waterford impassivity: Some Kingfisher's Airbus In No Condition For Repossession ? Civil ...

35 replies: All unread, showing first 25:

Don't know about India, but in other parts of the world it could be considered a criminal offence, as in "taken without owners consent". Whomever leased those aircraft to Kingfisher are looking at a long and protracted lawsuit, probably culminating in a massive financial loss. That's why they call it "risk", I suppose.

Going by the article you linked, a more precise description of circumstances would be that, of the 15 Airbuses left, a majority appears unfit to fly, and thus repossess. At least if these reports turn out to be true.
If proven true, it's pretty outrageous, I would say - Kingfisher didn't own those planes, so they couldn't just do as they saw fit with them. Cannibalising them to keep other planes flying is definitely not covered by their lease agreements, and I don't think I've heard of any other circumstances where this has happened - never mind at the alleged scale - even with the operator failing.

[Edited 2013-04-08 01:46:24]

Quoting B777LRF (Reply 1):
Don't know about India, but in other parts of the world it could be considered a criminal offence, as in "taken without owners consent". Whomever leased those aircraft to Kingfisher are looking at a long and protracted lawsuit, probably culminating in a massive financial loss. That's why they call it "risk", I suppose.

True - and in the end, it'll probably be insurers that are going to have to carry the bill for this, given that there's not going to be an awful lot left of Kingfisher to get any money from.
The whole Kingfisher affair is not a great boost for the reputation of India as a country to do business in if you're an aircraft lessor; first the protracted process of lessors trying to repossess their planes which had been impounded by the authorities as securities against Kingfisher's debt in taxes, service fees, etc., and now lessors finding some of their planes cannibalised.

Quoting anfromme (Reply 2):
I don't think I've heard of any other circumstances where this has happened - never mind at the alleged scale - even with the operator failing.

Batavia Air of Indonesia would be another recent example. Jakarta's Soekarno Hatta airport is currently littered with former Batavia aircraft, all of which are leased, yet none of which is in an airworthy condition because of cannibalizing.

But on the other hand, the leasing companies surely knew the risk when they agreed to do business with these companies. I'm sure this is not the first time that leased aircraft have been stranded in this manner.

Removing parts may render the aircraft unflyable but why should they go to the scrapyard? Why can't the missing parts be replaced?

Quoting art (Reply 8):
Why can't the missing parts be replaced?

Probably because the leasing company can't know if any parts have been removed and replaced with unserviceable parts from another aircraft.

Quoting BreninTW (Reply 9):
Quoting art (Reply 8):
Why can't the missing parts be replaced?

Probably because the leasing company can't know if any parts have been removed and replaced with unserviceable parts from another aircraft.

I see what you are saying.

I can see that Kingfisher management would not want unauthorised removal of parts from aircraft leased to them to be documented. I can well imagine that employees were instructed not to document what they were being ordered to do. It does raise the issue of safety - how could this not have been spotted by the Indian aviation authority responsible for regulating aircraft safety? It sounds like Kingfisher were flying aircraft whose airworthiness could not be demonstrated.

If Kingfisher were not documenting equipment being installed that would be illegal, wouldn't it? Wouldn't mnagement be liable to prosecution? Wouldn't the technicians who failed to follow proper procedures also be subject to action?

These are sitting at airport hangers. Even if some maintenance staff tried to sell these parts, within country AI is the only major Airbus operator, being a Govt. Airline impossible to buy illegal parts. For someone to export those overseas without paperwork is also impossible.

It is possible this is part of creative accounting practice. Why spend money to fix then try to find new homes. Write off and collect whatever ins gives back.

Quoting skipness1E (Reply 11):
As to the subject matter, doing business the Indian way is risky in itself. It's a very different outlook and culture.

Political Correctness gone too far, since when is corruption, laziness, negligence and downright substandard moral outlook a "culture"?

Quoting 3rdGen (Reply 17):
within country AI is the only major Airbus operator

IndiGo have 65 A320s and another 53 on order, don't forget them (source: Wikipedia)

On another note, the Government of India better help the leasing companies get back their losses or the other airlines will suffer, no one will want to lease to India again.

