As we begin the new year, the aviation industry is closely following certain Department of Transportation (DOT) Notices of Proposed Rulemakings (NPRM) published in 2022. These proposed rulemakings relate to consumer protections, including ancillary fees and airline ticket refunds.   

Ancillary fees 

In this alert, we focus on the NPRM relating to ancillary fees, , since it creates many new requirements.[1] “Ancillary fees” is a term used to describe charges for items such as checked baggage and changing or cancelling travel itinerary. DOT issued the NPRM in 2022 pursuant to its statutory authority in 49 U.S.C. 41712 to prohibit unfair and deceptive practices in air transportation and the sale of air transportation.[2] The comment period for the NPRM was initially set to close on December 19, 2022, but was extended by DOT to April 6, 2023. This extension occurred to allow parties to comment after a public hearing that occurred on March 30, 2023.[3] Currently, DOT is likely adjudicating the over 700 that have been submitted relating to the NPRM.[4]

Background

On July 9, 2021, President Biden signed Executive Order 14036, on promoting competition in the American economy. The Order included 72 initiatives for more than a dozen federal agencies to address competition issues affecting the economy. One such initiative directed the DOT to “consider initiating a rulemaking to ensure that consumers have ancillary fee information, including “baggage fees,” “change fees,” and “cancellation fees,” at the time of ticket purchase, and do so no later than 90 days after issuing the Order.

Subsequently, on September 25, 2022, DOT issued the NPRM Enhancing Transparency of Airline Ancillary Services Fees. Incidentally, this is not the first ancillary fee-related NPRM issued by DOT. In 2014 DOT issued a NPRM addressing disclosure requirements for fees, which was followed by a supplemental NPRM in 2017. However, DOT withdrew the SNPRM later that year, indicating that the withdrawal was consistent with Executive Order 13771, Reducing Regulation and Controlling Regulatory Costs.[5]

Highlights of proposed rule

The current NPRM (2022) applies to airlines (U.S. and Foreign), ticket agents and “metasearch sites” that display airline flight search options directly to consumers. Under the NPRM, these entities would need to list certain fees at the first point in a search process[6] where a fare is listed with a specific itinerary, including:

  • First and second checked bag fee
  • Carry-on bag fee
  • Fees for changes and cancellations, along with applicable policies
  • Fees for the adjacent seating of minors 13 and under[7]

The specific fee information above would have to be disclosed on airlines’ and ticket agents’ website and mobile websites, in addition during an in-person or telephone inquiry. Moreover, the fee information above would need to be “passenger specific,” meaning that it accounts for the passenger’s characteristics that may impact the fees charged (such as military status, frequent flier status, and method of payment).

Airlines would be required to distribute the fee information to ticket agents selling or displaying fare information, to ensure the information is “usable, accurate and accessible in real-time.” Entities subject to the disclosure rules would have six months to comply with the requirements of the proposed rule. Finally, any fee collected without the requested disclosures would be deemed an unfair and deceptive practice in violation of the law.

Reactions

With 2024 being an election year, there may be incentive for DOT to take final action on the NPRM this year. The question remains as to whether the rulemaking is necessary. Industry group Airlines for American (A4A) issued comments to the NPRM, arguing that the rulemaking will result in less transparency.[8] A4A maintains that the NPRM could lead to consumer confusion by providing optional and mandatory fees together when airfare is listed. Static and dynamic fees could also be listed in tandem, creating further hurdles for consumers to understand what price they will pay.

Despite DOT’s focus on airline fees, Airlines for America also notes the relative affordability of domestic airline travel today. In fact, domestic air travel (including ancillary fees) was 55% less expensive in 2021 than it was in 1979[9]. A record number of Americans can afford domestic travel since airline fares were deregulated in the late 1970s. As DOT considers and adjudicates the comments, time will tell whether DOT determines that issuance of the rule is warranted.


[1] In contrast to the NPRM relating to ancillary fees, the NPRM relating to ticket refunds arguably codifies existing DOT enforcement practices.

[2] A practice is “unfair” to consumers if it causes or is likely to cause substantial injury, which is not reasonably avoidable, and the harm is not outweighed by benefits to consumers or competition. A practice is “deceptive” to consumers if it is likely to mislead a consumer, acting reasonably under the circumstances, with respect to a material matter. A matter is material if it is likely to have affected the consumer’s conduct or decision with respect to a product or service.  14 CFR 399.79(b)(1). It is not necessary to establish intent for the purposes of this regulatory provision.  14 CFR 399.79(b)(2).

