Frontier Airlines sues lessor in clash over leaseback deal

Frontier Airlines (F9, Denver Int’l) has sued Dublin-headquartered lessor AMCK Aviation for allegedly seeking to alter the terms of an agreement signed between them regarding the sale and leaseback of six A320-200neo, the Irish Independent and Airfinance Journal have reported citing court documents. The deal was broadly agreed last year and a framework agreement for it was signed in March, but the Covid-19 outbreak ignited a dispute between the two sides, eventually prompting the ultra-low-cost carrier to file its claim at the United States District Court in the Southern District of New York on November 18. The companies already have longstanding lease agreements in place covering other Airbus narrowbodies. According to the ch-aviation fleets advanced module, the lessor provides twelve of Frontier’s fifty-eight A320-200Ns, one of its nineteen A320-200, and one of its twenty-one A321-200s. Under the framework agreement, AMCK committed to a sale and leaseback of the new A320neo, which Indigo Partners-controlled Frontier was due to acquire direct from the manufacturer. The first of the six, N370FR (msn 10038), was delivered to Frontier in March. However, “new commercial aircraft financing deals negotiated post-Covid-19 have been done on much more favourable terms to the aircraft leasing companies. This unexpected market change made the economic terms of deals finalised before the pandemic much less attractive to leasing companies, and on [which] information and belief motivated AMCK’s conduct giving rise to Frontier’s claims in this case,” Frontier outlined in the court filings. “Shortly following the delivery of msn 10038, Frontier requested all of its lessors to consider granting Frontier a voluntary one-time, short-term (three-month) aircraft rent deferral in light of the sudden and significant impact of Covid-19 on domestic US air travel,” it added. On receiving this request, AMCK “in addition to conveying its desire to repudiate the March 2020 Framework Agreement, […] immediately demanded that the economic terms of this agreement be renegotiated to improve AMCK’s profit margin. AMCK further demanded that Frontier work with Airbus to delay the deliveries of the five new aircraft that AMCK was required to purchase,” it continued.