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"In some situations...pilots can pretty much name their price."
March 30, 2010 4:46 AM   Subscribe

How airplanes are repossessed. The rule is ‘Don’t ask, don’t tell—just get our airplane back.
posted by allkindsoftime (34 comments total) 26 users marked this as a favorite

 
Previously.
posted by The Great Big Mulp at 4:54 AM on March 30, 2010


Doh. Guess the Air&Space author isn't that original in his ideas. My bad - didn't come across that one when posting.
posted by allkindsoftime at 5:07 AM on March 30, 2010


I don’t like or get this piece. Presumably the readers of Airspacemag.com will be aware that aircraft finance is straightforward asset finance albeit with a highly mobile asset. Of course the financing consortium will take security over the asset and, following default, of course they’ll enforce those arrangements. This should be straightforward if lending has been prudent. You only need a guy like this if the financing arrangements were shonky in the first place.

The global aviation business has profound structural problems driven by oversupply, concerns about climate change and terrorism. Airline insurance premiums are exponentially higher than they were ten years ago (not to mention, probably price-fixed) and pilots with a lifetime of experience are quietly leaving the service of the global carriers.

None of these things is a good thing for those of us who love travel but hagiography of the ‘Repo Man’ rather sticks in the craw. Companies pursuing a ‘don’t ask’ policy with regard to their service providers is revolting and leads to corruption (BAe; Rio Tinto), human rights abuses (Shell, Ken Saro-Wiwa) and worse besides. Directors of finance houses should be focussed on responsibility throughout their supply chain and glamorising mercenaries like this rows strongly in the opposite direction.

Finally, this is yet aspect of credit crunch fall out. For the past decade or so financing organisations have thrown money about with giddy abandon with little thought to the downside risk. Cue a contraction in the money markets and everyone’s all ‘Oh shiiii-iiit’ and trying to liquidate riskier investment. The fact that lending was irresponsible in the first place (aircraft finance to a company which will be operating the asset in a jurisdiction in which the security would be ineffective? That’s irresponsible) doesn’t legitimise this man’s business and attempts to pain him as some capitalist Indiana Jones ‘rescuing investors’ money from third world hell holes’ are simply risible.
posted by dmt at 6:19 AM on March 30, 2010 [13 favorites]


Neat article. Someone could make a movie about Popovich, predictably starring Nicolas Cage.
posted by slogger at 7:00 AM on March 30, 2010 [2 favorites]


Companies pursuing a ‘don’t ask’ policy with regard to their service providers is revolting and leads to corruption (BAe; Rio Tinto), human rights abuses (Shell, Ken Saro-Wiwa) and worse besides.

I liked the part where he took the airplane back.
posted by pianoboy at 7:10 AM on March 30, 2010 [5 favorites]


I thought it was a good read, but I haven't had coffee yet.
posted by PuppyCat at 7:10 AM on March 30, 2010


attempts to pain him as some capitalist Indiana Jones ‘rescuing investors’ money from third world hell holes’ are simply risible.

I thought they were trying to make his crew into Ocean's 11 in the name of capitalism with all that talk of getting planes out of JFK and De Gaulle.
posted by immlass at 7:15 AM on March 30, 2010


DMT can you expand a little on this - 'This should be straightforward if lending has been prudent. You only need a guy like this if the financing arrangements were shonky in the first place.'

There does not seem to be anything illegal in what he is doing, and what difference does it make who the 3rd party the financial consortium outsource the job of taking security over the asset make?

I think the 'mercenary' line is a bit much also. Seems to me the glamorising is more to do with Mr Popovich trying his hand at PR rather than the job itself which in reality is very very straightforward (it is just the fact that it involves aircraft that adds interest). If this was a guy going around reposessing combine harvesters would you have such an issue here?
posted by numberstation at 7:42 AM on March 30, 2010 [1 favorite]


Great article
posted by KokuRyu at 7:47 AM on March 30, 2010


The thing that impresses me most about airplane repo men is how much training they have. You have to have a very specific type rating for every kind of big plane you fly. Lots of training and hours in, say, a 727 to fly that, an A320 to fly that, etc. Also it takes some big balls to fly a plane maintained by a hostile company. It'd be very easy for them to break something that you wouldn't notice until 30 minutes into your flight.

