In November 2009 the courts resolved a return condition dispute between U.S. Bank National Association and Southwest Airlines. At the center of this dispute was the provision of the lease that permitted the lessee to substitute engines and parts with those of “equivalent value and utility,” a common clause in agreements in the ‘80s and ‘90s. At question were three Boeing aircraft leased to Southwest Airlines by U.S. Bank National Association. The argument centered on the interpretation of ‘value and utility’ and whether the modifications to the aircraft were inferior and ultimately devalued the aircraft upon return. Key to the case was the aircraft records as well as an overall knowledge of aircraft maintenance and operations. The Aircraft Group was able to assist in both these areas.
The Aircraft Group had the original records on the Boeing aircraft and was able to supply accurate and detailed documentation on the condition of the planes from the beginning of the lease and its return. These records were important to determine if the replacement parts were inferior to ones used in service. In addition, The Aircraft Group personnel were brought in as expert witnesses due to their extensive knowledge in aircraft operations and maintenance. Their knowledge of what is customary and what is not was significant to the case. Ultimately, the court found in favor of U.S. Bank National Association.
This case proved pivotal in how lessors and lessees interpret aircraft maintenance clauses going forward. Quality recordkeeping is necessary in ensuring that the equipment is maintained properly and replacement parts are appropriate throughout the life of the aircraft.
If you’d like to learn more about this case you’ll find a comprehensive article at http://www.vedderprice.com/docs/pub/23fcc1e6-b861-4462-b70f-fd60a505ccb1_document.pdf