Law Firms

Over a considerable period of time, the aviation finance market has shown itself to be subject to distinct phases which typify a ‘boom and bust’ cyclical development, as periods of rapid expansion and broad capital asset investment in aircraft are followed by massive contraction and restructuring of existing business.

In comparison, legal services in the market have generally remained the same in terms of the services themselves and the identities of the providers, which have each respectively come to represent ‘the market standard’.

However, as the market enters a new expansionist cycle, there are signs that a re-engineering of legal services to the aviation finance sector is well underway.

With each cycle has come the opportunity for lawyers already active in the aviation finance market to enhance their profile and that of their firms, leaving them well placed to serve a greater market share as the next cycle commences.

However, empirical and anecdotal evidence suggests that the established providers and their roles are being reassessed by an increasingly sophisticated group of legal service purchasers, both on the lender or lessor side at aviation finance banks and aircraft leasing companies and on the borrower or lessee side at airlines.

Many of these ‘smart procurement’ personnel are lawyers who were once employed by the established aviation finance law firms but who have sought greater and more varied industry involvement and work/life satisfaction in a business role.

Furthermore, with the massive aircraft orders for an increasing number of new market entrants and the emergence of new people at existing market players, clients are specifically assessing these issues and matters relating to the costs of doing business in aircraft finance.

A number of trends are emerging which are likely to dictate the future direction of legal services in this market.

Clients at banks, leasing companies and airlines reasonably expect that excellence and legal technical competence in aviation finance matters is now a given, so what is more likely to drive people to instruct law firms and particular lawyers on aviation finance matters is more to do with how the services are provided and what else they can expect to receive as part of the service offering.

How the services are provided

Aviation finance clients expect their transactions to be lawyered and visibly led by their trusted senior aviation finance specialist, rather than delegated to a team of junior lawyers.

Lawyers are expected to be good ambassadors for their client’s business as well as their own and therefore need to be well-rounded business people with a dynamic but sensitive approach to transactions.

Clients value an inclination of an aviation finance specialist to seek alternative solutions and help deliver better transactions more efficiently, rather than to rely dogmatically on aviation finance precedent.

What else they can expect

In an increasingly regulated environment (where the European Union alone has recently issued a number of directives on matters as diverse as support for airline passengers with reduced mobility and compensation for denied aircraft boarding), aviation finance lawyers are expected to understand and have a working knowledge of macro issues affecting the aviation industry and the industrial context of their advice, including the regulatory environment in the sector.

Additional benefits, such as training and know-how sessions for personnel, provided by lawyers and law firms, are appreciated and often provided free of charge as part of an ongoing business relationship with the relevant lawyer or law firm (increasingly relevant as a swathe of new law and practices affecting the market emerges, such as the Cape Town Convention).

A clear distinction of the market differentiation of a particular aviation finance lawyer or his firm to enable the potential client to choose the correct ‘horse for the course’, such as a particular subset of the market on a particular jurisdiction.

As a consequence of all this, established law firms and lawyers in the aviation finance market are coming up against a number of (relatively speaking) new entrants, providing real competition and genuine alternatives.

This is being welcomed by the purchasers because their increasing sophistication is supporting the trend towards a requirement for genuine value for money and a genuine ‘relationship’ approach to lawyering, which sees each side effectively open to a risk-sharing arrangement as regards each other’s business which, in turn, develops a broader, deeper and ultimately a more effective mutual understanding.

That, and the associated requirement for industry-grounded expertise and a broader knowledge of the sector context of aviation finance and transactions — including from the established aviation finance participants — is fostering the creation of boutique aviation specialist firms, where the full range of aviationrelated expertise in legal terms can be assessed by the clients and coherently delivered as advice and support to them, including top quality aviation finance legal services.

This phenomenon has had the interesting by-product of a number of recent (in some cases high-profile) lateral moves between law firms of senior lawyers and partners receptive to these changing requirements and unable to respond to them in the confines of the established aircraft finance practices in which they were working.

In the long run, these trends should benefit all concerned — purchasers with an increased choice of more relevant legal advisers and lawyers with an enhanced ability to take entrepreneurial advantage of a market shift.

We are into the next cycle in the aviation finance market, which will see change in some of its structures, including the provision of professional legal services. Clients are insisting on excellence as always, but it is increasingly clear that there is more competition to deliver that excellence and to be excellent in that delivery.

Obtaining outstanding value for money from law firms in this area is now, and will remain, a primary objective of clients in all areas of the aviation finance market and those law firms which succeed will be those that offer that value by way of industry knowledge and context, flexibility in approach and a business-like attitude towards pricing the cost of their services.

The situation represents a challenge to law firms in that regard, but also to the clients: those who articulate their needs in a sophisticated and relevant manner will derive most benefit from the increased choice of legal services to the aviation finance market.

Philip Perrotta is a partner in the aviation finance group at Clyde & Co.

Latest Jobs

• Debt Capital Markets, 3+ pqe, US Rates, To £135,000 + Bonus
• Construction Partner TO HEAD TEAM
• INSOLVENCY LITIGATION SENIOR ASSOCIATE/PARTTNER
• Property Litigation 1-2 PQE – to £City