EETCs: A Viable Financing Option For US And Non-US Airlines Alike?

IN SIMPLE TERMS, enhanced equipment trust certificates (EETCs) are corporate debt securities, typically issued by airlines. EETCs are secured on the aircraft operated by the airlines, and are structured through special purpose companies (SPVs) created specifically to own the aircraft and "enhanced" by elements such as debt tranching, availability of liquidity facilities and over-collateralisation.

The airline is the "deemed issuer" of Pass-Through Certificates for US securities laws purposes. Separate classes of EETCs are issued to bondholders representing tiered secured claims on multiple underlying aircraft, in accordance with intercreditor arrangements in the transaction documents. This effectively underpins credit quality for senior tranche holders, pushing first loss risk down to subordinated classes.