[3] DOT Docket No. DOT-OST-2022-0109-0721

[4] As of January 5, 2023, the DOT docket system indicated that 723 comments had been submitted. See https://www.regulations.gov/docket/DOT-OST-2022-0109.

[5] DOT Docket No. DOT-OST-2017-0007, Notice of withdrawal of proposed rulemaking (Dec. 5, 2017).

[6] According to DOT, this is “typically the first page of search results.” (Cite to federal register).

[7] In 2023, the Secretary of Transportation submitted a legislative proposal to require that airlines provide fee-free family seating. See https://www.transportation.gov/resources/individuals/aviation-consumer-protection/family-seating-legislative-proposal.

[8] DOT Docket No. DOT-OST-2022-0109-0727.

[9] When adjusted for inflation.

Originally published by Aerospace Testing International in ‘Showcase 2024 ‘

The Advanced Air Mobility sector is poised for sustainable growth and offers a plethora of opportunities to aerospace professionals who are considering including in their portfolios eVTOL aircraft and associated elements.

According to a study published by analysts this year, the Global AAM market is forecast to be worth more than US$68 billion by 2032, supported by a projected annual growth rate of around 35% between now and 2032. Over this time, it is anticipated that AAM operations will grow increasingly complex – from piloted to remotely piloted, to autonomous flight. Each of these phrases will bring new requirements related to safety and certification testing.

Read the full story here.

There are many opportunities in aviation infrastructure given the market growth in Advanced Air Mobility (AAM). Numerous countries are taking action to enable infrastructure development: in the United States, the FAA issued in September 2023 a conditional approval for the United States’ first public-use vertiport. Across the globe, leadership in Dubai approved in February a vertiport design with intent to develop a vertiport network in the city for launch by 2026. Nevertheless, AAM infrastructure still has ample room for growth as compared to principal aircraft manufacture, due to a variety of constraints for infrastructure developers.

Continue Reading Aviation infrastructure for new technologies

We are conducting a short, anonymous survey to find out your thoughts on sustainable fuel sources in the transportation industry, including your understanding of the various options, potential challenges, and expected timings for full conversion to sustainable fuel sources. Please take 5 minutes to complete the survey.

We know this topic is top of mind for many of our clients in the aviation industry, particularly with the International Air Transport Association (IATA) goal for the global aviation industry to meet net-zero emissions by 2050 and the push towards finding sources of sustainable aviation fuel.

We look forward to sharing the results of this survey in a report in the next few months.

We get it. You don’t want to think about it right now. You spent countless hours designing your aircraft and raising capital. Your company is getting closer to, or is already, conducting certification testing. FAA certification of your aircraft, manufacturing, and mass distribution are your ultimate goals. Understandably so. The next frontier of aviation is right there in front of us, with the FAA’s Innovate 28 Plan laying the groundwork for AAM operations in 2028. The FAA seems ready and willing, at a deliberate speed, to create a proper regulatory framework and work with AAM OEMs to get various AAM aircraft certified. 

Continue Reading Defending an AAM product liability lawsuit

From time-to-time, transactions or scenarios occur that require consideration of whether an operating lease or a finance lease is the best way forward for parties involved. Whilst the structures are similar, from a legal perspective, there continue to be key differences in how operating and finance leases are structured and function. 

Historically, the two received different accounting treatment, with operating leases being effectively off-balance sheet. This, however, changed with the introduction of IFRS 16 in 2019, with that distinction in accounting treatment ceasing to apply. 

Operating lease

An operating lease is traditionally described as an aircraft hire contract between the lessor (as owner) and a lessee (i.e. an airline) for the agreed term, which is normally no longer than 12 years. The lessor leases the aircraft to the lessee; the lessee pays (amongst other things) rent and at the end of the term, the aircraft is returned to the lessor.

Under this structure, the ownership (and residual value) risk will remain with the lessor with operating leases, also including more stringent maintenance and insurance requirements than finance leases in order to protect the aircraft’s value. Protecting the value is crucial to the lessor, as once the initial lease ends, the lessor will look to lease the aircraft out again in order to further monetise the asset. A lessor will usually enter into several operating leases over the life of an aircraft in order to recoup its initial expenditure and more. Operating leases will therefore, include much more detailed maintenance, insurance and return conditions and, in addition to rent, the lessee will be required to cover exposure in respect of maintenance costs (whether through regular maintenance reserve payments or an end of lease compensation payment). 