[Edited 2013-04-08 04:45:38]

Quoting comorin (Reply 14):
15 A320s is a write-off of around $2B to the leasing company, I think?

Depending how old they are and with which value they are in the books I'd say around 500 to 750 mio US$ at the most.

Since the airctraft are VT registered they might be likely part of the BK mass and cannot be moved anyhow. For the lessors it is likely a complete write-off with the possibiity that they get some mones back after the case has been through the courts. Meanwhile the a/c will deteriorate further

Quoting PanHAM (Reply 18):
Since the airctraft are VT registered they might be likely part of the BK mass and cannot be moved anyhow.

local Civil Aviation Authority deregistered these a/c on March 26. They went to court to deregister even though Kingfisher owes a lot to Airport Authorities.

If these aircraft are not air worthy because of missing parts, they can definitely sue Airport Authority and recover damages.

de registered or not, the aircraft are likely part of the insolvency mass and will likely be offered by the insolvency court to generate cash from which the creditora will be paid. Which can be one percent of what a creditor is owed.

At least that's the way it works here. An insolvency is a risk a lessor / creditor always has to calculate and usually this means that companies like Kingfisher have to accept higher interest rates than companies with a AAA credit rating.

Varig did the same before their demise, but virtually all the leased machines had the parts re-installed and they flew out. Even the B777's were used for spares, but all left, though unfortunately one aircraft eventually was the first to be scrapped because after it arrived in the USA it was deemed more economical to break her up for spares than refurbish for future use.

In actual fact all aircraft are cannibalized for parts at some stage in their lives, usually whilst on heavier maintenance. They take the part and then replace it when repaired or with a new item. It would seem Kingfisher had no money to repair the items or replace them. Those aircraft are not that old so I would guess the lessors will send a team and get them airworthy to at least fly them out.

OMG!! Some of you guys would put Bernard Woolley to shame! ?

I love it!!

Ahhhh just another day doing business in India! Does a civil aviation authority exist in India? Because obviously one can simply move parts between other peoples aircraft and god knows where with out the care of keeping records and no government department seemingly taking much care either. I think if true it is pretty bloody outrageous!

Do the lessors take interest in what is happening to their aircraft while on lease? Such as inspections of the aircraft and its day to day operation. I mean how could something like this get by without the lessors knowing it was happening? ?

The biggest problem I see is part removals without proper write ups and a document trail. If the planes were grounded and mechanics were taking parts off for other planes and not documenting what is on the plane and its configuration, then it is hard to maintain or transfer an airworthiness certificate. They can get a temporary ferry permit, but getting the plane into a serviceable and certifiable condition is extremely expensive. The same situation has happened at airlines like pan am, Olympic, varig and others.

Quoting PanHAM (Reply 22):
de registered or not, the aircraft are likely part of the insolvency mass and will likely be offered by the insolvency court to generate cash from which the creditora will be paid. Which can be one percent of what a creditor is owed.

I am a little confused as to how that would happen with leased planes. Kingfisher never owned rhem, but destroyed them. The lessor is just another creditor and unlikely to get much to repay the cost of the removed parts.

When combined with the shambles of Air India, this doesn't paint a very good picture of Indian business practices. Still the IPL is underway now...

I hope this isn't the case. IT had a few leasing companies and all will now add the costs of the repossession to other leases for Indian airlines. Its best for everyone to have these aircraft flying again ASAP.
If those associated with the failing airline wish to remain on good terms with leasing companies (e.g., for future jobs), they do not do this.

Quoting A36001 (Reply 23):
Do the lessors take interest in what is happening to their aircraft while on lease? Such as inspections of the aircraft and its day to day operation. I mean how could something like this get by without the lessors knowing it was happening?

Could they do anything about it? They do not actually inspect every aircraft daily, but not periodically inspection is just lazy.

Quoting dougbr2006 (Reply 22):
Those aircraft are not that old so I would guess the lessors will send a team and get them airworthy to at least fly them out.

