Partner Perspectives: Dr. Martin R. Geiger and Irena Gogl-Hassanin

Could you share with us how you initially became involved in the aviation sector and what drew you to this field? 

Martin:
I started my career with Freshfields Vienna and then later became partner at DLA Piper Vienna and DLA Piper I was in the banking and finance department. One of my larger banking clients once asked me do you also do aviation finance? And I said of course I do aviation finance.

And this was actually my start of becoming involved with aviation and finance. And from then on it started becoming a larger and larger practice. And the more I got involved in aviation, also operators, owners, KMOS, etc came to my practice and that’s where I ended up becoming an aviation lawyer.

Irena:
Well, apart from loving to travel, I started my career in a law firm that was basically the in house counsel of Austrian Airlines. I started there as a student and then as a trainee and they even seconded me to Austrian Airlines and that is how I got involved in aviation. So from the moment I started practising law, aviation law was a big part of what I was doing.

Other than Martin, I didn’t straight away start with aviation finance. It was more aviation law, regulatory matters and also civil law matters. I still go to court a lot with liability cases under the Montreal and Warsaw conventions, for example, flight accidents and all these issues that have an Austrian connection. That’s where I started my career as a litigator and then I moved on. I moved on also to DLA Piper, where I started working with Martin and in aviation finance.  And then I decided to do a master’s degree in London at UCL in international banking and finance. And that’s where I basically perfected my finance skills. And from that moment on, aviation has been a big part of our practice in the litigation area as well as in the finance area.

Your career spans various facets of aviation law and finance. What experiences or achievements are you most proud of?

Martin:
Obviously we’ve done a lot in the during time we are doing aviation and finance. But I think what I’m most proud of that after Lehman, obviously also a lot of Austrian banks became financial difficulties. And one of the large Austrian banks got basically insolvent and was liquidated by the Republic of Austria. And I advised this bank on their aircraft financing. And we were able, or I was able with my team together to recover through litigation within the EU and through arbitration internationally, dozens of aircrafts back to this bank. And this is what I’m very proud of.

Irena:
Well, the biggest achievements or the most achievements that make me proud are the ones where we go. We need to defend our clients in court and win because we are almost always on the side of the airline or the insurance standing behind the airline.

I work very closely with Clyde and Co, in the UK and so a lot of cases that have Austrian roots are referred to me and they are mostly major cases where there’s a lot at stake. And if we can manage and to defend the airline in circumstances which are usually quite difficult from an evidence point of view for the airline, then that makes me very proud. And we have had quite a few wins in that respect where we could defend $1,000,000 claims, for example, for flight damages or also in aviation and aircraft accidents where passengers claimed damages for injuries that were not related to the accident, which in the course of the evidential proceedings we could find out through expert opinions. And these wins make me proud because we can actually, although it is quite difficult for airlines to succeed before the courts, we could still manage to defend some of these very important claims for our clients.

You have extensive experience advising lenders and borrowers on aircraft financings. What are the most critical elements to consider when structuring these deals?

Martin:
I would like to start answering this question by because I’m an Austrian lawyer shortly about Austria. The Austro control, which is the Austrian supervisory authority for aircrafts, has a very good reputation to be a very service and so resolution oriented supervisory authority as compared to a lot of other countries.

And 2nd, as Austria is a neutral country and is quite reputable and recognised worldwide, a lot of international customers and clients decide for an Austrian call sign and an EU operator operating this aircraft because they have a good reputation when landing everywhere worldwide coming with an Austrian call sign. And secondly, because the Austrian aircraft register is an operator based register, which means the owner is not registered, not publicly available, which means that you can have a certain kind of privacy what the owners are.

And only the operator which is often used in Austrian operator lands the aircraft safely everywhere in the world. Now, having said this, when structuring finance regarding Austrian and international aircraft with the cross-border interest in Austria, you also need to know there is a Lex Niki Lauda, kind of Niki Lauda, famous Formula One driver created his, the first private airline after Austrian Airlines, the first national airline. And obviously Austrian Airlines did not like that very much. So they tried to impede this as much as possible. And this is why until this very date, the Austrian Aircraft register does not register pledges over aircrafts, which means that the Austria aircraft financing is done via leasing structures, so that the bank or the leasing firm stays the civil law owner of the aircraft.

This is a very central element which means that the things like the registration power of the attorney are very central. And also what we call the tripartite agreement, which means a three-part agreement between the bank or leasing firm, the commercial owner, so to say, of the aircraft and the operator that if there is anything happening, the bank or leasing firm gets very quickly direct access through the operator to the aircraft.

The 3rd element I would say, which is important is that if you deal with financings with all partners within the European Union or European Economic Area, including Switzerland for example, then litigation clause is sufficient because you can then enforce judgements of Austrian courts, which are by the way rather quick with judgements compared to international statistics in all of these countries.

When it comes to Non-European Union or Non-European economic area countries, you need to make sure that you have an arbitration clause in there and we have all so-called Vienna rules or you can also put an ICC clause in the agreement. And then you would be able under the New York Convention of 1965 to enforce this arbitral award that you get, for example, in Vienna nearly worldwide. Because I think some 117 countries worldwide have ratified the New York Convention.

Aviation law is heavily influenced by international regulations. How do you navigate the complexities of these regulations when advising clients?

