Carlos Sierra 0:00

We have a Russian aircraft in Mexico City right now. What can we do to grab it? The aircraft is supposed to leave in an hour and a half. So we have one and a half on a Saturday to see what we can do.

Courtney Miller 0:22

This is the Time On Wing Podcast. Welcome back. I'm Courtney Miller with Visual Approach Analytics with me as always, Gueric Dechavanne of Collateral Verifications. Gueric, who is our guest today?

Gueric Dechavanne 0:34

We are gonna have a chat with Carlos Sierra. Carlos is currently partner at uh Abogados Sierra. Hopefully I'm saying all those right. Prior to that, he was a partner at Allegre and Sierra, or e Sierra. Uh he was also legal counsel for Mexicana Airlines. He gets involved with a lot of different things, but he's a member of the Aviation Working Group, um, Aviation Law Committee of the IBA, International Registry of Advisory Board. Currently he's the president of AVIC. Um he's got a law degree from the Universidad Nacional Autonoma de Mexico. Um but then he's also done some postgraduate studies in civil and commercial and international law from the Escuela de Derecho, uh Duke University, Université de Bruxelles, and Ayata? A lot of different languages all at once. I know. I have to change him up almost. Yep, and he also has an LLM in air and space law from Leiden University. So we're gonna talk uh, I think some legal stuff today. I think he's uh he's also got a great, I mean he's been doing this for a long time, so he's gonna have some great stories for us as well. And we'll talk about hopefully the kind of maybe the Mexican market, see what's going on down there. So it's gonna be uh really cool to chat with him. So, Carlos, this is your time on the way.

Courtney Miller 1:47

Just a quick intermission to pay the bills, then we'll get you back to the podcast. You've probably heard of Visual Approach Analytics. Here's what we do. Visual Approach delivers contrarian data analysis on the commercial aviation industry. Subscribers can start with our industry analysis and weekly insights, and then upgrade to access our downloadable charts and visualize market trends. You can even white label our charts in your own branding. If you need a white paper, a custom presentation with novel contrarian insights for your investors, or your board members, or your boss, yeah, we do that. Our objective is not to be the thought leaders in aviation. Our objective is to give you the tools to be one. Vigileaproach.io. Check us out. Okay, back to the show.

Gueric Dechavanne 2:28

Well, hey Carlos. Um, you know, thank you for again for for uh agreeing to join us on the podcast today. Um, and as our listeners know, the what I like to ask at the beginning is uh figuring out um how you started your career in aviation or where where the passion came from. You know, we've heard the gamut of how people have done this, and so we'd love to hear from you in terms of you know where that got started and and where you kind of got to where you are today. That's all that you're doing. Thank you.

Carlos Sierra 2:56

Well, yeah, firstly, thank you, Garrick, and thank you, Courtney, for inviting me. It's uh it's an awesome opportunity, and I was really looking forward to it. So thanks for having me here. Um and well, yeah, I mean, how did I start it? It was uh accidental, as you probably heard from other people. I mean, I've I I've I've loved aircraft since I was a kid, and uh I actually used to gather anything that people could bring me from aircraft. Uh I don't know, napkins, uh flight schedules, uh uh, you know, these uh ticket covers that used to be around in the old days. Uh I have a I still have a beautiful Pan American uh world schedule booklet that's actually quite nice. And everything I piled all that in a box since I was a kid. And uh but it well, that was a hobby. And uh then when I went into law school, I studied law because I actually wanted to go into politics. That was my plan. So I signed up to the uh National University of Mexico, which is a gigantic institution with more than 300,000 students, if you can't believe that. And um, but very much into politics. It's like a small country in itself. So that was my plan. I started there. Then with a lot of struggle, I finally landed a job while I was still studying at the Ministry of Uh Budget and Planning, which is a job I absolutely hated.

Courtney Miller 4:29

That sounds fascinating.

Carlos Sierra 4:34

But but I thought that was my road into politics, which was a mess. And uh and and the only thing is that I was paid relatively well for my age, and uh, but I hated that. So once uh there was one time in which I was actually skipping class from the university with some friends, and we went to this cafeteria and we were in line for paying. And a friend of mine said to another friend, Well, uh, listen, that job at Mexicana that you talked to me about, I'm not gonna take it. And I was in line, and I said, What job are you talking about? And I said, Well, there's there's there's an opportunity at the legal department at Mexicana, they want an intern, and uh this guy doesn't want it. I said, Well, I want it, so give me the phone number, right? And and so I rang and uh I was interviewed, I was accepted in the legal department at Mexicana, but I was told that I was going to be paid a fifth of what I was being paid at the other job. But I said, Well, I think I have something to learn here, and and and Mexicana Airlines in those days was that's yeah, that's how it was totally, totally, and that was the Mexicana was one of these legacy airlines from the very beginning of aviation. So it was so appealing and it was so glamorous, to be honest, to work for that for that airline. So I said I said yes, and uh and then is how I started in aviation. I loved it. I I was one of the few lawyers at the legal department then that spoke a little bit of English, so I was actually thrown all of the aircraft leases on my desk. And then I started, and then there's another funny story because I started reading these leases. I had no idea what they said. I couldn't understand anything, it was totally new to me. I was I was I was 22 or 23 years old, and then all of a sudden, the Mexicano was gonna receive the first batch of A320s that were purchased uh from Airbus. And these were very, very new uh uh A320s with uh V1 engines. It it was it was uh it was I mean, I'm talking serial numbers 234, for instance. I think that was the first one.

