Imagine that an airline suddenly suspends all operations overnight.

Thousands of passengers arrive at airports the following morning only to discover that their flights have been cancelled. Employees have not received salaries for several months. Fuel suppliers, airports and ground handling companies are owed millions of dollars. Banks demand repayment of outstanding loans, while the airline’s aircraft remain parked on airport aprons.

Yet there is one fundamental problem:

Many of the aircraft that appear to form part of the airline’s “fleet” may not actually belong to the airline.

One aircraft may be owned by an Irish leasing company, another by a special-purpose vehicle incorporated in the Cayman Islands, while another may form part of an international bank financing structure.

The airline may merely be the lessee.

The immediate question therefore becomes:

Can the lessor immediately repossess an aircraft worth USD 50 million, USD 100 million or even USD 150 million when the airline becomes insolvent?

And perhaps more importantly:

Can employees, passengers or other creditors seize that aircraft for unpaid salaries, ticket refunds or commercial debts?

The answer requires much more than ordinary insolvency law.

Aircraft insolvency disputes sit at the intersection of ownership, possession, aircraft registration, secured finance, international registration and cross-border insolvency law.

Türkiye is particularly significant because it is a Contracting State to both the Cape Town Convention and the Aircraft Protocol, and has adopted Alternative A under Article XI of the Aircraft Protocol with a 60-calendar-day waiting period. The Convention and Aircraft Protocol entered into force for Türkiye on 1 December 2011.

1. The First Question: Does the Aircraft Actually Belong to the Airline?

When an airline advertises that it operates “a fleet of 50 aircraft”, this does not mean that the airline owns all 50 aircraft.

A modern airline fleet may consist of:

• aircraft owned directly by the airline;
• aircraft obtained under dry lease or finance lease arrangements; and
• aircraft operated under wet lease or ACMI arrangements.

This distinction becomes crucial when insolvency occurs.

Under Article 184 of the Turkish Enforcement and Bankruptcy Law, the attachable assets belonging to the bankrupt debtor form the bankruptcy estate.

Accordingly, aircraft genuinely owned by the airline may become part of the bankruptcy estate.

An aircraft owned by a third-party lessor, however, does not automatically become property of the insolvent airline merely because it has been operated in the airline’s fleet.

This makes documents such as the following critically important:

Aircraft Lease Agreement, Bill of Sale, aircraft registry records, International Registry registrations, aircraft mortgages, IDERA, security assignments and financing documents.

2. Does a Lessor-Owned Aircraft Become Part of the Bankruptcy Estate?

As a general principle, no.

The fact that an aircraft is in the possession or operational fleet of the bankrupt airline does not by itself transfer ownership to the airline.

Article 65 of the Turkish Civil Aviation Act No. 2920 provides that aircraft are generally subject to the legal regime applicable to movable property unless otherwise provided.

Articles 66 and following contain special provisions concerning ownership and rights in rem over aircraft and the significance of registration in the aircraft registry.

Furthermore, Article 119 of Act No. 2920 provides for aircraft lease agreements to be annotated in the aircraft registry in order to be asserted against third parties. Turkish DGCA practice likewise requires relevant leasing documentation for such registry procedures.

Accordingly, even if an aircraft has flown for years in the colours of a Turkish airline, the insolvency of the airline does not automatically transfer ownership of that aircraft into the bankruptcy estate where title remains with the lessor.

3. What If the Insolvency Administration Refuses to Return the Aircraft?

Turkish insolvency law provides a mechanism for third-party ownership claims.

Under Article 228 of the Enforcement and Bankruptcy Law, the bankruptcy administration decides whether property claimed by a third party should be returned to that third party.

If the claim is rejected, a short period is provided for bringing an ownership claim before the enforcement court.

The Turkish Court of Cassation has also recognised the use of third-party ownership proceedings where property physically held by the bankrupt debtor is claimed to belong to another person.

Aircraft leasing, however, adds another layer of protection:

the Cape Town Convention and Aircraft Protocol.

This is where aircraft insolvency becomes materially different from ordinary equipment leasing.

4. Why Is the Cape Town Convention So Important to Aircraft Lessors?

Commercial aircraft are highly mobile assets.

A Boeing 787 may land in Istanbul on Monday, Frankfurt on Tuesday and Dubai on Wednesday.

Aircraft finance would become extremely expensive if lenders and lessors had to rely entirely on a different security and insolvency regime every time the aircraft crossed a border.

One of the principal objectives of the Cape Town Convention is therefore to establish a predictable international framework for proprietary and security rights over high-value mobile equipment.

