As with the rest of the world, the Covid-19 pandemic has not been kind to African aviation industry stakeholders. To paint a broad picture of market performance, the African Airlines Association’s (AFRAA) recent report noted a 50% drop in capacity since April 2019 with the continent facing greater declines in 2020 in passenger numbers, seats offered and aviation-related jobs than the worldwide average. The continent also faces the twin challenges of limited financing options and difficulties with current policies. However, despite these challenges, there are positive aspects to the market’s recovery and opportunities for sustainable growth. There are several initiatives available to market participants and governments to counter the difficulties in the current operating environment, if these are adopted. Opportunities also abound in this unsaturated market for regional growth and in air cargo. Continue Reading
According to the Centers for Disease Control and Prevention (CDC), those who are fully vaccinated with an FDA-authorized vaccine or a vaccine authorized for emergency use by the World Health Organization can now travel safely within the U.S. Face coverings, however, must still be worn at the airport and during flight. Continue Reading
On Monday May 3, 2021, the California federal district court judge handling the Kobe Bryant helicopter crash lawsuit denied the United States Government’s motion to dismiss claims made against it by Island Express Helicopters, Inc.—the helicopter charter company operating the fateful helicopter flight—for indemnity. Continue Reading
It is still remarkable when you board a flight, after trying to squeeze a few final minutes out of the airport WiFi connection, when you see that your aircraft has its own internet connection. Although the technology to connect an aircraft to wireless internet-providing satellites has been around for the best part of the last ten years, the global fleet rollout is less than half of global seat capacity, yet the in-flight connectivity market is set to increase from US$1.5bn in 2020 to over US$5bn by 2027. However, evolving technology is taking the concept of a ‘connected aircraft’ further and deeper than simply allowing passengers to scroll through their Instagram feed at 35,000 feet. Continue Reading
What is the EU Taxonomy?
Essentially, this is an attempt to identify certain economic activities that qualify as ‘environmentally sustainable’ in order encourage investment in those activities. Continue Reading
On March 25, 2021, the U.S. Supreme Court handed down a decision which rejected a narrow construction of specific personal jurisdiction under the Due Process Clause. In Ford Motor Co. v. Mont. Eighth Judicial Dist. Court, the Supreme Court clarified the limits of specific personal jurisdiction and litigants’ due process rights and held that Ford Motor Co. can be sued in Montana and Minnesota over accidents involving used cars in those states even though the cars were not designed, manufactured, or sold in those states. The decision has significant implications for the scope of personal jurisdiction under the Due Process Clause, including for aviation manufacturers in product liability actions that are filed outside of their home jurisdiction.
The court’s ruling was 8-0, with Justice Alito filing a concurring opinion and Justice Gorsuch filing a separate concurring opinion that was joined by Justice Thomas. Justice Barrett did not participate.
In 2017, the Supreme Court held in Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2019), that specific personal jurisdiction can be exercised over a defendant pursuant to the Due Process Clause only when (1) a defendant “ha[s] purposefully availed itself of the privilege of conducting activities within the forum state” and (2) when the plaintiff’s claim “arise[s] out of or relate[s] to” the defendant’s forum conduct. The Supreme Court’s decision in Ford Motor Co. examined the limits of the second prong—that a plaintiff’s claim must “arise out of or relate to” the defendant’s forum conduct. Continue Reading
It is now a unanimous conclusion that the COVID-19 pandemic has resulted in the worst ever crisis in the history of the aviation industry. In 2020, we saw major airlines such as Avianca, LATAM, Thai Airways, Virgin Atlantic and Virgin Australia enter into formal insolvency or restructuring proceedings, with the majority of other airlines being kept afloat by a combination of government aid, cost-cutting measures and concessions from shareholders, employees, bondholders, lessors and other creditors. As we enter the spring of 2021, the inevitable question is: what will happen next? Which airline may fail and which will be well-positioned to benefit from an eventual recovery in international air travel? Continue Reading
In an article a few weeks ago on ‘How tech went big on green energy’, the Financial Times referred to a report released in February by Lancaster University and Small World Consulting, which found that the information and communication technology sector (i.e. IT) ‘is estimated to form ca. 1.8-2.8% of global GHG emissions in 2020’. That, the FT noted, ‘is roughly the same as emissions from the aviation sector’. Continue Reading
After considering whether to implement a COVID-19 testing requirement for domestic travel, including air travel, the United States Centers for Disease Control and Prevention (“CDC”) recently stated that it is not recommending point of departure COVID-19 testing for U.S. domestic travel. Federal officials had indicated that the CDC was considering a rule that would require all U.S. domestic flyers to test negative for COVID-19 prior to boarding a domestic flight. However, following industry opposition, including opposition from U.S. based air carriers, the CDC stated that it was not recommending point of departure COVID-19 testing prior to domestic travel. The statement by the CDC follows its January 29, 2021 Order which requires the wearing of masks by travelers. Continue Reading
On January 13, 2021, the Department of Transportation (DOT) issued a new final rule amending its rules regarding oversales and compensation due to passengers who are denied boarding involuntarily — a practice known as “bumping”. The final rule was issued in accordance with the Transparency Improvements and Compensation to Keep Every Ticketholder Safe Act of 2018 (“TICKETS Act”) which required the DOT complete a rulemaking to clarify that:
- there is no maximum level of compensation an air carrier or foreign air carrier may pay to a passenger who is involuntarily denied boarding as the result of an oversold flight, and
- the denied boarding compensation levels set forth in DOT regulations are the minimum levels of compensation an air carrier or foreign air carrier must pay to a passenger who is involuntarily denied boarding as the result of an oversold flight.
