12th Annual McGill Conferenceon International Aviation

Liability, Insurance &Finance

Montreal, Saturday 19 October 2019

“YELP-IFYING” THE CAPE TOWN CONVENTION AFTER

15 YEARS IN FORCE

Dr.Donal Hanley – PANEL CHAIRInstitute of Air and Space Law, McGill University – Montreal, Canada

PANEL MEMBERS

Louis EmeryEXIM Bank –Washington, D.C., USA

Maria Regina M.A. LynchMotta Fernandes Avogados – São Paulo, Brazil

Jason MacIntyreBlake, Cassels & Graydon LLP –Toronto, Canada

Carlos SierraAbogados Sierra – Mexico City, Mexico; Chair, Legal Advisory Panel, Aviation

Working Group

LisaValentovishMorgan Lewis – NewYork, NewYork, USA

CAPE TOWN CONVENTION – AIRCRAFT PROTOCOL

in force in 76 states

Is Cape Town delivering on its promise of cheaper aircraft financing?

Reduces Risk

Improve Risk Returns

Increases Access to Capital

Expands Aircraft Market

Governmental Benefits

Financier, Lessor, and Investor Benefits

Airline Benefits

Aircraft/Engine Manufacturerand Supplier Benefits

1

Air CanadaExample of CTC Savings

Benefited from Canada’s

Cape Town ratification

Collateralized by

787-8 aircraft

787-9 aircraft

777-300ER aircraft

Raised $1.6Bwith issuances in

March and December 2015

March pricing: (A) 3.600%, (B) 3.875%, (C) 5.000%

December pricing: (AA) 3.750%, (A) 4.125%, (B) 5.000%

Is Cape Town delivering on its promise of cheaper aircraft financing?

1

Source: Boeing © 2015 all rights reserved

New uses for Cape Town discount eligibility outside export credit financing

Can CTC constitute a benchmark

outside export credit financing

methods?

2

Ensure a level playing field for manufacturers and borrowers

Not displace or adversely affect commercial markets

Ensure that reasonable levels of export credit capacity and higher volumes during

times of market disruption

Relying on the Contracting States’ qualifying declarations

Benefits or preferential rates

CTC discount list taken as reference by the creditors

Export Credit

Private Financial Entities(example)

New uses for Cape Town discount eligibility outside export credit financing

2

Aviation Working Group monitoring of compliance with Cape Town

Source: Aviation Working Group © 2011 AWG

3

CTC Compliance Index ICAO Safety and Security Scoring

Assesses compliance by contracting states Measures the effective implementation of a State’s safety oversight system

Assigning a score and a categorization Assessing the effective implementation of eight critical elements in eight audit areas

Based on a noncommercial, non-political, objective assessment

According to the Universal Safety Oversight Audit Programme (USOAP)

Meaning fully and effective implementation, prevailing over conflicting law

As well as the Continuous Monitoring Approach (CMA)

Is AWG’s monitoring parallel with ICAO safety and security scoring?

Source: ICAO Safety Report 2018 Edition

Aviation Working Group monitoring of compliance with Cape Town 3

Source: Aviation Working Group © 2011 AWG

Aviation Working Group monitoring of compliance with Cape Town 3

Source: Aviation Working Group © 2011 AWG

The Cape Town Academic Project

Database containing reports provided by parties involved in the transaction, their counsel, or the government that sought or

took such action.

Reporting on Administrative and Other Non-Judicial Activity

(i) An agreed summary by the relevant parties

(ii) Where there is no agreed summary, an initial report by one of the relevant parties

Seeking only factual and objective

information

Prohibiting speculation, opinion, or commercial or proprietary

information or materials

May also include any official government documentation

publicly available

4

Source: Cape Town Convention Academic Project

The Cape Town academic project = airlines are NOT mentioned

1. Date of the transaction

2. Creditor3. State of Creditor4. Debtor5. State of Debtor6. State and date of aircraft registration 7. Summary of transaction structure8. Recordation of IDERA9. Registrations with International Registry10. Commencement by Creditor of the exercise of CTC remedies11. Completion of the exercise of CTC remedies by Creditor12. Nature of governmental action sought and taken, including by which authority and where and when

13. Related court order, if any, and timing therefor

14. Other CTC related technical information(Questions 8 – 13)15. List and description of attachments, being official government documents16. List the relevant parties and their contact details

I. Report Items

II. Comments on report

III. Comments on comments

4

CTC Index v. Pillsbury repossession, differences

CTC Compliance Index Pillsbury World Aircraft Repossession Index

Assesses compliance by contracting states Measures the legal environment for aircraft repossessions

Assigning a score and a categorization

Using seven factors(repossession, insolvency, deregistration, export, judgments and arbitral awards, preferential liens and political stability)

Based on a noncommercial, non-political, objective assessment

Assigning a weighting of each factor in accordance with its relative importance

Meaning fully and effective implementation According to:

Prevailing over conflicting law (a) the jurisdictional questionnaire

Being interpreted and applied in accordance with its terms and intent

(b) other external information

Source: Pillsbury © 2018 Pillsbury Winthrop Shaw Pittman LLP

5

Source: Aviation Working Group © 2011 AWG

Ranking of jurisdictions generally 5

Source: Pillsbury © 2018 Pillsbury Winthrop Shaw Pittman LLP

Discussion on recent replacements for aircraft export credit financing