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

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.

The Take-Off of Sustainable Aviation Fuel

By Celine Collis on 17 May 2023 Posted in Environment, Sustainable aviation fuel

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.

Ready for take off

By Simon Spells, Manoj Purush and Julia Norsetter on 3 May 2023 Posted in Advanced Air Mobility, Financing

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.

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

By Richard Hakes, Oliver Beiersdorf and Julia Norsetter on 20 April 2023 Posted in Advanced Air Mobility, Regulatory

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.”

Looking ahead: 2023 and the air freight market

By Simon Spells and Julia Norsetter on 16 March 2023 Posted in Airlines, Freight

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.

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

By Justin deBettencourt and Oliver Beiersdorf on 15 March 2023 Posted in Airlines, U.S.

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.”

An analysis of the new Hague Court of Arbitration for Aviation

By Hui Ling Teo, Jody Wood and Julia Norsetter on 13 March 2023 Posted in Airlines, Regulatory

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.

Investment opportunities in eVTOL

By Simon Spells, Manoj Purush and Julia Norsetter on 7 March 2023 Posted in Advanced Air Mobility, Airlines

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.

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

By Andrew Harper and Jody Wood on 21 February 2023 Posted in Airlines, Leasing

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.

Hague Court of Arbitration for Aviation gets off the ground

By Jody Wood, Adam Longney and Suhani Mangal on 6 February 2023 Posted in Disputes

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’).

We have questions: Julia Norsetter, Policy and Analysis Lead at Reed Smith

By Ashleigh Standen and Julia Norsetter on 13 December 2022 Posted in Advanced Air Mobility

Julia has recently joined our Transportation team here at Reed Smith, having previously been an attorney and policy advisor at the U.S. Department of Transportation and developing strategy and policy with the U.S. Federal Aviation Administration (‘US Regulator’) – including in relation to emerging transportation and advanced air mobility (‘AAM’).

The regulatory framework being built to facilitate AAM around the world can seem intimidating, and is changing with a speed and agility that those working in more established modes of transport may not expect. Julia shares some helpful thoughts on this, and we will be sharing more detailed insights soon – so watch this space!

We have questions: Chris Proudlove, SVP and Underwriting Executive at Global Aerospace

By Ashleigh Standen on 29 November 2022 Posted in Advanced Air Mobility

Chris leads the Emerging Technology Unit at Global Aerospace, which provides insurance for aviation and aerospace assets with a particular focus on innovation and keeping pace with new technology.

Insurance is a key piece of the puzzle in asset finance, and will be especially important for an entirely new class of assets and supporting infrastructure with their own unique features and risks for owners, operators, passengers, lessors and financiers to understand and accept. Chris very kindly spent some time discussing these risks with us, and provided his thoughts on a few key questions.

We have questions: David Tokoph, President and CEO of mba Aviation

By Ashleigh Standen on 17 November 2022 Posted in Advanced Air Mobility

mba Aviation provides a range of specialist aviation support services, from portfolio management software solutions to technical support to investor due diligence to airport revenue enhancement and beyond.

The team is now looking to the future of aviation, and the opportunities and challenges that advanced air mobility (‘AAM’) will generate. mba recently organised the Alternative Lift Exchange: Financing Future Technologies event alongside the Airline Economics conference in New York, providing a specialised forum for those working in and preparing for AAM to gather and share their experience.

We had questions about how and why mba is contributing to the momentum of AAM, and David kindly agreed to answer them.

We have questions: Jason Pritchard, Executive Editor of eVTOLInsights.com

By Ashleigh Standen on 31 October 2022 Posted in Advanced Air Mobility

As Executive Editor of eVTOL Insights, Jason has a unique perspective on the state of the advanced air mobility space, and helps to connect industry players by gathering and sharing news and views from across this dynamic and rapidly evolving landscape.

For the eVTOL Insights podcast, Jason interviews people working in a range of aspects of advanced air mobility, including everyone from founders and CEOs to engineers and software developers, marketers and certification experts, lawyers and battery designers, and beyond. Given his broad knowledge of this detailed and complex industry network, I thought we might turn the tables and interview Jason – and he kindly agreed.

We have questions: Clem Newton-Brown, founder and CEO of Skyportz Australia

By Ashleigh Standen on 26 October 2022 Posted in Advanced Air Mobility

With a background in law, politics, and transport services, Clem Newton-Brown is well placed to facilitate the development of vertiports in Australia and to help connect the various moving pieces of the local advanced air mobility (‘AAM’) puzzle. Through Skyportz, his team is working to assemble the expertise and investment needed to make this happen, to ensure that the landing infrastructure is available when the eVTOL aircraft are certified to fly.

