Training & Development Conference Welcome to Day 2, 19 September 2014

Aerial- Ryan Barrett 9/23/2014

Lanzarac, Stellenbosch – South Africa September 2014 Ryan Barrett – SVP Sales and Marketing GECAS

AERIAL Conference

Aerial- Ryan Barrett 9/23/2014

GECAS in Africa

Nairobi

Cape Town

Accra

12 Countries and 16 Customers ~$2Bn in Delivered and Committed Assets

50 Aircraft 3 Offices

Aerial- Ryan Barrett 9/23/2014

The True Size of Africa (Turvill, 2013)

The True Size of Africa

A mile of runway can connect cities thousands of miles apart, whereas a mile of road only gets you a mile.

Aerial- Ryan Barrett 9/23/2014

Sub-Saharan Africa Environment • GDP 1.6 Trillion USD (Est. 2013), 936 mm people ($1,624 GDP per capita) • 2013 GDP grew 4.7% across the region (6% excluding SA). • Economic growth is mainly reform-driven in the east and commodity driven in the west/central with limited domestic

consumption and/or intra-African trade (commodity exports outside of Africa with low levels of domestic value-add –

growth without employment). Only 11% of African trade is intra-African. • 80% of SSA’s consumer consumption comes from 6 countries (Angola, Ghana, Kenya, Nigeria, South Africa, and Sudan). • Top 3 destinations in SSA: JNB (4.25mm), CPT (1.6mm), LOS (1.33mm) (overnight visitors) • Value of South-South trade exceeds North-South trade by $2.2trillion – over a quarter of global trade. • Africa is already more urbanised than India (37%)

Outlook • GDP growth stable at 4.7% in ‘14 strengthening to 5.1% in ‘15 and ‘16 • FDI flows in resources, public investment in infrastructure, and improved agricultural production • Inflation expected to remain favourable although higher food and fuel prices can be expected in Ghana and SA due to

imported inflation. • Gas, oil and agriculture strong for east Africa • Tight monetary policy, labour unrest, and tight electricity supply constraining SA

• Nigerian non-oil sectors expected to outperform – robust growth predicted.

Challenges • Risk of lower commodity prices due to weaker Chinese growth • Increased Cap Market volatility due to taper • Political tensions in run up to elections in Nigeria

• Security problems in Kenya • Conflicts in South Sudan, CAR • Currency weakness and imported inflation to primary input goods and consumer products

Source: World Bank, African Business

Aerial- Ryan Barrett 9/23/2014

Aug ‘14 African Carriers Capacity Data

African carriers dominate Intra-Africa and Asia

Aerial- Ryan Barrett 9/23/2014

Africa is the 2nd most fragmented market globally

Potential for partnerships between ‘Big 5’ and others

BOMBARDIER

STRUCTURED FINANCE

GROWTH POTENTIAL OF

REGIONAL AIRCRAFT IN

AFRICA AND ROLES TO

BE PLAYED BY

FINANCIERS, LESSORS

AND LOCAL COUNSEL

Bombardier Commercial Aircraft

Structured Finance

Sept2014

LEGAL DISCLAIMER

When used herein, the term “BOMBARDIER” refers to Bombardier Inc. and/or its subsidiaries.

The material contained in this presentation shall not be used, redistributed, broadcast, published, copied to any other media or reproduced other than for

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distorted or used in any way that is detrimental to BOMBARDIER’s image or reputation. The copyright in these materials is either owned by BOMBARDIER

or is used by BOMBARDIER with the permission of the owner. BOMBARDIER does not represent or warrant that such materials do not infringe the rights of

others. Nothing contained herein shall be construed as granting, explicitly or implicitly, any license or other right to use these materials other than in

accordance with the terms contained herein.

This presentation includes forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology

such as "may", "will", “expect”, “intend”, “anticipate”, “plan”, “foresee”, “believe” or “continue” or the negatives of these terms or variations thereon or similar

terminology. By their nature, forward-looking statements require BOMBARDIER to make assumptions and are subject to important known and unknown risks

and uncertainties, which may cause BOMBARDIER’s actual results in future periods to differ materially from forecasted results. While BOMBARDIER

considers its assumptions to be reasonable and appropriate based on current information available, there is a risk that they may not be accurate. For

additional information with respect to the assumptions underlying the forward-looking statements herein, please refer to the sections on BOMBARDIER’s

aerospace segment and BOMBARDIER’s transportation segment in the Management’s Discussion and Analysis of BOMBARDIER’s Annual Report. Certain

factors that could cause actual results to differ materially from those anticipated in the forward-looking statements include risks associated with general

economic conditions, risks associated with BOMBARDIER’s business environment (such as the financial condition of the airline industry, government

policies and priorities and competition from other businesses), operational risks (such as regulatory risks and dependence on key personnel, risks

associated with doing business with partners, risks involved with developing new products and services, warranty and casualty claim losses, legal risks from

legal proceedings, risks relating to the Corporation’s dependence on certain key customers and key suppliers, risks resulting from fixed term commitments,

human resource risk and environmental risk), financing risks (such as risks resulting from reliance on government support, risks relating to financing support

provided on behalf of certain customers, risks relating to liquidity and access to capital markets, risks relating to the terms of certain restrictive debt

covenants and market risks, including currency, interest rate and commodity pricing risk). For more details see the heading entitled “Risks and Uncertainties”

in the Management’s Discussion and Analysis of BOMBARDIER’s Annual Report. Readers are cautioned that the foregoing list of factors that may affect

future growth, results and performance is not exhaustive and undue reliance should not be placed thereon. The forward-looking statements set forth herein

reflect BOMBARDIER’s expectations as at the date hereof and are subject to change after such date. Unless otherwise required by applicable securities

laws, BOMBARDIER expressly disclaims any intention, and assumes no obligation to update or revise any forward-looking statements, whether as a result

of new information, future events or otherwise.

This presentation and all related material shall in no event be construed as an offer of financing, whether by BOMBARDIER or any third party, nor as a

commitment as to any financing terms and conditions that might be achieved. BOMBARDIER makes no representation that materials, products or services

depicted in the presentation are appropriate or available in all locations.

THIS PRESENTATION AND ALL OF THE INFORMATION IT CONTAINS IS PROVIDED " AS IS " WITHOUT WARRANTY OF ANY KIND, EITHER

EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR

PURPOSE, OR NON-INFRINGEMENT.

