Latest updates

Aircraft repossession in bankruptcy – Brazilian judiciary's inconsistent treatment of lessors
Basch & Rameh
  • Aviation
  • Brazil
  • 28 August 2019

A number of recent aircraft repossession actions have demonstrated that a majority of judges have correctly recognised lessor rights to repossession in the face of apparent lease agreement defaults. However, these decisions have not clearly cited the Cape Town Convention as their basis. The Brazilian judiciary's failure to unify repossession actions against a bankrupt lessee in a single court has meant that some lessors are subject to minority view decisions that can be upheld on appeal.

Aircraft repossession: judiciary fails to uphold local law or Cape Town Convention
Basch & Rameh
  • Aviation
  • Brazil
  • 12 June 2019

Following developments earlier in 2019, aircraft repossession has continued to be in the spotlight – yet again with regard to the Oceanair Linhas Aéreas SA (commonly known as 'Avianca Brazil') bankruptcy and, in particular, the experience of lessors that sought repossession of leased aircraft therefrom. In this case, and contrary to Avianca Brazil's pre-bankruptcy experience, a bankruptcy court failed to uphold the express provisions of the Bankruptcy Law 2005 and the Cape Town Convention

Recent developments in aircraft repossession
Basch & Rameh
  • Aviation
  • Brazil
  • 16 January 2019

In respect of four aircraft that were recently repossessed before Avianca Brazil obtained bankruptcy protection, the Brazilian judiciary and civil aviation agency procedures worked reasonably well and Brazil's overall performance complied with its obligations under the Cape Town Convention. While all four aircraft were exported and de-registered within approximately two weeks, Brazilian customs authorities must still reassess the current export authorisation procedure.

Changes to registration requirements: why aircraft financiers should be on alert
Basch & Rameh
  • Aviation
  • Brazil
  • 20 June 2018

A tax regulation that was promulgated in 2016 has taken effect in ways that are now affecting aircraft lessors and lenders to Brazilian carriers, including by imposing requirements concerning the identification of lessor entities' ultimate beneficial owners and increasing the document disclosure requirements on lessors and lenders in cross-border aircraft finance transactions. While the full impact of the new rules is still unclear, lessors and lenders to Brazilian operators should prepare to comply.

Aircraft interchange agreements
Basch & Rameh
  • Aviation
  • Brazil
  • 03 January 2018

Interchange agreements are relatively new and have been increasingly used by commercial aircraft operators in Brazil. In response to industry requests, the Brazilian Civil Aviation Agency and the Brazilian Aeronautical Registry recently clarified several applicable rules. Due to their novelty, interchange agreements are not always understood in the industry. While such agreements share some similarities with interline and code-share agreements, they have important distinctions.

Modernising the Aeronautical Registry: electronic filing now available
Basch & Rameh
  • Aviation
  • Brazil
  • 09 August 2017

For the past few months, the Brazilian Aeronautical Registry has experimented with a new electronic filing system that allows parties to file documents electronically 24 hours a day, seven days a week. This system is now operative for documents relating to commercial aircraft. Documents relating to private aircraft, business aircraft and helicopters are still being filed physically. The new electronic system is expected to become available to them during the second half of 2017.

Brazil designates Ireland as tax haven: impact on aircraft finance
Basch & Rameh
  • Aviation
  • Brazil
  • 22 February 2017

In September 2016 the Brazilian Revenue Service unexpectedly promulgated a change in its treatment of Ireland, which had the potential to wreak havoc on the aircraft leasing sector for the entire country. After four weeks of considerable uncertainty, the changes – as they apply to commercial aircraft leases – were suspended. While the clarifications temporarily resolve the initial concerns regarding commercial aircraft leases, they provide no relief for other important sectors, such as the air taxi sector.

Interchange and foreign capital investment limits for airlines – changes to legislation
Basch & Rameh
  • Aviation
  • Brazil
  • 17 August 2016

As the revision to the Aeronautical Code is taking longer than expected, the president promulgated interim legal measures earlier in 2016, including one change particularly relevant to air carriers – restrictions on foreign investment in airlines. Although ultimately vetoed, these measures still merit attention, as they are indicative of future legislation.

Lessor rights in airline bankruptcy proceedings
Basch & Rameh
  • Aviation
  • Brazil
  • 30 March 2016

Brazil's airlines are facing unprecedented economic and financial pressures. With approximately 15 to 20% of their payment obligations fixed in US dollars, they have seen their operational profits drastically decline and are experiencing significant operating losses. Although no airline has sought bankruptcy protection, the risk that a major airline will do so is considerable and lessors should be aware of their rights and risks should this occur.