Rental amounts will, of course, be a commercial negotiation and take into account many different factors. The lessor will look at items such as current market conditions, credit of the airline, availability of similar aircraft, lease rate factors and (if used in a tax leasing structure) the potential tax benefits available to a lessor via the use of an operating lease. Whilst it will be specific to the jurisdiction of the owner/lessor, the tax treatment of an operating lease is a fundamental difference between it and a finance lease, operating leases are “true leases” because no ownership rights in the aircraft pass meaning that the lessor can utilise certain tax deductions in respect of the aircraft/rent received. As such, operating leases are an integral element of certain tax lease structures such as JOLCOs. 

Lessees like operating leases as they allow them to expand a fleet without the requirement for large capital expenditures. It also means that they can modernise their fleet through bringing in newer aircraft and disposing of older models all whilst protecting their liquidity position. For Lessors, operating leases are good long-term investments with potentially lucrative revenue streams. There is also a sizeable secondary market for lessors to trade aircraft amongst themselves, nearly always with the lease “transferred” via a novation or assignment and assumption depending on jurisdiction. 

Finance lease

A finance lease ultimately confers the economic benefit of the asset on the lessee and is a common financing tool. Whilst there could be multiple users of an aircraft during its economic lifetime where operating leases are used, the lessee is intended to be the sole economic beneficiary of the asset in a finance lease. Such structures are commonly used in financings, for example export credit agency structures where an orphan SPV will lease the aircraft by way of a finance lease to the relevant lessee. The financing nature of the structure does mean there are added regulatory consideration here though and local law “financial leasing” regulations should always be considered. 

The structure is ostensibly similar insofar as the lessor will lease the aircraft to the lessee for an agreed term and the lessee will pay rent over that period. However, that rent will effectively amortise the capital cost of acquiring that aircraft. In addition, the lessee will be entitled to take title to the aircraft, either through an early termination option (and paying the outstanding capital cost then due) or at the end of the term through a nominal purchase option (once the capital cost has fully amortised). On payment of the early termination amount or purchase option, legal title will pass to the lessee. 

As an economic owner, the lessee is the one who takes the ownership risks/reward. Given the expectation that the aircraft will not be returned to the lessor, the lessee is not generally required to pay anything towards maintenance events (as would be the case with an operating lease where the aircraft will ultimately be returned to the lessor). 

Final thoughts 

Most leasing transactions will be formulated with a clear idea of whether an operating lease or financing lease is required, however for those bespoke transactions, it is always good to remind ourselves of the characteristics and structures of both.

Recent news headlines relating to air travel have demonstrated the aviation industry’s refocus on passenger experience and consumer protection issues.  Airlines are working hard to address scenarios that may affect the passenger experience during air travel today, including remediating weather delays and personnel-related issues. The Biden Administration has made consumer protections in the aviation industry a priority issue. For example, we covered the U.S. Department of Transportation’s (DOT) May 2023 launch of a new platform for passengers to communicate with DOT about airline travel issues they encounter.  DOT Secretary Pete Buttigieg has also announced the DOT’s commitment to consumer protections, and consumer protections provisions, are included in Congress’s reauthorization bills for the Federal Aviation Administration.

Our review of recent enforcement orders issued by the DOT demonstrates that the DOT is enforcing these consumer protection commitments with assessment of civil penalties against airlines. The DOT generally assesses civil penalties against airlines following the receipt of a consumer complaint and subsequent proceedings. The DOT’s Office of Aviation Consumer Protection reviews and responds to consumer complaints and may determine that an enforcement action is warranted after considering all the facts in a case.  Our review of the enforcement orders issued by the DOT Office of Aviation Consumer Protection in its public database from 2021 to July 2023 demonstrates that approximately 86% of the enforcement orders relate to consumer protections violations by airlines or airline ticketing agencies.

