Francisco Zozaya, Chief Commercial Officer at JSSI, recently sat down with Matt Harris, Commissioning Editor at AvBuyer, to discuss the organization’s unique pro-rata engine coverage and explain how the program is structured.

Read the full article below or on AvBuyer’s website:

March MRO Special Industry Guide (pages 46-50).

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Hourly Engine Maintenance Programs are nothing new. They’ve been around for decades helping make maintenance costs for aircraft owners and operators more predictable.

Over that time, a spectrum of service levels and options emerged from the engine manufacturers and third-party program providers at different price points, some covering certain elements of planned and unplanned maintenance events and others covering everything, depending on an operator’s needs and/or budget.

One type of coverage that has been in existence for many years – JSSI has been offering it for more-or-less as long as it has been involved in the industry – is the pro-rata engine maintenance program. Yet despite the time it has been available as an option to owners and operators, it appears to be viewed with suspicion in some industry quarters. Is this justified, though?

The concept seems simple enough: If an aircraft has been operating without previous enrolment on an engine maintenance program and the owner later decides they would like to do so, or if the plane is sold and its new owner wishes to enroll it, the pro-rata program provides a choice.

The owner can either buy in to a program, meaning that if the jet has accumulated 2,500 hours on its powerplants, for example, they would need to pay a lump sum up-front to the program operator to cover those hours. Or they can avoid the up-front cost by choosing pro-rata.

For some owners, “with two engines, each with 2,500 hours, charged at the hourly program rate, that lump sum could be a significant amount out of pocket up-front,” says Francisco Zozaya, Chief Commercial Officer for JSSI.

Zozaya’s career in Business Aviation began in Mexico when he joined Aerolíneas Ejecutivas out of school in 2004 as a junior sales trainee. Remaining with the company for the next 14 years, he progressed to run the aircraft brokerage and fractional ownership sales before moving to JSSI in 2019.

“Let’s say the deferred cost is $1.5m,” he illustrates. “[With pro-rata] that’s a sum of money the aircraft owner can defer until the time of overhaul.”

So, what lies behind the misunderstandings that surround this program type? Zozaya believes a significant portion of it relates to resale value…

Does Pro-Rata Coverage Hurt Aircraft Residual Value?

According to Zozaya, it is simply not accurate to assume that enrolling an aircraft’s engines on a pro-rata program adversely impacts its residual value. In fact, he says, over time it ultimately lessens the depreciation curve.

“At the point you enroll on the program, the value of the aircraft has already depreciated more sharply than a similar aircraft with the same hours that’s been enrolled all along,” he says. “When you enroll with a pro-rata program though, your ongoing payments into the program will lessen the depreciation curve.

“The value of the aircraft holds up far better over time than it would if the aircraft was never enrolled. Assume you enrolled the jet at 1,000 hours. By the time the plane reaches 4,000 hours, the only thing discounted [from its value, comparing 100% coverage since new versus pro-rated coverage] is the initial 1,000 hours.”

So, if three similar aircraft were on the market with 4,000 hours on their engines, and one has either been enrolled on a program from Day 1 or the owner opted for a ‘buy-in’ program, let’s say it has a value of around $10m. By comparison the one that was enrolled with pro-rata at 2,000 hours might have a market value of around $9m. But that’s a greater value than the one that remained unenrolled, which is on the market for $8m.

In fact, Garett Jerde, Founder & CEO of JetHQ, an aircraft brokerage and consultancy firm with offices located around the world, highlights that buyers of unenrolled pre-owned aircraft could capitalize on the pro-rata option.

“Buying a pre-owned aircraft is a substantial financial commitment, even with full engine coverage,” he points out. “Let’s say we’re talking about a $4m jet. Not everyone wants to pay an additional $1m for the inactions of the previous owner on getting their engines covered.

“Now if you have two airplanes sitting on the ramp that, apples-for-apples, are very similar in all respects except the engine coverage – the systems are all the same, the time on the airframe is the same, but the unenrolled plane costs $1m less, then instead of spending that $1m difference up-front the buyer has an option.

“With a pro rata program, they can acquire the lower-priced jet, enroll it, and keep that $1m difference sitting in the bank, knowing they’re going to need to spend it at the time of overhaul.

“They can invest that money in bonds, in other profit-making corporate activities, and grow it so that when the time of overhaul comes, they’ve multiplied it to well above the percentage they would need to pay into the overhaul.”

Zozaya supports this logic. “Let’s say they decide to keep the up-front buy-in fee in their pocket, earn around 5% of that amount annually, and fly 200 hours per year. If they don’t resell the aircraft in the meantime, it may be 10 years before their overhaul is due and they need to spend that money. And, in that time, they have an opportunity to put that money to work, earning a return on their investments.”

And Jerde adds that in some instances, aircraft dealers might buy unenrolled aircraft at a discount price and place them on a pro rata program. By doing so, they’ll broaden the airplane’s appeal to a wider audience, to whom they can sell it at a slight mark-up, but still below market value.

“Clearly communicating with the buyer that the discount reflects a sum that will need to be paid towards the overhaul, the buyer can again use the saving they made on the acquisition price and invest it, turning a profit that will more-than-likely cover their overhaul contribution,” he explains.

Patrick Hosmann, CEO of Southern Cross Aircraft, a Florida-based aircraft brokerage, recalls a time when, several years ago having acquired a number of Learjets, his company took out a fleet package for pro-rata. “On average, the airplanes were about mid-way between shop visits.