IN NO EVENT, IN REGARD TO THIS PRESENTATION OR ANY SUCH MATERIAL, WILL BOMBARDIER BE LIABLE TO ANY PARTY FOR ANY

DAMAGES OR INJURY CAUSED BY (INCLUDING BUT NOT LIMITED TO) ANY FAILURE OF PERFORMANCE, ERROR, OMISSION, DIRECT,

INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS

INTERRUPTION, OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

9

Agenda

GROWTH POTENTIAL FOR THE REGIONAL AIRCRAFT MARKET IN AFRICA FROM OEM PERSPECTIVE

HOW WE AS OEM SEE FINANCIERS & LESSORS ENTERING THE AFRICAN MARKET

2 CASE STUDIES

1

2

3

10

BOMBARDIER COMMERCIAL AIRCRAFT

LEADERS IN THE NEW REALITY

BOMBARDIER, Q-SERIES, Q400, CRJ SERIES, CRJ700, CRJ900, CRJ1000, CRJ, NEXTGEN, CSERIES, CS100 AND CS300 ARE

REGISTERED TRADEMARKS OR TRADEMARKS OF BOMBARDIER INC. OR ITS SUBSIDIARIES.

Q400

NEXTGEN

CRJ

NEXTGEN

CSERIES

Most

profitable

turboprop

Cost

leader

100%

new

aircraft

Q400 NEXTGEN

CS300 CS100

CRJ700 NEXTGEN CRJ900 NEXTGEN CRJ1000 NEXTGEN

11

12 SOURCE: ASCEND, BOMBARDIER. IN-SERVICE AND ON-ORDER AIRCRAFT. FIGURES AS OF JUNE 30TH, 2014

SOURCE: OAG FLEET INET JUN 2014

BOMBARDIER IS THE TRUE LEADER OF REGIONAL

AIRCRAFT IN AFRICA

Bombardier leads the regional aircraft market segment due to

lower operating costs, superior performance and greater

flexibility of its aircraft

0

50

100

150

Bombardier Embraer ATR

Number of Regional Aircraft in Africa

Regional Aircraft Market Share in Africa

Operators Aircraft

Scheduled Airlines 18 92

Non-Sched. Airlines 17 56

Governments 3 7

Corporations 1 1

Leasing/ Broker 1 6

Total 40 162

Operators Aircraft

Q-Series 30 111

CRJ Series 17 51

BOMBARDIER OPERATORS IN AFRICA

SOURCE: ASCEND, BOMBARDIER. IN-SERVICE AND ON-ORDER AIRCRAFT. FIGURES AS OF JUNE 30TH, 2014

LIVERIES REPRESENT A SAMPLE OF BOMBARDIER OPERATORS

13

BOMBARDIER OFFERS TOP LEVEL SUPPORT TO ITS

AFRICAN OPERATORS

Simulator / Training Centre

Authorized Service Facility

Spares Depot

Mini RSO

SAMCO

Bombardier Factory

Q400 Q400

Q300

Q400

CRJ

Dash8

Q400

CRJ

Q400

CRJ

Q400

CRJ200

14

AFRICAN AIRLINES HAVE THE LOWEST LOAD

FACTORS OF ALL REGIONS

15 SOURCE IATA 2014 STATISTICS

Load factor in Africa is 10% lower than industry average

40,240

24,733

MOST OF THE TRAFFIC IN AFRICA IS DOMESTIC

REGIONAL TRAFFIC HAS GREAT GROWTH

OPPORTUNITIES

16 SOURCE: OAG SCHEDULE

Domestic

Regional

July 2014 Top 20 Intra Africa Flights July 2014 Intra Africa Flights

Regional- Domestic mix in

Europe and Asia is

approximately 50/50

Origin Destination Flights

Johannesburg, ZA Cape Town, ZA 1,281

Durban, ZA Johannesburg, ZA 909

Lagos, NG Abuja, NG 578

Zanzibar, TZ Dar Es Salaam, TZ 469

Nairobi, KE Mombasa, KE 418

Port Elizabeth, ZA Johannesburg, ZA 379

Gaborone, BW Johannesburg, ZA 371

Cape Town, ZA Durban, ZA 352

Port Harcourt, NG Lagos, NG 348

Brazzaville, CG Pointe Noire, CG 337

Praslin Is., Seychel, SC Seychelles, SC 316

Sharm el-Sheikh, EG Cairo, EG 305

Cape Town, ZA Lanseria, ZA 294

Johannesburg, ZA Bloemfontein, ZA 285

Cairo, EG Hurghada, EG 267

Accra, GH Kumasi, GH 243

Johannesburg, ZA East London, ZA 236

Lagos, NG Accra, GH 234

Abuja, NG Port Harcourt, NG 224

Johannesburg, ZA Windhoek, NA 222

KEY TO BUILDING A STRONG AIR TRANSPORT

INFRASTRUCTURE IS DEPENDABLE AIR SERVICE

THROUGH INCREASED FREQUENCIES

17 SOURCE: OAG SCHEDULE

Only 18% of the markets are served by double daily service

which allow convenient flights for day trips

Approximately 40% of the markets are served on a daily

basis compared to 80% in North America

July 2014

Intra Africa Markets Service

July 2014

Intra North America Markets Service

Double Daily 55%

Daily 22%

4x Weekly

10%

Less than 4 Weekly

13%

Double Daily 18%

Daily 20%

4x Weekly 21%

Less than 4 Weekly

41%

REGIONAL AIRCRAFT ARE IDEAL TO INCREASE

CONNECTIVITY TO REGIONAL HUBS BY FEEDING SMALLER

MARKETS INTO THE HUB

Hub

Widebody & Large narrow body

Regional Aircraft

Regional aircraft benefits :

Low-risk tool for developing

new routes and smaller

markets

Increase hub efficiency by

serving more markets Small Narrowbody Regional Aircraft

18

EDC

Local African banks (both DFIs and investment banks such as Investec, RMB, Nedbank, PTA and AfriExIm)

Some international Aviation Lenders such as Natixis, DVB, StanChart , HSBC etc. Appetite limited to top tier credits and low risk countries mostly

Operating leases becoming ever more popular especially on Q400

No to very little Capital Markets or EETC activity (exception is ET/KQ/SAA)

Rise of aviation fund platforms

BCA AFRICA MARKET ASSESSMENT

Delivery Market Forecast

Regional Fleet2

Financing Market Dynamics

ECA financing continues to dominate regional aircraft financing

market in Africa; however, the availability of financing from regional

and international banks, and Lessors is trending upwards

The availability of non-ECA financing (whether price competitive or

not) continues to be dependent on the existence of a strong credit,

appetite for country risk, shareholder support along with acceptable

asset liquidity and/or manufacturer’s support

Various hurdles include government interference, lack of equity, low

levels of perceived product support.

