Even if it is not economically possible for an airline in the midst of a pandemic to operate the aircraft, it is not illegal for the lessee to fulfil its obligations arising from the lease of the aircraft. At the time of the letter, the Movement Control Order (MCO) imposed by the Malaysian government contains no restrictions on international and domestic air operations3, although travel restrictions are imposed on individuals. At that time, the Malaysian government did not make the flight operations illegal and it is important to note that the decision to cancel flights is made by the airlines concerned. As a result, this pandemic is unlikely to fall within the definition of an “illegal event” or constitute a “change in the law”. Assuming that the aircraft lease agreement includes a force majeure clause, whether or not such a clause can be invoked as a result of the Covid 19 pandemic depends on whether an “outbreak” is included in the lease as a triggering event. Although the onset of the Covid 19 pandemic is beyond the proper control of the lessee, it would be rare to find a force majeure clause in a standard aircraft lease agreement allowing the lessee to avoid paying rents in a situation where the lessee is forced to cancel its flights and ground its fleet. They can also be considered as a form of chartering in which the lessor provides minimum operating services, including ACMI, and the lessee provides the rest of the services with the flight numbers. For all other forms of chartering, the owner provides flight numbers. Variations of a lease agreement include a codeshare agreement and a block-seat agreement. Most aircraft leases are subject to English law or New York law, and whether or not frustration depends on the legislation in place in the lease agreement.
The English courts have been cautious in deciding whether or not frustration can be invoked, as the application and effect of the frustration doctrine could be very draconal. As soon as the teaching of frustration is in force, the contract becomes null and void due to the impossibility of performance and the parties are definitively relieved of their respective contractual obligations. There are very few exceptions to the net lease clause with which landlords agree. At the best of times, airlines with stronger negotiating positions may benefit from a carve-out if the lessor itself has breached its obligations under the lease agreement, which means that the lessee cannot operate the aircraft during the period of quiet enjoyment. In the absence of limited carve-outs, it is likely that tenants will be subject to the “hell or flood” clause and will have to continue to pay rents under the lease, even in the midst of this global pandemic. While it is interesting to consider the legal position of the parties in the context of an aircraft lease agreement, the relevant question may not be legal, but rather what is the best way for all parties involved. . .