The final rule prohibits airlines from involuntarily denying boarding to a revenue passenger after the revenue passenger has checked-in for the flight and the passenger’s boarding pass has been collected or scanned and the passenger has been “accepted by the gate agent”, subject to safety and security exceptions that may require removal of the passenger. In addition, the final rule states that the passenger can be removed if the passenger is engaging in behavior that is “obscene, disruptive, or otherwise unlawful.” The final rule also makes clear that it does not limit the authority of the pilot of the aircraft provided for in 14 CFR 121.533. Continue Reading
2020 was a challenging year for the aviation industry as a whole due to the COVID-19 pandemic, but for Boeing it has been an even more challenging time as it has also had to deal with the global grounding of its flagship product, the 737 MAX, since March 2019.
The 737 MAX was launched with the intention of becoming Boeing’s market-leading narrow-body aircraft, trying to break through the stiff competition in the narrow-body market from its main competitor, Airbus. However, that aspiration has so far failed to materialise due to the global grounding of the aircraft in March 2019 following two catastrophic incidents. At its peak, with over 750 MAXs grounded and unable to generate revenue, Boeing faced a significant challenge to return the MAX to the skies and restore the confidence of regulators and safety authorities, its customers and the flying public around the world. Continue Reading
On December 2, 2020, the U.S. Department of Transportation (“DOT”) announced its final rule revising its Air Carrier Access Act (“ACAA”) regulation on the transportation of service animals by air. The final rule constitutes significant changes to the ACAA regulations regarding the transportation of service animals. Significantly, the final rule restricts the types of service animals allowed on U.S. flights to dogs and frees airlines from having to accommodate a variety of emotional support animals. However, the rule does not bar emotional support animals from traveling in passenger cabins.
Prior to the issuance of the final rule, the DOT published an Advance Notice of Proposed Rulemaking titled “Traveling by Air with Service Animals” on May 23, 2018. On February 5, 2020, the DOT issued a Notice of a Proposed Rulemaking providing notice of a proposed rule amending its ACAA regulation on the transportation of service animals by air. The DOT then received more than 15,000 comments on the proposed rule before announcing the final rule on December 2, 2020. Continue Reading
The aviation financing industry has undergone a monumental shift in the past decade. As traditional bank lenders have come under increasing regulatory pressure, by virtue of their systemic importance in a decade of low interest rates and a search for yield, private capital (private equity, hedge funds, distressed debt funds, etc.) has been attracted to the relative stability of cash flows and value retention of aviation assets. It is no secret that private equity and other alternative funds have long been accumulating capital, waiting for the opportune moment.
The COVID-19 Pandemic (the “Pandemic”) has wreaked havoc on the aviation and travel sectors. As difficult as this has been to be involved in, distress is attractive to private equity. As airlines restructure and revisit their global fleet compositions, the market reprices distressed assets to reflect evolving operating conditions. In this relatively illiquid market, therefore, there are unprecedented opportunities for longer term investors with experience in distressed assets. Continue Reading
The French government, through its investment bank Bpifrance, has recently invested in the newly created Ace Aéro Partenaires fund, which aims to support French SMEs in the aviation industry that have been badly hit by the COVID-19 pandemic and the subsequent drop in aircraft deliveries. 630 million Euros have been raised so far, with the French State (through Bpifrance) contributing 150 million Euros, Bpifrance (from its own funds) 50 million Euros, the “big four” French manufacturers (Airbus, Safran, Dassault and Thales) 200 million Euros, and the fund manager, Tikehau, the remaining 230 million Euros.
The investment is part of the French government’s 15 billion Euro plan to revive and transform the sector in three steps:
- providing emergency relief to the industry and its workforce, through export credits, government orders and emergency funding;
- investing in SMEs and the technological transformation of French aviation; and
- investing in R&D to design and build tomorrow’s aircraft.
