MARTYN FIDDLER AVIATION: HOW TO HANDLE THE UNEXPECTED
While you cannot plan for the unexpected, you can put in place methods to help you handle anything from ramp check allegations to international sanctions.
The team at Martyn Fiddler Aviation guides us through their checklist, covering the potential impact an unexpected event can have on a transaction, how to manage that event to give a positive outcome and why communication and leadership are vital to managing the unexpected.
While the private aviation industry is currently enjoying near-record levels of aircraft transactions, it has also had to cope with a series of unexpected blows, from the uncertainty of Brexit, through the global pandemic, ongoing financial crises and now war in Europe. While these global events expose aircraft transactions to unexpected risks, so do the more local corporate happenings, such as unforeseen aircraft technical issues, unexpected absence of key team members, or even IT and email crashes or hacks that stop access to required information. So what can you do when your transaction is affected by an unexpected event?
“It is likely that a core team will already be involved if a transaction is underway when the unexpected event occurs.”
Heather Gordon, Legal Director, said: “The very first step is to identify the main issue and any issues that flow from that primary event. In practice, there will often be a ripple effect – a key issue to resolve but several others that will arise as a result.” She explained that while having an aircraft suddenly grounded is your first issue, the flowing events could be ongoing flights that cannot happen, routine maintenance that was scheduled, or crew hours and positioning that will be affected.
Gordon added: “It is vital to consider very early on whether or not a potential reputational issue may arise. If in doubt you should appoint a dedicated person responsible for managing media and public relations as part of the core team. This is an incredibly important and dedicated role that you want in place at the outset.”
Martin Kennaugh, Aviation Director at Martyn Fiddler Aviation, expanded on the importance of establishing a capable team, either from within the company or bringing in expertise to handle the situation.
“You need to assess the options – do you have multiple options, or just one? Are the options interim, such as safe guarding the aircraft and crew, or providing copy documents if originals will be delayed, or do you require longer term solutions”
He said: “It is likely that a core team will already be involved if a transaction is underway when the unexpected event occurs. If not this should be formed quickly and consist of persons that control, operate and manage the business of the aircraft; people that are able to take decisions and have lines of communication with the owner. It is vital to know the strengths and limits of the team and decide if any specialist or local advisors are required, depending not only on the nature of the event, but where it is happening. There is no harm in admitting that you are not completely comfortable in handling the situation and getting help. Getting things right is the key thing.”
Lines of communication must be established as unexpected events often unravel quickly and decisions will need to be made. Depending on the event, external bodies such as the relevant aircraft registry may also need to be informed and have input.
Information is power
The first role of the team is to assess what information is available and what additional information required in order to take actions and decisions.
Kennaugh said: “It is unlikely that you will get all information immediately. There may be lots of scrappy and perhaps unreliable information. It could come in different forms – such as data that you have to turn into information to begin making decisions. However, you must accept that you are dealing with an unexpected scenario and while the information you have is not perfect, you just need sufficient ‘good enough’ information to make decisions. Don’t delay and be afraid to make decisions.”
Kennaugh advises controlling the timeline where possible, but to remain flexible. He said: “If there is an aircraft or crew incident then near future flights scheduled may need to be delayed, canceled or alternative travel identified. It will be important to notify all parties that will be impacted by a change in timescales as soon as possible, to understand any additional issues this could present, and make all parties aware that flexibility will be required and highlight what is not moveable.”
Usually these unexpected issues will only cause a short delay, but the core team will need to identify how that impacts the closing mechanics, consider any knock on effects and perhaps suggest alternative options
Identify and discuss the options
Once the team has gathered the information, they have to assess and prioritise the available options. Phill Rawlins, Project Manager, said: “You need to assess the options – do you have multiple options, or just one? Are the options interim, such as safeguarding the aircraft and crew, or providing copy documents if originals will be delayed, or do you require longer-term solutions? Then you need to organise them in level of viability. Will they work or not?”
Once the options are organised, and the plan of action in place, it is essential to communicate the plan to everyone who will be impacted by your response to the problem.
Rawlins added: “Communicate what the plan is, so you can get feedback from other parties. It could be that your plan has an unintended consequence somewhere else. Get the communication net cast out as wide as required. It is then important to provide regular review and updates. Even if the update is that there is no update! Keep that communication regular so no one is left wondering if the situation has been resolved or not.”
From theory to reality
Unfortunately, the checklist is not just theory and the team has had to implement it regularly, often during the sensitive part of closing the transaction, and for all sorts of reasons.
