Inkombank found to have no title to pledged aircraft

Published: 3/17/2000

The Arbitration Court of Samara has decided in favour of Samara Airlines in the case of a dispute between the airline and Inkombank, over guarantees reportedly given by the airline for leasing of engines from Inkombank subsidiary, Inkom-Avialeasing (IAC). Under the original agreement at the beginning of 1998, IAC was required to buy 14 time expired engines from the airline's fleet, to be refurbished by Perm Motors and leased back to Samara, under a two year agreement. In August 1998, Samara decided that, given the dramatic decline in the air transport market, it would reduce its requirement to 11 engines and its financial exposure from $6.6m to $5.4m. IAC, however, was less relaxed with the Samara decision, having committed itself, in March 1998, to borrow the required $3m funding for the programme, from Inkombank, at a rate of 20%. Repayment was scheduled for March 2000, a month after the original schedule of payment was to be completed by Samara. IAC pledged six of the engines to Inkombank against the outstanding credit, in addition to other unspecified assets. According to Samara, it had also collateralised four of Samara's aircraft, with a value of $2m, without the airline's board of directors' approval and after the original loan had been granted. In November 1998, Samara announced its intention to change the terms of the lease, leaving IAC, according to the company's statements, with a liability of $4m. It then demanded that the airline surrender the aircraft that had been placed as a guarantee. The court, however, decided that the guarantee had been given without Samara's consent and was, therefore, invalid. According to Samara, it has paid off its liability to IAC, but did not reveal how many engines have been delivered.

Article ID: 1702