New Aeronautical Circular on Leasing of Aircraft

Alfredo Cabellos Ballenilla.

14/02/2007 International Law Office


Introduction

The leasing of aircraft among airlines is common practice in the aviation sector. Leasing meets various needs, including:

  • peaks in demand;
  • replacements;
  • delays; and
  • damage.

Leasing requires flexible regulations to allow airlines to use the aircraft of other airlines or lease aircraft to third parties.

On November 21 2006 Aeronautical Circular 3/2006 was published in the Spanish Official Gazette. The circular, which was issued by the General Directorate of Civil Aviation, deals with the leasing of aircraft which have not been registered with the Aircraft Registry.

Main Features

Formerly a resolution of the general directorate, the newly enacted regulation has been issued within the framework of:

  • Article 8.2(a) of the EU Licensing of Air Carriers Regulation (2407/92);

  • the Ministerial Order of the Ministry of Development dated March 12 1998; and

  • the Joint Aviation Requirement on Commercial Air Transportation (JAR-OPS) 1.165 (leasing), which, surprisingly, was not listed in Royal Decree 220/2001 (which implemented JAR-OPS 1 in Spain).

The ministerial order provides that Spanish airlines must register their aircraft with the Aircraft Registry on the basis of:

  • ownership;
  • lease; or
  • any other means of use of the asset.

The order also provides for certain exceptions in relation to short-term leases. Exceptions are also granted in case of temporary needs of the operator or other exceptional circumstances subject to the approval of or notification to the general directorate, whose task is to ensure an adequate level of safety and responsibility.

The new circular sets forth the compliance prerequisites that airlines must meet in order to be granted approval by the Spanish authorities, as well as the procedures for notification.

The circular details the conditions under which airlines holding an operation licence issued by the general directorate may be exempt from registering aircraft. Exemptions may be granted where leases are taken from third-party domestic or foreign airlines for a brief period in order to alleviate extraordinary circumstances or temporary needs.

The scope of the circular covers both wet and dry in-lease and out-lease transactions involving aircraft registered in countries that are party to the Chicago Convention or leased to airlines from these countries. Dry leases are subject to specific authorization by the General Sub-directorate of Air Transport Operation. Wet in-leases simply require notification to the authorities of the transaction carried out by the airline. Wet out-leases require notification (as opposed to authorization) only where the purpose of the operation is urgently to replace aircraft in unforeseeable circumstances such as delay, breakdown and force majeure. Both the authorization and notification processes must follow a certain format and comply with the regulations set forth in the annexes to the circular.

Comment

Although the circular brings no significant new developments to the Spanish aviation sector, it represents a step towards the clarification of the conditions that airlines must meet when applying for authorizations or filing notifications before the Spanish authorities. The circular strengthens the regulations formulated in the general directorate's resolutions and contributes to the maintenance of the modern security standards which now apply to European skies.