Forensic Analysis Assists FAZ Client in Quantifying Damages From Alleged Breach of Contract
FAZ Forensics was retained to calculate economic damages in the aeronautical industry arising from an alleged breach of warranty by an aircraft manufacturer. The damages stemmed from the client’s aircraft being out of service for approximately ten months—significantly longer than initially represented—resulting in lost charter revenue and other consequential costs.
Pertinent Facts
According to the plaintiff, the aircraft was operated in accordance with applicable maintenance manuals, and all inspections and maintenance were performed exclusively by the manufacturer. During a routine 12-year inspection, the manufacturer proposed remediation work related to excessive structural deterioration and component wear.
The plaintiff alleged that the manufacturer’s initial estimates regarding repair costs and return-to-service timelines constituted material misrepresentations. What was initially represented as a four-month repair period ultimately extended to approximately ten months. The plaintiff further alleged that the manufacturer should have identified the need for additional repairs earlier and completed the work during a prior maintenance cycle, thereby avoiding the prolonged delay.
FAZ Work Performed
In performing its analysis, FAZ Forensics relied on the expert report of an aviation maintenance professional retained by the plaintiff. That expert concluded that the manufacturer failed to meet the reasonably expected standard of care of a competent and experienced aircraft maintenance, repair, and operations provider.
Forensic accountants routinely rely on other technical experts when matters extend beyond accounting, finance, or economic analysis and require specialized expertise. Such reliance is appropriate where causation, technical compliance, or operational performance must be established before economic damages can be quantified. This approach is consistent with professional standards, preserves appropriate expert boundaries, and supports the reliability and admissibility of the resulting financial analysis.
Other Technical Expert Report
The technical expert concluded that the manufacturer failed to meet the applicable standard of care in the planning, execution, and management of the aircraft inspection and repair process. The report identified multiple deficiencies, including inadequate pre-inspection planning, proposal deficiencies, workforce and project management failures, and substandard corrosion management practices. According to the expert, these failures were the proximate cause of the extended delays and increased costs incurred by the plaintiff.
Damages Analysis
FAZ’s damages analysis included an evaluation of variable operating costs, such as fuel handling fees, landing fees, overflight and landing permits, aircraft parking charges, and other miscellaneous expenses. These costs were analyzed to determine which expenses were variable in nature and directly tied to aircraft utilization. A notable aspect of the analysis involved aircraft engine maintenance costs. While typically classified separately from direct operating expenses, engine maintenance represents a significant operating cost. In this matter, the engine maintenance contract was structured on a fixed rate per flight hour, making it a predictable and usage-based expense. This structure aligns the interests of the aircraft owner and the original equipment manufacturer by incentivizing reliable engine performance.
FAZ also analyzed consequential costs resulting directly from the aircraft’s unavailability. These included expenses for alternate aircraft charter, commercial air travel, lodging, ground transportation, and other travel-related costs incurred as a direct substitute for the unavailable aircraft.