Bird & Bird Outlines Key Diligence and Structuring Issues in Aviation M&A for Buyers and Sellers

Bird & Bird has published an article by Henry Everett, an associate in its International Corporate Group in London, setting out the main legal issues in aviation mergers and acquisitions. It says aviation deals resemble conventional corporate transactions but take place in a highly regulated environment exposed to macroeconomic, geopolitical and operational risks. Targets can include airlines, lessors, airports, ground handling operators and maintenance, repair and overhaul providers, and recent years have seen renewed deal activity driven by consolidation pressures.

For buyers, the key diligence areas are corporate structure, including multi-jurisdictional groups and aircraft held in special purpose vehicles or leasing entities; regulatory licences such as air operator certificates, operating licences and traffic rights, and whether they survive a change of control; and fleet and asset financing, including lease terms, maintenance and return conditions, security packages (including under the Cape Town Convention Aircraft Protocol) and cross-default provisions. Commercial contracts are also covered, including airport slots, ground handling, aircraft purchase and fuel supply. Structuring considerations include earn-outs and deferred consideration linked to metrics such as passenger volumes, EBITDA or route expansion; the treatment of lease liabilities and secured debt at completion; mapping regulatory and competition approvals early; integration and operational continuity across IT, fleet management, scheduling and customer service; and ESG exposure, including emissions schemes.

For sellers, the article highlights consideration structure, with a preference for fixed-price or locked-box deals and clearly defined, verifiable earn-out metrics. It also covers risk allocation through warranties, disclosure and warranty and indemnity insurance; conditionality, including regulatory approvals, third-party consents from lessors, lenders and civil aviation authorities, and long-stop dates; and interim covenants that preserve operating flexibility, taking account of factors such as seasonal demand. The article concludes that aviation M&A requires a sector-specific approach, with early identification of regulatory constraints, thorough diligence across licences, fleet and contracts, and careful risk allocation between the parties.