CTC economics

Economic assessment of the Cape Town Convention

AWG makes significant efforts, including through its commissioning of third-party experts, to assess and quantify the economic benefits of CTC. 

AWG continues to work closely with governments around the world in assessing the economic benefits of CTC. 

Historic documents

In 1988, a first economic impact assessment was prepared under the joint auspices of New York University and INSEAD (Paris). That document was commissioned by AWG, IATA, and ICAO, and helped guide the development of the treaty. 

In 2009, AWG commissioned an updated independent study addressing the economic benefits of the Cape Town Convention. The new study was narrower in scope. It focused exclusively on airline benefits and strictly assumed application of the insolvency rule found in Protocol, Art. XI, Alternative A. 

In December 2010, AWG commissioned an independent study assessing the economic benefits of the ratification of the Cape Town Convention in the United Kingdom.

These studies have confirmed the substantial and widely shared economic benefits of ratification and effective implementation of the Cape Town Convention. Such benefits are predicated on a Contracting State making a specific set of economically-oriented declarations, that is, the ASU qualifying declarations, and ensuring that the Cape Town Convention prevails over inconsistent national law.

AWG has submitted, or materially contributed to submissions of, several other economic assessment for individual governments, but has elected not to make these public, given commercial information.

Academic work on economic assessment

AWG’s work on assessing the economic benefits of CTC is strengthen by academic work that assesses the economics of broader context of international commercial law reform. 

This project is undertaken under the joint auspices with the University of Cambridge and UNIDROIT. These institutions carry the project forward from, and further develop the pioneering work by, the Universities of Oxford and Washington.  AWG’s secretary general, acting in his academic capacity, directs the project. 

Various workshops have taken place on economic assessment of international commercial law. The latest workshop took place in June 2025. After such workshop the CTCAP and UNIDROIT will proceed to finalize and publish a guide on the Framework for the Economic Evaluation of International Commercial Law Reform.

The official website of the project and its details can be consulted at https://www.law.ox.ac.uk/research-subject-groups/economic-assessment-international-commercial-law-reform

Export credit and the Cape Town Convention

The OECD Aircraft Sector Understanding (ASU) establishes the basic rules for the provision of export credit.

On 1 February 2011, the current ASU (the 2011 ASU) entered into force. The 2011 ASU, like its predecessor 2007 version, permits a reduced fee or interest rate (as applicable) where CTC applies to a transaction. Under the 2011 ASU, the maximum Cape Town discount is 10% off the otherwise applicable upfront fee or per annum spread. 

The Cape Town discount endorses the long-standing view of AWG that application of CTC reduces transaction risk, and, thus, should be reflected in the terms of credit. 

The 2011 ASU permits a Cape Town discount provided that a set of qualifying declarations has been made and CTC is effectively implemented in national law and the country complies with its treaty obligations.

Assessing eligibility to the ASU CTC discount

AWG assesses whether a country meets the standards set out in the ASU for eligibility for the Cape Town discount under the 2011 ASU. It produces and maintains a country-by-country listing of that assessment, based on data and inferences from the relevant parts of CTC compliance index. The AWG assessment is independent of the OECD (and its participants) and their decision-making on eligibility for the CTC discount under the ASU. It assesses the substantive ASU standard without reference to whether a country is on the ‘Cape Town list’, as defined in the ASU.

AWG has held productive consultations with the OECD since 2018 relating to discretionary and non-exclusive use of CTC compliance index by the OECD in connection with OECD decision-making on eligibility for the CTC discount.

Tariffs and the aviation sector

AWG released a detailed statement, with policy recommendations, on tariffs and the aviation sector.

The Statement sets out and applies fundamental AWG principles (market primacy, level playing field, predictable international trading rules, and aviation safety) to recommend and support the continuation and strengthening of a zero-tariff system applicable to aviation assets (new and existing) and aviation activities.

The Statement concludes by noting that the aviation sector stands out as a unique and highly valuable field of trade, which itself facilitates high levels of economic activity. It is anchored in international rules that have served global commerce well. It has not seen the types of trade imbalances that might warrant a costly and unpredictable change from the relied upon, and highly successful, zero-tariff regime.

Economic sanctions impacting international aviation finance

AWG has published a statement of principles which should be considered in connection with the formulation of any future economic sanctions which may affect the aviation industry. This statement of principles has been prepared as a general policy document.

Guidelines in structured financings with shared security

AWG has prepared guidelines which it recommends in order to provide greater predictability for financiers and investors in situations where multiple classes of debt share in a single security interest over aircraft equipment and related collateral and remedies are being exercised. These guidelines have been prepared by AWG as an elective guidance tool.

Model law to facilitate inventory financing in special economic zones

A model law to facilitate inventory financing in special economic zones was produced by AWG. The model law may be used by governments as they see fit.

Airline restructuring

AWG has issued a statement on guiding principles which it recommends to materially enhance the prospects for a successful airline restructuring. That statement has been prepared by AWG as an elective guidance tool.

These could apply to a voluntary, ad hoc process without the aid of the court proceedings, or through a process involving a plan, scheme of arrangements, or other structure of any kind. That statement has been prepared by AWG as an elective guidance tool.

Technical note: We use the phrase ‘cape town convention’ or ‘CTC’ to mean the convention on international interests in mobile equipment and its aircraft protocol.  Where needed, the ‘convention’ and ‘protocol’ are referred to individually.