Revisions to Aeronautical Code
Basch & Rameh
  • Aviation
  • Brazil
  • 02 December 2015

The Senate is undertaking a serious effort to revise and modernise the Aeronautical Code, which dates back to 1986. Although it is too early to know the special senate committee's final recommendations, the new code is expected to conform to the Cape Town Convention and relax existing restrictions on foreign investment in Brazilian airlines.

Post-closure matters in aircraft finance – common misunderstandings
Basch & Rameh
  • Aviation
  • Brazil
  • 01 July 2015

A common misunderstanding that arises in Brazilian aircraft finance transactions relates to post-closure requirements as, due to delays, a significant amount of the legal work on a transaction occurs after the closure date. As no magic solutions exist to avoid post-closure issues completely, lessors and financiers must accept that Brazilian transactions may take longer compared with those in other jurisdictions.

Changes to applicability of COFINS tax on aircraft
Basch & Rameh
  • Aviation
  • Brazil
  • 25 February 2015

For decades, imports of aircraft and aircraft parts have been exempt from most taxes that apply to imports. However, the application of the contribution to the financing of social security tax has recently changed and some tax inspectors have begun applying the tax to aircraft imports. While most industry participants expect the courts to clarify that the tax does not apply to the import of aircraft, it is unclear whether and when this will happen.

Cape Town Convention – first six months
Basch & Rameh
  • Aviation
  • Brazil
  • 08 October 2014

The Cape Town Convention has now been in effect for six months, and has thus far been encouraging. The Brazilian Aeronautical Registry has become increasingly proficient at issuing authorising entry point codes. Further, the Civil Aviation Agency has demonstrated its knowledge of the convention and its willingness to enforce it, including deregistration of an aircraft on the basis of an irrevocable deregistration and export request authorisation.

New regulations on functioning of Brazilian Aeronautical Registry
Basch & Rameh
  • Aviation
  • Brazil
  • 02 April 2014

A number of new regulations were recently promulgated relating to the functioning of the Brazilian Aeronautical Registry (RAB). The new regulations are a positive step towards achieving additional clarity on a variety of issues and demonstrate the RAB's responsiveness to the aviation finance community. They will be of interest to both Brazilian operators and non-Brazilian lessors and holders of security interests.

Increased clarity for bond requirements in aircraft repossession
Basch & Rameh
  • Aviation
  • Brazil
  • 20 November 2013

Bond requirements imposed on non-Brazilian plaintiffs in Brazilian aircraft repossession cases have been subject to uncertainties for some time. However, emerging court trends have increased the clarity of such issues and improved the procedures for the repossession of leased aircraft. While these trends and the decision have not eliminated all uncertainties, they have reduced them significantly.

Changes to structure of aircraft financing have far-reaching consequences
Basch & Rameh
  • Aviation
  • Brazil
  • 31 July 2013

Two recent changes - one legislative and one regulatory - have substantially altered the way in which aircraft may be financed for Brazilian operators. The changes affect virtually all new cross-border aircraft finance transactions, although the precise impact will depend on the type of Brazilian operator. For business aviation, the modifications are the most significant and sweeping to occur in nearly two decades.

Privatisation of Brazilian airports continues apace
Basch & Rameh
  • Aviation
  • Brazil
  • 24 April 2013

Despite Brazil's position as a major emerging market, its transportation infrastructure is somewhat lacking. Ground-based alternatives are limited, which exerts tremendous pressure on the air transport system. As the government does not have the necessary resources to modernise its facilities, it has turned to privatisation to speed up renovation of the country's most important airports.

Procedures for international registration announced despite convention delay
Basch & Rameh
  • Aviation
  • Brazil
  • 28 November 2012

Despite committing to the Cape Town Convention over a year ago, Brazil's legal system requires publication of a further executive order before the convention can be fully implemented. Notwithstanding this, the government recently announced proposed rules and procedures concerning how international interests over aircraft registered in Brazil may eventually be made with the International Registry, among other things.

Brazilian aircraft mortgages and their use in aircraft financing
Basch & Rameh
  • Aviation
  • Brazil
  • 01 August 2012

Mortgages given over aircraft registered in Brazil have been used for many years. However, there are several major differences between Brazilian aircraft mortgages and those given under New York or English law. An understanding of these differences assists lending institutions in deciding how to evaluate their security packages, when to require aircraft mortgages and what they can expect from such mortgages.

Developments in exporting and deregistering repossessed aircraft
Basch & Rameh
  • Aviation
  • Brazil
  • 21 March 2012

Since the early 1990s repossession of leased aircraft in Brazil has been a relatively efficient process, with most lessors able to secure possession of leased aircraft in a matter of days. However, over the past two years, several changes have occurred in the procedures that have resulted in longer periods for exporting and deregistering aircraft repossessed from Brazilian lessees.