Timely refunds

According to our review of the DOT’s enforcement orders, the most common consumer protection violations relate to airlines’ failure to provide timely refunds to passengers whose tickets the airline cancelled or significantly changed allegedly in violation of a U.S. law relating to “unfair and deceptive practices.”[1] In 2020, the DOT published a final rule defining the terms “unfair” and “deceptive” for the purposes of the law.[2] Under this rule, a practice is “unfair” to consumers if it causes substantial harm to consumers, the harm is not reasonably avoidable, and the harm is not outweighed by benefits to consumers or competition.[3]

For failures to provide a timely refund, two factors appear to notably impact the amount of a civil penalty against an airline: (1) the number of passengers affected, and (2) the duration of time that passengers waited for a refund.  For example, in one case, the DOT received approximately 1,900 complaints and found that the airline in question took more than 100 days to provide refunds to a majority of the complainants.  This case resulted in a substantial civil penalty against the airline of $1.4 million.  In another case, approximately 700 consumers complained of an airline’s failure to provide a timely refund for more than 100 days, and the resulting civil penalty against the airline was $750,000.  Not surprisingly, the civil penalty issued by the DOT generally increases proportional to the number of passengers affected and the length of the delay in providing a refund.

It is worth noting that, the DOT’s decisions indicate that even the COVID-19 pandemic and resulting governmental restrictions may not constitute a sufficient excuse for an airline failing to provide a timely refund.  In one such case, the DOT received “thousands” of consumer complaints relating to an airline that cancelled or significantly changed flights due to the COVID-19 pandemic and associated governmental restrictions.  In its review, the DOT found that, among other facts, thousands of passengers were left waiting for “many months” before receiving refunds to which they were entitled.  Despite the burden of the pandemic and associated restrictions on the airline, the DOT issued a civil penalty of $1.1 million against the airline.  

Lengthy tarmac delays (deplanement)

The second most common violation found in DOT enforcement orders from 2021-July 2023 relates to airline procedures for lengthy tarmac delays.  U.S. law requires covered U.S. carriers and foreign air carriers with a seating capacity of 30 or more seats to adopt, implement, and adhere to “contingency plans” for lengthy tarmac delays for large hub, medium hub, small hub and non-hub airports.[4] In general, the law requires that for domestic flights, U.S. air carriers must provide passengers the opportunity to deplane before the tarmac delay exceeds three hours.[5] For international flights, carriers must provide a passenger the opportunity to deplane before the tarmac delay exceeds four hours in duration.[6] As part of the contingency plan, the carrier must also provide lavatories, and after two hours of delay, adequate food and water.[7]  

Similar to the fact patterns for timely refund violations discussed above, the amount of civil penalty assessed by the DOT for lengthy tarmac delays generally takes into account (1) the number of passengers affected and (2) the duration of delay.  In one case, an airline permitted an international flight to remain on the tarmac for over five hours without providing the 268 passengers onboard the aircraft the opportunity to deplane.  The resulting civil penalty assessed by the DOT amounted to $225,000.  In another case, an airline failed to provide passengers the opportunity to deplane on two different instances despite delays exceeding the specified time limits where the opportunity to deplane must be offered.  Although the delays in these instances were partially weather-related, the DOT found that the airline’s actions resulted in the prolonged deplanement because in the first instance, the airline failed to notify the arrival airport of its delayed takeoff.  In the second instance, the DOT found that the airline knew or should have known that de-icing could not be accomplished before exceeding the delay window provided in the airline’s contingency plan.  The total number of passengers affected in both instances was 471, and the resulting DOT fine against the airline was $300,000.

DOT’s summary of airline complaint data

It is clear that consumer protections are at the forefront of DOT priorities as it relates to air travel.  On August 2, 2023, the DOT released a summary of airline complaint data from February 2023.  This summary relates to all airline complaints, as opposed to just those resulting in a civil penalty, but the DOT’s discussion of this data nonetheless demonstrates the DOT’s continued focus and commitment to consumer protections for passengers.

The summary released by the DOT revealed that in February 2023, the DOT received 6,644 airline service complaints from consumers.  Of the 6,644 complaints, 66.3% were against U.S. carriers, 29.0% were against foreign air carriers, and 4.7% were against travel companies.  As to the type of grievance, 31.8% concerned cancellations, delays, or other schedule deviations.  Refunds were the second-highest category of complaints, amounting to over 21% of the consumer complaints.  In its announcement accompanying the release of the data, the DOT cautioned that it was taking note of this data, announcing that the DOT “has taken and will take enforcement action against noncompliant airlines and ticket agents as necessary.” 

