Urgency of Regulation: Aircraft as Object of Credit Guarantee

Abstract

Until now in Indonesia, there is no specific regulation regarding aircraft as collateral object. As a result, in practice, the aviation industry players experienced obstacles related to aircraft financing by guarantee agreements with aircraft objects. Such conditions create legal uncertainty both for credit providers (creditors) and the aircraft guarantees (debtors), because there are no references or signs that can provide direction in the guarantee agreement. If there is a default by the debtor, the creditor has no legal basis for how to execute it. To fill the legal vacuum, in practice, a guarantee agreement was found with the fiduciary deed of the aircraft. Whereas the Fiduciary Law expressly states that it does not apply to (mortgages) aircraft. While on the other hand, Law No. 20 of 2014 concerning Notary Position gives authority to the notary to make an aircraft mortgage deed. Thus the regulations in Indonesia give signals to use aircraft as collateral object. Such a situation demands the urgency for regulations on aircraft guarantee that can provide legal certainty and legal protection for the parties.

Model of legal protection for aircraft property guarantee in Indonesia

“…Therefore, specifically towards the legal isssues regarding aircraft financing have a high risk which frequently caused the subordinate position of the creditor (Yahanan, 2020;Wirsamulia, 2021), due to the aircraft is a high value movable asset which able to travel rapidly from one jurisdiction into another jurisdiction within a short time (Shadrina, 2011;Yeomans, 1986). According to the international perspective, there are several recognitions to set an aircraft as a collateral such as the whole aircraft including the spareparts, the separation of the spareparts from the aircraft, an aircraft currently in the construction stage, all aircraft (airlines' fleets) legally owned by an airline, and all the property owned by an airline (Yahanan, 2020). A collateral can be defined as a several regulations to implement a legal protection for the creditor (Hartanto, 2015).…”