May 1, 2012 - Aviation Capital Group (ACG) of Newport Beach, California has prevailed in its litigation with Olympic Airlines (Olympic). In a case that has attracted considerable attention in the aircraft leasing industry, the English High Court rendered judgment on Monday in ACG’s favor in ACG Acquisition XX LLC v Olympic Airlines S.A.  

The Court found that Olympic was bound by its acceptance of a leased aircraft and its statement that the aircraft satisfied the delivery conditions.

As a result, Olympic is liable for unpaid rent and not entitled to damages. By upholding a lessee’s acceptance of a leased aircraft, the judgment highlights the importance of commercial certainty to all participants in the aircraft leasing industry.  

Subsequently, a fault was discovered with a spoiler cable. Following further inspections a number of other issues were identified. Olympic carried out work on the aircraft but failed to return it to service. The Court has now confirmed that ACG was unaware of any defects in the aircraft when Olympic accepted the aircraft and certified that it complied with the delivery conditions. The Court also found that Olympic's ultimate failure to restore the aircraft to service in Greece cannot be attributed to any failure by ACG.  

Olympic had refused to pay rent and minimum monthly maintenance reserves for the aircraft, and also claimed that it was entitled to be compensated for both wet leasing costs and the costs of repair. The Court has rejected those claims. It has held Olympic liable for all of the unpaid rent and maintenance reserves, plus damages to cover the remainder of the lease term.  

The Court referred to the importance of certainty in commercial dealings in its judgment. “I believe that today’s judgment should reassure participants in the aircraft leasing industry that lease documents, especially acceptance certificates, will have the clear and certain effect that lessors and lessees expect,” said Loren M. Dollet, Executive Vice President of ACG. “Having that clear and certain interpretation of leases facilitates the efficient and cost-effective financing of aircraft, which benefits all operating airlines as well as lessors.”

The aircraft in this case is owned by the Claimant entity, ACG Acquisition XX LLC, which is a non-consolidated securitization vehicle for which Aviation Capital Group acts as Servicer.  Any alleged defects were in no way attributable to ACG; prior to being leased to Olympic, all maintenance work was the responsibility of the previous lessee, Air Asia.  Following its repossession from Olympic by ACG, the aircraft was successfully returned to service, and placed with a new lessee. It has operated without incident since that time.

Previously, an interim judgment had been given in which the Court held that Olympic had an arguable case for breach of contract, total failure of consideration and frustration. Despite the fact that it did not decide any questions of fact or points of law, that decision attracted considerable attention. The judgment which the Court has given does decide the case, and having considered Olympic's arguments, the Court has rejected them. Olympic has the option to appeal this ruling.