Sourcing – Buy/Sell
By following historical market trends and using an analytical approach, MDI is able to identify aircraft in the 10-15 plus year age-range, that not only have remaining PAX life but also have potential to cross-over into MDI Engine Investment and Cargo Investment platforms. The sources for PAX acquisitions include airlines, banks, aircraft leasing companies, and after-market aircraft companies. Sourcing opportunities present themselves on aircraft, engines, and parts. Through mandates and agreements, MDI sources buyers and sellers for assets that have been identified for having a high-upside or fit customer needs.
Leasing of Aircraft
Airlines lease aircraft for one of two reasons, to temporarily increase capacity, through short to medium length leases, or to lessen the financial burden of the outright purchase of an aircraft. MDI concentrates on short-term leasing as a tool to drive down residual cost and to support MDI’s other investment platforms. There are several types of leases:
Dry Lease – Common type of operating lease. In a dry lease, the lessor provides the aircraft without crew, maintenance obligations and passes all operational control to the lease. Under a dry lease, the lessee must include the aircraft on its own operating certificate and maintain all required registration and insurance. In a dry lease, the lessee will remit the monthly rental payment and reserves to the lessor for the use of the aircraft. More commonly used in the Long-Term lease structure.
Wet Lease – In addition to an aircraft, the crew, maintenance, and insurance are provided by the lessor. Under a wet lease arrangement, the lessee will remit monthly payments to the lessor. (Short-Term)
•ACMI – Providing aircraft, crews, maintenance and insurance.
•Damp Lease – Providing aircraft, limited crew, maintenance and insurance.
•Moist Lease – Providing aircraft, no crews, maintenance and insurance.
Sale and Leaseback – Under a sale and leaseback transaction, an airline, as owner of an aircraft will sell its aircraft to MDI at an agreed upon price and immediately undertake an agreement to lease the aircraft back on previously agreed upon terms.
Attractive deals sometimes present themselves as airlines transition and modernize their fleets. The airlines will sell off entire fleets of aircraft. With most “bulk” purchases, the aircraft may be available at lower prices if a full or partial fleet is acquired. MDI analyzes and re-markets the aircraft upon procurement, both individually or together to maximize return. In certain scenarios, the aircraft can be parted-out, the engines moved into the Engine Investment Platform or converted into freighters.
Philippine Airlines A340-300, CFM56-5C Partout Project
MDI was a 50% partner of 80C2 Partners, which acquired 6 Airbus A340-300 and 13 spare CFM56-5C engines. A total of 37 CFM56-5C engines and 6 Airframes from Philippine Airlines ( PAL).
- 6, Airbus A340-300 aircraft in Philippine Airlines and the 13 spare CFM56-5C Engines.
- Goal was to Maximize the return on the aircraft’s investment through the aircraft aftermarket, with an emphasis on the engines.
- Segregate the 37 CFM56-5C engines for dismantlement, harvesting the cross over Non-Life Limited Parts, the Life Limited Parts (LLP) that are used in the CFM56-5B, and CFM56-7 engines.
- Airframes were to have been sold separately.
After the acquisition, the A340-300 market shifted due to the Airbus A350s’ delay and the grounding of the Rolls Royce Powered Boeing 787s. By the Summer of 2018, there was a demand for long-haul passenger aircraft. 80C2 Partners ended up selling all six A340s back into operators and selling the engines into partout. Due to PAL’s delays by March of 2020, PAL had only delivered 4 of the 13 spare engines. We exercised our options for the remaining nine engines not to extend our purchase agreement and offered PAL the opportunity to renegotiate the purchase price after the COVID Crises subsided.
Retired fleet assets can be repurposed in a variety of ways depending our professional expertise of higher and best use. This includes providing feed stock for other airlines to successfully carry our their operations.