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Registration of leases with French aircraft registry

Article L6131-4 of the French Code of Transport provides that if an aircraft is leased, the owner and the operator are jointly liable for damages caused to third parties. However, the Code further provides that if the lease is recorded with the Civil Aviation Registry, the owner is only liable if the third party can demonstrate that the damage was caused by the owner. This provision seeks to protect « passive » owners, such as lessors providing financing to the operator through a finance lease or owners that do not retain any operational interest in the aircraft under a dry operating lease (eg, where an airline leases an aircraft to another airline).

However, the Code – quite rightly – refers to the operator, rather than the lessee. Lessors and financial institutions providing financing to airlines or aircraft owners often misinterpret this provision, particularly where the aircraft is leased by a lessor or a bank to a lessee and that lessee in turn subleases the aircraft to the operator (whether it be a commercial airline or a business jet operator). Sometimes, the lessor or the bank will insist on having the lessee registered in the Registry, as opposed to the operator or airline.

This is wrong and defeats the purpose of article L6131-4 of the French Code of Transport. In so doing, the lessor or bank will ensure that the lessee is exclusively liable for damages caused by the aircraft in accordance with the provision. However, in the structure describe above, the aircraft is at the operator’s sole risk and that operator – rather than the lessee or sublessor – should be responsible for the operation of the aircraft and liable for damages caused to third parties. This is particularly critical in business jet financings, since the finance lessee will usually be an entity of the purchaser’s group with no operational interest whatsoever in the aircraft.

Accordingly, both aircraft financiers and aircraft owners should pay attention to the registration of the right party with the French Registry: recording the wrong lease may prove not only useless but also onerous.