Thailand’s aviation regulator has threatened to immediately deregister aeroplanes leased to some of its carriers, in a bid to tackle ingrained industry malpractices that have seen domestic airlines deliberately default on lease agreements and then refuse to return the aircraft to foreign lessors.
The Civil Aviation Authority of Thailand said in a statement on 2 March that it would revoke the registration of all aircraft that are operated by national carriers, where the airlines are embroiled in litigation with foreign lessors over delayed rental payments.
Although most Thai-based carriers lease commercial aircraft from foreign lessors, the regulator warned that in some cases this practice is being abused by operators who take advantage of lengthy legal proceedings to default on rental fees but avoid terminating the lease, which in turn delays the return of the aeroplane and any outstanding payments, allowing the airline to extend its use of the aircraft without paying.
The regulator said this has been a problem for five years and it was unwilling to wait for individual cases to settle before taking action. The regulator has the authority to deregister any aircraft under its jurisdiction.
The regulator refused to identify any ongoing lawsuits or the names of the carriers it plans to target, but said it was necessary to protect the country’s scrupulous airlines from paying unreasonably high rental fees and facing difficulties when trying to lease aircraft from foreign lessors.
“Long judicial proceedings may in practice prevent the lessor or the registered owner of the aircraft from resuming the full use of the aircraft or enter into a new transaction with a new lessee,” the regulator said in a statement. This “delay tactic” has been employed by carriers with poor finances to avoid paying their debts until ongoing litigation is resolved, the regulator added.
Deregistering the aircraft in question is necessary to protect the credibility of the regulator, the nation’s aviation sector and its legal system, in order to regain the trust of foreign lessors, the regulator said.
Before commencing its deregistration drive, the regulator has promised to conduct meetings with the foreign lessors and domestic lessees that are involved in ongoing litigation, inviting them to present evidence to support their claims.
If it becomes clear that a lessor has legally terminated a lease agreement and has declared its intention to break its contractual relationship with a domestic carrier, the regulator said it will revoke the registration of the aircraft, allowing the lessor or actual owner of the aeroplane to re-register the asset overseas.
John Frangos, an aviation law consultant at Tilleke & Gibbins in Bangkok, said the regulator’s efforts are timely, as certain lessees continue to expend considerable effort retaining possession of the owner’s aircraft in an attempt to game the legal system.
“Some smaller Thai-registered charter carriers have defaulted on their aircraft lease agreements and then continue to try and hold on to the aircraft after lease termination and, in some cases, after deregistration,” he said.
“These actions adversely affect service and safety, and of course damage the aircraft leasing companies who own the assets. Amicable and timely resolution often depends on the level of cooperation from the lessee.”