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ISR Platform Leasing vs. Ownership: An Expert's Perspective

When considering the acquisition of an ISR aircraft, it is important to understand that it deviates from the typical framework of purchasing a conventional aircraft with additional camera and workstation components. From the perspective of acquisition, an ISR aircraft involves three crucial categories: the aircraft itself, the sensors and related equipment, and a partnership with a specialized entity that can provide support, upgrades, and maintenance for the unique aspects of the aircraft.

The financial aspect of acquiring an ISR aircraft raises questions about financing options and whether leasing such a collection of high-value items with loose connections is a viable choice. Additionally, the procurement process is hindered by the substantial capital investment required, as well as the necessary gate checks and committees, which often result in deployment delays that do not align with operational needs.

Capital Deployment Challenges

Access to capital or sufficient cash flows is the primary determinant of decision-making speed across various agencies and entities. However, securing approval for large funding requests to acquire expensive equipment is rarely accomplished at the pace necessary for operational flexibility and responsiveness.

For ISR aircraft, leasing options should be considered. However, the challenge lies in the fact that underwriters typically hesitate to lend on combination packages due to their limited understanding of the elements involved, as well as concerns about reselling, upgrading, or reconfiguring the equipment for future customers.

Unmet Demand: The Solution of Flexible Leasing

While aircraft possess practically unlimited utility throughout their lifespan until they become obsolete, the accompanying ISR equipment—comprising a significant portion of the investment's value—often requires upgrades sooner than the aircraft itself or any other equipment on board. In most cases, operators prefer a lease arrangement that offers flexibility in terms and helps mitigate variable costs. This type of lease includes value-added controls over hourly and monthly expenses, ranging from aircraft maintenance to avionics and ISR equipment. By having control over expenditures, operators can take advantage of predictability.

Best Practices for ISR Lease Structures

The advantages of a flexible lease for upgrading or acquiring ISR capabilities can be summarized into three key drivers that should be thoroughly evaluated by decision-makers and stakeholders during the decision-making process:

  1. Predictability: Maintenance is an inevitable requirement for any aircraft. With a flexible lease, the lessor can include maintenance as a line item for scheduled and unscheduled upkeep. Even if this incurs additional costs compared to assuming all maintenance risks, it provides taxpayers with the desired predictability.

  2. Flexibility: Committing to an asset worth twice as much as a similar airframe necessitates long-term dedication. However, by opting for a flexible lease, operators can enjoy the benefits of software, hardware, and sensor upgrades. Operational flexibility is also enhanced, allowing for fleet expansion or early returns. Structuring the lease with maximum flexibility simplifies the integration of additional ISR capabilities for all stakeholders involved.

  3. Savings: Lease solutions shift the focus from capital expenditure (CAPEX) to operational expenditure (OPEX), resulting in improved cash flows due to reduced capital-related costs. Leasing eliminates the substantial upfront expenses associated with sourcing, inspecting, and finalizing an airframe acquisition. Furthermore, leasing mitigates depreciation risks since the monthly payments cover depreciation.

What's Next

If you or your organization are interested in optimizing the financial and operational configuration of your ISR fleet, we invite you to schedule a consultation by clicking here. Before making your next purchase decision, it is essential to consider all the elements that impact operational effectiveness, including the speed of deploying or removing assets from the field and ongoing operational support. By aligning your financing relationships with your operational demands, you can make informed decisions to drive optimal outcomes.



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