The world's airlines, including those based in Africa face particular challenges, both legal and commercial when considering aircraft acquisition and international operation.

Aircraft Acquisition

The basic choice is whether to purchase or to lease. The choice is not only affected by financial aspects but also by legal ones.

Whether the airline leases or purchases, the following table sets out the main steps which will need to be followed:

Aircraft Inspection And Acceptance

Whether new, pre-owned or leased, an aircraft must be subject to due diligence to be performed on the aircraft prior to delivery. If the aircraft is leased it is important to make sure that the state of the aircraft would enable it to meet the return conditions without excessive expenditure on redelivery. If the aircraft is purchased new then factory inspection support is needed prior to acceptance of the aircraft. Reliance have so far delivered over 300 new aircraft and performed over 325 pre-purchase inspections or lease inspections.

Purchase Agreement Or Lease Agreement

The Purchase Agreement or the Lease Agreement together with the various side letters or commitment letters must be well negotiated. When leasing it is essential to think ahead to the likely state of the airframe and engines at the likely date of redelivery in order to ensure that normal maintenance during the lease period will be sufficient to ensure that the aircraft satisfied such return conditions. Where appropriate, a contract with an outside maintenance provider can be made in such a way that the maintenance provider takes upon itself the contractual responsibility to ensure that the aircraft meets return conditions at the end of the lease. In this way a significant risk to the operator is avoided. Other matters that need to be considered are training support, onsite field service, technical documentation and appropriate maintenance and airworthiness supervision to ensure that the aircraft will be permitted to operate in all jurisdictions intended by the airline.

Moving Aircraft Between Jurisdictions

The process of moving an aircraft to a new airworthiness environment is, in theory, simply a case of ascertaining the new Authority's requirements (this being the authority in which the aircraft will be registered will be referred to as the Airline's Authority) for the issuance of a Certificate of Airworthiness for the aircraft type, determining the current status of the aircraft and ensuring that the aircraft complies with the Airline Authority's requirements when presented to the airworthiness certification representative. There are certain differences between the various airworthiness authorities in terms of requirements and certification procedures.

What Is Airworthiness?

Before looking at the procedures for aircraft transfers, it is appropriate to review what airworthiness is and how the procedures used by Reliance contribute to the airworthiness process. In overall terms airworthiness and continued airworthiness is a total process for achieving safe and reliable aircraft operations. It encompasses:

A)           the basic concept of achieving airworthiness through design and production standards with the ultimate achievement of a type certificate and certificate of airworthiness; and

B)            the continued airworthiness aspects of accomplishing mandatory modifications and inspections, ensuring reliability through the effective and timely maintenance of the aircraft in accordance with an approved maintenance schedule and operating the aircraft in accordance with the approved aircraft flight manual.

The FAA actually defines an 'Airworthy' aircraft in FAA Order number 8130.2C as one which conforms with its type certificate and which is in a condition for safe operation.

The Aircraft Transfer Process

In summary, the aircraft transfer process involves:

A)           Determining the Airline Authority's requirements for the aircraft type and issuance of a certificate of airworthiness;

B)            Inspecting the aircraft and its records to determine the aircraft's current status and compliance with the Airline Authority's requirements. This leads to the identification of differences between current and required status and allows the airline to develop a 'bridging' check;

C)            Accomplishing the required maintenance and modifications and ensuring that the application for aircraft registration, and more importantly, the certificate of airworthiness are submitted with the required compliance data. When accomplishing these requirements the airline would need to comply with the relevant regulatory authority procedures when applying to export and subsequently import the aircraft. This would mean following defined application procedures and use of the relevant documentation as well as securing the services of appropriately approved organizations to accomplish the required maintenance, modification and airworthiness compliance statements.

Determining The New Regulatory Authorities Requirements

This is as much a case of knowing where to find the requirements as it is determining how to comply. Typically the issuance of a Certificate of Airworthiness is dependent upon the aircraft being registered by the Authority and the aircraft complying with, and having a Type Certificate issued by the Authority. The Airline Authority will be seeking to ensure that the aircraft complies with its original type certification data when issuing a Certificate of Airworthiness. In addition, the Airline Authority will want the aircraft to comply with any special conditions imposed by it for the aircraft type and to have all mandatory modifications complied with. This information can be found in the Airline Authority's regulations some of which will follow EASA, FAA or the UK CAA or be independent.

