PBH, widely known as Power by Hour or Pay By Hour, is an agreement between the operator and suppliers. The supplier undertakes to supply a number of spare parts either at the operator`s facility or at common storage locations, and the operator pays the costs depending on the use of the aircraft. The operator benefits from not owning the item, which reduces storage costs and also meets the desired service levels required for operation. There is no doubt that airlines are facing each other in the current environment. Regardless of the debate about the effectiveness of lockdowns, travel restrictions or quarantines in controlling the coronavirus, the fact remains that air traffic has decreased significantly in almost all regions of the world. Aircraft leasing companies and financiers are facing difficulties stemming from declining airline revenues, albeit less directly. Their business models include lease breaks and airline bankruptcies, but at a time when demand is declining almost everywhere, it is not possible to take a plane back and transfer it to a new airline. At least not in the short term. The takeover of an aircraft entails significant costs, including storage, maintenance and preservation, insurance, as well as remarketing, reconfiguration and return to service. In the case of transactions without maintenance reserves, the maintenance consumed (the difference between the documented delivery status and the actual state at the time of recovery) is lost. This provision, the PBH Agreement and the Agreements contain the entire agreement between the parties with respect to the subject matter of this Agreement and may only be amended in writing, signed by the respective parties or their duly appointed representatives.
We guarantee the delivery, repair and overhaul of rotary components in all ATA chapters up to the most recent state of change. We do not impose any restrictions or restrictions, regardless of the size of your fleet. Several airlines have asked landlords in recent weeks to sign hourly leases (PBH) to reduce costs in anticipation of a harsh winter for passenger transport. The coronavirus (also known as Covid-19) has brought us into unprecedented territory; Its effects are not localized or industry-specific, but affect all aspects of our lives. Government intervention to protect businesses and society will be considerably more widespread than in previous events triggering the slowdown, so what happens next is not necessarily what we would “normally” predict. The origins of PbH date back to the 1960s, when Rolls Royce leased hourly engines to airlines. PBH aircraft leasing has happened before, more often for a short period of time when an airline has been subject to seasonal fluctuations in traffic. The 60-year-old and PBH agreements are back in vogue, with more and more airlines seeking additional support from donors. This short article examines both the pros and cons of PBH resuscitation.
Identifying the parties to be covered in the PBH agreement is crucial. Operators usually opt for rotary elements (RSPL classification: SPC-2) from the PBH list, which significantly reduces inventory costs. Choosing the PBH supplier is relatively simple depending on OEM dependencies, prices and pre-existing agreements between the buyer and the supplier (BFE/SFE). The amount to be stored is based on the provider`s RSPL recommendation or the internal assessment of operator-based factors such as go/no go, number of operating bases, expected service level, etc. The aviation industry focuses on reducing costs in all areas, the most important being fuel, operation, maintenance and warehousing costs. One of the industry-proven ways to minimize storage costs is the Food-by-Time (PBH) agreement. When it comes to strategies for deploying new fleets or newly acquired pre-owned aircraft, accuracy and reliability in terms of spare parts availability are essential. Since an initial provisioning solution requires a larger initial investment than a power-by-the-hour deployment strategy, this is not the right answer for everyone. Warehouse space, material management know-how and traditional 12-month spare parts inventory can inflate budgets by millions.
For small airlines or start-up airlines that may not have this type of capital to invest, power on time remains a healthy and viable option for bringing aircraft to market. Both are viable options, so it`s really about asking how much peace of mind is worth? Initial provisioning (IP) or Power-by-the-hour (PBH)? Both solutions have their strengths, but in today`s data-driven aviation industry, where time is almost a literal currency and efficiency is a key factor in gaining or maintaining a competitive advantage, is there a solution that prevails? The next factor to be determined by the parts list, quantity and supplier are the storage points. The essentiality code (ESS) of parts in RSPL helps to decide on storage locations. If the item is prohibited, it must be stored at the operator`s premises (attachment base). For this, the operator must pay higher rates to the seller. If the item is a Go-if or Go object, the operator can choose to access (pool access) the primary inventory that the seller manages at their inventory locations. In the payments of the lessor and the lease, the aircraft financing market Without limiting the generality of the foregoing, (i) all agreements, leases, conditions of return and other obligations of the lessee will remain in force, and (ii) except with respect to the obligations described herein or in the PBH agreement as granted with administrative priority, all obligations described in Section 1(b)(i) shall be enforceable as urgent claims. As a rule, hourly electricity contracts cover 8 to 12 years. Meanwhile, a customer`s consumption of certain part numbers is regularly recovered and renegotiated based on usage. The same goes for extensions of a range of part numbers. All this affects PBH fees.
In this article, we`ll look at the profound implications of deployment strategies based on these two options. We will compare the broad lines of intellectual property and PBH to examine two of the most important decision factors: total cost and parts availability. Component support includes repairing a wide range of aircraft parts technology, managing technical and reliability standards, and managing the physical flow of parts to and from customer facilities. As an overhead MRO, our component support model is based on the extensive internal capabilities of Air France-KLM`s group workshops. Our repair shops are organized to work according to a predictable and stable TAT, which allows us to optimize stock levels and ensure the highest possible operational availability and reliability of the pooled components. The central caveat here, of course, is the lack of control over inventory availability and maintenance reliability that an airline receives by securing the initial investment in an initial provisioning solution. Depending on the size of the airline, it may also require additional funds for spare parts inventory and materiel management training. With the number of global flights expected to exceed 40.3 million by the end of the year, airlines` need for operational efficiency has never been critical to maintaining competitiveness.
Passengers have increased expectations when it comes to travel on time and without problems, which essentially means that airlines must avoid extended AOG hours at all costs. The performance of this provision and the PBH Agreement does not constitute acceptance or remedy under any applicable provision of bankruptcy law by debtors with respect to agreements between debtors, to the extent applicable, and counterparties. A customized program tailored to your specifics may include: A power contract by the hour allows you to manage your budgets more efficiently. At a fixed price, we can offer you hourly power-per-hour service for modern and commercial Aircraft from Boeing or Airbus, helping you reduce your purchases of MRO items and improve your results. It should be remembered that pbH rates are not a long-term solution. They cannot be because the payments do not cover the basic costs of the lessors/financiers for the ownership of the aircraft. For airlines, PBH fares are not completely variable. They still have a solid element and are just a maintenance model to some extent as they try to restructure and recover. They will end up with fixed costs across the fleet that they may not benefit from. However, for lessors/financiers, the most important problem is planned or heavy maintenance.
Airlines will try to exempt heavy maintenance obligations from PBH leases as they are fairly trying to recover and thus avoid significant cash expenses. For lessors, the maintenance value consumed during the PBH period is often not fully covered and can be completely lost. In addition, airlines with very large fleets that all have PBH fares can take advantage of availability, and the possibility of discriminatory use can cause an airline to consume aircraft-based available maintenance by simply parking an aircraft and rejecting it if it is grounded due to maintenance. .