Aircraft Repossessions Considerations & Cape Town Agreement

First of all we can consider an agreement commonly referred to as the Cape Town Convention 2001.

The Cape Town Convention (2001) is often referred to during an Aircraft Repossession and has circa 80 countries as members. Within this we can consider the “Matters Specific to Aircraft Equipment” and the aim of the Protocol is to protect the title and security interests in the aircraft and engines. 

The Protocol brings speed, certainty, and cost savings to the process of repossessing aircraft and engines on an insolvency or other default, particularly where these assets are in a country whose legal system would otherwise give cause for concern in such matters.

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Aircraft Lease – Asset protection – Lessee Considerations prior to lease

IALTA

When you lease an asset such as an aircraft, the value is large and as such constant oversight and many financial considerations are required.

For example, you can insure the asset against loss of value, you can mitigate the risk of unpaid maintenance through the use of maintenance reserve funds (MRF) – this means along side the monthly lease costs for the aircraft a second charge often referred to as supplemental rent is paid which is a breakdown of the expected costs of maintenance as per the usage of the aircraft.

While maintenance reserve funds are used in a cycle – lessee pay to lessor and then when maintenance is carried out the lessor releases money to lessee in a very simple overview it is not enough to compensate for all risks.

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EASA Ferry Flight Awareness / General & Repossession Considerations

For many reasons it is most likely that a repossessed aircraft will operate under a “Permit to Fly” – this can often be the case where maintenance is overdue, or a relocation flight is required, and the aircraft is not an on AOC (Aircraft Operation Certificate) such as the case might be when the company operating it has failed.

Regarding EASA registered aircraft, it is important to be aware of some of the requirements for aircraft flights as operations are split into 2 major categories: that of commercial and non-commercial.

Non-commercial operations are broken into NC Non-Commercial & SPO Special Operations

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Aircraft Repossession & Asset monitoring – Ferry Flight Preparation

When we want to move an aircraft after a repossession will occur, we need to ensure some details are in place. Often we will need some details such as the details for the installed Engines/APU and landing gear for example, we will need the current maintenance status, hours and cycles for the aircraft and scheduled maintenance also for example. 

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Aircraft Repossession – Considerations for taking an aircraft

An aircraft repossession is never a cheap option and is not favoured. Often an aircraft might be impounded by the airport for unpaid fees (landing for example). It is why where possible if there is another way then it will be explored and options will depend on customer and market.

For example in COVID, most lease agreements could not be honoured as the airlines did not have an income. It is not in the lessors interest to take the aircraft or they have to maintain them with no customers at that time. That was a key reason why many leases went onto “power by the hour” andthis allowed airlines to pause the expensive repayments, but remain responsible for storage and maintenance. It also meant that the lessor did not get the payments and maintenance reserves as before.

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