By Blake O'Neill -
Snapshot
- Australia recently became a party to The Cape Town Convention which came into effect on 1 September 2015. The Convention is designed to facilitate aircraft financing by reducing risks and costs associated with financing mobile objects.
- Time will tell what impact the Convention will have on the Australian aviation industry, including whether it results in an increase in the availability of asset-based financing and leasing and a reduction of the associated costs.
- Insolvency practitioners and aviation financiers need to be fully aware of the practical implications of the changes, particularly with respect to its interaction with the Personal Property Securities Act 2009 (Cth).
One of the effects of the global financial crisis was that it left participants in the Australian aviation industry searching for costs savings from international finance as a source of credit. With global passenger demand expected to rise by 31 per cent by 2017 and air craft traffic expected to grow 4.6 per cent annually, requiring some 32,600 new passenger and dedicated freighter aircraft at a value of US$4.9 trillion, the need to access international funding sources comes at a critical time for the industry.
In 2001, the Convention on International Interests in Mobile Equipment (Convention) and the associated Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (Protocol) (collectively, the Cape Town Convention) were signed. The Cape Town Convention is designed to facilitate aircraft financing by reducing risks and costs associated with financing mobile objects by establishing an ‘international registry’ for creditors to register their security interests and record the priority of those interests.
Recently, Australia became a party to the Cape Town Convention which came into effect on 1 September 2015. Time will tell what impact it will have on the aviation industry in Australia, including whether it results in an increase in the availability of asset-based financing and leasing and a reduction of the associated costs.Insolvency practitioners and aviation financiers need to be fully aware of the practical implications of the changes, particularly with respect to its interaction with the Personal Property Securities Act 2009 (Cth) (PPSA).
