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

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!

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

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.

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

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.

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

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.

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

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.

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

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. 

Continue Reading Walmart continues to expand its drone-delivery program

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.

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

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.

Continue Reading Vertiports 2022: The story so far

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:

  1. a passenger seating configuration of nine or fewer; and
  2. 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.

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

“Fly along with me,” sings Dave Grohl, “I can’t quite make it alone.” We can imagine eVTOL developers singing along to this as they work towards autonomous flight, as so many of the vehicle models will have to commence operations – however briefly – with a pilot onboard.


But the ultimate viability of the eVTOL proposition relies in no small part on achieving certification for (and confidence in) autonomous flight as quickly as possible. It will take time for aviation authorities, local councils and the travelling public to get comfortable with this, but the economic reality is that the industry will only be able to operate at a sustainable scale if each vehicle’s full capacity is available for paying passengers or revenue-generating cargo. We need to find a way to facilitate safe pilot-free flight while also managing the technological and operational challenges autonomous flight presents – as Dave sings, hook me up a new revolution.

Continue Reading Learn to fly: eVTOLs and autonomous flight

As a result of the COVID pandemic, with the resulting payment defaults amongst several airlines , the past few years have seen a surge in interest in distressed debt opportunities within the aviation sector. One particular area which has seen a lot of attention has been Japanese tax leasing – namely the Japanese operating lease (“JOL”) and Japanese operating lease with call option (“JOLCO”) products.

JOLs and JOLCOs have been staples of the aviation market for many years. Both are essentially operating leases with an investment of Japanese equity, typically provided by a Japanese corporation with tax capacity. This is usually twinned with limited recourse senior debt from a Japanese bank or a Japanese branch of an overseas bank, such that the credit of the underlying lessee is integral to the transaction as the revenue flowing from the lease would be used to pay the debt.

Continue Reading Distressed Assets: JOLs and JOLCOs

Hop to it: Vertiports as an asset class

The sums invested in the development of electric vertical take-off and landing (‘eVTOL’) aircraft have been well publicised. It seems that not a week goes by without a new partnership announcement, a new SPAC combination, or another large investment being reported in the press – such as the additional $450 million being invested by Boeing in Wisk, announced at the end of last month. The Financial Times recently referred to a McKinsey finding that ‘investors have bought into the dream, pumping more than $7bn into such projects, mainly through special purpose acquisition vehicles (Spacs) listed on US stock markets,’[1] The article goes on to note that ‘while all kinds of vehicles are planned, from cargo planes to surveillance drones, almost 75 per cent of the money went to companies developing manned electric vertical take-off and landing (eVTOL) craft.’[2]

Continue Reading Hop to it: Vertiports as an asset class

As the global economy becomes more interconnected, aviation takes on an increasingly central role in our collective economic growth. The aviation industry supports 65 million jobs and enables the best part of $3 trillion in global GDP annually. If aviation were a country, it would rank among the world’s largest economies.

With the loss of nearly two years of passenger traffic, however, the COVID-19 pandemic has hit aviation harder than nearly any other industry. Yet there are reasons for optimism as the industry looks to emerge from the crisis stronger than before. In this report, Reed Smith’s aviation team examines how the industry can reconfigure itself and continue to connect the people and economies of the world, long into the future, with a much different footprint.

The report explores the dynamics in four key areas for the aviation industry:

  • Tomorrow’s world
  • Business continuity – ensuring a solid business model
  • Avoiding unnecessary disruption (increasing number of disputes)
  • Navigating the given external considerations

We hope you enjoy reading the report and as always, we welcome your feedback and questions. Please feel free to reach out to any of the authors, or to your usual Reed Smith contact.

Please see link to site: Global Air Freight

Unruly passenger numbers have been on the rise, with many of these incidents related to compliance with COVID-19 mask-related regulations. There are concerns of further issues during the holiday period with Omicron on the rise and an increase in travel as people visit family.

Our U.S. litigation team have set out some of the considerations for airlines in dealing with these potential issues.

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[1]. 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 Supporting the African aviation market to recovery

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 FAA and Homeland Security issue warnings as unruly passenger incidents increase