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Aircraft Specific Lease Agreement

Airlines that do not have the means to do good business with direct aircraft in the factory or companies that prefer to maintain flexibility can lease their aircraft with an operating lease or a financial lease. From a Malaysian perspective, there is unlikely to be frustration, as it is not impossible for leasing companies to meet their obligations under the aircraft lease agreement, which is simply not economically profitable for them during this period. It is likely that the courts will also find that it is unfair to exempt the parties from their obligations under the aircraft lease simply because operations are temporarily suspended. The global wet rental market is expected to grow from $7.35 billion in 2019 to $10.9 billion in 2029, for a CAGR of 4.1%. With an aggressive growth mandate, more aggressive and smaller players have paid too much for many of their assets in the sale and rental market, and then are too little solicited to gain the business, with lower maintenance reserves and yield conditions: leasing factors have fallen to 0.6% per month (7.2% per year) and even reach 0.55% (6.6% per year). [3] Assuming that the aircraft lease agreement includes a force majeure clause, whether or not such a clause can be invoked as a result of the Covid 19 pandemic depends on whether an “epidemic” is included in the lease as a triggering event. Although the onset of the Covid 19 pandemic is beyond the proper control of the lessee, it would be rare to find a force majeure clause in a standard aircraft lease agreement allowing the lessee to avoid paying rents in a situation where the lessee is forced to cancel its flights and ground its fleet. In Malaysia, an agreement providing for an act that will later become impossible or illegal could be considered frustrated and not concluded in accordance with section 57(2) of the 1950 Convention (Contracts Act) providing that standard lease and finance agreements would normally allow a creditor (i.e.dem lessor or financier) to declare that a default has occurred, in the event of a “major adverse change” in the debtor`s financial situation (i.e.B. the borrower or borrower) or in circumstances that would have a “significant” effect on the debtor`s obligations to perform its obligations under the leasing or financing agreement. Recently, we have seen that commercial airlines prefer to use their aircraft rather than use their own resources to finance the purchase of their fleet.

Over the past two years, AirAsia, Malaysia`s leading low-cost airline, has sold much of its aircraft portfolio in two transactions, first to companies managed by BBAM Limited Partnership in 20181 and, second, to private investment firm Castlelake LP in 20192. These aircraft were then re-leased to airlines within the AirAsia Group. With the rise of leasing companies in this region, the increase in the availability of leased aircraft and competitive rental prices, it is no wonder that many commercial companies have chosen to lease their aircraft and set aside their cash to expand their business in another way. Aircraft leasing has also enabled operators to quickly fill in the gaps in the event of an aircraft shortage due to special circumstances such as fleet grounding or to respond to seasonal increases in flight volumes. Rentals are often anchored in LIBOR rates. The rents of the A320neo and B737 MAX 8 are $20 to $30,000 higher than those of their predecessors: by 2018, a B737-8 can be leased for just over $385,000 per month, and a 12-year term with good credit may be less than $370,000 per month for an A320neo (0.74% of its capital cost of about $49 million), which generates a turnover of $ 53 million and more than $ 8.5 million in compensation for the end of the maintenance-free lease agreement. and is worth another $20 million. [7] Wet-leases are sometimes used for political reasons….