The Oklahoma Bar Journal October 2024

must 1) satisfy the requirements for recording the original conveyance and 2) describe the original convey ance in sufficient detail to identify it. 18 Engines and Propellers Covered by Mortgages and Leases Aircraft equipment – such as engines, propellers and, in certain rare circumstances, spare parts (as discussed below) – are often included as collateral in an FAA security agreement and/or leased under a lease, sublease or operating agreement. Such aircraft objects may be mortgaged or leased by themselves, separate and apart from an airframe. Mortgages granting an interest in engines or propel lers must describe the engine and propeller by manufacturer, model and serial number and meet the same requirements as mortgages filed against airframes, as described earlier. 19 Yet, there are key distinc tions to analyze when working to effectively create a security interest in aircraft collateral using FAA mortgages that may cover only engine or propeller equipment. Engines, propellers and spare parts are not registered in the name of their owner by the FAA registry. 20 In fact, there is no requirement – under either the Transportation Code or the regulations – that the mortgagor/ grantor (of an FAA security agree ment) or a lessor (of a lease agree ment) be a U.S. citizen.

leases covering engines and/or propellers must first determine if each engine has 550 or more rated takeoff horsepower or the equiva lent thereof. For propellers, these must be capable of absorbing more than 750 shaft horsepower or the equivalent thereof. If those thresh old requirements are met, then the description for each aircraft object must state this fact. 21 Spare parts can be collateral cov ered by an FAA mortgage but only when those spare parts are “main tained by or on behalf of a U.S. Air Carrier.” 22 Such a mortgage must include a statement concerning the certification of the U.S. air carrier. 23 Furthermore, the FAA mortgage against spare parts does not need to describe the parts specifically ( i.e. , by manufacturer, model and serial number, as with airframes, engines and propellers) but only generally by type. 24 The spare parts mortgage Aircraft Spare Parts Covered by FAA Mortgages

must also describe the location or locations of the spare parts the mortgagee will take as collateral. For example, it’s acceptable by the FAA registry for the purposes of recordation to describe the spare parts, generally, as simply as “all de Havilland DHC-7 spare parts located at Hangar 8, Washington Dulles International Airport.” 25 Aircraft spare parts mortgages are not common because of the narrow category qualifying spare parts as collateral, e.g. , that they are main tained by a certificated air carrier. AIRCRAFT EQUIPMENT: THE INTERNATIONAL REGISTRY PERSPECTIVE Introduction to the International Registry In addition to creating the secu rity interest in and to the aircraft equipment serving as collateral under an FAA mortgage (as described earlier), lenders and MORTGAGE AND LEASE INTERESTS IN

Threshold Requirements for Engines and Propellers as Collateral Under a Mortgage For instruments covering

engines and/or propellers, such air craft equipment must meet certain threshold requirements to be eligi ble for instruments to be recorded against them by the FAA. Therefore, drafters of FAA mortgages and

Statements or opinions expressed in the Oklahoma Bar Journal are those of the authors and do not necessarily reflect those of the Oklahoma Bar Association, its officers, Board of Governors, Board of Editors or staff.

OCTOBER 2024 | 9

THE OKLAHOMA BAR JOURNAL