Key Regional Financing Strategies

Develop EDC into co-lender and guarantor (incl local currency guarantees)

Develop DFI funding market – focus on getting aircraft included in

infrastructure mandates

Build relationship engagement plans with local jurisdiction financiers

Develop trade office relationships to assist with Government as shareholder

interaction

Educate market on risk/reward profile of investing in CRJ, Q400 & CSeries.

(Target audiences incl airlines & advisors, credit rating agencies, lessors,

investment banks and asset management industry/instutional investors).

SOURCE:

BCA 2014 MARKET FORECAST, MARKET DATA AS OF DECEMBER 31, 2013

FLEET INET AS OF DECEMBER 31, 2013

STRUCTURED FINANCE DATA ANALYSIS, DELIVERY FINANCINGS SOURCES FROM 2009-2013 PERCENTAGE OF UNITS DELIVERED

Order Backlog1

Delivery Financing Sources3

0%

20%

40%

60%

80%

ECA Banks Cash other

CRJ/Q400

23 units delivered

Sources of Financing/Key Regional Aircraft Lenders

11

1

QSeries CRJ Series

In-Service Fleet1

93

49

QSeries CRJ Series

20-149 seat In-service

Fleet2 640 units Airbus,

5%

ATR, 13%

Boeing, 23%

Bombardier, 22%

Embraer, 19%

Other, 18%

Africa Demand Distribution by seat segment

10%

53%

37%

Total: 700 units

20 to 59-seat

60 to 99-seat

100 to 149-seat

Source: Bombardier Commercial Aircraft Market Forecast 2014-2033

19

Agenda

GROWTH POTENTIAL FOR THE REGIONAL AIRCRAFT MARKET IN AFRICA FROM OEM PERSPECTIVE

HOW WE AS OEM SEE FINANCIERS & LESSORS ENTERING THE AFRICAN MARKET

2 CASE STUDIES

1

2

3

20

LESSORS / FINANCIERS ENTERING AFRICA

Dynamic: Rationale:

Why Africa? Deals allow for better margins earned

(correctly risk adjusted always?).

Growth dynamics better than developed

markets

Which types of Lessors/Financiers? Small to medium banks/Lessors have

greater interest level (1-2 aircraft deals)

English law? Normally required by Lender/Lessor

and many non-francophone happy to

apply English Law principals

SPV jurisdictions used? Mauritius/Ireland/Caymans/BVI

depending on WHT and Lessor

preference

Local African counsel use? Required, but often poorly overlooked

area not being consulted appropriately

21

LOCAL COUNSEL USE

Importance of local counsel:

• Local jurisdictional laws that impact on rights of

Lender AND Borrower

• Withholding tax knowledge

• General Borrower/Airline/Lessee relationship

interaction

• Local CofA issues

• Local CofR filings etc

• Local Civil Aviation Authority insights/engagement

• Deregistration knowledge (IDERAs)

22

Agenda

GROWTH POTENTIAL FOR THE REGIONAL AIRCRAFT MARKET IN AFRICA FROM OEM PERSPECTIVE

HOW WE AS OEM SEE FINANCIERS & LESSORS ENTERING THE AFRICAN MARKET

2 CASE STUDIES

1

2

3

23

CASE STUDY: LOAN-LEASE FLOW THROUGH

What played out……..:

Lessor stormed ahead to secure operating lease with Lessee. Balance of

power during lease negotiation with large Lessee.

Export Agency provided broad loan terms with limited input into lease and

security

Lease completed in final form and executed

Export Agency commenced loan & security documentation but struggled to

agree flow through items between lease/loan such as tax indemnities etc

due to strong push back from Lessee (who “completed” their lease) and

Lessor (who has equity investors not willing to accept risk on them now..)

Substantial mismatch between lease and loan negotiation

Structure/deal outline:

• New aircraft 10year operating lease

• Ringfenced offshore SPV with Lessor equity and Export

Credit Agency senior debt

24

CASE STUDY: TERM SHEET NEGOTIATION

/ AIRLINE CONSULTANT ROLE

What played out…….:

Airline gives exclusive mandate to Lender

Lender agree terms and security with Export Agency

Airline appointed consultant who completes Business plan utilized by Lender

as part of credit due diligence

Lender provides Term Sheet to Lessee 3 weeks prior to aircraft delivery…..

Lessee reacts negatively to “aggressive pricing” and cashflow impact of loan

costs versus what the airline consultant included in the Business plan…

Structure/deal outline:

• New aircraft 10year finance lease

• Commercial Lender (senior and junior debt) with Export

Agency backed debt to Lender only. Lender on-lending to

Lessee

25

OEM SUMMARY

OEM aim/input:

Bombardier active in region and here to assist both the airline/buyer/lessee

in their aircraft procurement steps:

Aircraft type analysis/comparisons

Airline economics/route planning

Financial viability assessments – lease vs loan etc

Banking/lessor market feedback and introductions

Bombardier can provide deeper insights into used aircraft values,

depreciation curves, demand/supply cycles, repossession and remarketing

services than other non-aligned third parties Regional Representative: Wouter Du Preez, Director, Structured Finance wouter.dupreez@aero.bombardier.com

(W) +27 76 3917631 / (M) +27 82 4127570 26

Impact of Foreign / International Regulations – an update

Marisa Chan, Clifford Chance LLP

Friday 19th September 2014

GECAS Aerial Conference 2014

Cape Town, South Africa

Executive Summary

Financing or leasing aircraft to an African

airline

Sanctions

OFAC

UN

EU

EU ETS

Aviation

EU Operator Bans

28

Loan and lease documentation

Reps and covenants

Defaults

Operations

Routes

Sub-leasing

Outside of financing/leasing

Sales of aircraft

Third party dealings

EU Emissions Trading Scheme Objectives: reduce and regulate emissions of greenhouse gases in the EU

Directive (2003/87/EC) came into force on 1 Jan 2005; applies to all Member States; targets

energy-intensive industries (e.g. power plants, manufacturing facilities)

Emission reduction targets set for each Phase (Phase I 2005-2007, Phase II 2008 to 2012

and Phase 3 2013 and beyond), at governmental level

“Cap and trade” system

operators must surrender allowances equal to tonnes of CO2 emitted

Allowance caps set by EU each year, on a declining basis

operators receive some allowances free from government each year; must obtain additional

allowances to cover shortfall against actual emissions by purchasing from government

auctions or from other market participants, through trading scheme, or by setting off any

applicable credits or using other allowances, subject to restrictions

Scheme extended to include emissions from “aviation activities”

