PPS Serial Numbered Collateral Series – Part 3: Aircraft

Articles

Aircraft is a type of serial numbered collateral which includes a specified type of machine or craft that can travel in the air along with an aircraft engine, airframe or helicopter.

The Personal Property Securities Regulations 2010 (Cth) (PPS Regulations) defines “Aircraft” as follows:

  • a machine or craft that can travel in the air and has nationality and registration marks assigned to it under the Convention on International Civil Aviation (done at Chicago on 7 December 1944) (as amended) (Chicago Convention);
  • Aircraft Engines” – engines that are powered by jet propulsion or turbine or piston technology and
    • in the case of jet propulsion aircraft engines, have at least 1750lb of thrust or its equivalent; and
    • in the case of turbine-powered or piston-powered aircraft engines, have at least 550 rated take-off shaft horsepower or its equivalent;
  • Airframes” airframes that, when appropriate aircraft engines are installed to it, are type certified by the competent aviation authority to transport at least 8 persons (including crew) or goods in excess of 2,750 kilograms;
  • Helicopters” means heavier-than-air machines supported in flight chiefly by the reactions of the air on one or more power-driven rotors on substantially vertical axes and which are type certified by the competent aviation authority to transport that can transport  at least 5 persons (including crew) or goods in excess of 450 kilograms,

together with all modules and other installed, incorporated or attached accessories, parts and equipment (including rotors) and all data, manuals and records.

The PPS Regulations have a separate definition for “Small Aircraft” – being an aircraft other than an Airframe, Aircraft Engine or Helicopter.

The definition of Aircraft Engines, Airframes and Helicopters has the same meaning as given to those terms in the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (done at Cape Town on 16 November 2001) (Aircraft Protocol).

The Personal Property Securities Act 2009 (Cth) (PPSA) and Aircraft Protocol both exclude aircrafts that are used in military, customs or police services.

Cape Town Convention and Aircraft Protocol

The Convention on International Interests in Mobile Equipment (done at Cape Town on 16 November 2001)) (Convention) and the Aircraft Protocol took effect in Australia on 1 September 2015 (collectively, the Cape Town Convention).

The Cape Town Convention is designed to:

  1. establish an electronic online registry – known as the International Register of Mobile Assets (International Registry) – for recording international security interests in aircraft objects – Airframes, Aircraft Engines and Helicopters. The interests can include a financier’s or lessor’s security interest or the interest of a purchaser under a purchase agreement;
  2. regulate priorities of international interests; and
  3. establish standard international default and enforcement remedies for countries that have acceded to the Cape Town Convention.

Broadly, the Cape Town Convention applies to:

  1. high-value aircraft objects in civilian use with specified capacity and power – being the specifications as outlined in the definitions of Airframes, Aircraft Engines and Helicopters:
    • airframes that can transport at least eight persons (including crew) or goods in excess of 2,750 kilograms;
    • helicopters that can transport at least five persons (including crew) or goods in excess of 450 kilograms; and
    • aircraft engines that have at least 1750lb of thrust (jet propulsion) or 550 rated take off shaft horsepower (turbine powered); and
  2. security agreements:
    • in writing;
    • that grant an “international interest”; and
    • under which, on execution, the grantor is situated in a state where the Convention applies (i.e. Australia).

Where the Cape Town Convention applies, the secured party must register security interests in the aircraft objects on the International Registry. The following priority regime will subsequently apply:

  1. a registered interest on the International Registry will prevail over an unregistered one; and
  2. as between two registered interests, the first to be registered will prevail.

See here for more information on the Cape Town Convention.

Interaction between Cape Town Convention and PPSA

In Australia, security interests in aircraft objects are regulated by the PPSA and Cape Town Convention, as applicable.

The Convention (and registering on the International Registry) only applies to aircraft objects which satisfy the relevant capacity, power and use definitions. Aircraft objects that do not meet the criteria set out in the Cape Town Convention are regulated solely by the PPSA (and registration is required on the Personal Property Securities Register (PPSR)).

For collateral where the Cape Town Convention applies, a security interest registered on the International Registry will have priority over a registration on the PPSR, even if that registration was registered on the PPSR first. Additionally, the Cape Town Convention will prevail over the PPSA to the extent of any inconsistency between the two regimes.

Notwithstanding that the application of the regimes are specific to certain aircraft objects, the scope of the PPSA is broader in some ways – for example, a security interest over sale proceeds or contractual rights relating to the aircraft. In the circumstances, secured parties should register security interests on both the International Registry and on the PPSR (even where only the Convention applies).

Registration Requirements for Aircraft on PPSR

For registration purposes on the PPSR, separate security interests should be registered on the PPSR and must be described by serial number (irrespective of whether the property is consumer property or commercial property) over any Small Aircraft, Helicopter, Airframe and each Aircraft Engine.

To describe an Aircraft Engine, Airframe or Helicopter by serial number for a financial statement on the PPSR, the following must be included:

  • the manufacturer’s number (which means the serial number attached to the aircraft and each engine by the manufacturer);
  • the manufacturer’s name; and
  • the manufacturer’s generic model designator / description.

For a Small Aircraft, the description by serial number must include the aircraft nationality code and registration mark assigned to it under the Chicago Convention. The nationality mark for an Australian aircraft is ‘VH’. The nationality mark is followed by a hyphen and registration mark of three characters as allocated by the Civil Aviation Safety Authority (CASA).

A registration will be considered defective under s 165(a) of the PPSA if the collateral must be described by serial number and a search of the serial number is unable to identify the registration (i.e. there is an error in the serial number or no serial number was included in the registration).

This article does not cover the specifics of registration on the International Registry. The International Registry is a separate online system with distinct processes to the PPSR. ERA Legal can assist secured parties register on the International Registry.

Stay tuned for Part 4 of the series on Watercraft, satellites and Certain intangible property (i.e. patent, trade mark, plant breeder’s right and design) coming soon.

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