I once met a guy on a commercial flight who was an airplane repo man out of Midland/Odessa. I asked some polite question about what he did and he said "basically, I steal airplanes". Little ones in his case. It seemed like a kinda cool job.
posted by Nelson at 7:49 AM on March 30, 2010 [1 favorite]


dmt it sounds like from the article that the lending agreements weren't being enforced by the local governments in many cases. Local governments that are probably seeking to prop up their airlines. Failing to follow the law in a jurisdiction creates a niche for this guy.
posted by no_moniker at 7:52 AM on March 30, 2010


Oh, and the Discovery Channel is making a TV show about Popovich. Last I heard it was 8 episodes in Q1 2010, but I can't find it yet on their website.
posted by Nelson at 7:56 AM on March 30, 2010 [2 favorites]


I don't want to be pedantic but 'i steal airplanes' sounds a lot cooler than 'i acquire property on behalf of its rightful owner in accordance with the law.'

and dmt: lets be clear here your gripe is with the irresponsible lending practice as you see it or what this guy in particular does? (which is a logical progression from the lending practices that seem to concern you).

Oh and this gripe in particular sounds ridiculous 'aircraft finance to a company which will be operating the asset in a jurisdiction in which the security would be ineffective? That’s irresponsible' - are you expecting a finance company to place restrictions on the territorys in which the asset can be operated in? You are talking about an aircraft whose sole raison d'etre is to traverse the globe.
posted by numberstation at 8:02 AM on March 30, 2010 [1 favorite]


dmt it sounds like from the article that the lending agreements weren't being enforced by the local governments in many cases. Local governments that are probably seeking to prop up their airlines. Failing to follow the law in a jurisdiction creates a niche for this guy.

I don't see a single example of that in the article. There was the case in Haiti, which appears to have involved simple corruption. And if the French authorities didn't appreciate the repossession of the Fairlines plane in Charles de Gaulle, it is quite clear that it was because the airplane was already impounded on behalf of another creditor.
posted by Skeptic at 8:08 AM on March 30, 2010


I see examples in the Haitian, Brazilian and African cases the article mentions. The African case in particular the airline wasn't paying the rent on an aircraft when they had the money. The threat of repo got them to pay.
posted by no_moniker at 8:27 AM on March 30, 2010


I hafta get my wife's 747 out of this bad area.
posted by Ickster at 8:35 AM on March 30, 2010 [5 favorites]


Oh, movie with Jason Statham, definitely - "High Retriever." And after he manages to repo a Cessna from a drug kingpin who was smuggling cocaine inside of migrating dolphins, he discovers the kingpin's girlfriend, Mila Jovovich is passed out in the luggage compartment. What's more, they are being trailed by two heat-seeking missiles. Missiles that fire sharks!
posted by dances_with_sneetches at 8:45 AM on March 30, 2010 [4 favorites]


I don't understand something. How does the air traffic controller clear a plane not scheduled for take off to take off (such as when he's nabbing a plane)? I guess I don't get how air traffic control really works.
posted by anniecat at 8:47 AM on March 30, 2010


In one case they re registered an airplane under a new number (registered under another country) to trick air traffic control into allowing them to take off. Its not like air traffic control looks at the numbers on the tail of every plane. Its mostly done over radio.
posted by no_moniker at 8:52 AM on March 30, 2010 [1 favorite]


Oh, that makes sense. Thanks, no-moniker.
posted by anniecat at 8:53 AM on March 30, 2010


numberstation, no_moniker and Skeptic

Please forgive if I give one answer for all three questions. Aircraft financing is a subset of asset finance which is a well-developed area of law and finance. To be clear, I am concerned about irresponsible lending. More so than that however I am concerned about the lengths that finance consortia will go to, to recover assets. The article paints a picture of someone operating at the fringes of private international law which the big boys of finance (who tend to be behind aircraft finance deals) should not be getting into bed with.

