Aviation Finance & Leasing 2020 features 20 jursidictions. The guide covers insolvency proceedings, transfer of ownership, insurance and reinsurance, sales agreements, deregistration and export, and liens.
Last Updated: July 30, 2020
“As happens sometimes, a moment settled and hovered and remained for much more than a moment. And sound stopped and movement stopped for much, much more than a moment.”
– John Steinbeck, Of Mice and Men (1937)
The 20/20 vision of the most experienced aviator could not have seen the great black swan of 2020 approaching. That proverbial bird strike has been nothing short of catastrophic for the aviation industry, which has been subjected to the full fury of the COVID-19 pandemic. Still, reality was bound to puncture aviation’s balloon – or, as some might say, bubble – sooner rather than later. A serious slowdown in the aviation sector was predictable, even in the absence of an external shock. One need only look to the opening paragraph of the introduction to the 2019 edition of this Guide, where I wrote that “[a]lthough ‘the winter of despair’ is not yet upon us, I suspect that it is coming soon. It is on the tip of what may be a barely visible, yet potentially enormous, iceberg of distress in the wider aviation industry that the launch of this practice guide is most timely.” Today, in the early throes of an epoch-making crisis in the aviation industry, the release of the second edition of this Guide is again most timely.
The history of aviation has been, and will forever continue to be, marked by cyclicity and crisis. The unprecedented magnitude of the pandemic, and its likely economic – some might say nuclear – fallout, means that the spectre of financial ruin haunts many in the industry for whom a liquidity crisis could quickly turn into a solvency crisis. Recovery is difficult to conceive amidst a cascade of distress, default and disputes that test the resolve of even the most coveted lessor-lessee and lender-borrower relationships. Nevertheless, there will be recovery. There must be, if for no other reason than the fact that the human spirt demands it. To that end, may aviation hasten the return to a day when, once again, the greatest distance between any two places on the planet is only time.
The predation of the globalised economy is such that there must be winners and losers; the victors to whom go the spoils, and the vanquished who must simply go. All airlines and many lessors have seen their profit margins scorched. To many investors in aviation finance and leasing, the quest for a return on capital has now been replaced with the desire for the return of capital, or at least enough cents on the dollar to not bruise their egos irreparably. Such investors may exit the sector stage right, never to be seen or heard from again. The preceding five years in particular witnessed a tsunami of new capital flooding a marketplace already bustling with bright-eyed and yield-chasing neophytes who had not yet experienced the distinct displeasure of a depressed aviation finance market (and were at risk of confusing a bull market for brilliance). Yet, aviation finance and leasing is a sector where deal and distress experience remains the best – and, possibly, the only – teacher. Such experience is to an aviation finance and leasing attorney what pure Damascus steel is to a sword. Nothing will substitute.
Battle-scarred aviation finance and leasing attorneys, who have helped shepherd airlines or their creditors through varying degrees of airline distress during prior – less drastic – downturns (and the early stages of the present crisis), appreciate the skill it takes to make the terrifyingly complex terrifyingly simple. It is presently a matter of intense speculation which airlines will survive the current crisis. Many will not. As for the would-be survivors, debate rages as to who, between governments and the private sector, will be their saviours, and on what terms salvation will be granted. There is an intriguing serendipity about the restructuring of airlines. The fortunes of airlines depend upon the fortunes of nations, and the reverse also holds true (while the fortunes of aircraft lessors, financiers and investors depend upon both). Although some are scrupulously cautious of endorsing government intervention, it is desperately needed. Governments around the world have thus far in the crisis granted in excess of USD100 billion in so-called “bailouts” to airlines, with most encouraging or commanding their private sector counterparts to also do their part. The International Air Transport Association presently estimates, however, that airlines will require a minimum of USD300 billion of government support to survive. A further USD200 billion in government support on the precipice of a deep recession or depression will almost certainly not happen. As such, many airlines are experimenting with novel methods of capital raising and rescue financing ahead, or as part, of major restructurings. All of this, in addition to pre-existing calamities (such as the Boeing 737 Max-8 grounding), indubitably promises to keep top aviation finance and leasing attorneys around the world gainfully employed for the foreseeable future.
I believe that the best attorneys live in the blank white spaces between the lines and at the edges of contracts, where law meets commerce and strategy. The amount of knowledge that had to be mastered to complete the 140-point questionnaire that forms the cornerstone of this guide would have defeated many lesser attorneys, but not the ones who took a significant amount of time out of their thriving legal practices to respond to the questions. They did so masterfully, in a manner that only confirms their place in the upper echelons of the profession. Crafting the questionnaire itself was, I might add, a gargantuan undertaking made possible by my unrelenting impulse to somehow comprehensively capture and usefully present thousands of elements of cross-border and domestic law and practice into a single resource. I owe a debt of gratitude to each of the leading and highly experienced aviation finance and leasing attorneys from around the world who coalesced to make this guide possible, and to the truly excellent – and exceedingly patient with me – Chambers and Partners staff who led this project superbly. Finally, my thanks to Tina Lee Jebely, Hooman Yazhari, David Power, Dr. Donal Hanley, Neil Liebenberg, Kathleen Oliver, Luca Denora, Eugene Yeung, Sharon Nourani and Jason Greenberg for their contributions.
I hope that you not only find this guide to be helpful, but also to be the best resource of its kind. To that end, and in the spirit of semper ad meliora, I welcome and encourage feedback and suggestions from readers for future iterations of this guide.