Aircraft Lease Common Terms Agreement

While it is not economically possible for an airline to operate the aircraft in the midst of the pandemic, it is not illegal for the taker to meet its obligations arising from the lease of the aircraft. At the time of the letter, the Malaysian government`s Movement Control Regulation (MCO) does not limit international and domestic air operations3, although there are various restrictions on the movement of persons. At present, the Malaysian government has not declared that the flight bans are illegal and it is important to note that the decision to cancel flights is made by the airlines concerned. Therefore, this pandemic is unlikely to fall within the definition of an “illegal event” or to constitute a “change in the law.” There are two main types of aircraft leasing structures: most lenders are “credit lenders,” so the lease probably includes credit pacts, duplicates and reporting obligations similar to those that could be included in a credit facility contract. At the expiry of the lease, the taker must either return the aircraft under certain conditions defined in the lease, or buy the aircraft at (at least) fair value, or extend the life to (at least) the fair market rental value. It is very likely that leasing companies will first consider the “infernal or flood clause,” which is a standard clause in aircraft leases. The “infernal or flood clause,” also known as the “net tenancy” clause, provides for the obligation for the holiday of the taker to pay the rent unconditionally for the duration of the lease, regardless of the circumstances. Individuals interested in a traditional leasing structure should be aware that the FAA takes the misuse of dry leasing very seriously and aggressively pursues enforcement action against companies that enter into fraudulent dry leases. Any entity that requires the taker to use a certain group of pilots when leasing the aircraft is a de facto lease on wet ground and therefore requires an airline operating certificate; this ultimately exposes the lessor to a lower risk of enforcement and civil sanctions.

The aviation industry was devastated by the Covid 19 pandemic. The pandemic has raised health fears around the world and, with the many travel restrictions imposed by many countries, passenger bookings have dropped dramatically. As a result, many commercial airlines have brought a large part of their fleet to Dener. Airlines have taken drastic measures, such as implementing wage cuts, cancelling air routes and providing unpaid leave for staff to preserve their cash flow. Given the uncertainty about the recovery date of the sector, airlines are now facing difficult decisions about how to allocate their remaining reserves. Airlines that have leased aircraft would have significant rent payment obligations to landlords that they may not be able to hold while their fleet is on the ground. If the underwriters are unable to meet their payment obligations under their leases, this would make it more difficult to meet their financial obligations to their investors and financiers to the leasing companies. At the end of July 2015, the 50 largest aircraft leasing companies managed 8,184 aircraft: 511 regional turboprops, 792 regional aircraft, 5,612 narrow-bodied aircraft and 1,253 wide-body aircraft. [11] In 2017, the 150 leasers manage 8,400 aircraft worth $256 billion with 2,321 aircraft behind 28, whose penetration has stabilized at 42.6%. [12] Aircraft rental companies are often banks, hedge funds or financial institutions.

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