believes there are a number of issues affecting the sector that are becoming more prevalent.
“The market has been challenging for a while”, he observes. “So, the collaboration between airlines, lessors and industry professionals is essential to be better prepared and thus mitigate transition and repossession challenges.”
In terms of aircraft transitions, the major problems remain MRO slots and correct documentation. Although airlines are trying to improve, it is still commonplace for airlines’ records standards to differ from what a lessor expects.
Those carriers with dedicated redelivery teams manage well, but smaller airlines that do not regularly redeliver aircraft struggle. Lessors need to proactively engage with airlines if they want to protect against redelivery delays.
How NewGen engines are complicating aircraft redeliveries
The impact of NewGen engines on transitions is expected to have a major impact in the future.
“The panel discussed the topic of reliability, early shop visits and unexpected module swaps in detail, and how they may complicate redelivery conditions that weren’t drafted to anticipate these challenges. Inevitably, there will be end-of-lease compliance issues on the horizon,” continues Watts.
Of course, there are OEM power-by-the-hour programmes to consider, and whilst some provide reassurance, concerns are raised regarding lessors’ rights under these agreements, their transferability to other airlines, and the impact of these agreements on the marketability of the aircraft and engines.
As Watts remarks, “FHA (Fleet Hour Agreements) give some peace of mind and are good for airlines, but for lessors, the maintenance costs are hidden, which makes it harder to calculate maintenance costs in the real world.”
Maintenance and supply chain pressures intensify transition delays
Key pain points are MRO slots for engines, transitions, and base checks. These need to be secured several months in advance, as manpower at MRO providers continues to remain a big challenge. Aside from engines, landing gear for A330s, 787s and A320neos are also badly affected by supply chain shortages.
As regards aircraft repossessions, Watts states that although there have been few airline failures over the past 12 months, there has been quite a high number of quiet repossessions as lessors seek to optimise their portfolios. “At ACC Aviation, we note that a number of assets previously under ‘COVID-era’ contracts have been moved into new contracts under favourable market conditions.”
However, it is important to understand what has been happening in the wider marketplace and aviation law specialists confirmed that there have been some uncooperative airlines that cannot afford to give back the assets that they are relying upon.
As Watts observes, “In the aftermath of COVID, lessors adopted a more tolerant approach. But now we’re in a hot market, so the smartest are staying on top of the situation and at the first red flag, they’re moving to recover and redeploy their assets. Naturally, lessors prefer consensual lease terminations, but being prepared is key.”
Why preparation and paperwork are key to successful aircraft repossessions
It’s clear that whilst ‘doing deals’ might be exciting, it’s getting all the paperwork correct at the outset that cements the best transactions.
“Someone in the team must ensure that all the records and paperwork are handed over at completion, and this needs to be monitored continuously,” says Watts. “Records can be held hostage during repossessions to create a bargaining tool.
“Most of the large lessors know what operators and jurisdictions are cooperative. Smaller lessors may need to secure expertise in different countries and cultures and watch out for dubious practices. Engines can be swapped illegally, records held by third parties may be difficult to obtain if they have unpaid bills – it is not uncommon for repossessions to take several months to complete.”
Delegates at the conference raised a point regarding the digitalisation of aircraft records, and this area is still fraught with difficulty, as Watts explains.
“The problem is that it’s still too early for lessors to trust fully digital records; there is no consistency, and they prefer the paper trail. Even though there is a big initiative from EASA coming up in October where the security of records will affect airline licences, and airlines are digitising their records more and more, there is still a risk of tampering. Physical records are essential to prove the quality and detail of repairs; some of this evidence is handwritten, and scanning is incomplete. If you have the ‘box’, you have the records.”
Cape Town Convention offers limited help in aircraft repossessions
Another topic raised by the conference panel relates to the impact of the Cape Town Convention* which was designed to standardise court assistance in releasing assets to lessors and financiers in different places. The overall opinion seems to be that lessors and the financing community as a whole consider this to be practically useless when it comes to enforcement and repossessions.
To repossess an engine or an aircraft requires co-operation from a lot of people, and it needs a court order, so although a Cape Town signatory does help with local courts, it is a well-known truth that countries go at their own pace, and there is nothing that can be done about that.
*Cape Town Convention. Commonly referred to as the Cape Town Convention, the Cape Town Convention on International Interests in Mobile Equipment provides specific rules for creating, registering, and enforcing international interests in high-value aviation assets, including airframes, aircraft engines, and helicopters. It aims to reduce the cost and risk of financing and leasing these assets by establishing a unified, internationally recognised legal framework through an International Registry.