Conclusion

As airlines continue to increase their focus on customer service to improve the passenger experience, it also is worth keeping in mind the DOT’s readiness to pursue enforcement actions for alleged violations of U.S. law. The abundance of enforcement actions, particularly in the areas of ticket refunds and tarmac delays, demonstrates that the DOT is dedicating resources toward enforcing consumer protection laws.


[1] 49 U.S.C. § 41712 and 14 C.F.R. 259.

[2] 49 U.S.C. § 41712.

[3] 14 C.F.R. 399.79(b)(1).

[4] 14 CFR 259.1(a).

[5] 14 CFR 259.4(c)(1).

[6] 14 CFR 259.4(c)(2).

[7] 14 CFR 259.4(4) and (5). These requirements are subject to certain exceptions. For example, adequate food and water must be provided unless the pilot-in-command of the aircraft determines that safety or security considerations preclude such service. 14 CFR 259.4(c)(4).

In a New Jersey personal injury action, when a plaintiff alleges physical and/or mental injury as a result of the defendant’s negligence or other tortious conduct, the defendant is entitled to have the plaintiff examined by one or more medical experts pursuant to New Jersey Court Rule 4:19. The purpose of such examinations is for defense-retained medical experts to assess and offer opinions concerning the injuries the plaintiff is claiming in the lawsuit. Oftentimes, the plaintiff’s counsel will request that a third-party be present for the DME or that it be audio or video recorded. Such requests typically lead to disagreements between counsel and ultimately motion practice.   

Continue Reading New Jersey Supreme Court clarifies who may attend a Defense Medical Examination (DME) and whether the examination may be recorded

After 9/11, waves of lawsuits were filed seeking to hold those who sponsored and supported the al Qaeda terrorist organization accountable.  For instance, insurance companies, who paid out hundreds of billions of dollars in compensation for property damage and personal injuries as a result of the 9/11 attacks, filed subrogation lawsuits against al Qaeda and a host of other terrorist organizations, individual terrorists, nation states[1], and financial institutions allegedly involved in providing support and financial assistance to certain 9/11 hijackers and plotters.  In addition, family members of those killed in the attacks, as well as those injured, also filed lawsuits.  These lawsuits, among others, were consolidated into a multi-district litigation captioned In Re Terrorist Attacks on September 11, 2001

Continue Reading Southern District of New York dismisses defendant bank in 9/11 litigation for lack of personal jurisdiction

In the past week, the U.S. House and U.S. Senate separately proposed legislation to reauthorize and fund the Federal Aviation Administration (FAA). While there are similarities and overlapping provisions in the two bills, there are many differences. For example, while the House’s version provides great funding and revitalization of the general aviation community, the Senate’s version does not. By way of further example, the Senate’s version provides sweeping provisions for what it calls “consumer protections” which would drastically alter a commercial airline’s financial obligations in the event of a delayed flight and requires hotlines for the general public. The House version takes a softer stance on such issues.    

The business, commercial, and general aviation communities should take note of our key takeaways from the two competing bills and monitor the developments in Congress over the summer as we approach the September 30 expiration deadline of Congress’ FAA authorization. Below we focus on certain highlights from the two pieces of legislation, including part 121 air carriers, advanced air mobility, general aviation, and consumer protections.

Continue Reading U.S. House of Representatives and U.S. Senate propose bills to reauthorize the FAA

Flying in the U.S., Europe and Australia is significantly safer than driving a car. Your current odds of being in a fatal accident are one in 11 million, whereas travelling by car lowers the odds to roughly one in 5000. Without taking away from the tragedy and loss of victims of crashes, the safety of flight must be preserved and improved even as we explore the new frontier of autonomous flight.

Today, some commentators have even argued that autonomous flight is likely to become a reality much earlier than autonomous driving. Unmanned eVTOLs (electric vertical take-off and landing aircrafts) are now being manufactured and are undergoing certification processes. A distinct but related issue is the extent to which artificial intelligence (AI) may be used in autonomous flight; for example, a passive sensor may eventually mimic human analysis onboard. Yet the legal regime around autonomous flight is still under development, as well as the distinct legal issues posed by AI. Having an accurate sense of how the legal regime will evolve to balance the need to innovate in aviation against protecting the public at large will help manufacturers, investors and operators better navigate this sector.

Continue Reading Legal challenges in autonomous flight: Things to consider before investing in an aircraft that flies itself

In 2021, the International Air Transport Association (IATA) announced its goal for the global aviation industry to meet net-zero emissions by 2050. The International Civil Aviation Organisation reinforced the commitment to this target at the most recent UN Climate Change Conference. While there are a number of ways to drive aircraft decarbonisation, in recent years, there has been an increased focus on sustainable fuel to power flight.

