Aircraft Lease Agreements – Total Loss

In a lease contract many terms and definitions are noted to avoid contention or dispute such as what a Total Loss means:

The term “Total Loss” as an example can in a lease be defined as an example, we will quote text from a “lease” and under it, we explain its intent.

“The actual or constructive total loss of the Aircraft (including any damage to the Aircraft or requisition for use or hire which results in an insurance settlement on the basis of a total loss).

This statement refers to a situation where the aircraft is considered a total loss either through actual destruction or circumstances making it unusable (like severe damage or government commandeering). If the insurance company settles the claim by treating the aircraft as a complete loss, it’s recognized as such.

“The Aircraft being destroyed, damaged beyond economic repair or permanently rendered unfit for normal use for any reason whatsoever”

This phrase means that the aircraft is considered a total loss if it’s destroyed, too expensive to repair, or can’t be used normally for any reason.

“The requisition of title or other compulsory acquisition of title for any reason of the Aircraft by any Government Entity or other Person, whether de jure or de facto”

This means that a government entity or another party has officially or effectively taken ownership of the aircraft, for any reason, through a legal or actual process.

“The hi-jacking, theft, disappearance, confiscation, detention, or hire of the Aircraft, which deprives any person permitted by this Deed to have possession”

This statement refers to situations where the aircraft is unlawfully taken, stolen, goes missing, is seized, held, or rented out, resulting in someone who is allowed by this agreement to lose possession of the aircraft.

“Use of the Aircraft of its possession and/or use for more than sixty (60) days (and one hundred eighty 180 days in the case of seizure or requisition for use). If, within 30-days following the Total Loss Date in relation to such hi-jacking, theft, disappearance, confiscation, detention, seizure or requisition for use or hire of the Aircraft, is restored to the possession of XXXX, then the scheduled Delivery should continue; and (b) in relation to any Aircraft (other than as A330 Aircraft), the loss, destruction or, in the reasonable opinion of the relevant Manufacturer, the damage of such Aircraft beyond repair”

This statement means that if the aircraft is not available for use due to specific events like hijacking, theft, or seizure for more than 60 days (or 180 days in case of official seizure or forced use), it’s considered a total loss. However, if the aircraft is returned to XXXX within 30 days after such an event, the planned delivery should proceed. Additionally, for any aircraft, if it’s lost, destroyed, or deemed beyond repair by the manufacturer, it’s also considered a total loss.

The lease demonstrates how it looks after the asset value and works to benefit the lessors interests and exposure.

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