Engine Program Transfers: What to Look For

Francisco Zozaya, Chief Revenue Officer at JSSI, which offers engine, airframe, APU, and ‘Tip-to-Tail’ maintenance programs for virtually any make and model of business aircraft, notes that there are two types of maintenance program.

First, he says, there are ‘perpetual engine programs’, which are generally transferable to new owners so long as the program is in good standing and payments are up to date. Next, there are ‘term programs’, designed to cover a specific operation for a predetermined contract term. These are tailored to the geographic location and estimated utilization of the aircraft and are unlikely to transfer to the new owner.

Instead, a new program will need to be created to meet the requirements of the new operator. This is true for both engine and airframe term programs, Zozaya reveals. 

“It is generally most beneficial to transfer a perpetual program. Funds are accrued over time, and transferring the program means that you are essentially buying the reserves to cover future maintenance.”

According to Zozaya, in the event that there was a technical variance with the engine in the past, changing coverage could result in certain exclusions. By transferring the program, you can ensure coverage as described on the contract and avoid potential issues, he says.

To ensure the existing program can be transferred to you as the new owner, it will be essential to verify that the previous owner is in good standing with the program provider and that the program qualifies as transferable, Zozaya adds.

“You can request a copy of the contract and program agreement from the seller, who also should facilitate an introduction to the program provider and approve sharing of information with you,” he says.

Buyers should review the terms and conditions of the new agreement and familiarize themselves with the coverage, confirming that the previous owner has not breached any requirements that could result in the program being invalidated or non-transferable.

“While a pre-owned aircraft may come with a transferable engine program, there is always an opportunity to upgrade existing programs and add coverage to other assets, based on preference and risk parameters,” Zozaya concludes.

Rare Reasons for Non-Transfer

Paul David, Senior Director of Sales for Business and General Aviation at Honeywell Aerospace (https://aerospace.honeywell.com), says it would be very rare for his company’s Maintenance Service Plan (MSP) to fail to transfer to the new owner, which would only occur in cases where the buyer is a prohibited/sanctioned party, or has a poor payment history with Honeywell MSP.

“The buyer should contact MSP and request a contract transfer package ahead of close of sale of the aircraft,” David adds. “MSP will review the request and ensure that the purchaser is not a sanctioned party and has not previously established a poor payment history with MSP.

“This will ensure that both buyer and seller are aware of contract transferability ahead of the sale of the aircraft.”

In terms of the engines themselves, the primary exclusions to MSP coverage are abuse and Foreign Object Damage (FOD). It is important that the prior operator adhered to OEM instructions for engine/APU operation and maintenance.

“In cases where an aircraft has sat idle for a long period, it’s very important that OEM instructions are adhered to for installed engines that have not undergone long-term preservation,” David highlights.

“A logbook review by qualified personnel ahead of sale is a wise course of action, as well as a visual inspection of the engine ahead of purchase,” he advises, adding that borescope inspections are not required to transfer coverage.

Reasons to Do Your Homework...

Sean Lynch, Managing Director of Engine Assurance Program (www.eap.aero), which provides hourly engine programs on a wide range of aircraft and engine types, reiterates it’s crucial that buyers ensure the engine program on their newly acquired aircraft has all the relevant data reported to the engine program and all bills and invoices paid.

“If there's a substantial balance, that creates a big problem for people,” he adds. “Any type of balance – a $20,000-$30,000 balance would make people upset – but if there's a $300,000-$400,000 balance, the program will not transfer until it gets paid.”

It is incumbent on owners to check the status of any ‘deferred buy-ins’ tied to the engine maintenance program, which essentially sees owners spread the cost of buying into the program across a period of time, rather than paying it up front. The new owner should check if such an arrangement is outstanding, Lynch says.

Moreover, not all programs have 100% coverage for all systems, according to Lynch. So it is vital to ensure all the details are understood.

In concluding, Lynch underscores an essential point made by all the other experts sourced for this article. “It makes sense for people to get their contracts and read through.

“This is not about ‘legalese’, but the meat and potatoes of the contract - what is covered. People need to pay attention to this.”