A finance agreement for the purchase or lease of an aircraft will almost certainly involve the incorporation of a Special Purpose Vehicle in an tax efficient jurisdiction (which actually owns the plane(s)) but will be governed by UK or US law in many cases, depending on where the deal was done and who the funders and advisers were.

Where the leasing/borrowing party defaults, that will trigger litigation in London or the US. A civil judgement should then result which in turn should be enforced in the foreign jurisdiction in which the asset is to be found. As aircraft are highly mobile, the deed which gives effect to the financing arrangements will almost certainly specify where the aircraft can and cannot be flown to.

If the aircraft is to be found in a jurisdiction where there are no reciprocal treaty arrangements (e.g. Hague Convention or the 2000 EC Regs on civil judgments) one of two things has happened. Either the funding agreement was irresponsibly loose in the first place or the leasing party is in further, even more serious breach of the agreement.

Taking the example of Egypt from the article, not being an asset finance lawyer, I have no idea whether there is a UK or US reciprocal treaty arrangement with that country but the point is that if the finance agreement had had appropriate safeguards, the aircraft shouldn’t have been there either way. That it is, this becomes a matter of Egyptian law. If there is a treaty in place but it is not being enforced, this goes to the risk assessment at the time of doing the deal. It should not have been done in the first place if the security couldn’t be enforced.

Perhaps there is a mefite somewhere who can give us a view on whether arbitrarily seizing an asset in Egypt is in compliance with civil law in that country but I’d be surprised. The article paints a picture of someone with a fly-by-night approach to compliance with the law of the country in which he is operating which I find highly unsettling (vide the BAe and Rio Tinto links above). I would be astonished if he obtains the comfort of a legal opinion in the country in which the disputed asset is situated.

What this guy is doing is short circuiting the rule of law in the countries in which he operates and that cannot be a good thing. At a time when the US and the UK are perceived* as imposing their law at will on the rest of the world and riding roughshod over local jurisprudence, retaining agents such as this cannot be to the collective good.

And all of this quite apart from corporate governance issues about whether recovery agents should be employed who routinely breach the law of the country in which they operate. ‘Mercenary’ perhaps overstates my point – and apologies for the hyperbole, if so – but if he has ever carried a weapon while overseas that is precisely what he is. The article makes no suggestion that he has done so but in any event truly he is a hired gun for funders. This is ‘might makes right’ in a corporate context and it make me feel very queasy.

Paging patricio for a finance lawyer’s view and Mutant for a financing perspective.

* I accept that this perception is primarily rooted in acts of public law rather than private but I suspect that the now newly unemployed Egyptian aircraft mechanic might not give two hoots for this, lawyers, distinction.
posted by dmt at 9:39 AM on March 30, 2010 [2 favorites]


What this guy is doing is short circuiting the rule of law in the countries

What, you're saying the international repo man may occasionally skirt the local laws? Next you're gonna tell us that bounty hunters sometimes are a little rough with the guys they bring in.
posted by Nelson at 9:51 AM on March 30, 2010 [1 favorite]


If the aircraft is to be found in a jurisdiction where there are no reciprocal treaty arrangements (e.g. Hague Convention or the 2000 EC Regs on civil judgments) one of two things has happened. Either the funding agreement was irresponsibly loose in the first place or the leasing party is in further, even more serious breach of the agreement.

dmt, are you saying that your funding agreement would prohibit the financing party from taking the collateral to jurisidctions where there's inadequate legal process? Seems that would severely restrict a lot of use of the aircraft. Further, if you're already breaching the agreement (by failing to make payments), what's the "harm" in the further breach of flying the collateral in further violation of the agreement?

It's been a long time since I've even come close to an aircraft finance instrument (and that was in the context of a US-domestic bankruptcy), so just regard this as idle and uninformed speculation... but wouldn't the financing instruments contain choice-of-law and consent-to-jurisdiction provisions that would purportedly trump local law?