“We were able to immediately offer potential clients the full benefits of an aircraft with engine program support from a very reputable provider. This both increased the value of the aircraft and gave comfort to the respective new owners.”

So, when deciding between buy-in and pro-rata, essentially the question becomes whether the aircraft owner will take the hit upfront with the buy-in option, or at the time of resale or overhaul with pro-rata, whichever comes first.

Who do Pro-Rata Programs Work For?

In total, JSSI covers over 5,000 assets, 40-50% globally on maintenance programs. While it continues to gain market share on new delivery 100% enrollments, over 100 pre-owned aircraft owners choose to enroll pro-rata every year.

Meanwhile, the average age for enrolled aircraft is currently around eight years – out of manufacturer warranty but not necessarily nearing an imminent overhaul.

Many of the engines enrolled on the pro-rata program are on-condition engines typically mounted on the larger airframes such as Gulfstreams or Bombardier Global business jets. Historically you wouldn’t see an off-wing event on these types of powerplants before around 7,000 hours, Zozaya estimates.

For many such owners who may enroll the engines pro-rata at – say – 2,000 hours, even if they were to fly an average 400 flight hours annually, they would be unlikely to still be the aircraft’s owner by the time the overhaul comes around, having likely already sold it on.

But if the overhaul looks likely to be a future owner’s lookout, what’s the draw for the current owner to enroll their engines on a pro-rata program?

“Many engines that are between 10-80% of the way to scheduled overhaul (or average first shop visit for On-Condition engines) would be suited to pro-rata coverage,” Hosmann says. “This is the sweet spot in which financially savvy owners can best realize the ‘pay later versus pay now’ choice that such a program facilitates.”

“Pro-rata buy-in isn’t really tied to a specific aircraft model or owner-type,” Mike Mikolay, Founder & CEO of Mikolay Jet Group, argues. As an aviation advisor, Mikolay gets a lot of questions about engine programs – how they impact operating costs and whether they add value when buying or selling.

He also spends a lot of time helping owners, operators, and buyers navigate the different program types, giving him plenty of experience of some of the common misconceptions around the market.

“[Pro-rata is] a flexible option that makes sense in certain situations,” he explains. “Instead of paying a huge sum upfront, it defers a sizeable cost, making enrollment more manageable and/or provides advantages to the aircraft owner.”

Can you Really Know What’s Covered With Pro-Rata Programs?

For those less likely to be facing overhaul themselves, Zozaya says it’s the protection against unscheduled maintenance surprises that pays off, leading to a second common misunderstanding surrounding pro-rata programs: the claim that you never know what’s covered. That is simply not the case, he and others assert.

“A common misconception is that pro-rata programs are just a scaled-down version of full coverage – that’s not really the case,” Mikolay highlights.

“In reality, a pro-rata program gives immediate coverage for unscheduled maintenance while deferring the big buy-in cost – often a multi-million-dollar expense – until the next major engine event. It also provides better access to maintenance solutions than going it alone.”

“People often believe that enrolling engines on a pro-rata program will give them less than full coverage,” Hosmann affirms. “But over the past 30 years, this hasn’t been our experience.

“For example, from day one of enrolment full support is given for troubleshooting or Airworthiness Directives (ADs). We’ve often more-than recouped our investment into the program in a few months, just by having protection against future ADs,” he says.

Beyond the decision of whether to part with the $1-2m upfront or not, the coverage features are the same as for buy-in program members, Zozaya says. “The pro-rata aircraft owner has the same benefit of getting any unscheduled event fully covered – they get the same access to JSSI’s ‘white glove’ service.”

For Jerde, the key point is that the aircraft owner enrolled on a pro-rata program “is in it with the program provider”, adding that “JSSI oversees the process and wants to get you the best time and price – it’s just not in their interest not to.”

Included are the same preferred terms as for buy-in enrolled aircraft with the maintenance shops covering slot availability, turnaround times, pricing, rental engine availability, and more, according to Zozaya. “

And according to Mikolay, independent programs have strong buying power with the manufacturer and can access parts, facilities and solutions just as effectively as an OEM program, working directly on your behalf to negotiate with the OEM to get the best outcome for you. “Plus, they maintain their own loaner pool and resources, so when you need help, they have solutions ready to go.”

Zozaya reiterates that the concept of pro-rata isn’t complicated. “If you join a program pro-rata at 2,500 hours and the next major scheduled inspection comes at 5,000, then we cover 50% of the costs while you cover the other 50%. If you join at 1,000 hours and the overhaul is at 10,000 hours, we cover 90%.”

Beyond estimating the total cost of that overhaul and apportioning the percentage the owner is responsible for, and the percentage JSSI will cover, everything else is the same as a full buy-in, 100% program.

In Summary…

As with almost everything in Business Aviation, pro-rata coverage is not a one-size-fits-all solution. Inevitably there are aircraft owners who it would not be suitable for.

In addition to those owners who simply prefer to have everything paid up-front and covered (who would naturally select the full buy-in option), those who plan on financing an aircraft acquisition will likely find their lender mandates the engines must have 100% coverage. They, too, will need to seek a buy-in solution.

But rather than make assumptions based on second-hand advice, it’s worth exploring all the options personally when seeking to match the right engine maintenance coverage solution to individual mission needs and projected tenure of ownership.

As would appear to be the case of the pro-rata engine maintenance program, the difference could simply boil down to when an aircraft owner prefers to pay a lump sum…

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Article written by Matt Harris, AvBuyer, February 2025 – AvBuyer.com