The aviation industry has been severely impacted by the COVID-19 pandemic. Although flying has now resumed in a limited capacity, airlines which have already been severely weakened by months of enforced inactivity are now facing a long, slow recovery, and for many the worst is not over yet. We have already seen a number of airlines enter into bankruptcy protection, and more are likely to follow over the coming months as passengers and operators adjust to the realities of flying in the post-COVID era. As a result, financiers and lessors are considering their position and looking at ways that they can improve their rights or enforce their security in a default situation. In particular, there has been an increased focus on the security that a financier would typically take over the shares in a Cayman Islands aircraft owning SPV and how, in practice, a financier can enforce their rights under this share security to gain control of an aircraft from a defaulting owner.


In aviation finance transactions, it is very common for the financed aircraft to be held in a corporate structure by a Cayman Islands special purpose vehicle (“SPV”), rather than directly by the owner. The SPV will obtain third party financing from a commercial bank or other financier in order to enable it to acquire legal title to the aircraft, which the SPV will then lease on to the airline or intended operator. Although the shares in the SPV may be held directly by the owner or operator of the aircraft (whether an airline or a lessor), more typically the shares in an SPV established for the purposes of a secured aircraft financing transaction will be held in an orphan trust structure.

Effective 3 December 2020, all legislation in the Cayman Islands is described by the term “Act” rather than “Law”. Any references to “Law” (and accompanying acronyms) in Conyers written materials pre-dating October 2020 should be read as “Act”.

Jarladth Travers

Senior Vice President and Head of Conyers FIG (Cayman) Limited

Cayman Islands

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