How Does Gemco Work In Leaseback Arrangements?
Leaseback agreements are becoming more popular for both flight schools and for charter operators. And rightfully so. Leaseback agreements make aircraft ownership more affordable, and allow operators more access to aircraft that have capitalization costs that can exceed what is practically possible based on the maximum asset utilization. Enrolling a leasebacked aircraft on a Gemco program only adds value to this business arrangement.
Gemco's Overhaul Savings program is, at its heart, an hourly cost stabilization program. When designing the contract, we work with both parties to determine a viable cost for the future engine overhaul. We maintain a comprehensive list of engines, and estimates for what we believe the engine will cost to overhaul based a variety of factors. These include inflation, demand curve appreciation, and our proprietary predicted TBO expectations.
Gemco is the only provider of engine programs for piston engine operators that provides owners with access to this price modeling for their engine. So, instead of both parties shooting darts in the dark to try and nail a future overhaul cost bullseye, Gemco's program solidifies what the operational cost of the aircraft actually is so that the leaseback arrangement can be drafted to be fair to both parties. Faced with these hourly figures, both parties can make an informed decision as to the viability of moving forward with a leaseback arrangement consulting the practical hourly rate that can be charged for the aircraft in the open market.
Gemco also acts as an informal mediator between both parties in the leaseback. Instead of a faith based system to report hours flown, with each parties "word" to follow through on their contractual obligations the glue holding the arrangement together, Gemco ensures that both parties follow through on their commitments on an hour-by-hour basis. Should an agreement start to fall apart, the parties will be able to identify the issue in a timely manner and take steps to rectify the situation before a large expense puts both parties in a tight position that can lead to a disintegration of the agreement.
When the time comes for the overhaul to be completed, Gemco allows the parties in the leaseback to chose whatever overhaul facility they wish. The parties are not required to provide any cash for the overhaul at this time, as they have taken proactive action to save for the overhaul as they used the aircraft. This eliminates the possibility of any cash-crunch moments where people struggle to access cash that may be locked into illiquid invesment structures that can be devised by parties that are not experienced with the unique requirements of aircraft and helicraft overhauls.
These leaseback-specific benefits are all on top of Gemco's other benefits. These include predictable tax-deductible payments that may be made via credit card at no additional charge, consistent access to your reserve account funds, and access to professionals who specialize in developing and managing reserve accounts for both aircraft and helicraft.
The majority of jet engine operators take advantage of hourly engine programs in the context of a leaseback arrangement already, and there is no reason you are not able to, either. Gemco's programs are affordable, practical, and let you focus more on what you bought your aircraft for in the first place: flying.
If you have any questions regarding how Gemco can work in your leaseback structure, contact us. We'll be happy to work with you.