Power by the hour leasing is a form of operating lease wherein the Lessor retains ownership of the engine and provides the engine to the Lessee on a fixed cost basis. The fixed cost is either a cost per flight hour or cost per month. Power by the hour eliminates the requirement for the Lessee to pay hourly maintenance reserves for the use of the engine in addition to a fixed monthly lease fee.
Utilizing the power-by-the-hour program, the Lessee is protected from the unexpected cost of premature engine failures or capital cost to refurbish their owned engines that require replacement due to LLP expiration, AD compliance, or performance degradation.
Lessor is responsible for the cost to refurbish or repair engines that require removal from the aircraft and a shop visit to resolve discrepancies. Exceptions are:
Failures resulting from ingestion of foreign objects that result in foreign object damage to the engine that exceed the manufacturer’s published limits; and
Engine operation beyond the manufacturer’s published limits such as exceeding EGT or RPM limits; and
Failures due to misuse or abuse, such as dropping the engine. Typically, the Lessee’s aviation insurance will cover the cost to repair foreign object damage or damage due to misuse or abuse.
Advantages to the Lessee utilizing Power by the Hour leasing;
- Eliminates the capital cost of refurbishing Lessee’s owned engines
- Eliminates the unexpected and unplanned expense of premature engine failures
- Eliminates Lessee’s need for on-site monitoring of the repair shop during engine shop visits
- Allows Lessee to establish known annual engine operating cost
- Provides reduction in capital assets
- The Lease is an off balance sheet transaction since it is an operating cost