Directive (2008/101/EC) came into force on 2 Feb 2009; monitoring requirements since 1

January 2010 and reporting requirements since 31 March 2011

Initially, effective date for inclusion of aviation emissions was set for 1 January 2012

First compliance deadline for surrendering allowances was meant to be 30 April 2013 – in

late 2012, EU allowed a one-year temporary postponement for international flights

Since then, suspension has been extended for period from 2013 to 2016 (more details later)

29

Aviation ETS Scheme applies to any aircraft operator that lands at or takes off from an EU airport, even if:

the operator is not licensed in the EU; or

the flight is not wholly within the EU – i.e. international flights caught

Limited exceptions, including flights by operators that perform worldwide (a) fewer than 243

flights per 4 month period for 3 consecutive periods or (b) flights with annual emissions lower

than 10,000 tonnes; and light aircraft / military / emergency flights

Loan and lease documentation may include specific language requiring airline compliance

with Aviation ETS requirements

Application to owner and to aircraft

If operator of the flight is not known or not identified, then the owner will be held liable –

lenders / lessors will require confirmation that airline has identified itself as operator of

relevant aircraft

Consider sub-leasing arrangements

Liability does not attach to the aircraft (i.e. new purchasers or lessees should not be caught

by previous operator’s non-compliance)

30

Aviation ETS cont’d Administering Member State

For EU operators, the state where the operator is licensed; and

For non-EU operators, the state with the highest emissions from the operator’s departures

from EU and arrivals into EU in 2006 or, for new entrants, in their first year of applicable

operation (the “base year”)

List of operators and their administering states – EC Regulation 748/2009, as amended

Cannot switch administering state unless operations cease in that country

Penalties and enforcement

Enforcement by administering state; note national measures may apply

Penalties for non-compliance with monitoring and reporting requirements or failure of

operator to surrender sufficient allowances include:

– Charge of EUR 100 per surplus tonne of emissions

– Carryover of surplus emissions to next year

– In extreme cases of continued non-compliance, Commission may impose an operating

ban, at request of administering state

EU’s Aviation ETS page - http://ec.europa.eu/clima/policies/transport/aviation/index_en.htm

Aircraft operators and administering member state lists (latest list Feb 2014 – EC Reg 100/2014)

http://ec.europa.eu/clima/policies/transport/aviation/operators/documentation_en.htm

31

Aviation ETS - UK position National implementation

UK is the administering state for several African licensed operators, including Kenya Airways,

South African Airways and a number of Nigerian airlines

Regulator is the UK Environment Agency, supported by the CAA

Aviation Greenhouse Gas Emissions Trading Scheme Regulations 2009 and 2010

– Voluntary benchmarking system

– Additional mandatory reporting requirements

– Additional penalties – from £1000 to £5000 per breach, increasing by £500 every

breach, up to a maximum after 90 days of £50,000

Powers of detention and sale

After 6 months’ of unpaid charges or following an operating ban under Directive 2008/101,

regulator may detain any aircraft in defaulting operator’s fleet

If operator or another interested party shows that operator is no longer entitled to possession

of the aircraft, then regulator must release lien

Lease may include specific termination event for non-compliance with ETS (or triggered by

any breach of obligations, including compliance with all applicable laws/specific ETS rules)

Sale after 56 days of detention - subject to court order; court must be satisfied that regulator

has taken steps to notify all interested parties and given them the opportunity to participate in

proceedings

UK CAA’s Aviation ETS page - https://www.caa.co.uk/default.aspx?catid=589&pageid=12443

32

Aviation ETS - Challenges US airlines

Case brought in the English High Court against UK Secretary of State (as UK is

administering state for the relevant airlines)

Referred to the ECJ – 21 December 2011 decision on whether Aviation ETS breached:

– Chicago Convention

– Kyoto Protocol

– US-EU Open Skies Agreement

– Principles of customary international law, including state sovereignty and freedom over

the high seas

ATAA statement – “compliance under protest”

US legislation - European Emissions Trading Scheme Prohibition Act 2011, signed Nov 2012

– Secretary of Transportation must issue prohibition order, if determines US interests are

harmed under EU ETS – will apply to operators of US registered aircraft

Other countries

PRC and Indian airlines prohibited by governments from complying with scheme

Russia criticism; Asian airlines under AAPA

African airlines – as co-ordinated by AFRAA

N.B. South Africa Carbon Tax – 28 Feb 2013 announcement - delayed until 2015 (was to

come into force on 1 April 2013), in face of opposition from metals industry

33

Aviation ETS – Stop the clock

Nov 2012 – EU agreed to "stop the clock" for one year for international flights’ emissions, pending

alternative international measures to be led by ICAO

Operators of international flights to and from the EU would have been required, by 30 April

2013, to surrender allowances in respect of emissions generated by flights conducted in

2012, and to comply with various monitoring and reporting obligations

Obligations (and sanctions) not to be retrospectively applied after suspension ended

EU intended to reinstate the scheme for emissions from 2013 flights (and onwards);

suspension was to be viewed as temporary measure pending ICAO proposals

Postponement applied only to 2012 emissions from flights from an EEA state or closely

connected state (see below) to third countries and to flights from third countries to an EEA state

or closely connected state

Reporting and monitoring obligations continued to apply to qualifying flights between the

EEA states and to flights between an EEA state and certain "closely connected" states

(including Switzerland and EEA overseas territories)

Operators of such flights still required to surrender allowances for emissions from 2012

flights by 30 April 2013 – e.g. corporate jets and short-haul operators

Suspension primarily benefited non-EU based operators – competition concerns

April 2013 – EU clarified that the suspension of EU ETS obligations would apply to international

flights from 2010 to 2012 (Decision 377/2013)

34

Aviation ETS – Stop the clock continues

ICAO proposals

Alternative system based on a global market-based mechanism (“MBM”) - consultation

Triennial Assembly in Montreal Sept 2013 - report

Global MBM for aviation emissions to be finalised by 2016 and implemented by 2020

Oct 2013 – EU proposed amending the Aviation ETS for period from 2013 to 2016 to exclude

emissions from international flights to and from the EEA only in respect of the portion of the

flight not within EEA airspace (as well as over-flights). This was widely criticised.