Quoting BreninTW (Reply 9):
Probably because the leasing company can't know if any parts have been removed and replaced with unserviceable parts from another aircraft.

If the paperwork isn't accurate, that is a criminal offense. Now prosecuting it might be a challenge...

Lightsaber

ps
For the record, I like Arbii. ?

Quoting Roseflyer (Reply 24):
I am a little confused as to how that would happen with leased planes. Kingfisher never owned rhem, but destroyed them. The lessor is just another creditor and unlikely to get much to repay the cost of the removed parts.

Administrators collect as many assets as they can. It depends on the local laws if a leased item becomes part of the insolvency mass.

Quoting PanHAM (Reply 21):
de registered or not, the aircraft are likely part of the insolvency mass and will likely be offered by the insolvency court to generate cash from which the creditora will be paid. Which can be one percent of what a creditor is owed.

Lending money is one thing, it's pretty obvious that it gets spend right away and the creditor risk is that it can't be paid back. Those planes were never the property of the airline however, and the risk the lessor take is only to not get paid for usage, not to lose the assets.

Quoting 3rdGen (Reply 16):
Political Correctness gone too far, since when is corruption, laziness, negligence and downright substandard moral outlook a "culture"?

Sounds like my native Greece to me!! LOL jk.

I'd love to moan and whine about the Airbii comments needing to be stricken from this thread and ermoved altogether, but, y'all are providing me with quality entertainment here!

It appears over past several years IT itself used parts from leased aircraft to keep owned planes running. Now they are not airworthy. Now Courts/Civil Aviation Authority(DGCA)/Airports Authority of India(AAI) agreed to release, it is a problem for ILFC.

IT owes close to $46 Million to AAI and thought they can hold the planes, but apparently there is a Cape Town international convention doesn't allow them to hold.

Quoting PanHAM (Reply 21):
the aircraft are likely part of the insolvency mass and will likely be offered by the insolvency court to generate cash from which the creditora will be paid. Which can be one percent of what a creditor is owed.

Be careful with that statement. It is the combination of local legislation and leasing contract that decide if it is part of the assets or not. Leasing companies have learned how to write contracts so they remain their assets. It is suppliers who get hosed for having delivered good but not received payment.

well, I said it depends on the local laws. In other cases, like MA, the leased aircraft where flown out quickly, but those have been on the EI registry. Before I made statements here I checked which registry these a/c have been on and it was Indian. Which explains IMHO why there was no repossetion. Any attempt to fly the a/c out would most likely have failed, even at a time when Kingfisher was still operating. The only chance would have been on an internationals ervice, seizing an aircraft there.

Which, BTW can even happen to states, as Argentina and Tango1 proves.

25 lightsaber: If there is any question of ownership, then that ends leasing by Indian airlines. For that would change a lease for a very secured loan transaction t

26 viasa: Afaik there were a lot of former Kingfisher Airlines / Kingfisher Red planes still on ground in India: 09x A320-200s (in BLR/BOM/DEL/MAA) 04x A321-200

27 avek00: Exactly. When an airline is under significant financial distress to the point where repossession of aircraft might occur, the aircraft lessor or fina

30 texan: One clarification is that, when an aircraft is leased in accordance with the Cape Town Convention (and the country where the lessee is based has acce

31 LJ: And as a result leasing companies won't lease or finance aircraft to airlines based in these countries. No, however, I think the repercussions go bey

32 DTW2HYD: Not really. With $36 Billion defense capital budget this year and YOY 20% increase, there is no aircraft/defense manufacturer in the world say/do any

33 art: If the above is correct, this is a mickey mouse state. That's not good if the state's incompetence screws things up for local companies (who cannot r

34 DTW2HYD: IT owed Airport Authorities of India $43 Million. AAI thought they can hold equipment until they get paid. Germany's DVB Bank filed a lawsuit and on

35 texan: The good news is that the court basically upheld the validity of Cape Town in at least some cases. We'll know more once a hard copy of the decision i

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