JULIAN MOXON / LONDON

Initiative will create first ever registry of interests Lease rates could be lowered 30% as insurance premiums fall

Aircraft leasing rates could be slashed by as much as 30% for operators who join an international registry of ownership being created by the International Civil Aviation Organisation.

The register will for the first time offer a comprehensive database of all financial interests in an aircraft or engine, reducing the risks taken by leasing companies and other institutions when providing financing. The legally based scheme will eventually replace national approaches with a harmonised international system that will establish the priorities of ownership interests in an aircraft or engine. Leasing companies now need expensive insurance to cover for the potential failure of leasing deals, which is passed on to customers through higher charges.

A recent study by US Export-Import Bank found that leasing companies will be able to reduce charges by up to 30% for customers that have signed up for the register, leading to potential savings to the airline industry of $5 billion a year. Savings of this magnitude would be a major boost for poorer airlines wishing to re-equip with modern aircraft, with a knock-on effect for manufacturers.

ICAO principal legal officer Silverio Espinola says the registry will take the form of an electronic database, available 24h a day, seven days a week, "providing total transparency to help potential lenders establish the prices they should charge for leasing". It will be operated on a cost-recovery basis and the charge for those wishing to use it is expected to be between $50 and $75 per session.

In early February ICAO released a notice of request for tender inviting bidders to set up and run the registry. Bids must be submitted by 15 April, with the winner to be selected by August.

The registry is the central component of the 2001 Cape Town Convention on International Interests in Mobile Equipment, which established for the first time an international legal framework providing for the registration of financial interests in aircraft, railways and space. Eight ratifications are needed before its provisions can be enforced, but so far only four - Ethiopia, Nigeria, Pakistan and Panama - have signed.

A source close to the aviation working group that helped develop the register says the USA will ratify in June and the remaining three of the eight required will do so shortly after, paving the way for full go-ahead in November. He adds: "The essence of this treaty is that it will significantly reduce the financial and legal risks inherent in a leasing transaction, and therefore the uncertainty. It will help airlines adjust their capacity more quickly to the market, and bring far more fluidity to the leasing system."

Leasing company GE Capital Aviation Services says that the registry "reduces the legal risk for owners and lessors alike and will definitely lead to lower leasing rates".

Source: Flight International

Topics