Beyond its tax provisions, Panama offers a number of legal and transactional benefits relevant to international aviation finance and leasing.
For aircraft owners, lessors, financiers and operators, these include an international framework for aircraft interests, mechanisms supporting deregistration and export, flexibility in structuring aircraft security, recognition of different financing and leasing arrangements, and the ability to remit aircraft sale proceeds abroad without exchange controls.
Cape Town Convention framework
Panama is a contracting state to the Cape Town Convention and its Aircraft Protocol, providing an internationally recognised framework for interests in aircraft equipment.
The Convention operates alongside Panama’s local registration requirements. Aircraft leases, subleases and mortgages remain subject to the corresponding Panamanian registration and filing formalities.
For international transactions, coordinating the international and local registration components is therefore an important part of the structuring process.
IDERA mechanism for deregistration and export
Panama permits Irrevocable Deregistration and Export Request Authorisations (IDERAs) to be filed with the Civil Aviation Authority.
An IDERA provides the authorised party with a mechanism to request the deregistration and export of an aircraft, subject to the applicable local procedures and requirements.
For lessors and financiers, this provides an additional mechanism that can form part of the protections contemplated when structuring an aircraft transaction in Panama.
Flexible aircraft security
Panamanian law allows security to be structured over different types of aviation assets.
Aircraft mortgages may cover an aircraft with its engines, an airframe independently, engines independently or an entire fleet. Security may also extend to certain spare parts, including future parts, depending on the structure used.
This flexibility allows the security package to be adapted to the assets and financing involved in a particular transaction.
Financing and leasing flexibility
Panama recognises a broad range of aviation financing and leasing structures.
These include secured loans, sale-leaseback arrangements and finance leases, as well as dry and wet operating leases, subleases, charter agreements and interchange agreements.
Financing arrangements may also be governed by foreign law. Panamanian courts may recognise the choice of foreign law governing an aircraft mortgage, subject to applicable local formalities and public policy requirements.
No exchange controls on aircraft sale proceeds
Panama does not impose exchange controls or require governmental consent for the remittance abroad of aircraft sale proceeds.
For cross-border aircraft transactions, this facilitates the international transfer of sale proceeds without an additional currency-control approval process.Taken together, these features provide aircraft owners, lessors, financiers and operators with different mechanisms for structuring aviation transactions involving Panama. Their practical application requires coordination of international instruments, local registration formalities, security documents and the particular financing or leasing structure involved.