Buzz Update Aircraft Operator Bankruptcy: Default Prevents. TOU

Buzz Update Aircraft Operator Bankruptcy: Default Prevents. 

 TOU

Aircraft Operator Bankruptcy: Default Prevents.

High-value property requires significant and secure financing. Assuming the asset is ‘mobile’ like an aircraft (the value of the B737 Max or A320Neo can vary between $ 90 million and $ 120 million), it becomes even more complicated as the security provided for financing must be well within the jurisdiction.

Although multiple conferences regulate various aspects of aviation, there was no direct mention of the financing and acquisition of aircraft prior to the Convention on International Interests on Mobile Devices, i.e. the Cape Town Convention (CTC / Convention), which came into force on November 16, 2001, at the 31st Mission in Cape Town, South Africa. Approved in 2008, came into force on July 1, 2008 after a three-month waiting period.

As it is an executive decision, the Constitution of India gives the Executive the power to enter into a Convention / Agreement. However, the most subtle nuance is that in cases of conflict where the terms of the contract are not included in the domestic legal framework, domestic law goes beyond the requirements of tradition / contract.

The CTC has been instrumental in providing the public register in the form of an international registry and, in particular, a network of approximately 83 countries, providing practical default defaults, reduced financing costs, and records for aircraft ownership and security records. Agreed to the Convention.

Recaptured

In the event of a default, including when the aircraft operator goes bankrupt, it is imperative that the owner / financier or creditor regain control of the aircraft and retain it within the jurisdiction of choice. In the Indian recapture experience, we have noticed a marked shift in how recapture has evolved from the Kingfisher era to the latest jet airways.

It is imperative that CTC be reasonably quickly incorporated into the domestic legal framework and for the benefit of shareholders, including consumers; This not only makes the transaction eligible for the 10% OECD (Organization for Economic Co-operation and Development) discount but also provides the CTC relief required by the lender (India has already selected these in its declaration under CTC) to bankrupt the operator.

Considering that India has not explicitly excluded interstate transactions from the impact and coverage of the Convention, it is even more critical that it is now comprehensively adopted. This is significant due to the initiative taken by the Government of India to set up GIFT IFSC, an aircraft leasing and financing platform in Gujarat.

(Neha Singh Associate Partner, Link Legal).

Published

April 17, 2022

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