Original decision: Wells Fargo Trust Company, National Association (trustee) v VB Leaseco Pty Ltd (administrators appointed)  FCA 1269
Appeal: VB Leaseco Pty Ltd (Administrators Appointed) v Wells Fargo Trust Company, National Association (trustee)  FCAFC 168
The Federal Court of Australia has provided important guidance on the meaning of the phrase “give possession of the aircraft object to the creditor” as used in Article XI of the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the Aircraft Protocol) in the context of an insolvency. It is likely that other common law (and possibly civil law) Cape Town jurisdictions would reach a similar conclusion. Continue Reading
The newly updated European Union chapter of the Getting The Deal Through Air Transport guide provides a useful and succinct overview of the European Union regulatory framework applicable to the aviation sector.
It offers highly practical insights into the various European measures that regulate the industry relating to:
- Aviation operations and market access (safety regulations, licensing, public service obligations, regulation of airfares)
- Ownership and control (financial fitness, nationality)
- Aircraft and airports (maintenance, economic regulation, access, slot allocation, ground handling, air traffic control)
- Liability and accidents
- Competition law and state aid
- Consumer protection
The chapter also provides a summary of the recent measures adopted by the European Union to deal with the devastating effects the COVID-19 pandemic has had on the industry.
To download the chapter please see our client alert here.
Developments in environmental regulation for the aviation industry have gathered momentum over the last year, notwithstanding the challenges arising from the pandemic and the related groundings.
Last month saw the publication of plans for the UK Emissions Trading System, which is proposed to take the place of the European Union Emissions Trading System when the UK leaves the EU at the end of 2020. The baseline emissions reference period for the International Civil Aviation Organisation’s Carbon Offsetting and Reduction Scheme for International Aviation has also very recently been adjusted to reflect the dramatic drop in 2020 aviation emissions resulting from responses to the COVID-19 pandemic, in the context of a heated debate over long-term environmental goals and the aviation industry’s survival. You can read more about this in our earlier blog on the topic here.
Aviation is reportedly responsible for 2 per cent of global carbon emissions, and in the last 12 months we have all had to come to terms with Extinction Rebellion protests and ‘flyksgam’ (discussed in this piece by Ashleigh Standen last autumn). The industry is very aware of the need to reduce its carbon footprint – both for green reasons and to help mitigate its exposure to oil price fluctuations. However, the drivers are frequently external factors. We had become familiar with the push by financial institutions, which are subject to increased regulatory requirements and public scrutiny, as part of a drive for increased sustainability. However, as attention turns to what emergence from the pandemic might look like and our prospects of entrenching green imperatives in our recovery infrastructure, one of the major points of discussion in aviation is the ‘green strings’ attached to government bailouts of airlines. Continue Reading
The landscape of environmental regulation is changing for aviation operators, due to a powerful combination of global pressures to reduce emissions for one of the transportation sectors with the largest emissions outputs. Plans have recently been published for the UK Emissions Trading System (UK ETS), which is proposed to take the place of the EU ETS when the UK leaves the European Union at the end of 2020.
Plans to establish a baseline emissions reference for the International Civil Aviation Organisation’s Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) have also been adjusted to reflect the dramatic drop in 2020 aviation emissions resulting from responses to the COVID-19 pandemic, in the context of a heated debate over long-term environmental goals and the aviation industry’s survival.
The UK ETS Continue Reading
On 24 May 2020, the German government announced that it had agreed an extensive €9 billion rescue package for Lufthansa, including a significant recapitalisation leading to a government shareholding of 20 per cent. The European Commission indicated that any approval of the proposed bail out would be subject to slot divestitures at Lufthansa’s Frankfurt and Munich hubs. While Lufthansa’s supervisory board had initially indicated it would not approve a rescue package subject to these conditions, it reversed its position, and on 30 May 2020 decided to accept giving up eight aircraft with 24 landing slots at Frankfurt and Munich in return for the bail out. This case illustrates some important lessons.
The Lufthansa case shows that while the Commission has accepted that government recapitalisations may be required to provide urgently needed liquidity, it is determined to ensure that such aid does not unduly distort competition in the market. Its firm position further reflects the fact that any Commission approval decisions are likely to be subject to appeal. Ryanair, in particular, has adopted an aggressive stance, and has indicated its intention to challenge a significant number of aid packages.
In addition to any conditions the Commission may impose, national governments may attach further strings. For example, Air France has had to accept certain environmental obligations in return for the French government’s financial support.
It is clear that a major restructuring of the aviation industry will take place when the worst effects of the pandemic have subsided. The conditions attached to the rescue packages may, however, impose some important limitations that the airline recipients will need to take into account when devising their post-COVID-19 strategy to deal with these changes.
Read the full article here.
The COVID-19 pandemic has caused many airlines to temporarily ground aircraft. Due to its dry desert conditions, Arizona is a popular state for airlines and commercial aircraft lessors to park aircraft while not in active use. Airlines and commercial aircraft lessors should be aware, however, that Arizona’s annual aircraft license tax may apply to an aircraft owned by a nonresident of Arizona if the aircraft is based in the state for more than 90 days in a calendar year. The annual license tax is administered and enforced by the Arizona Department of Transportation (“ADOT”).