The aviation financing industry benefits from documentary standardisation and simplification for certain types of transactions. That is the case where the benefits of standardisation and simplification, including reduced negotiating time and related expenses, outweigh the costs of the effort, including production time, risk of an unacceptable effort, and transition to a standardised document. The forms of existing documents, the process by which they are negotiated, and the nature of the transaction are also relevant factors in any decision to standardise.
AWG, with IATA, has produced one such standardised document – a model Short-Term Emergency Engine Lease. That document is open to use by any parties with any modifications they deem fit. It is widely used in the industry.
Currently, AWG and IATA are at work on standardised templates for the following four documents: Engine Title Agreement; Warranty Assignment and Consent; Master Used Aircraft Purchase Agreement; and Aircraft Lease Novation Agreement. In addition, the Short-Term Emergency Engine Lease is currently being updated to reflect the entry into force of the Cape Town Convention. These documents are expected to be finalised in 2011.
All work on documentary standardisation is undertaken in accordance with strict compliance guidelines produced by leading international counsel.
Documentary Practices
SHORT-TERM EMERGENCY ENGINE LEASE
SHORT-TERM EMERGENCY ENGINE LEASE
After extensive collaborative work, AWG and IATA finalised and released a form master short-term engine lease agreement, designated IATA Document No. 5016-00 (Short-Term Emergency Engine Lease, or, in short, STEEL). That occurred in 2002.
As summarised in the covering note to STEEL, that document was prepared by working parties from IATA and AWG with expertise in short-term engine leasing. The document sets out standardised wording on technical and legal matters and clearly identifies areas for commercial decision-making. The object is to streamline the negotiation process on legal aspects, thus reducing transaction costs for both sides. This is particularly important in the context of an emergency engine lease, where negotiating time equates to lost revenues, and, in certain circumstances, passenger inconvenience.
STEEL is a short and concise document, which permits electronic contracting, and, without restricting its general applicability, embodies the leading-edge concepts contained in the Cape Town Convention.
The structure of STEEL is that of a master form – which is not signed – but rather is incorporated by reference in any particular transaction through an individually executed short-form engine "Lease Agreement". The Lease Agreement identifies commercial decisions to be negotiated and agreed. In addition, any amendments the parties wish to make to the master form can be accommodated through an annex to the form.
STEEL is a public document – any transaction parties, whether or not members of IATA or AWG, may utilise the document if and when they deem fit and with whatever amendments they deem appropriate.
AWG and IATA are currently updating this document to reflect the entry into force of the Cape Town Convention.
As summarised in the covering note to STEEL, that document was prepared by working parties from IATA and AWG with expertise in short-term engine leasing. The document sets out standardised wording on technical and legal matters and clearly identifies areas for commercial decision-making. The object is to streamline the negotiation process on legal aspects, thus reducing transaction costs for both sides. This is particularly important in the context of an emergency engine lease, where negotiating time equates to lost revenues, and, in certain circumstances, passenger inconvenience.
STEEL is a short and concise document, which permits electronic contracting, and, without restricting its general applicability, embodies the leading-edge concepts contained in the Cape Town Convention.
The structure of STEEL is that of a master form – which is not signed – but rather is incorporated by reference in any particular transaction through an individually executed short-form engine "Lease Agreement". The Lease Agreement identifies commercial decisions to be negotiated and agreed. In addition, any amendments the parties wish to make to the master form can be accommodated through an annex to the form.
STEEL is a public document – any transaction parties, whether or not members of IATA or AWG, may utilise the document if and when they deem fit and with whatever amendments they deem appropriate.
AWG and IATA are currently updating this document to reflect the entry into force of the Cape Town Convention.
ADDITIONAL STANDARDISED DOCUMENTS
ADDITIONAL STANDARDISED DOCUMENTS
AWG and IATA are currently at work standardising a next set of template documents. They are as follows:
AWG and IATA are also updating the STEEL, short-term emergency engine lease.
These documents have been agreed and will be posted, together with accompanying User's Guides and Commentaries, in early 2012.
- Engine Title Agreement;
- Warranty Assignment and Consent;
- Master Used Aircraft Purchase Agreement; and
- Aircraft Lease Novation Agreement.
AWG and IATA are also updating the STEEL, short-term emergency engine lease.
These documents have been agreed and will be posted, together with accompanying User's Guides and Commentaries, in early 2012.
