Air Transport World

...While lessors fume. (airlines) (Section 1110 uncertainties hurt market)

Imagine that you are an aircraft lessor with two airplanes--let's call them 727s--on lease to a major U.S. airline that goes Chapter 11, a not-infrequent occurrence over the last two years. Relax. As a lessor, you are protected. Under Section 1110 of the U.S. Bankruptcy Code, your client has just 60 days to return your jets or honor his obligations and continue to operate them. At the worst, he returns the jets after 60 days and you are out two months' rent, right?

Now imagine, if you will, that nine months after the bankruptcy filing--months spent battling your client's efforts to have your rights under Section 1110 invalidated and his obligations to you lumped in with all the other unsecured bankruptcy claims--the airline tells you to come get your aircraft. You arrive to find that each of your 727 is missing two engines. Of the other two, one is disassembled and in cartons. The airplanes are neither flyable nor remarketable.

Sound impossible? A clear violation of the lease agreement? Get a lawyer, buddy, and get in line. Because that's how the game is being played at more than one U. …

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