April 2014 (Regulation 421/2014)

Emissions from flights to and from countries outside of EEA from 1 Jan 2013 to 31 Dec

2016 are fully excluded from Aviation ETS

Emissions from flights within EEA for that period (with limited exceptions) are still subject

to Aviation ETS; operators must report 2013 and 2014 emissions by 31 March 2015 and

surrender allowances in respect of such emissions by 30 April 2015

N.B. EU has stated that it will reinstate Aviation ETS in full, with effect from 1 January

2017, if ICAO fails to deliver global MBM framework

35

EU Operator Bans Basic Regulation (2111/2005/EC) establishing a Community list of banned or restricted carriers, based

on common safety criteria (“EU air safety list”)

Safety deficiencies of air carrier

Inability or unwillingness of responsible aviation authority to address carrier’s safety deficiencies

Operating bans imposed by third countries

ICAO reports

Applies to EU and non-EU airlines

List is updated regularly and may be updated whenever the Commission deems necessary (latest

version April 2014)

Annex A - airlines banned from operating in EU airspace

Annex B – airlines subject to conditions when operating in EU airspace – restricted aircraft and no

expansion of network

Ferry flights still permissible

Airline can wet-lease aircraft from other carriers

Individual Member States may impose national measures, even if carrier is not subjected to a total or

partial EU ban

Carriers may apply directly or through their supervising aviation authority to the Commission or to a

Member State to be removed from the list

Air Safety Committee will review evidence

EU’s air safety page - http://ec.europa.eu/transport/modes/air/safety/air-ban/index_en.htm

36

Sanctions – US OFAC Example

37

Sanctions Targets

• Governments

• Specially Designated individuals

• Specially Designated entities

• Sectoral Sanctions

• OFAC published lists

US subjects

• US citizens and permanent residents, wherever located

• Persons within the US

• Entities organised under US law, including foreign branches

• (And for Cuba and Iran – foreign entities that are US-owned or controlled )

Extra-territorial scope

• OFAC contends that its regulations also apply to non-US persons in relation to all transactions involving US persons or the US financial system

• Special case [- Iran Sanctions Act] and similar legislation and US Executive Orders

Penalties

• Civil e.g. for breaches of IEEPA, up to the greater of US$250,000 or twice the underlying transaction amount

• Criminal e.g. for breaches of IEEPA, up to 20 years’ imprisonment and fines of up to US$1M

• Potential forfeiture of funds and assets

• Reputational damage

Sanctions

OFAC potential relevance to an aircraft leasing or financing transaction

US transaction parties

US content – e.g. Boeing aircraft

US dollar payments

Equivalent sanctions issued by UN and/or EU

Scope of sanctions

Economic and trade sanctions, including export controls

Military sanctions - note aircraft as potential “dual-use” assets

Narcotics / drug-trafficking sanctions

Anti-terrorism sanctions

Impact on lease and loan documentation and on airline’s operations

Representations and covenants confirming not subject to sanctions and assuring

sanctions compliance, including use of proceeds of financing

– Group companies

– Directors and other officers

Routes and sub-leasing restrictions regarding Sanction Countries

Potential sales, transfers or other disposals to parties in Sanction Countries

Dealings with providers in Sanction Countries

38

Sanctions – discussion points

Aircraft lease negotiations – starting point “Lessee shall comply

with all applicable sanctions, including any sanctions issued by

OFAC”

Airline request – rely on general compliance with laws provision

Airline request – “Lessee shall comply with any sanctions

applicable to it or to its jurisdiction”

Lender request - “Lessee shall not operate the Aircraft in a

Sanctioned Country”

39

Sanctions – starting point in documents

Obligor representations – not a Sanctions Target, no violation of any Sanctions; Obligor group

Obligor covenants – shall not use the asset or any proceeds/funds in contravention of Sanctions, shall not fund or make any resource available to a Sanctions Target, shall comply with Sanctions and take any action required to allow [Counterparty] to comply with Sanctions

Illegality trigger (vs. event of default only)

40

The Cape Town Convention

Update & Focus on Africa

David Bartlett, GECAS

AERIAL Conference – 19 Sept 2014

AERIAL Conference 19 Sept 2014

World Wide current adoption of the Cape Town Convention

Which African Countries

Are Contracting States? • Angola • Cameroon * • Cape Verde • Rep Congo * • Ethiopia • Kenya • Madagascar • Malawi • Mozambique • Nigeria • Rwanda • Senegal • South Africa • Tanzania • Togo

* No declarations made under Aircraft Protocol

Gabon, Seychelles and Zimbabwe.

Burundi and Lesotho – signed but have not yet ratified

• Effects and terms vary enormously between

contracting states

• Convention and Protocol adopted by State

with Declarations

• There are considerable choices

• Declarations refer to Article numbers

Arabic numbers refer to Convention;

Roman numerals refer to Protocol

System of Declarations

• Article 39 – Rights having priority without registration

• Article 40 – Registrable non-consensual rights

• Article 54 – Self help – without need to go to court

• Article VIII – Respects contractual choice of law

• Article X – Interim relief; deregistration and export

• Article XI – Insolvency

• Article XII – Insolvency Assistance

• Article XIII – Deregistration & Export Request

Authorisation (IDERA)

Key Articles

“Qualifying declarations” for Aircraft Sector Understanding:

Africa --Angola, Ethiopia, Kenya, Nigeria, Rwanda and Senegal See full list at : http://www.oecd.org/tad/exportcredits/ctc.htm

Declarations Compared Self help Choice of

law

Interim relief Insolvency A IDERA

ANGOLA 10 days 60 days

CAMEROON

CAPE VERDE 10 days 60 days

REP CONGO

ETHIOPIA 5 days 30 days

KENYA 10 days 60 days

MADAGASCAR 10 days 60 days

MALAWI 10 days 30 days

MOZAMBIQUE 10 days 60 days

NIGERIA 10 days 30 days

RWANDA 10 days 60 days

SENEGAL 10 days 30 days

SOUTH AFRICA 10 days 30 days

TANZANIA 10 days 30 days

TOGO 10 days 30 days

Libya

Madagascar

Cote D’Ivoire

Algeria

Botswana

Kenya

Sierra Leone-

Mali

Democratic Republic

of the Congo

Somalia

Guinea-Bissau-

Ghana

Uganda

Mozambique

Mauritania

Angola

Sudan

South Sudan

Niger

Zambia

Ethiopia

West Sahara

Chad

Guinea

Nigeria

Tunisia

Namibia

South Africa

Egypt

Tanzania

Equatorial Guinea

-Lesotho

-Burundi

-Djibouti

Rep. of the Congo-

Rwanda-

Senegal

Togo

Gabon

-Malawi

Morocco

Liberia Central

African Republic

Zimbabwe

Benin

Eritrea

-Swaziland

The Gambia-

Cape Verde

Comoros

Mauritius

Sao Tome & Principe

Seychelles

Burkina Faso

Good or Average No Protocol Declarations • No Art 54(2)Convention

declaration • No ratification / accession

Declaration Status

Cameroon

Gabon, Seychelles & Zimbabwe

Article 54 (2) CTC

A Contracting State shall, at the time of ratification,

acceptance, approval of, or accession to the Protocol, declare

whether or not any remedy available to the creditor under any

provision of this Convention which is not there expressed to

require application to the court may be exercised only with

leave of the court.

