At present, there are limited possibilities for bankers to finance aircraft business unless the law is extended and one hopes that this happens soon.
In fact, the Maltese Aircraft Registration Act, 2010 is drafted in a manner that affords tangible protection provisions to the creditor (including a bank), seller, lessor or chargee as the case may be in the case of default, including but not limited to the power to take possession or control of the aircraft or any aircraft object, procure deregistration of the aircraft, or apply to the court for a specific order in relation with such default. Naturally, such remedies do not supersede the rights of holders of higher ranking registered interests.
Moreover, the law extends protection to a Maltese registered mortgage constituting an executive title that is automatically enforceable without the need for further court intervention. Another salient benefit is that the mortgagee may make provision in the relevant mortgage instrument to prohibit the registration of further mortgages over the same aircraft.
Amendments are presently being drafted to make this legislation more empowering to its users. The important next step is our full empowerment as a party to the Cape Town Convention. The EU is itself a party to this convention – however it is so in its capacity of a supranational body and therefore not representing its individual member states.
For this reason, there is a process that government needs to activate in order for Malta to be acknowledged in its own name. To understand the background to this legal process, you may refer to the 2011 Aircraft Sector Understanding which Malta is working to accede to within the CTC. This replaces the former 2007 ASU and applies to financing by export credit agencies. The Cape Town Convention Discount benefits a qualifying operator through a reduction of minimum premium rates, which are conveniently set out against 12-year repayment terms over asset backed transactions. The higher the risk classification of the transaction, the lower the minimum premium rate stipulated, making the minimum premium rate inversely proportionate to the transaction’s risk classification. These minimum premium rates can be reduced by not more than 10 per cent of the stipulated rates and can be accessed if the applicant cumulatively satisfies three criteria.
The first of these criteria is that the asset-backed transaction relates to an aircraft object within the meaning of the Cape Town Protocol on Matters Specific to Aircraft Equipment.
The second is that the operator of the aircraft object is situated in a State which, at the time of disbursement in respect of the aircraft object, appears on the list of states which qualify for the reduction of the minimum premium rates (Cape Town List), and where applicable, in a territorial unit of that state that qualifies under Article 38 of this appendix.
The third is that the transaction relates to an aircraft object registered on the International Registry established pursuant to the CTC and the aircraft protocol thereto (CTC).
It is thanks to the drive shown by the Transport Malta Aviation Division in its ongoing efforts to conclude the matter as soon as possible. In conclusion, PKF Malta is keeping itself abreast with latest developments and shall continue to work to cultivate new relations and better existing ones with all relevant factions of the aviation industry. PKF Malta also invests significantly in accessing international investors by travelling to and speaking at key conferences and symposia. Having joined the Aviation Malta stand at the EBACE symposium in Geneva last May, PKF Malta is now looking positively to participating at EBACE 2016.