Irena:
Well, with our experience of course, but no, to be serious now, I think the regulation by international regulations and harmonised law is benefit that we have an aviation law because it makes clients much more aware of what is applicable, and you don’t have to explain particular Austrian frameworks and particularities to the clients, because they already know, because they are harmonised and internationally applicable.

We have basically two internationally applicable frameworks. One is the EU, where especially aviation law is heavily regulated by an EU regulations which are directly applicable, and some EU directives which are implemented into national law. But here also the rules are interpreted in the same way, which makes it easier for us to first of all access this interpretation and court judgments for, for example, from the ECG, which sometimes are a bit unpredictable. But yeah, we have to navigate that and work with it. But also in terms of the understanding that the client brings when they have a problem that we advise on so we can actually explain it a lot better than.

On the international level we deal mainly with the Warsaw and Montreal Convention framework and which are two of the main international conventions that are applicable in Austria and which also have rules that are clear enough to be directly applicable. As you know, international conventions first need to be ratified and then, if they are not clear enough, implemented into a national law. These two conventions are applicable as they are, which makes it easier to interpret them because judgments not only from Austrian courts but also from other courts where Member States are part of this conventional framework can be used to argue in favour of the client. So we have a lot of liability cases and that are regulated by this framework.

Other conventions that are applicable in Austria a lot of times refer to technical issues or safety and security issues, and that are not so much issues for us as legal advisors because there’s not so much dispute over these issues. There’s one convention that I would like to also mention which is the Cape Town Convention on international interest in mobile equipment, where Austria is not a party to that convention. So it is actually not a people in Austria. However, it still has a great impact, especially in finance and usually finance transactions.

Austria is a small country, so a lot of aircraft sales, for example, in business aviation, are performed cross-border. And then if an aircraft, for example, is sold to a country where the Cape Town Convention is applicable, and even though it was not applicable in Austria, any mobile interest that is registered in that convention might suddenly become relevant. So even though it is not part of the Austrian law, we still have to take it into consideration.

How is the aviation industry adapting to the increasing emphasis on sustainability and environmental regulations, and what role do you play in advising your clients in this area?

Well, I think the aviation industry has been working on becoming more sustainable and environmental friendly for a very, very long time. I think a lot longer than maybe other industries because the finger is always pointed at the aviation industry for being so environmentally unfriendly. And I think that is where innovation kicks in and is developed at and nobody really notices it, I think.

So for example, what is now very, very often discussed and also implemented are E fuels, SAF for example, which is now being mixed into the fuels used in commercial aviation regularly. And I think there are also there’s an interest to see these issues being used more and more often. Also in terms of suppliers for the aircraft industry, I think sustainability and environmentally friendly material and to be used is very important.

There’s a lot going on here. Just recently I went to visit a company that makes interior design for aircraft and they had some really very interesting innovative techniques where they make vegan leather and they made some material made of throw away corn cobs and that is now used in very high level and luxury interior design for an aircraft. So there’s really I think no limit with regard to that concerning the industry. Where our role now comes in, in terms of sustainability and environmental regulations. I think looking at aviation finance, the compliance with ESG requirements and regulations will become more and more important, not only for the aviation and industry players themselves seeking them for finance, but also for the banks providing the finance, because they too are regulated and are required to take into consideration ESG requirements. And I think we can see it in other industries, not so much in the aviation industry yet, but it will come that ESG compliance and environmentally friendly projects will profit from better conditions in finance and others.

Another development that the EU is now working with is the Corporate Sustainability Due Diligence Directive, the CS3D, which was agreed on in April 2024. And that will have a big impact also on the aviation industry because it provides for rules on reporting, risk assessment, compliance with human rights, working conditions and Environmental Protection. And all these requirements will need to be implemented in the whole process of the companies, not only the large companies that reach certain thresholds, but also suppliers and corporation partners and that are maybe of a much smaller scale than these big companies. And they will need to consider the requirements and reporting systems and maybe internal bodies that need to be drawn up or other procedures that need to be defined under this new directive.

And so I think we will be playing a large role here in advising not only larger companies with how to effectively implement these requirements, but also for the smaller companies that might not have this internal framework and internal capacity and to handle this by themselves. So I will see our role in advising there in terms of ensuring efficiency and also the least impact on procedures and profitability that are already in place.

How has the aircraft financing landscape evolved over the past decade, and what trends do you foresee in the near future?

Martin:
What we see a lot is that the aircraft operators, the banks and the owners look to create efficiencies financially and also structuring wise for the financing through getting the aircraft flying as much as possible especially in business aviation. Which means that the charter structure needs to be optimised because a lot of especially business aircraft used to stand a long time obviously would not make money in this time. So a lot of industrial groups of companies go together, especially last decade, or also privately held aircrafts. They create groups of owners that give their aircrafts to one AOC, one operator in order that the aircraft, let’s say, makes money all the time, because that makes them happy and it makes the bank happy.

And the 2nd trend I see a lot, especially in Austria is that as also COVID turns down obviously the air traffic a lot. Meanwhile, we are back to where we were at 2019. And the predicament is that the aircraft traffic will increase tremendously over the next decades, especially also with Asian travellers. And this is, for example, why Vienna Airport now is building a third runway and this building a further very modern great terminal and improving also the general aviation business hubs and so forth. So I foresee that especially Vienna and Austria, which is already a strong hub for airlines and specials of a business aircraft, will become an even stronger hub in the heart of Europe for both airlines and business aviation aircraft.