Navigating the Complexities of Aircraft Repossession

The Last Resort

Aircraft repossession is the ultimate remedy for a lessor when a lessee defaults on its lease obligations. It is a complex and challenging process that is fraught with legal and practical difficulties. However, in some cases, it is the only way for a lessor to protect its asset and to recover its investment.

The Legal Framework: The Cape Town Convention

The legal framework for aircraft repossession is governed by a combination of international treaties and national laws. The most important international treaty is the Cape Town Convention on International Interests in Mobile Equipment. The Cape Town Convention provides a standardized set of rules for the creation, enforcement, and priority of security interests in aircraft. It has been ratified by over 80 countries, including most of the major aviation jurisdictions.

Under the Cape Town Convention, a lessor can obtain an "irrevocable de-registration and export request authorization" (IDERA) from the lessee. An IDERA allows the lessor to de-register the aircraft from the lessee's national registry and to export it to another country without the lessee's consent. This is a effective tool that can greatly simplify the repossession process.

Practical Challenges

Despite the legal protections afforded by the Cape Town Convention, repossessing an aircraft can still be a very challenging process. Some of the practical challenges that lessors may face include:

• Locating the aircraft: The first step in any repossession is to locate the aircraft. This can be difficult if the lessee is uncooperative.
• Gaining control of the aircraft: Once the aircraft has been located, the lessor must gain physical control of it. This may require the assistance of local law enforcement.
• Obtaining the necessary documentation: To de-register and export the aircraft, the lessor will need to have all of the necessary documentation, including the original bill of sale, the certificate of airworthiness, and the maintenance records.
• Dealing with local authorities: The lessor will need to work with the local aviation authorities to de-register the aircraft and to obtain an export certificate of airworthiness.

Protecting the Lessor's Interests

There are a number of steps that lessors can take to protect their interests and to increase the likelihood of a successful repossession. These include:

• Conducting thorough due diligence on the lessee: Before entering into a lease, the lessor should conduct thorough due diligence on the lessee to assess its financial strength and its creditworthiness.
• Drafting a strong lease agreement: The lease agreement should clearly specify the lessor's rights in the event of a default, including the right to repossess the aircraft.
• Perfecting the security interest: The lessor should take all necessary steps to perfect its security interest in the aircraft under the Cape Town Convention.
• Monitoring the lessee: The lessor should closely monitor the lessee's financial performance and its compliance with the terms of the lease.

Aircraft repossession is a complex and challenging process, but it is a vital tool for lessors. By understanding the legal framework and the practical challenges involved, lessors can protect their interests and increase the likelihood of a successful outcome.