So if the contract says "You agree that US law governs this agreement, and you consent to the jurisdiction of US courts," and then presumably have contractual invocation or ratification of the repossession of collateral provisions that you're following, wouldn't the foreign jurisdiction have to apply US choice-of-law, etc.? I guess what I'm saying is, that these contracts are sophisticated enough that by signing the finance agreement, the airlines are probably agreeing that all of the Repo Man's actions are acceptable.
posted by QuantumMeruit at 10:19 AM on March 30, 2010 [1 favorite]


dmt, are you saying that your funding agreement would prohibit the financing party from taking the collateral to jurisidctions where there's inadequate legal process?

QM, my sense is that yes, a funding agreement should define the jurisdictions to which the asset could be flown to. A pain yes, but it stops the asset being put beyond effective reach of the funding parties. As I said upthread however, I’m not an asset finance lawyer so I will defer to the better informed on this point. If I’m wrong, my argument is weaker although not entirely without merit – especially on the point about corporate responsibility with regard to the acts of contractors.

wouldn't the financing instruments contain choice-of-law and consent-to-jurisdiction provisions that would purportedly trump local law?

There would be choice of jurisdiction clauses in the funding agreement. However you’d almost certainly sue on the breach in the UK or US and then seek to enforce that judgment in Egypt. It’s unlikely that you’d begin proceedings in an Egyptian court looking for determination according to the law governing the contract for pragmatic reasons - that would likely take years.

In the absence of local recognition of an overseas judgement (or a decision from a court in that jurisdiction), the agent’s actions in appropriating the aircraft in Egypt are likely to contravene that country’s law irrespective of choice of jurisdiction clauses in the funding agreement. The funding agreement can’t override Egyptian law which taking the asset off the tarmac in that country almost certainly does.
posted by dmt at 10:35 AM on March 30, 2010


How do these guys zip in and out of different international airports, and steal planes while they're at it? How do they get access to the tarmac? If they're deported from France, how do they get back into that country for the next job?

This makes it seem like anyone could swoop down and steal a plane, and somehow take off in a hell of a hurry. Don't you have to file a flight plan to take off?
posted by KokuRyu at 10:58 AM on March 30, 2010


One of my Finance professors had two really cool part-time jobs. One was doing free-lance work for the CIA detecting money laundering enterprises. The other was tracing huge assets, like building cranes, to repossess. He had lots of entertaining stories about finding huge items in quaries, or in the rainforest. Really, really interesting.

I do think this would make a good movie. Or TV show. I like Operacion Repo and it's staged! Think about how cool a real airplane repo show would be!
posted by Ruthless Bunny at 12:00 PM on March 30, 2010


Isn't the whole point of repossession that you gain control of the asset WITHOUT having to file a lawsuit / obtain a judgment? That is the way it works with automobiles. And uh, see UCC § 9-609 ("After default, a secured party may take possession of the collateral.")

So, as far as I can see, there's no foreign judgment to domesticate or enforce.

In any event, how could the contract NOT "override" local law, though, if it says something like: "YOU AGREE that if you fail to make payments or otherwise default, we can/will repossess the aircraft whenever we want, consistent with the laws of the State of ___."

Objection: You can't do this.
Repo man/lawyer: You agreed we could do this if you defaulted, when you entered into the financing contract.

Objection: ____ (foreign domicile) law says you can't do this.
Repo man/lawyer: The contract is governed by US law, and you agreed to that choice-of-law provision when you entered into the financing contract.

I have vague recollections that a contract to do something blatantly illegal in one country can't or won't be enforced. But getting a judge to see repossession of secured collateral in the same way as say, slavery, well...that's what makes international law fun, right?
posted by QuantumMeruit at 12:13 PM on March 30, 2010


Not being US qualified, I am not familiar with the statute you cite nevertheless I get the gist. Are you suggesting it has extraterritorial effect? While you’d repo a car as you describe, I reckon it would be cavalier to try the same thing with as multimillion dollar asset situated in a foreign jurisdiction. Hence before letting a dog like this off the leash, it would be prudent to obtain judgment on the default as further comfort if it did all go to rat shit.