No declaration under this Article so adoption of

CTC preparatory only

Other issues to watch

Non-consensual interests Can or need be registered – Art 39 /40? Priority?

Extent: Wages, taxes, judgments, liens - others?

Cameroon / Rep Congo : No Protocol

declarations

Madagascar : Art X(5) – security may be

required for remedies: no party choice

Togo: Article 39(1)(a) – meaning of declaration?

Implementation

Is local legislation /regulation needed to make

effective?

Clearing Wrongfully registered

interests

• Art 25 (Discharge of Registration)

• Art 40 (Registrable non-consensual rights or interests)

• Art 44 (Jurisdiction against Registrar)

• Irish Court decisions PNC Equipment Finance v. Aviareto and Link Aviation;

TransFin-M Ltd v. Stream Aero Investments and Aviareto

Imagination at work.

Cape Town September 19th, 2014 John Ludden

Troubles with Liens and Non-Consensual Interests

52

Troubles With Liens and Non-Consensual Interests

INTRODUCTION

• English Law Perspective

• Characteristics of a Lien

• Possessory Liens

• Right of Detention and Sale

• Overview : Africa

• Potential Mitigants

• Non-Consensual Rights/Interests under Cape Town Convention

53

Troubles With Liens and Non-Consensual Interests

LIENS

Characteristics of a Lien

• Right of one person to retain property until claim for payment satisfied

• Contractual or Non-Contractual (imposed through operation of law)

• Examples: Seller’s Lien, Contractual Lien, Salvage Lien and Possessory Lien

54

Troubles With Liens and Non-Consensual Interests

FOCUS ON POSSESSORY LIENS

• Similar to Pledge, but Lienholder retains possession for purpose other than security

• Pledge of aircraft very rare

• Constituents of Repairer’s Lien

Lawful and continuous possession

Work has enhanced value

Lien for unpaid labour

55

Troubles With Liens and Non-Consensual Interests

AIRCRAFT LEASE/FINANCING DOCUMENTS

• Only Permitted Liens allowed

• Repairer’s Liens where payment not due

• Owner still subject to Repairer’s Lien

• No Provision for registration of Repairer’s Lien

• Priority of Repairer’s Lien

• Practical impact for Owner/Financiers

56

Troubles With Liens and Non-Consensual Interests

RIGHTS OF DETENTION AND SALE

Overview

• Legislative right applying in variety of circumstances

• Most practical relevance : outstanding payments regarding airports, air navigation and aircraft emissions

• Detention rights referred to as liens/fleet liens, but not based on possession

57

Troubles With Liens and Non-Consensual Interests

RIGHTS OF DETENTION AND SALE (Continued)

Airport Charges

• Payable for use of airport facilities

• S.88 Civil Aviation Act 1982 Power to detain and sell:

“(i) the aircraft in respect of which the charges were incurred…..; or

“(ii) any other aircraft of which the person in default is the operator of the aircraft at the time when the detention begins”

58

Troubles With Liens and Non-Consensual Interests

RIGHTS OF DETENTION AND SALE (Continued)

• New operator can be required to pay charges incurred by former operator

• Fleet lien concept : one aircraft may be detained for charges incurred by rest of operator’s fleet

• No Warning / court order required

• Aircraft may be sold after 56 days

59

Troubles With Liens and Non-Consensual Interests

AIR NAVIGATION CHARGES

• Similar legislation enabling CAA to act on behalf of NATS and Eurocontrol

• Recovery of fees for air traffic/air navigation services

• Primary liability falls on operator

• Eurocontrol may request CAA to detain pending payment:

(a) the aircraft which incurred the charges

(b) any other aircraft of which person in default is the operator when detention begins

60

Troubles With Liens and Non-Consensual Interests

AIR NAVIGATION CHARGES (Continued)

• Fleet lien of significant concern covering en route charges owed to 39 European countries

• Global Knafaim Leasing Ltd & CGTSN v CAA, BAA Ltd [2010]

GKL required to pay $2 million to Glasgow airport

Charges incurred by Zoom Inc

Outstanding amount due on GKL’s aircraft only US$400k

Collins J : fleet lien was “harsh but not unlawful”

61

Troubles With Liens and Non-Consensual Interests

EU EMISSIONS TRADING SCHEME

• Operators required to surrender allowances equal to tonnes of CO₂

• Civil penalties for non-compliance

• If unpaid for 6 months aircraft can be detained and sold

• Aircraft must be released if operator no longer entitled to possession

62

Troubles With Liens and Non-Consensual Interests

Repairer’s Lien Right to Detain Airport/Navigation Charges

Fleet Lien Airport/Navigation Charges

Ethiopia X X X

Kenya X

Morocco

Nigeria X

South Africa X

OVERVIEW: CERTAIN JURISDICTIONS IN AFRICA

63

Troubles With Liens and Non-Consensual Interests

POTENTIAL MITIGANTS

• Preventative monitoring : access to CEFA

• Checking with airport authorities

• Security deposit

• Supplementary monthly payments

• Pre-planning

64

Troubles With Liens and Non-Consensual Interests

NON-CONSENSUAL RIGHTS AND INTERESTS UNDER CAPE TOWN CONVENTION

Article 39 - Rights Having Priority Without Registration

• Article 29 – Priority of Competing Interests

“1. A registered interest has priority over any other interest subsequently registered and over an unregistered interest”

65

Troubles With Liens and Non-Consensual Interests

NON-CONSENSUAL RIGHTS AND INTERESTS UNDER CAPE TOWN CONVENTION (Continued)

• Article 1 definition of “unregistered interest”

“….. a consensual interest or non-consensual right or interest (other than an interest to which Article 39 applies) which has not been registered….”

