Our company owns an aircraft engine that is leased to a Slovak airline. The aircraft itself is owned by another company and is registered in the Slovak Aircraft Register. The ownership of the aircraft is now changing as the original aircraft owner sells the aircraft to another party. The engine, which is installed in the aircraft, will remain our property and the aircraft will continue to be operated by the same Slovak operator. We would like to ensure that the change of ownership of the aircraft will not affect our ownership of the engine. We would prefer our ownership of the engine to be publicly visible so that we can rely on the principle of publicity. Is it possible to register the owner of an aircraft engine separately from the owner of the aircraft in the Slovak Aircraft Register or in the Aircraft Certificate? If not, how can our ownership of the engine be protected?
Slovak Act No. 143/1998 Coll. on Civil Aviation lists in Section 26(5) the information that is or may be recorded in the Slovak Aircraft Register. According to this provision, the Slovak Transport Authority also records “other facts relating to the owner of the aircraft, the operator of the aircraft, the aircraft and its components, and changes in rights relating to the aircraft and its components that are known to the Transport Authority on the basis of a submitted public document.”
Although the wording “other facts relating to the aircraft and its components” could suggest that the identity of the owner of an engine (where different from the owner of the aircraft) might also be recorded as one of those facts, the current practice of the Slovak Transport Authority confirms that this is not the case.
Based on our recent inquiry with the Slovak Transportation Authority, it is not possible to register the owner of an aircraft engine separately from the owner of the aircraft in the Slovak Aircraft Register or in the aircraft’s registration documents. The Authority confirmed that the Slovak Aircraft Register does not provide for a separate entry identifying the owner of an engine installed on an aircraft owned by another person. According to the Authority, such registration has not been carried out in Slovakia to date.
Therefore, the answer to your first question is no. This means that even where ownership of the aircraft changes, the Slovak Aircraft Register will continue to identify only the new aircraft owner, with no separate entry for the engine owner. The engine owner’s title cannot be recorded separately in the register.
Fortunately, this does not mean that the engine owner’s rights are unprotected.
Under Slovak law, an aircraft engine may be owned by a person different from the owner of the aircraft. Slovak law does not require ownership of the engine to be registered locally for the ownership structure or the lease arrangement to be legally valid and recognised between the parties.
Protection of the engine owner’s interests therefore primarily lies in the transaction documentation relating to the engine lease. This documentation will typically include the engine lease, the bill of sale, the novation documents and, where appropriate, a recognition agreement. These documents should clearly acknowledge that the engine remains a separately owned asset belonging to the engine owner.
In addition, the engine owner may seek further protection by fitting engine identification plates and obtaining written acknowledgements from the aircraft owner that confirm the engine owner’s separate ownership rights. These documents can further strengthen the engine owner’s legal position.
However, if the engine owner still wishes to have some form of registration in Slovakia, we have identified one possible mechanism. Although ownership of the engine cannot be registered, it is possible to register a pledge (mortgage) over the engine in the section of the Slovak Aircraft Register reserved for security interests. This would require the engine owner to create a pledge over the engine in favour of a third party. In practice, such a pledge could be created solely for registration purposes, for example in favour of an affiliate of the engine owner.
Such registration can be valuable where the parties wish to prevent deregistration of the aircraft without the pledgee’s involvement. In practice, the Slovak Transport Authority would not complete the deregistration process without the pledgee’s participation or consent.
In summary, a change of ownership of the aircraft does not require the engine owner to transfer ownership of the engine or to register that ownership in Slovakia. While the Slovak Aircraft Register does not recognise a separate engine owner, Slovak law does recognise separate ownership of an aircraft and its engine. The engine owner’s legal position should therefore be protected primarily through carefully drafted contractual documentation and, where commercially appropriate, by registering a security interest over the engine rather than attempting to register ownership itself.