Continue Reading The Take-Off of Sustainable Aviation Fuel

Originally published on theoath-me.com.

Simon Spells, Manoj Purush and Julia Norsetter shine a light on the eVOTL investment opportunities taking into account advances in the Middle East and Southeast Asia regions.

As we look towards 2023, aviation regulators, investors and industry firms are making marked progress towards a new sector of aviation: advanced air mobility (AAM). This progress stems from a variety of factors, including reducing urban congestion, capitalising on innovation, and the environmental benefits of reduced carbon emissions. In the near term, many manufacturers are focusing their developments on electric vertical-takeoff-and-landing aircraft (eVTOL) for passenger or cargo carriage. A myriad of manufacturers are seeking to enter the eVTOL market, with significant investment already occurring. For example, market leaders like Joby Aviation reported 2022 Q4 financial statistics of USD1.1 billion in cash, cash equivalents, restricted cash, and investments in marketable securities. German eVTOL manufacturer Lilium reported USD119 million from existing and new investors following its IPO in November 2022. These are just two examples of significant investment trends we are seeing in the VTOL sector. Below, we discuss two key markets (Mid-East and Southeast Asia) and provide investment insight on the eVTOL industry.

Continue Reading Ready for take off

Originally published on dronelife.com.

Drones and VTOLs (vertical-takeoff-and-landing aircrafts) will significantly increase the number of aircraft in the sky. This will lead to the need for modifications to our existing air traffic control systems. Currently, air traffic controllers are at capacity serving the existing passenger and cargo planes in the sky. 

In anticipation of this dilemma, the European Union, through its aviation safety authority (EASA), has developed an air traffic management program to address large numbers of unmanned aircraft, called the “U-Space.” This framework envisions roles for EU Member States, drone servicing companies and more. It may also serve VTOL aircraft in the future.  Below, learn more about the details of the “U-Space.”

Continue Reading EASA’s U-Space: The future of air traffic management for drones and VTOL

In 2022, we discussed an increased demand for air freight, and the resulting need for aircraft prime for conversion from passenger to freighter. The most significant factor leading to this demand was the COVID-19 pandemic and resulting accelerated e-commerce market. After all, the plunge in passenger air travel meant that the 50% of air cargo transported in the hold of passenger aircraft was no longer available. In reaction, logistics companies sought an alternative source for transport of their air cargo, and airlines adapted.

The outcome was significant growth and ingenuity in the conversion of passenger aircraft to freighter aircraft. In our previous article, we discussed some of the challenges faced by stakeholders in the conversion industry, such as the retirement of older aircraft (as airlines sought to invest in more efficient new generations of aircraft). We also discussed the availability of slots at conversion facilities, which faced far more demand than they could accommodate. In 2022, for example, slots at most major conversion facilities were booked up until 2024, or in some instances, until 2026.

Continue Reading Looking ahead: 2023 and the air freight market

On March 6, 2023, the United States Department of Transportation (“DOT”) launched a new online dashboard in an attempt by the Biden Administration to put pressure on U.S. airlines to address customer concerns regarding family seating. The online dashboard represents an effort by the DOT to publicly pressure airlines to eliminate fees related to family seating in the absence of specific rulemaking on this issue.

According to the DOT, the dashboard highlights which U.S. airlines guarantee fee-free family seating, and those that do not. In a press release that accompanied the rollout of the dashboard, the DOT indicated that it has already “begun work on a common-sense rulemaking to ban airlines from charging families junk fees to sit together.”

Continue Reading U.S. Dept. of Transportation launches online dashboard to address airline family seating charges

The HCAA (Hague Court of Arbitration for Aviation) is a newly established specialized arbitration center catering specifically to the aviation sector, which was launched at the Farnborough International Air show in July 2022. Earlier this year, we did an overview of our initial views on the HCAA Model Clause and Rules. The HCAA has also recently revised its arbitration rules on 14 February 2023, showing the high level of consultative engagement that the HCAA has with the aviation community.

