Aercap takes Garuda to court
Irish lessor Aercap and several aviation firms registered in France have filed a lawsuit against state-controlled flag carrier Garuda Indonesia in the High Court of Justice of England and Wales over missed lease rental payments.
Clifford Chance represents the claimants.
Sources tell Airfinance Journal that Aercap is seeking outstanding rent for 10 aircraft, including nine Boeing 737-800s and a single Airbus A320 leased to Garuda and its group affiliates.
The claim is said to total approximately $16 million.
The same sources say that Garuda is currently both unable and unwilling to pay up, arguing that the Covid-19 pandemic is a force majeure event and as such it should be cut some slack in its payment obligations.
The ‘Aercap vs. Garuda’ case does not come as a big surprise: On 14 July, Airfinance Journal reported that six lessors had denied Garuda Indonesia’s requests for lease payment deferrals, resulting in default events and the leasing companies issuing grounding orders for their assets to Garuda.
A total of 31 lessors are exposed to Garuda. Twelve have agreed to payment restructurings, six have declined to grant deferrals and negotiations are continuing with the remaining 13 lessors.
ICBC Leasing has by far the largest exposure in terms of asset value (some $650 million pre-Corona), followed by Nordic Aviation Capital, Aercap, CDB Aviation, DAE Capital and GECAS, Airfinance Journal's Fleet Tracker data shows.
Sources claim that Garuda is paying a $1.6 million a month to ICBC Leasing for per 777-300ER rental when the going market rate even before Corona was some $900,000 only. Garuda leases six 777-300ERs from ICBC Leasing and is understood to be seeking renegotiation of those rental contracts.
Nordic Aviation Capital (NAC) is another lessor impacted by Garuda’s precarious standing. Garuda last week told its government owner that it wants to stop operating its ATR72-600 and Mitsubishi CRJ1000 fleets “immediately” as both are deemed unsuitable for its future operations. NAC leases 12 CRJ1000 and 20 ATR72 aircraft to Garuda, with both types on 12-year operating lease agreements expiring between 2023 and 2030.
As for Aercap, financial officer Peter Juhas in June said that the lessor is keeping to its history of repossessing aircraft “very quickly”.
“I can't remember a situation where another lessor was faster than us to pull airplanes out. When someone stops paying, we would enforce our security rights, we may seize assets of the airline in different jurisdictions, we may put liens on their cash flows. There are many things we will do,” Juhas told an investor update.
“Now generally what you will do is you will move extremely quickly, because your concern is that when the airline stops paying for the aircraft, they will continue to fly and burn green time off the airplane. Now the second reason you want to move very quickly is when you're in a hostile jurisdiction. You want to get it out before liens can attach to your airplane,” he continued.
Airfinance Journal understands that Aercap affiliated companies are separately taking Ryanair’s Laudamotion and HNA’s Beijing Capital to court in the UK and Wales, also over missed rental payments.
Aercap has declined to comment on this story.