The Convention expressly recognises leasing agreements.

A qualifying interest vested in a lessor under a leasing agreement may constitute an international interest, and the Convention defines a lessor as a creditor and a lessee as a debtor for these purposes.

Consequently, in sophisticated aircraft leasing transactions, registration at the International Registry may be just as important as registration in a domestic aircraft registry.

5. What Is “Alternative A” and Why Does It Matter in Türkiye?

Perhaps the single most important insolvency concept in international aircraft finance is Alternative A.

Türkiye has declared that it will apply Alternative A under Article XI of the Aircraft Protocol in its entirety to all types of insolvency proceedings and has selected a 60-calendar-day waiting period.

In simplified terms, when the relevant requirements are satisfied, the insolvency administrator or debtor must ultimately choose between two paths.

It must either:

cure the relevant defaults and agree to perform future obligations under the agreement,

or

give possession of the aircraft object to the creditor no later than the expiry of the applicable waiting period.

During the waiting period, the aircraft and its value must be preserved in accordance with the agreement.

The Aircraft Protocol further provides that, after the relevant date, Convention remedies may not be prevented or delayed.

This is one of the most powerful creditor protections in modern aircraft finance.

However, it would be incorrect to say:

“Every leased aircraft in Türkiye must automatically be returned exactly 60 days after an airline files for bankruptcy.”

The applicability of the Convention, the status and registration of the creditor’s international interest, the relevant aircraft object, the contractual structure and competing priority rights must all be examined.

6. Can the Lessor Repossess Before the 60 Days Expire?

Potentially, yes.

The 60-day period should not necessarily be understood as a mandatory period during which the creditor is always prohibited from recovering the aircraft.

Article XI requires possession to be provided no later than the earlier of:

• expiry of the waiting period; or
• the date on which the creditor would otherwise be entitled to possession.

Therefore, if non-payment, insolvency, suspension of the AOC or cessation of operations constitutes an Event of Default under the aircraft lease, the contractual right of termination and repossession may arise earlier.

Article 10 of the Cape Town Convention separately recognises the lessor’s ability, following default and subject to the Convention structure, to terminate the leasing agreement and take possession or control of the relevant object.

This is why the following provisions are critical in an aircraft lease:

Events of Default, termination, repossession, deregistration, export, IDERA, governing law, jurisdiction, maintenance and insurance.

7. IDERA: The Aircraft’s Legal “Exit Key”

One of the most important documents in aircraft finance is the:

Irrevocable De-Registration and Export Request Authorisation – IDERA.

In Türkiye, SHGM/DGCA operates a specific system for recording and implementing IDERAs.

The central purpose of an IDERA is to enable the authorised party, once the applicable conditions have arisen, to procure the deregistration and export of the aircraft without having to obtain fresh consent from the debtor.

Under Article XIII of the Aircraft Protocol, where an IDERA has been properly recorded, the authorised party or its certified designee is entitled to exercise the deregistration and export remedies contemplated by the Protocol.

The debtor cannot revoke that authorisation without the authorised party’s written consent.

Türkiye has expressly declared that Article XIII will apply.

The Turkish DGCA also operates a formal IDERA registration procedure through the Turkish Civil Aircraft Registry.

For this reason, sophisticated transactions frequently involve several layers of protection:

Aircraft Lease + International Registry registration + IDERA + local registry perfection.

8. Can Employees Seize the Aircraft for Unpaid Salaries?

An important distinction must be made.

Suppose an airline owes a pilot, engineer or cabin crew member substantial unpaid salary and severance compensation.

That does not mean that the employee can automatically sell a USD 100 million aircraft owned by an unrelated leasing company.

The distinction is fundamental:

priority of a debt is one issue; ownership of the asset is another.

Under Article 206 of the Turkish Enforcement and Bankruptcy Law, certain employment-related receivables, including qualifying severance and notice compensation claims, enjoy first-ranking statutory priority in the bankruptcy distribution.

But that priority applies against the assets of the insolvent employer.

It does not automatically destroy the ownership rights of an aircraft lessor.

In simple terms:

the employee may be a privileged creditor of the airline, but not of the aircraft owner’s separate estate.

9. What Happens to Passenger Ticket Claims?

Passengers are often the most visible victims of an airline collapse.

Imagine an airline becoming insolvent in July after having sold 500,000 tickets for flights scheduled throughout the remainder of the summer.

The airline could suddenly owe enormous amounts in respect of unused tickets.

