Desperate times require desperate measures: implications of Covid-19 on aviation law
Serap Zuvin, Partner, Cakmak Avukatlik Ortakligi, Istanbul, Turkey
It is a fact that the aviation sector has materially been affected by the Covid-19 pandemic and is passing through severe turbulence on a global scale, with all nations taking their share. Airline companies are desperately trying to take concrete steps to combat the implications of the pandemic to the aviation sector, by adopting commercial decisions while the governmental authorities and the lawmakers are helping them in this fight. There are certain measures adopted specifically for the aviation sector in response to this pandemic, the results of which are yet to be observed. In the absence of government bailouts, many airlines look to be at risk of disappearing. This turmoil has inevitable effects on the enforcement procedures involved in exercising the remedies available to the financiers of aircraft under the Cape Town Convention (CTC).
Legislative measures affecting the remedies available under the CTC
At the national level, with the Presidential Decision No. 2279 dated 22 March 2020, all ongoing enforcement and bankruptcy proceedings are halted and initiation of new proceedings are prevented until 30 April 2020. Continuation of judicial time frames are also suspended with the amendments introduced in the Omnibus Law No. 7226 on 26 March 2020. The decision of the Council of Judges and Prosecutors dated 30 March 2020 ordered that all upcoming hearings, debates and explorations of commercial lawsuits are now postponed until 30 April 2020.
The remedies available to the CTC creditors (both secured financiers and lessors) which are mainly dependent on local court orders as provided under Article 8/2, 10/2 and 13 of the CTC, are de facto non-enforceable until 30 April 2020, due to the suspension of the proceedings. In case the CTC creditors wish to use their repossession rights under Article 8/1(a) (ie the right to take possession or control of the secured asset) or 10/1(a) of the CTC (ie the right to terminate the agreement and take possession or control of any asset to which the agreement relates in case of a default), the enforcement of the same with the decision of the Turkish Civil Aviation Department (CAD) before the Ankara Execution Offices (assigned as the competent forum for the creditor/secured party or lessor under CTC to apply with a registry document issued by the CAD, without the necessity of a court judgment) is also not possible due to ongoing shutdowns and delays in the Turkish judicial system against Covid-19.
Aside from the remedies provided under the CTC, the right to legal remedies of any party to any aviation-related dispute is currently, partially unavailable, save for the right to file a lawsuit, which remains permissible.
Other notable implications of the pandemic on the Turkish aviation sector
Certain parts of Atatürk Airport, which is now only being used for private and cargo flights following the opening of Istanbul Airport in 2018, will now serve as a hospital to battle the pandemic.
Turkey banned commercial flights to 68 countries, and a total of 71 countries have also introduced commercial flight bans towards Turkey. Passengers may still board domestic flights, with the condition that they hold an appropriate Travel Permission Certificate as issued by Travel Permission Councils.
As part of the governmental support to the sector, with the Presidential Decision No.2278, VAT applicable on the domestic flight tickets will be reduced to one per cent, down from 18 per cent, until 30 June 2020, to promote the sale of flight tickets with an aim to enhance the financial capabilities of the airline companies. Certain local airlines demanded a temporary waiver for the applicable slot rules until 1 June 2020, as the current form of the rules stipulate that if the airline companies do not carry out at least 80 per cent of their scheduled flights, they will lose their allocated slots at relevant airports. Such demand has not been addressed yet.
According to Eurocontrol’s statistics, the air traffic in Turkey on the date of 5 April 2020 was tremendously decreased, for a rate of 91 per cent compared to same date last year.
Pursuant to the Regulation Amending the Regulation on Air Passenger Rights (Amending Regulation), a provisional clause has been added to the Regulation on Air Passenger Rights (SHY-Yolcu). The provisional clause states that if a flight is cancelled after 5 February 2020 due to the Covid-19 pandemic, air carriers shall be exempt from providing their obligations to passengers as regulated under Article 8 on indemnity rights, Article 9 on refund and rerouting rights and Article 10 on service rights of the SHY-Yolcu, beginning from 5 February 2020 until the end of an additional two months following the abolition of the travel/flight bans. It is also envisaged in the Amending Regulation that, the passenger whose flight is cancelled due to the Covid-19 pandemic, will have the right to change the date of their flight or suspend it. If the passenger chooses to suspend the flight, they can get a refund after two months, following the abolition of the travel/flight bans.
Istanbul Airport served up to 55 million passengers during its first fully-operational year. As a result, IGA, the operator of Istanbul Airport, already exceeded the minimum amount of income, equal to €233.1m, to be obtained from the international passengers as guaranteed by the General Directorate of State Airports Authority (GDSAA), and therefore, will make a payment of €22.4m to GDSAA.
As of 7 April 2020, Turkey has reported 34,109 confirmed cases of Covid-19, and a total of 725 succumbed to the infection. The death ratio in Turkey is currently 2.12 per cent, which remains comparatively below the world average of 5.5 per cent.
The aviation sector has entered unchartered territory with this pandemic. There are various modellings and predictions carried out by experts, which provide varying time frames for the containment or eradication of the virus. The measures will likely be extended, and in some cases enriched until the pandemic is over. The damage it has done to the aviation sector may only be accurately assessed when the dust settles.