Letters of credit are often issued in aircraft leasing transactions as an alternative to the provision of a cash security deposit and, less frequently, the obligation to pay maintenance reserves in cash. In an airline bankruptcy scenario, it is important to understand the differences that exist between different forms of letter of credit and some of the challenges that may arise for an enforcing lessor or financier.
Aviation is among the fastest growing sources of greenhouse gas emissions, which has given rise to environmental concerns over their global impact and effect on air quality, particularly at ground level. In an effort to tackle aviation's increasing contribution to climate change, international organisations – such as the United Nations and the International Civil Aviation Organisation – are taking steps to reduce global aviation emissions and develop measures with worldwide effect.
In January 2018 the single African air transport market (SAATM) was formally launched. Its principal objective stems from the Yamoussoukro Decision, which provided for the full liberalisation of intra-African air transport services in terms of market access. The SAATM is a welcome development; however, to reap the full potential of the initiative, the African Union must do all that is necessary to ensure that the resources, infrastructure and capacity required to grow the aviation sector are available.
The African Union endorsed the Yamoussoukro Decision in 2000 and it became fully binding in 2002. Its rationale was the need to foster socio-economic development in Africa – policymakers recognised that aviation and a competitive aviation market could be decisive for unlocking Africa's economic potential. However, the agreement has not been fully implemented by its signatories.
The International Air Transportation Association (IATA) Dangerous Goods Regulations – the only standard recognised by airlines – contain the globally applicable provisions for shipping dangerous goods by air. A violation of the regulations might lead to criminal proceedings and infringements are a notifiable fact to be reported to the competent authority. In order to assist shippers in understanding the complete requirements, IATA has prepared the Lithium Battery Shipping Guidelines.
A key component which promotes growth in the aviation industry is the availability of capital to finance aircraft transactions. Although the existing methods for financing aircraft are acceptable, they have some notable flaws. Conversely, a number of possible benefits exist for airlines that choose to accept digital currency for financing transactions in the sector.
After years of protracted negotiations, the General Assembly of the International Civil Aviation Organisation recently created the first global market-based measure to attempt to contain aviation emissions. However, the new scheme has significant limitations, leaves questions unanswered and mechanics undetermined, and – in the view of many non-governmental organisations – does not sufficiently address the ongoing dangers posed by aviation greenhouse gas emissions.
The Cape Town Convention allows for any state to designate an entity within its territory as the entry point through which information shall or may be transmitted to the International Registry. Where a contracting state has so designated such an entity, any registration made which seeks to circumvent the applicable entry point will be invalid. However, there is an important exception to this rule.
In recent years the aviation sector has witnessed increased attention from Middle Eastern airlines, asset managers and Islamic financial institutions looking to diversify their investments. The nature of Islamic law makes it imperative that aircraft financing be structured in a manner that complies with Sharia law, which forbids the payment and receipt of interest.
The increase in the volume of commercial air traffic in Africa has led to an upsurge in aircraft acquisitions. Aircraft acquisitions can be undertaken through either a lease or an outright purchase. In either instance, insurance has a major role to play in the acquisition process.
The recently published third edition of the official commentary to the Cape Town Treaty calls into question the validity of an international interest filed against a helicopter engine that is attached to a helicopter. To address this issue, industry members have recommended that a 'prospective international interest' be filed against helicopter engines. It is hoped that the treaty will be amended in light of this commentary.
The rules governing the financing that export credit agencies can provide for the purchase of aircraft were recently amended. The new rules apply to all forms of official state support for export credits and set out the most favourable terms allowed for aircraft financings supported by the export credit agencies of members of the Organisation for Economic Cooperation and Development and Brazil.
The International Civil Aviation Organization has adopted two new air law conventions that set out international compensation and liability rules for damage caused by aircraft to third parties. Each treaty makes operators liable for death, bodily injury and mental injury, as well as environmental and property damage. However, both conventions are a long way from coming into effect..