I fear that the ‘whole point’ question is one neither of us can answer and would go to the civil code in the country in which the 'repossession' took place. A sensibly drafted funding agreement would specify that in the event of breach, ownership of the asset vests in SPV but the enforceability of that clause in the foreign jurisdiction would be subject to local law – it’s not difficult to conceive of a situation in a civil law jurisdiction wherein expropriation of the asset in the customary US/UK common law way would be illegitimate. Remember, the asset will be owned by an SPV and held on trust for the funding parties. Lots of civil jurisdictions are squeamish about the very concept of equity and trust law.

As you say, private international law is fascinating and I wish I got to think about it more.
posted by dmt at 12:55 PM on March 30, 2010


Im with QM. There is no way a financier would give a milti-million dollar aircraft to a company that wouldnt agree to let it be repo'd and there is no way a company would agree to restrict it's usage to a couple "pre-planned" routes.

If there is a plane that they need to take off to go to Mexico and the only one available is the one that is only authorized (by the bank) to fly in the US, any smart person would fly it to Mexico.

Besides, getting a judgement in the country of origin and then having any action done on that judgement overseas would take months. All the while, the offending party would just move the asset to another country and wait for another judgement to come down over and over again and the only thing the holding company would be left holding would be the proverbial bag.
posted by subaruwrx at 1:23 PM on March 30, 2010


I looked up an aircraft "dry lease". How about these apples:

"[in the event of default], Lessor at its option may, subject to Lessee’s safety and security regulations and during normal business hours, enter upon the premises where the Aircraft is located and take immediate possession of and remove such Aircraft"

(Disclaimer: looks like the lease was for a mid-size business aircraft; I offer no opinion on the suitability or sufficiency of that clause for anything!)

Also, for financing for a Cessna:

"[in the event of default, lender may] take possession of the Aircraft [or blah blah blah, or] Sell, lease or otherwise dispose of the Aircraft at public or private sale, without having the Aircraft at the place of sale, and upon terms and in such manner as [lender's] Representative may determine (and [lender's] Representative may be a purchaser at any sale) [etc etc, blah blah blah, or] Exercise any remedies of a secured party under the Uniform Commercial Code as adopted in the state where the Aircraft is located or any other applicable law."

Yup, that's pretty broad.

Also, for the true law geeks, take a look at the Cape Town Convention (a/k/a Convention on International Interests in Mobile Equipment) (Wikipedia article here).
posted by QuantumMeruit at 1:54 PM on March 30, 2010


dmt, they didn't seize the Egypt plane in Egypt; they seized it in Britain after the lessee flew it there.

Since they weren't in Egypt, they weren't exactly breaking Egyptian law, were they?
posted by NortonDC at 2:06 PM on March 30, 2010


Don't you have to file a flight plan to take off?

No. A flight plan is filed so that the authorities can find you if you crash. You tell them where you plan to go and when you plan to get there, so if you do not arrive they initiate a search. You also can obtain clearances for instrument flight in inclement weather. In fair weather there is absolutely nothing wrong (except for increased personal safety risk) with not filing a flight plan. Air carriers have additional standards, but for general aviation a flight plan is not required.

For some reason you will often see a note about whether a flight plan was filed in news articles about air accidents, but it really is a largely orthogonal issue.
posted by meinvt at 6:57 PM on March 30, 2010 [1 favorite]


I looked up an aircraft "dry lease". How about these apples.

I looked up some real examples, they appeared to say that in the event of a breach of contract the security agent could do anything it wanted in order to enforce the security. So like you say, pretty broad.

[I'm not a lawyer, so I may have misinterpreted, but I don't think so]
posted by Infinite Jest at 4:44 AM on March 31, 2010


dmt I don't think the airplane leaser cares about the local jurisdiction, they just want their plane back. I agree that this could cause problems. I wouldn't expect the airplane leaser to act ethically mostly because they are likely a large amoral corporation and there is a lot of money on the line. From that perspective, they have much to gain in hiring a guy like this and very little to lose. I don't know what would force them to act more ethically, maybe if they were accountable for this guys actions, but that doesn't seem to be the case. Also there is always the possibility that the local jurisdiction will not rule on the case in good faith or sufficiently fast.
posted by no_moniker at 7:23 AM on March 31, 2010


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