• Article 39 Contracting State may specify categories of non-consensual right or interest having priority over registered international interest

66

Troubles With Liens and Non-Consensual Interests

KEY FEATURES OF ARTICLE 39

• Right/interest conferred by law

• May restrict but not expand right/interest through Convention

• Set out in Declaration

• Priority determined by Contracting State

• Examples : repair costs / air navigation charges

• Rights of detention : N.B. “another object”

67

Troubles With Liens and Non-Consensual Interests

ARTICLE 40 – REGISTRABLE NON-CONSENSUAL RIGHTS OR INTERESTS

• Specific categories of non-consensual rights/interests may be registered

• Examples: attachment orders/liens for unpaid taxes

• Same rights or interests can not be covered under both Articles 39 and 40

• Priority over subsequently registered international interests

68

Troubles With Liens and Non-Consensual Interests

APPENDIX 1

1. A Contracting State may at any time, in a declaration deposited with the Depositary of the Protocol declare, generally or specifically:

(a) those categories of non-consensual right or interest (other than a right or interest to which Article 40 applies) which under that State’s law have priority over an interest in an object equivalent to that of the holder of a registered international interest and which shall have priority over a registered international interest, whether in or outside insolvency proceedings; and

(b) that nothing in this Convention shall affect the right of a State or State entity, intergovernmental organisation or other private provider of public services to arrest or detain an object under the laws of that State for payment of

amounts owed to such entity, organisation or provider directly relating to those services in respect of that object or another object.

2. A declaration made under the preceding paragraph may be expressed to cover categories that are created after the deposit of that declaration.

3. A non-consensual right or interest has priority over an international interest if and only if the former is of a category

covered by a declaration deposited prior to the registration of the international interest.

4. Notwithstanding the preceding paragraph, a Contracting State may, at the time of ratification, acceptance, approval of, or accession to the Protocol, declare that a right or interest of a category covered by a declaration made under sub-paragraph (a) of paragraph 1 shall have priority over an international interest registered prior to the date of such ratification, acceptance, approval or accession.

Article 39 – Rights having priority without registration

Article 40 – Registrable non-consensual rights or interests

A Contracting State may at any time in a declaration deposited with the Depositary of the Protocol list the categories of non-consensual right or interest which shall be registrable under this Convention as regards any category of object as if the right or interest were an international interest and shall be regulated accordingly. Such a declaration may be modified from time to time.

Unmanned Aerial Systems - "Drones”:

big potential, big regulatory hurdles Claudia Eisenberg and Fabio Miceli

Associates

Norton Rose Fulbright LLP

19 September 2014

Parallel development of commercial drones

73

• The future is here

Delivery drone Paparazzi drone

Anti-poaching drone

The world’s giants invest in the future

74

Hoverbike

76

The Hoverbike has been designed to replace conventional helicopters such as the Robinson R22

Applications

78

Initially used by military

Today, drones mostly used for domestic, non-war and recreational uses:

• Real estate

• Mining

• Surveillance

• Ecology

• journalism etc.

Civilian drones outnumber military drones owned by US military

80

The democratisation of drones.

• In June, Dominos "DomiCopter" delivers pizza right to your door.

• Amazon.com is counting on its no-longer-secret "Octocopter" package delivery project.

81

• Shooting commercials and movies

• Surveillance of mines – with our own mine companies in South Africa already making use of drones

• Medicine delivery

• 3D mapping

• Protecting wildlife – conservation efforts such as those relating to orangutans and rhinos.

83

Physical cities and spaces are dissolving and giving way to planetary systems or networks of which the drone is the most

pervasive example.

Flying drone swarm

84

• A flock of interactive autonomous drones that form their own temporary Wi-Fi community–a pirate Internet.

• A free local network - completely off the radar.

• Facebook CEO Mark Zuckerberg has outlined plans to bring the internet to remote communities using drones.

• Google plans cloud-based Wi-Fi network - The Times of India

South Africa: a regulatory example

• Part 94.01.2

”No person shall operate a non-type certificated aircraft unless:

(a) An authority to fly or proving flight authority has been issued in terms of these regulations;

(b) The aircraft is in an airworthy condition; and

(c) The PIC is the holder of a valid pilot licence with the appropriate rating for the

particular category and type of non-type certificated aircraft.”

85

South Africa: a regulatory example (cont’d)

Model aircraft vs Unmanned aeronautical vehicles

• Model aircraft

– a heavier-than-air aircraft of limited dimensions

– with or without a propulsion device

– unable to carry a human being and

– to be used for competition, sport or recreational purposes rather developed for commercial or governmental, scientific, research or military purposes.

– not exceeding the specifications listed in Document SACATS 24.

• Unmanned aeronautical vehicles (UAV)

– no definition

– excluded from definition of model aircraft - developed for commercial or governmental, scientific, research or military purposes

– no specifications provided

86

South Africa: a regulatory example (cont’d)

PART 24

• Airworthiness standards for non-type certificated aircraft

– Applicable to UAVs and model aircraft

– Cannot be flown unless it has been registered and marked in accordance with Part 47 (Part 24.01.03)

– The owner must submit certain documentation to the Director for approval, as specified in SA-CATS 24.

• Airworthiness standards for non-type certificated aircraft

– The owner may apply for an authority to fly or amendment thereof (Part 24.01.1(2).

So far so good….

The problem?

No specifications for the SACAA to work against.

87

South Africa: a regulatory example (cont’d)

SA CAA Press Release (July 2014)

• “The SACAA has not granted any approval to any entity or individual, due to significant and real safety risks presented by this new sector of aviation…”

• “… the SACAA has made considerable progress in terms of drafting of an Interim Guiding Document earmarked to help with… authorisations…”

– Provide certain standards for compliance in order to obtain an authorisation to operate RPAS in South African airspace

– Research is currently underway with “a state-owned entity” in relation to suitable standards

– Will be turned into appropriate regulations and technical standards

• “It is envisaged that the new regulations will be available soon after…. 31 March 2015…”

88

DRONEs and ICAO

DRONEs

• dynamic remotely operated navigation equipment - not limited to aircraft.

• The term is usually associated with military uses. . Therefore, UAS is preferred.

• Increasing autonomy with “detect and avoid” technology.

• However, still poor safety record (World Crash Database)

ICAO

• “pilot” v “remote pilot”

• UAS will not, in the foreseeable future, have passengers on board for remuneration.

89

US approach and FAA

90

• Special Airworthiness Certificate – Experimental Category

• UAS operations are currently not authorised in Class B airspace

• The FAA Modernization and Reform Act was passed by US Congress on 14 February 2012.

EU and EASA

91

• The EU set up a UAS initiative in 2011 with a view to integration starting in 2016.

