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| 1 minute read

Will improved prospects for the air travel industry cause further problems for defaulting airlines?

With the easing of travel testing requirements in Europe, airlines are gearing up for a strong bounce-back this Summer. The light at the end of, what’s been, a very long tunnel is getting brighter; and with that, there is a palpable sense of optimism in the aviation industry. It is reported that Ryanair is recruiting and training 1,000 new pilots and 2,000 cabin crew. However, beware; not all that glitters is gold.

Ironically, improved prospects for the aviation industry may also prove the catalyst for non-consensual aircraft repossessions. During the height of the pandemic, many lessors were forced to take a pragmatic approach to defaulting lessees, not dissimilar to shipping banks at the height of the global financial crisis. Provided that the airline in question was looking after the leased aircraft and covering the associated costs of maintenance, storage and insurance, repossession against defaulting lessees made no commercial sense unless the lessor had found a suitable home for the aircraft (which was a tall order, to say the least).

Opportunities to place aircraft with viable operators are improving significantly, and with that, aircraft leasing companies’ patience with defaulting lessees will undoubtedly wane. Accordingly, defaulting airlines that have not reached agreements with their lessors with respect to the deferral of outstandings or are otherwise in persistent default, are now at real risk of losing the aircraft that they will need to take advantage of the expected boom in ticket sales in advance of the Summer.

Reed Smith’s aviation team (in the asset finance, transactional and litigation space) is well placed to advise and guide its aviation clients through whatever turbulence lies ahead as the market continues to normalise itself in the wake of the pandemic.

The chief executive of EasyJet, Johan Lundgren, said pent-up demand should push summer capacity near to 2019 levels.

Tags

covid-19, transportation, aviation, enforcement

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