Inspecting The Aircraft & Technical Historical Records

In the case of a leased aircraft when inspecting the aircraft and its historical documentation, the Airline must ensure the following:

1.            The aircraft still complies with its original type certification and that this has not been changed by any 'locally' approved modifications.

2.            All mandatory modifications e.g. Airworthiness Directives have been accomplished.

3.            All maintenance has been accomplished at the prescribed time and in a manner including certification, that meets the new authority's requirements.

4.            All repairs have been appropriately assessed, accomplished and documented in a manner that meets the new authority's requirements.

5.            All modifications and any STCs have been incorporated and certified in an acceptable manner.

6.            Identification of any additional requirements in the form of aircraft modification or maintenance action and any additional mandatory modifications that the authority mandates are accomplished.

The Airline will need to submit substantiating data to the authority with its Certificate of Airworthiness application and/or present such data to the Authority's representative during their inspection process. Such data should be presented in a manner that complies with the authority's requirements and should be certified as true and correct by a suitably qualified individual, design or maintenance organization. Over the years and with increased industry experience, the Authority's representatives are looking at a wider range of issues when assessing an aircraft for Certificate of Airworthiness issue. For example until recent years the Authorities only required traceability on hard time and life limited components. But now with the increased application of on condition techniques and the worry over 'bogus' parts the Authority's representatives now review all component and material certification and traceability.

The 'Bridging' Check

Having identified the new Authority's requirements and following inspection of the aircraft and its records it is now possible to identify the work-scope for the 'bridging' check and the most appropriate manner for conducting this work. The aircraft inspection would typically lead to the following significant items being identified and resolution action being loaded onto the 'bridging check: In theory the 'bridging' check work should be completed and applications submitted to the new Authority detailing all the work completed before the Authority is required to inspect the aircraft and subsequently issue the Certificate of Airworthiness or detail what additional work is required before a Certificate can be issued. In reality most Authorities recognize that aircraft and their associated maintenance and modification work packages require significant investment. The Authorities generally recognize the commercial pressure of requiring a return on investment and will normally work with the relevant parties by scheduling their inspections and providing the associated findings in a manner that will allow the aircraft to transfer in a timely manner, assuming it complies with the required conditions. Planning, effective project management and communication especially with the Airline's Authority are the key elements to avoiding unnecessary delays.

De-Registration And Export Certificate Of Airworthiness - Registration

The export C of A does not authorize the operation of the aircraft, but confirms that at the time of export, the aircraft complied with the airworthiness requirements of the exporting jurisdiction. It must be borne in mind when changing the registration Authority, that the new Authority may have additional requirements which need to be met. There is listed above, under the heading, inspecting the aircraft and technical historical records, an outline of the procedure which will need to be adopted prior to registration.

Aircraft Asset Value Guarantee

In acquiring a new aircraft, the airline may wish to protect itself by buying an asset value guarantee insurance which will guarantee the residual value of the aircraft. Reliance is able to offer such services.

Lease Administration

If the airline elects to lease an aircraft then the requirement for proper lease administration is critical. Apart from the routine lease rental payments, lease agreements include numerous provisions that require monitoring and some form of action by both parties. The airline must ensure that it is in compliance with the lease obligations. Issues that require monitoring, adjustment and follow up could include:

" routine maintenance reserve rate adjustments; (the airline must ensure that these adjustments are in line with the lease agreement)

" major maintenance events subject to reserve collections and reconciliation of associated claims; (the airline must make sure that it collects all its dues from the lessor)

" renewal of letters of credit, insurance and airworthiness certification; and

" the exercising of any options under the lease such as early termination rights.

Running a proactive lease administration programme that is integrated with effective technical management services helps the airline to obtain the highest possible utility and economic return from the aircraft. When the lease is being negotiated it is important to ensure that reserves are no higher than a realistic estimate of maintenance cost and that the procedure for draw down from the reserves held by the aircraft lessor are such that they will allow maximum flexibility and draw down once the maintenance event occurs.

Conclusion

A minimal amount of legal and technical advice at the outset of the transaction can save huge sums later for airlines. Such advice can be obtained without causing delay or at disproportionate cost.

This note is prepared by Mr Henry Page of Penlaw (h.page@penlaw.fr), an aviation specialist law firm based in Paris and by Dr El Borai of Reliance Aerospace Solutions (mb@relaer.aero). Penlaw has many years of experience in all aspects of aviation acquisition and operational matters from a legal aspects of aviation, acquisition, leasing, maintenance and operational matters. Reliance Aerospace is an experienced advisor to airlines, lessors and banks worldwide on structures, operational and technical aspects.