Like the Court of Arbitration for Sport and the Chambre Arbitrale Maritime de Paris, one of the HCAA’s key advantages is the availability and expertise of aviation arbitrators in their specialist field which is intended to reduce cost and increase efficiency. Drawing references to the construction and maritime industries however, it is worth noting that setting up a specialized arbitration center is not the only method of allowing transacting parties access to specialists. Professional groups of arbitrators such as the London Maritime Arbitrators Association and Society of Construction Arbitrators can also provide a similar advantage to parties to a dispute in an ad hoc forum rather than a fully administered arbitration. In aviation, the American Arbitrations Association has a panel dedicated to Aerospace, Aviation, and National Security. 

Continue Reading An analysis of the new Hague Court of Arbitration for Aviation

Originally published on evtolinsights.com

The aviation industry has had significant shifts in the profitability of different sectors over the past several years. From the decline of passenger travel due to the COVID-19 pandemic to the rise of the global air freight market as demand for e-commerce increased and investors’ profits soared.

Investors are now interested in environmentally friendly targets, such as advanced air mobility (AAM) and electric vertical-takeoff-and-landing aircraft (eVTOL) for passenger or cargo carriage. Many manufacturers are focusing on developing eVTOL, and significant investments are already occurring in this sector.

Continue Reading Investment opportunities in eVTOL

Overview

The Covid pandemic placed immense strain on lessors and airlines alike. The recent case in the High Court of Peregrine Aviation Bravo v Laudamotion [2023] EWHC 48 (Comm) sheds some light on the impact the pandemic had on relationships between lessors and airlines, especially amidst the dystopian atmosphere of the early lockdowns, and highlights important issues to take into consideration when looking to terminate the leasing of (or the commitment to lease) an aircraft.

By way of brief overview:

  • The claimant lessor, acting through various entities (including Peregrine Aviation Bravo) (hereinafter, the “Lessor”), had several existing leases with Laudamotion, a subsidiary of Ryanair (and hereinafter, the “Airline”), under which the aircraft had been delivered (the “Delivered Leases”), and had entered into four new leases for mid-life aircraft scheduled for delivery during Q2 2020 (the “New Leases”).
  • Whilst the Delivered Leases were guaranteed by Ryanair, only one of the four New Leases was guaranteed by Ryanair (with the apparent intention that the other three New Leases would be guaranteed closer to delivery).
  • As a consequence of the Covid pandemic which had spread widely across Europe by March 2020, there were extensive discussions and communications between the Lessor and the Airline in March and April 2020 concerning the status of the aircraft already operational under the Delivered Leases and the aircraft scheduled to be delivered under the New Leases.
  • The Airline sent at times bold communications, two of which were later cited as grounds for an event of default. The first, sent on 18 March 2020, stated amongst things that delivery under the New Leases would be unilaterally deferred until at least the end of June 2020. The second, sent on 20 April 2020, indicated that it would apply a unilateral rent reduction to the Delivered Leases and that it could not accept delivery of the aircraft under the New Leases. It is important to note that the Airline did continue to pay rent (when due) in full under the Delivered Leases.
  • The Lessor eventually decided to force delivery of the first aircraft, MSN 3361, as a “shot across the bow”, tendering it for delivery on 7 May 2020 having only given notice (in a best-case scenario) on 1 May 2020. 
  • The Airline claimed that, amongst other things, the aircraft was not in the requisite delivery condition and that inadequate notice had been provided. The Lessor terminated the first New Lease and the remaining three New Leases on 15 May 2020.
  • The Lessor subsequently re-leased the aircraft to SmartLynx, an ACMI operator, on a power-by-the-hour arrangement.

Disputes arose between the parties which fell to be resolved in the High Court of England and Wales. Henshaw J, the case judge, found against the Lessor, deciding that the Airline did not wrongfully fail to take delivery as alleged by the Lessor and that no events of default had occurred. Ancillary claims against the guarantor also failed as a consequence.

Continue Reading High Court strikes a cautionary note on lease termination: The recent case of Peregrine v Laudamotion

Introduction

There is much buzz around the launch of the Hague Court of Arbitration for Aviation (the ‘HCAA’), a new industry focussed arbitral regime, in Rotterdam. However, it remains to be seen whether the hype is justified and whether the HCAA will gain traction within the aerospace industry and, in particular, with industry participants.

In this alert, we take a closer look at the administration of the HCAA by the Netherlands Arbitration Institute (the ‘NAI’), the model clause and, of course, the proposed rules (the ‘Rules’).

Continue Reading Hague Court of Arbitration for Aviation gets off the ground