December 22, 2020

Court Affirms Thai Civil Aviation Authority’s Ability to Repossess Leased Aircraft in Default

Tilleke & Gibbins advised Air Lease Corporation, a publicly listed American aircraft leasing company, on the repossession of two Boeing 737 aircraft with a combined value of over USD 80 million from a Thai airline that defaulted on its payments, in a case that confirmed, for the first time, the CAAT’s ability to repossess aircraft in default without a court order.

We assisted the client in liaising with the Civil Aviation Authority of Thailand (CAAT) to obtain the deregistration of both aircraft, and filed a case with the Central Intellectual Property and International Trade (IP&IT) Court to seek the return of the aircraft and monetary compensation for our client.

The defendant-airline asked the Thai Administrative Court, a special court to hear disputes between private entities and Thai government agencies, to review the legality of CAAT’s deregistration order. Our firm joined the case in the Administrative Court, on the same side as the CAAT.

We worked with CAAT to defend the case and obtain a favorable judgment for our client and CAAT. The Administrative Court ruled that CAAT’s deregistration order was legal, and that CAAT had the legal authority to deregister aircraft.

The Administrative Court decision has important implications for Thai aviation, especially for aircraft leasing, financing, and repossession. Thai law is ambiguous on whether CAAT has the authority to deregister aircraft. The law only states that an aircraft’s registration with CAAT becomes ineffective if the registrant (i.e. the Thai airline) no longer has possessory rights. As a result, CAAT has traditionally deregistered aircraft only with a court order (though in other repossession cases we have successfully convinced CAAT to deregister without a court order).

Ultimately we successfully argued to the Administrative Court that our client’s lease agreement with the airline was validly terminated, and, under the terms of the agreement and Thai law, the airline lost its possessory rights to the aircraft. Because of the Administrative Court decision, CAAT now has a stronger legal basis to deregister aircraft without a court order. We expect that this will enable aircraft lessors to be able to repossess aircraft faster, which is critical in the aviation leasing industry.

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