Passengers retain contractual, consumer-law and potentially aviation-law rights against the carrier.

However:

having a valid claim and having a priority claim in bankruptcy are two different things.

Under Article 206, unsecured claims that do not benefit from a specific statutory privilege generally fall into the ordinary fourth ranking.

Consequently, an ordinary refund claim for an unused ticket will not normally permit a passenger to defeat the proprietary rights of a third-party aircraft owner and satisfy the refund claim from the value of the owner’s aircraft.

The practical result may be different where the passenger has access to:

• credit-card chargeback protection;
• travel insurance;
• package travel protection;
• another responsible contractual party;
• applicable insurance arrangements.

Claims involving death, personal injury, baggage or international carriage may additionally involve the Montreal Convention and aviation liability insurance and therefore require separate analysis.

10. The Aircraft Owner and the Employees Are Not Necessarily Competing in the Same Queue

This is perhaps the most important conceptual point.

The issue is frequently presented as:

“Who gets paid first: the aircraft lessor, the employees or the passengers?”

But that may be the wrong question.

The genuine owner of the leased aircraft may not primarily be asking:

“Pay me money from the bankruptcy estate.”

The owner may instead be saying:

“That aircraft belongs to me. Return my aircraft.”

That is a proprietary claim.

By contrast, passengers and employees normally hold monetary claims against the insolvent airline.

Accordingly, the lessor’s proprietary right over the aircraft must be distinguished from personal claims against the airline.

11. What About the Lessor’s Unpaid Rent?

This is different.

Even after the aircraft has been repossessed, the lessor may still have claims for:

• unpaid rent;
• default interest;
• maintenance reserves;
• return-condition compensation;
• repossession costs;
• termination damages.

The lessor’s ownership claim to the aircraft and its monetary claim against the airline are legally distinct.

The lessor may recover the aircraft yet still be required to prove certain financial claims in the airline’s insolvency.

Its recovery will then depend heavily on whether those claims benefit from separate security such as:

• a security deposit;
• letter of credit;
• parent guarantee;
• aircraft mortgage;
• assignments;
• insurance proceeds;
• other security arrangements.

Repossession of the aircraft therefore does not necessarily make the lessor economically whole.

12. Finance Leases Receive Additional Protection under Turkish Law

The Turkish Financial Leasing, Factoring, Financing and Savings Financing Companies Law No. 6361 is also highly relevant.

The statute expressly covers certain aircraft financial leasing transactions and confirms that ownership of the financially leased asset belongs to the lessor.

More importantly, Article 28 provides specific protection where the lessee becomes insolvent or is subject to enforcement proceedings.

In the event of the lessee’s bankruptcy, financially leased property is to be separated from the bankruptcy estate under the statutory procedure.

Where enforcement is commenced against the lessee, the financially leased asset is to be excluded from the enforcement process.

Thus, if a Turkish airline operates an Airbus A321 under a qualifying finance lease while title remains with the financial lessor, ordinary creditors of the airline cannot simply treat that aircraft as if it belonged to the airline.

13. Can Nobody Ever Detain an Aircraft Owned by a Third-Party Lessor?

There are important exceptions.

Cape Town protection is powerful, but it is not absolute.

Türkiye has made a declaration under Article 39 of the Convention preserving the priority of categories of non-consensual rights or interests which receive priority under Turkish law.

Türkiye has also declared that the Convention does not prejudice rights that Turkish law may give to the State, State entities, intergovernmental organisations or certain public-service providers to arrest or detain an aircraft object in respect of amounts directly relating to relevant services.

Accordingly, a lessor must investigate potential claims relating to matters such as:

• airport charges;
• navigation charges;
• customs claims;
• maintenance and repair charges;
• statutory liens;
• detention rights;
• prior registered interests.

Article 71 of the Turkish Civil Aviation Act also permits aircraft manufacturers or repairers to request registration of a statutory aircraft mortgage for claims arising from construction or repair of an aircraft.

Therefore, the statement:

“I own the aircraft, so nobody can ever detain it”

would also be legally unsafe.

14. What Happens Where a Bank Financed the Aircraft?

Modern aircraft finance is rarely a simple two-party transaction.

A typical structure may look like:

Banks / Lenders → Security Trustee → Aircraft-Owning SPV → Airline Lessee

The SPV may legally own the aircraft but may have granted lenders a substantial security package including:

• aircraft mortgage;
• assignment of lease;
• assignment of insurances;
• bank-account security;
• share pledge;
• registered international interests.