Gueric Dechavanne 6:52

Was that like the early 90s at that point?

Carlos Sierra 6:54

The early it was 1991, I think, at the moment. And uh so I was I was uh I had to negotiate these leases, and I was supposed to be joined by a team from people from finance, my boss, my boss's boss, and other people, because I was very junior, and then I was thrown in this room with ILFC to negotiate these leases, and uh nobody was coming into the room, and honestly, I had absolutely no idea of what to say. So, wait a minute. So, were you an intern at this time? I was an intern. I was gonna be in the meeting, and I was thrown into this meeting and nobody was showing up. So I was for a long while sitting down with ILFC and uh who was represented by John Evans, whom you've heard, that later founded Jetscape and other things, and Joseph Hermosillo, who was the general counsel at ILFC. And uh they saw that I had no idea, and they were actually very kind because John started keeping, well, both of them started giving me a masterclass on aircraft leasing, which was totally not in respect to the lease we were gonna discuss, but just they just kind of, I guess I liked it, they liked me, and they said, Well, uh uh, we're just gonna teach this kid a thing or two about aircraft leasing. So we talked about maintenance reserves, overhaul of engines, return conditions, events of default, all of these niceties, and I I I still remember to this day how kind they were. And um and and and and well, I started learning. I worked five years at Mexicana. Then there's another story when uh I was I was uh well I was married, uh my wife was expecting our daughter, our first uh kid, and uh and I was not making enough money. And I remember I had to, at some point, part of my job, I had to write the mortgage uh release of one 727 aircraft of the Mexicana fleet. So I remember I prepared that that that that that document. Everything was typewritten back then, that there were no no computers, nothing. So I prepared the document and I had to go get it signed by Bank of America back then. So I went, there was nothing, no other way, no email. I went to the Bank of America office and uh the director of the bank was sitting there with his lawyer. And um, I remember it must have been a Monday because I walked into the meeting room and they were talking about golf and how what they did over the weekend. So all of a sudden they said, Okay, what what what do you want, kid? And so, well, this is the mortgage termination for this aircraft and so on. So the guy says, Okay, come here. And uh I showed him the document, he passed it on to his lawyer, he didn't even look at it. And the lawyer just kept talking about golf, and he wrote one comma and another comma and gave it back. I said, Okay, fine, I guess they it's all right. So I went back to the office. That was completed, time passed, a couple of weeks or so, and then, as it was part of a financing arrangement, then came the legal bill for that lawyer. Five thousand dollars, I I remember. Well, in the 90s, I went for that mortgage termination. Yeah, so I went right into my boss's office and I said, Can you believe this? I mean, this is ridiculous. I drafted that document, yeah, and I told him the story, and he said, Well, you know, I mean, it's part of the finance arrangement, those fees are payable by the borrower, which is us, and uh, don't worry. He gave it to me. He signed it off, authorized it, got it paid. Meanwhile, you're thinking $5,000. $5,000 was what I made in about six months. Yeah. So honestly, so I walked out of his office and I said, I'm in the wrong business here.

Courtney Miller 11:11

You're in the right business, you're on the wrong side of the table.

Carlos Sierra 11:17

So I said, No way. So I I quit it and I started my my my own firm when I was 28 years old in 1994. And uh I remember, as I said, my wife was pregnant, and my dad said, That's so irresponsible. You're gonna lose your job and you're gonna start. It's that's that's just ridiculous. You can't do that and say, Well, I must because I need more money. And uh and I also felt that there was uh I I had noticed for some time that aircraft lesores and banks were not properly serviced in Mexico. There were firms that were doing the job, some of them are still around, but I don't think that they really knew aviation and the the jargon and everything that comes with it from within. So um I I I noticed that every time I was across the table with another Mexican lawyer that didn't know about anything about aviation, I noticed because they said instead of saying engine, they said turbine. Instead, things, things of that sort. And uh so you could always tell. So I I sense there was some space there to work for these companies. So I quitted. Uh uh we rented, I I had a partner, we rented a very small cubicle uh in a bad area of town, and uh and I started making phone calls. And one of the first phone calls I made, or the few phone calls I made, was to Joe Hermosillo at ILFC. Oh, yeah. And uh, and and I said, Joe, you remember me from those years and all? I said, Well, we've started this firm, and I cannot even dream of, but if ILFC would ever have anything that you might need in Mexico, uh, I'm happy to help. So he said, sure, why don't you come to Los Angeles? And I said, Okay. So I went to Los Angeles. I met with all of the ILFC team, and we were retained by ILFC.

Gueric Dechavanne 13:28

Wow, wow.