Rawlins said: “When closing a transaction there are many moving parts. Frequently last minute problems arise because something has been overlooked. In our field of work this tends to be the formal customs export of the aircraft not having been put in place: whether this has been overlooked or it has been assumed to be managed by the buyer or the seller. This obviously impacts the timeline. In such scenarios contacting your specialist trusted advisors to assist and advise on the options available to resolving the issue is key. Communication is also required to explain to all parties if there is going to be a delay and keep everyone well informed. All the elements of the checklist come into play.”
“Usually these unexpected issues will only cause a short delay, but the core team will need to identify how that impacts the closing mechanics, consider any knock on effects and perhaps suggest alternative options”
When closing a transaction it is not always the elements that were missed, or perhaps should have been thought of, that can cause problems and suspend the closing. Sometimes things come completely out of the blue, as Gordon explained: “We experienced a situation when a sudden power outage in Oklahoma City meant that the FAA, escrow and everything was shut down for a period of time. The weather can also cause problems, especially on a small island where original documents have got to be delivered and fog can be an issue.
“Most recently we had an issue when an aircraft transaction was taking place and a World War II bomb was discovered at the airport and so it was temporarily shut down. These things are really beyond your control.”
Usually, these unexpected issues will only cause a short delay, but the core team will need to identify how that impacts the closing mechanics, consider any knock on effects and perhaps suggest alternative options – such as will copy documents do until the originals can arrive? Communication with all parties is key to minimise any unwanted impact on the parties involved.
Unforeseen financial issues
The team has also seen situations where unexpected financial events affect business, and they have been the specialists that were turned to for help. In this situation you are playing catch up with core team, identifying the information you will need to help and presenting options and issues that may not have previously been considered.
Kennaugh explained: “We had a situation where we were not involved with the client, companies or the bank, but were asked to step in when the client, who owned several assets and several companies, became insolvent. The other companies involved in the transaction asked us to come and help and become a safe pair of hands, to move the companies and the directorships over to us so we could pick up the ball and start running with it. We had to assimilate a lot of information in a short period of time: the business of the companies, their assets and contractual commitments. We had to form a team of accountants, administrators and advisors to consider what actions and information was required. Then we moved to prioritising. With regards to timescales, we didn’t move anything that was already set in place; rather it was trying to catch up with a moving train.”
Customs: ramp checks
Customs problems are not uncommon. The easiest way to help prevent such issues or to stop allegations escalating is to ensure you always carry the correct documentation on board. Rawlins is an expert in this area, and has plenty of experience with unexpected issues arising from aircraft ramp checks.
He said: “If a ramp check leads you into customs problems you need to ensure that the crew and anyone on the frontline clearly understands what allegations are being made and what their rights are. The first move is to ensure you use your trusted local advisors to get the support you need in that particular jurisdiction. You may need to outsource advice and your team and their network should be able to do that. A translator may also be required to ensure that terminology doesn’t get misconstrued, as language can be used differently in corporate contexts, or that the documents you need to provide are not misunderstood. Nationality, residency and passports can be unclear and need explanation.
“We have had situations where an operator has come to me, because they were aware that they had busted regulations, and came to us for advice and information gathering – asking ‘what have we done, what are the consequences, and how do we move on from here? We were able to work with them to gather that information and put mitigation measures in place.
“Another situation I had was with a customs officer who had out of date information. The industry is very specific and there are a lot of nuances with aviation. I was able to discuss this with the customs officer and show that they were actually wrong. They were using old legislation that no longer applied and they were trying to levy tax and duties from the client that were not there. That intervention from a trusted advisor solved the problems, so never hesitate to ask an expert.”
Global politics and legal sanctions
These examples are localised to specific aircraft and incidences, but as we have seen in the last few years, much broader global events can have huge effects on the industry, as the Russian incursion into Ukraine, and the sanctions that have arisen from it, shows. International sanctions can cause serious problems; contractual payments may be suspended and assets frozen.
Gordon said: “When unexpected sanctions are put in place, one of the parties involved in the transaction may no longer be able to operate in the way they had been. This will nearly always require additional, specialist advisors who really understand the sanction rules put in place, the politics behind it and the information that is required as well as any possible solutions. Timescales will likely be out of the control of the parties that are involved.
“While it is possible that the situation could resolve itself, this is unlikely to be because of input from any of the parties affected by it. It will be therefore be important for the team to consider whether an impacted transaction needs to be suspended temporarily or indefinitely. For example, if sanctions prevent a party from making or receiving payment, it is likely to involve an event of default. The parties will need to consider ending the contracts and remedies available to them.
She concluded: “Experience shows that the unexpected happens all too regularly and while we cannot plan for such events, we can prepare ourselves to manage them in the best way possible to coordinate a positive outcome. We have highlighted a simple checklist involving identifying the issues, looking at the timescales, getting your team together and identifying various options that flow from the primary crisis event and any ancillary issues that may arise.”