• EASA

• Policy statement

“to facilitate acceptance of UAS civil airworthiness applications, while upholding EASA’s principle objective of establishing and maintaining a high uniform level of civil aviation safety in Europe”.

• More than €315 million on drone research. Much of it for border control and policing.

ASTREA

92

Autonomous Systems Technology Related Airborne Evaluation & Assessment

• Led by an impressive consortium of seven companies: AOS, BAE Systems, Airbus Defence & Space, Cobham, QinetiQ, Rolls-Royce and Thales.

• Two projects

– Assurance & Control

– Autonomy & Decision Making

• 500-mile flight through UK airspace under the command of a ground-based pilot and control of NATS air traffic controllers.

Presenter details

Fabio Miceli

Associate

Norton Rose Fulbright South Africa

• +27 (0)11 685 8901

• Fabio.Miceli@nortonrosefulbright.com

Claudia Eisenberg

Associate

Norton Rose Fulbright South Africa

• +27 (0)11 685 8554

• Claudia.Eisenberg@nortonrosefulbright.com

93

Disclaimer Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members (“the Norton Rose Fulbright members”) of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.

References to “Norton Rose Fulbright”, “the law firm”, and “legal practice” are to one or more of the Norton Rose Fulbright members or to one of their respective affiliates (together “Norton Rose Fulbright entity/entities”). No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose Fulbright entity (whether or not such individual is described as a “partner”) accepts or assumes responsibility, or has any liability, to any person in respect of this communication. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifications of the relevant Norton Rose Fulbright entity.

The purpose of this communication is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of any Norton Rose Fulbright entity on the points of law discussed. You must take specific legal advice on any particular matter which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose Fulbright.

Aerial Training & Development

Conference, 18 and 19

September 2014

“Ownership and Control” – Recent developments

in South Africa Thomas Lawrenson

95

• The concept of “Ownership and Control”

• Background to the requirement of Ownership and Control

• Bilateral Air Services Agreement

• Position in foreign jurisdictions

• Current legislation in RSA – Domestic and International

• Recent Developments

• Africa – General Liberalisation – Ownership and Control

hurdles

• Conclusions

Introduction

96

Concept of “Ownership and Control”

97

• Chicago Convention – Article 6 – The source of BASA

• The Transit and Transport Agreement – Concept of “Ownership

and Control” is created

“Each contracting State reserves the right to withhold or

revoke a certificate or permit to an air transport

enterprise of another State in any case where it is not satisfied

that substantial ownership and effective control are vested in

nationals of a contracting State”

• Reasons behind the specific requirement?

• Economic Protection

• National Pride

• Security concerns

Background

98

• Purpose – Regulation of the air service between the territories

of two parties

• Exchange (regulation) of “Hard Rights” and “Soft Rights”

• Progression to “Open Skies” BASA – (Deregulated)

• Constant throughout progression – “Ownership and Control”

• Substantial ownership – not defined – Defer to local law, i.e.

majority ownership (50% + 1)

Bilateral Air Services Agreements

99

Foreign Jurisdictions

• 75% of the “Equity” controlled by US Citizens

• Effective control – Subjective test

• President must be US Citizen

• 2/3 of Board must be US Citizen

• Identity of those who make decisions on key

issues affecting airline, i.e. business plans,

major investments

• Who has the power to appoint or dismiss

directors

• Identity of Actual Control – Piercing the

Corporate Veil

• EU Regulation 1008/2008

• Art 4 (f)

• Members and/or nationals own more

than 50% of the undertaking; and

• Members and/or nationals are in

effective control, directly or indirectly, of

the undertaking

• “Effective Control” – the possibility of directly

or indirectly exercising a decisive influence

on an undertaking .

100

• Two Acts that govern the provision of Air Services

1. The Air Services Licensing Act No 115 1990 of (“Domestic Act”)

2. The International Air Services Licensing Act No 60 of 1993

(“International Act”)

• Domestic Act

1. 75% of the voting rights to vest in residents of the Republic

2. License holder to be in “active and effective control” of the air

service

• International Act

1. substantial voting rights to vest in residents of the Republic

2. License holder to be in “active and effective control” of the air

service

• Resident of the Republic – ordinary residence and citizen

• No definition of “active and effective control”

Position in RSA

101

Recent Developments – Safair / Skywise

and Comair

• Factual Background

• Amendment Application for scheduled license

• Company structure at the time

• Compliance with the Act

• Objections by Comair and Skywise

• More than 25% of shareholders non-residents

• Safair not in “effective control” of air service

• Beneficial shareholders – 100% owned by Holding

Company

• The Council Dismissed Objections and granted

license

102

• 100 Ordinary shares - D

• 300 “A” ordinary shares – A, B and C

• 400 issued shares - Total

• 75% vest in residents of the Republic

Structure Presented by Safair

Safair

Individual A

(South African)

25% "A" shares

Company D

(Registered in

Ireland) 25% shares

Individual B

(South African)

25% "A" shares

Individual C

(South African /

Irish) 25% "A"

shares

103

The True Structure uncovered

A (0%) B (0%) C (0%) D

(100%)

Company E

(Irish 100%

of D)

Company F

(Belgium

51% of E)

Company G

(Belgium

49% of E)

104

Courts interpretation of the requirements

• Application to Court to stop Safair from flying

• Same basis of objections

• “Ordinary Residence”

• Court assessed factors that can be taken into

account in determining the “ordinary residence”

of an individual:

• Where do you feed your pets?

• Where do you get your mail?

• Where do you go to bed every night?

• “Active and Effective Control”

• Active – Meaning the everyday running of the

airline

• Effective – Accepted the EU Regulation

definition

105

• Yamoussoukro Decision – Purpose

• Development of intra-African and International air services

• Liberalisation of air transport services with the region

• Abandons the concept of “ownership” and accepts the notion

of “place of business”

• Requires “effective control” to vest in State or nationals of

State

• Implementation has been slow:

• States not willing to relax ownership and control requirements –

Protection of State / Legacy carriers top priority.

• Ownership effective control requirement – market entry barrier

• Foreign companies not willing to invest in airline without some

form of control over the business.

Africa – Liberalisation – Ownership and

Control Hurdles

106

• “Ownership and control” – Is it still necessary?

• Air Service Providers to approach Courts in the event of failure

by Regulators to enforce requirements (Safair) – Importance of

level playing field

• The Key to Liberalisation in Africa - Balance between

protecting flag / local carriers from international competition

and relaxing foreign ownership and control requirements

THANKS

Conclusions