Advanced Air Mobility: We have questions

By Ashleigh Standen on 25 October 2022 Posted in Advanced Air Mobility

Advanced air mobility, or ‘AAM’, is a concept that seems to grow and evolve on a weekly basis, as hundreds of companies and thousands of people worldwide invest their expertise, their motivation and their money into the project of making the concept a reality.

Walmart continues to expand its drone-delivery program

By Oliver Beiersdorf, Amanda Cunha, Catherine Kiernan and Gregory Speier on 19 July 2022 Posted in Advanced Air Mobility

If you live in Arizona, Arkansas, Florida, Texas, Utah, or Virginia, your recent online Walmart order may have been delivered to your home by a drone. In May, Walmart announced that it completed hundreds of drone deliveries. By this time next year, Walmart hopes to complete over a million drone home deliveries in these states.

In the May press release, Walmart announced that its drone delivery program was made possible through its partnership with DroneUp, a company that offers drone flight services through a network of single pilots and pilot organizations. Through close consultation with DroneUp, Walmart is now able to deliver packages weighing less than 10 pounds, in as little as 30 minutes, between the hours of 8am and 8pm. While Walmart believed most customers would use its drone-delivery service for “emergency items,” it turns out that the top selling item in one hub location is Hamburger Helper.

This demonstrates that consumers quickly become comfortable using drone delivery service for all kinds of goods, including food and everyday household items.

According to recent press releases, Walmart’s delivery process is as follows: a DroneUp delivery hub, with a team of certified drone pilots, is tasked with the safe delivery of packages within the confines of FAA guidelines. When a customer places an order, the item is fulfilled from the store, packaged, loaded into the drone, and delivered to the customer’s home using a cable that gently lowers the package to the ground.

‘Rules of the Air’: EASA Publishes World’s First Air Taxi Rules

By Celine Collis on 5 July 2022 Posted in Advanced Air Mobility

Hail a black cab on a busy London street, and you can assume that the driver will follow the ‘rules of the road’ to your destination. However, what can a commuter expect when taxis begin to take flight?

With Airbus, Boeing and even Uber, amongst others, developing and investing in electric take-off and landing (eVTOL) aircraft, the concept of flying taxis is quickly becoming a reality rather than a concept relegated to Sci-Fi. Test flights are currently being conducted on eVTOL aircraft, and while estimations for their commercial roll-out vary, it is likely we will see flying taxis in the next few years. One market research company has estimated that 430,000 air taxis will be in operation by 2040. As such, ‘rules of the air’ are in order for the safe operation of air taxis.

Vertiports 2022: The story so far

By Luke Drake on 30 June 2022 Posted in Advanced Air Mobility

We wrote earlier this year about vertiports as an asset class, and a perceived potential lag in the development of these assets compared to that of the eVTOL aircraft that vertiports are designed to support (you can read that piece here).

This now seems to be changing, and there has been a real sense of momentum building in this space over the last few months – so much so that it can be difficult to keep up, which is why we set out here a few of the key developments shaping vertiports and eVTOL support infrastructure to be aware of.

SC-VTOL confirmed as basis for eVTOL certification in the UK

By Ashleigh Standen and Celine Collis on 20 June 2022 Posted in Advanced Air Mobility

The UK Civil Aviation Authority (‘CAA’) announced last week that it will use the certification standards informing the ‘Special Condition for small-category VTOL aircraft’ (the ‘Special Condition’ or ‘SC-VTOL’), developed by the European Aviation Safety Agency (‘EASA)’, as the basis for the certification of new models of electric vertical take-off and landing (‘eVTOL’) aircraft in the UK.

What is SC-VTOL?

EASA pioneered VTOL certification through the issuance of the Special Condition on 2 July 2019, which sets out the technical specifications and requirements developers must meet to achieve certification for new models of VTOL aircraft intended to carry passengers.

In doing so it recognised that VTOL aircraft are an entirely new category of vehicle for regulators, noting in the preamble to the Special Condition that ‘despite having design characteristics of aeroplanes, rotorcraft or both, in most cases EASA was not able to classify these new vehicles as being either a conventional aeroplane or a rotorcraft as covered by the existing certification specifications.’

The Special Condition applies to small rotorcraft with:

a passenger seating configuration of nine or fewer; and
a maximum certified take-off mass of 3,175 kg.

It is now confirmed that the CAA will use SC-VTOL as a basis for the certification of eVTOL aircraft in the UK.