Structuring Aircraft Acquisition Transactions: Purchase, Lease, and Financing Alternatives

Description

An aircraft can be acquired by a secured loan, an operating lease, a financing lease, or variations of these methods. Counsel advising the acquirer should have a thorough understanding of the structuring options available, their documentation, and the advantages and disadvantages of each.

A secured loan allows the purchaser-borrower to take immediate title to the aircraft (and lease it to a different operator). Still, it is typically full recourse to the purchaser-borrower. Provisions customary to secured loan transactions will restrict the owner's ability to operate its business and incur further debt. In contrast, operating lessees have greater flexibility in managing their fleet because they can increase their lift capacity only as and when needed by just signing an operating lease and returning the aircraft when no longer needed.

In a finance lease structure, the parties structure the lease so that rent payments return all or substantially all of the acquisition price. The risks and rewards incident to the aircraft ownership transfer to the financing lessee and the lessee has the right or obligation to purchase the aircraft at the end of the lease term. A leveraged lease is similar to a finance lease except that the financer provides the financing lessee with loans to cover a portion of the acquisition cost of the aircraft.

Listen as our authoritative panel discusses these and other alternatives to acquiring an aircraft. The panel will also review the significant title, registration, regulatory, and other deal points, as well as clauses to consider when documenting the transaction for acquiring a U.S. or foreign aircraft.