Finance leases—aircraft lease financing
Produced in partnership with Norton Rose Fulbright
Finance leases—aircraft lease financing

The following Banking & Finance guidance note Produced in partnership with Norton Rose Fulbright provides comprehensive and up to date legal information covering:

  • Finance leases—aircraft lease financing
  • Secured lending
  • Lease financing

There are two principal types of aircraft finance structure:

  1. secured lending under which the lender lends money to the purchaser to buy the aircraft and the lender takes security over the aircraft, and

  2. leasing which offers greater flexibility to financiers in many instances

Secured lending

Secured loan structure

Under a traditional secured loan structure, the lender will lend money to the prospective owner of the aircraft in order to finance its acquisition of the aircraft. In return for this money being made available, the lender will usually take first priority security by way of a mortgage over and in respect of the aircraft.

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Once the loan has been repaid in full, together with any other amounts owing under the transaction documents, the lender will release the aircraft from the mortgage with unencumbered title being returned to the borrower. If the borrower does not repay the loan or it defaults in respect of any of its other obligations under the loan agreement, the lender will have the right to enforce the security created by the mortgage and sell the aircraft (depending on the nature of the rights under the mortgage pursuant to its applicable law). The proceeds of such sale will be utilised to satisfy the debt outstanding under the loan in priority to any other creditors which the borrower may have