An airline insolvency may therefore trigger not only the aircraft lease but the entire financing structure.

Repossession is not simply a matter of “collecting the keys”.

It can require the simultaneous management of:

lease termination, aircraft records, insurance, deregistration, export, ferry flight approvals, engine status, liens, customs and International Registry filings.

15. Wet Lease and ACMI Aircraft Are Different Again

The position may be simpler for wet-leased or ACMI aircraft.

In a wet lease structure, the aircraft normally remains operated under the lessor airline’s AOC.

Suppose Turkish Airline A obtains three aircraft from foreign Airline B under an ACMI arrangement for the summer season.

If Airline A becomes insolvent, Airline B may terminate or suspend performance in accordance with the agreement and remove its aircraft from the operation.

The aircraft remains structurally part of Airline B’s operational system.

Airline A’s ordinary creditors therefore cannot simply treat it as an aircraft owned by Airline A.

Dry lease insolvency is often considerably more complex because the aircraft may have been integrated into the lessee’s fleet, livery and operational organisation for many years.

16. Example: What Happens When an Airline with 20 Aircraft Fails?

Consider a hypothetical airline called Anatolia Airways.

Its fleet consists of:

• 3 aircraft owned by the airline;
• 10 aircraft dry leased from foreign leasing companies;
• 2 aircraft under finance leases;
• 5 aircraft supplied under seasonal ACMI arrangements.

When Anatolia Airways becomes insolvent, there is not simply a “20-aircraft bankruptcy estate”.

The three owned aircraft may form part of the bankruptcy estate, subject to mortgages and other proprietary security.

The ten dry-leased aircraft require examination of the lessors’ ownership, contractual and Cape Town rights.

The two finance-leased aircraft may benefit from the specific separation regime under Law No. 6361.

The five ACMI aircraft belong to the operational structure of other airlines and may leave once the ACMI agreements are terminated.

Twenty aircraft parked side by side on the same apron may therefore belong to four entirely different legal worlds.

That is what makes airline insolvency legally fascinating.

17. The Critical First 72 Hours of an Airline Collapse

From an aircraft lessor’s perspective, the first days of financial distress can be critical.

Counsel will typically want immediate answers to questions such as:

• Where is the aircraft physically located?
• Are the engines still installed?
• Where are the aircraft records?
• What law governs the lease?
• Has an Event of Default occurred?
• What does an International Registry search reveal?
• Is an IDERA recorded?
• What interests appear in the aircraft registry?
• Are there airport or maintenance liens?
• Is insurance still valid?
• Is the aircraft airworthy?
• What authorisations are required for export?
• Can a ferry flight be performed?

A USD 100 million aircraft is not valuable merely because of its physical airframe.

Its technical records, maintenance history and regulatory documentation are essential to its commercial value.

An aircraft without complete records can suffer a substantial reduction in market value.

This is why aircraft repossession lawyers often care almost as much about records delivery as physical delivery of the aircraft itself.

18. Conclusion: The Airline’s Bankruptcy Does Not Mean the Aircraft Owner Is Bankrupt

The insolvency of an airline does not mean that every aircraft in its fleet becomes available for distribution among the airline’s creditors.

The fundamental distinction is straightforward:

An aircraft owned by the airline and an aircraft merely operated by the airline under a lease do not have the same legal status.

Under Turkish insolvency law, the debtor’s own attachable assets enter the bankruptcy estate, while property owned by third parties may be subject to ownership and separation procedures. Turkish finance leasing legislation provides additional statutory protection for qualifying leased assets.

Aircraft finance adds another international layer through the Cape Town Convention and Aircraft Protocol.

Türkiye’s adoption of:

Alternative A + a 60-day waiting period + IDERA

is therefore highly significant for lessors and financiers participating in Turkish-related aircraft transactions.

For this reason, the statement:

“The airline has collapsed, so its creditors can seize the aircraft”

is far too simplistic for modern aviation finance.

The correct questions are:

Who owns the aircraft?

Who has registered rights against it?

What appears on the International Registry?

Who holds the IDERA?

Are there prior statutory liens or detention rights?

Does the Cape Town insolvency regime apply?

An airline bankruptcy is therefore not merely a corporate insolvency.

It is a complex intersection of:

insolvency law, aviation regulation, aircraft finance, property law, secured transactions, employment claims, passenger rights, insurance and cross-border enforcement.

And in some airline failures, determining the legal status of a single Airbus or Boeing parked on the apron may be more complicated than analysing the rest of the airline’s assets combined.