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When United Airlines wants to buy a new jumbo jet, where does it go shopping? It may dial up a manufacturer like Boeing to place an order. But usually it turns to a finance company to pay for the purchase or negotiate a lease. And that’s when Thomas Zimmer comes on the scene. A partner at Holland & Knight’s San Francisco office, Zimmer specializes in aviation financing. In that role he helps structure and negotiate transactions between airlines and the finance companies that sell or lease aircraft. While the deals can be mundane and time-consuming, they have moments of high drama. Once, Zimmer recalled, a pilot took off with a plane before the airline signed on the dotted line. Zimmer, who was representing the company financing the purchase, said there was a mad rush to catch the plane when the pilot stopped to refuel in Ireland. “We had to engage counsel in Ireland to arrest the aircraft,” Zimmer said. “We didn’t have the comfort that we would retain control over the aircraft” once it reached its destination in Eastern Europe. In other instances, Zimmer and his colleagues have had to track a plane’s flight path to make sure it was in a jurisdiction with favorable tax provisions at the moment that the deal was inked. “Often a transaction is scheduled to occur when an aircraft is in a particular location,” Zimmer said “That sometimes requires having direct contact with the pilot.” He said it’s not always possible to maintain telephone contact, and in a couple of transactions the parties have had to track an aircraft by radar to ensure it was over international waters. “Sometimes you may actually delay closing until the aircraft is in a favorable jurisdiction,” Zimmer said. Such maneuverings can keep a plane on the ground, to the ire of the airline and its passengers. Zimmer is among a relatively small group of attorneys in the San Francisco Bay Area that specialize in aircraft deals. He said about 10 local firms handle aviation financing, including Orrick, Herrington & Sutcliffe; Morrison & Foerster; and Thelen Reid & Priest. New York and British firms are more frequently involved in such transactions, he said, since deals are typically based on New York and U.K. laws. Zimmer and fellow partner William Piels got into aviation financing almost 20 years ago while at the now-defunct Pettit & Martin. Their first client in this area was Polaris Aircraft Leasing Corp., which at the time was a small outfit. As Polaris grew, so did their practice. In 1992 they jumped to Haight, Gardner, Poor & Havens, a firm specializing in the transportation industry. Five years later the firm was acquired by Tampa, Fla.-based Holland & Knight. Now, six attorneys in the San Francisco office focus the majority of their time on aviation deals. They represent both finance companies — like GE Capital Aviation Services and GATX Capital Corp. — as well as airlines and investment banks. What’s the role of the middlemen in an airline’s buying spree? Only a small percentage of aircraft are actually owned by airlines. Finance companies are the primary buyers and some own upward of 1,000 aircraft that they sell or lease to airlines around the world, Zimmer said. Airlines may buy directly from the finance company that has placed speculative orders for aircraft rather than a manufacturer in order to avoid a delay of one year or longer from the time of order to delivery. And instead of ponying up $200 million to buy a new wide-body plane, they often opt to lease one for more than a million dollars a month. “With a lease arrangement an airline can get 100 percent financing and free up its financial resources for other uses,” Zimmer said. “Leasing also gives airlines more flexibility in the future if they decide to switch to a different type of aircraft or decrease their fleet.” Aviation deals may involve five or six countries, and for Zimmer the opportunity to work with people from diverse cultures is a highlight of the practice. “The thing that makes cross-border transactions particularly attractive is working with lawyers or clients and the customers of clients around the world and trying to mesh legal principles” between the United States and other jurisdictions, Zimmer said. That makes the work “very interesting and challenging.”

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