Carlos Sierra 13:31

Well, not just like that, but it was very, very quick. And we started working with them and and and doing things for them in Mexico, and then from that came others, and then then then we went on. I mean, it was a difficult start. Um, but we started uh uh calling friends and a lot of people that I I I had met in the in the in the leasing industry and and that and we started doing what we do now. And then I remember in 2003 I was called by by Carol Chase, who has passed away. She used to be at Pegasus, she used to be general counsel of Pegasus, uh working for Rich Wiley. And uh they had this issue with a Mexican airline, and she uh someone recommended me and she called me, and we've we made a very good connection. She was she was a great woman and a great mentor to me. And uh and and and she got me into the uh repossession side of the business because we started uh suing this airlines and trying to recover all of these aircraft, and I learned so much, and and and from then I I I sort of learned to be on uh uh to take care of both aspects, uh the transactional work and the repo work, which which is uh uh taught me a lot of so many lessons because once uh once you recover an aircraft in this environment, which is very hard uh from a legal standpoint, you learn to put a number of things in the documents that would make it easier the next time. So we started I started sort of uh selling that product, and uh and a lot of Lesources liked it. And what I noticed uh over the years is that the Lesource had this uh taboo to say to say it somewhat how that uh there there was a type the typical Irish lease that was floating around in those years that was used before by by GPA and the old leasing companies that was uh considered to be untouchable. You couldn't change uh anything at all. The airlines were always pushed back in anything they wanted to change, but everything was just written and uh nothing could be changed. So there was no local adaptation of the remedies within the lease that could be effectively enforced in countries like Mexico, which is countries with a civil law system that is totally different from the common law system under which this type of documents are are drafted and and under which this type of transactions are actually designed. Um so enforcing remedies uh in a country that that that with a civil law system is is is complex and it's it's uh uh very formalistic. So the lease and the documents need to allow you to do that effectively. So I started working on that, suggesting numerous numerous uh changes that were pushed back at the beginning, but when we started repossessing aircraft and doing things, Lessource started realizing that that local law could not be ignored, especially local procedure. And uh and then we started uh uh uh uh suggesting a number of changes and comments and providing jurisdictional questionnaires and legal opinions that sort of resembled what you needed to do here in order to effectively enforce your rights. And that was that was liked. I I I I then became involved with the aviation working group, uh, with Jeffrey Wool and people in that in that environment in trying to uh uh implement in Mexico and elsewhere the Cape Town Treaty and all. And so we started more effectively enforcing rights of creditors in this environment and and recovering many aircraft. Um we were lucky as well because from 2000, say 1999 to 2000, uh starting there, uh all the way up to 2010 when Mexicana went out of business, we had to recover aircraft from 13 different Mexican airlines that went bust.

Courtney Miller 18:10

That's what I mean.

Carlos Sierra 18:14

And uh and and and and we we I mean we just were super busy during all of that decade and and then thereafter with others. So so that's essentially how uh our firm grew, and uh we do a lot of regulatory work as well. We represent international airlines, more than 30 international airlines, and we work for all of I like to say all, but obviously not all, but most of the aircraft less source that we all know, plus banks, OEMs, uh uh you name it, financiers, private equity funds. Everybody that has invested in an aircraft in Mexico, we we we've had in one way or another something to do.

Courtney Miller 19:04

Yeah, and that's are you uh do the law that you practice is it exclusive to Mexico, or do you branch out to other countries with similar systems? How does that work?

Carlos Sierra 19:15

Yes, we we work, well, we have uh as part of the sort of expansion we've experienced over the years, we've expanded to Latin America. We we we believe that uh we could, and and it has worked relatively well, we could provide sort of like a one-stop solution to aircraft lesores that have aircraft in Mexico, in Argentina, in Colombia. And uh so we try to control the transaction, the speed, the fees, the communication with the lesores in these environments. Some of these Latin American countries we found have much less aviation than Mexico or Brazil do, for instance. So uh for people to establish actually a practice of law only dedicated to aviation in a country like Bolivia or uh Ecuador is not is not possible. I mean, people need to do a lot of people.

Courtney Miller 20:16

Imagine being the aircraft repo guy in Panama, and it's Copa. Like they nothing, nobody's repossessing anything from Copa.

Carlos Sierra 20:24

That's right. Yeah, exactly. And and and maybe one firm does a lot of Copa work, but the others don't. So sometimes what Lesource cannot find in Latin America is the uh the knowledge of how to work these things out. Uh as I said, the language for some reason is very important. Uh, I mean, and what I'm what I mean by the language is uh aviation language. I mean, what what what an overhaul of an engine means, what cycles and hours mean, what is an APU, what is the landing year. I mean, there these things seem obvious to you guys, but but but many people don't have any clue about. I mean, we've struggled over the years to persuade judges that the aircraft is composed by a number of parts, including, for instance, the aircraft records, which they tend not to believe that the records are part of the aircraft. So explaining that it's more complicated than you would think. Uh so until we recover the records of, say, an aircraft or an engine, we don't have the whole aircraft. Right. And perhaps it's not a bit, I mean it loses value, etc. And and the records are always in this deep hidden warehouse gaining, I don't know, fungus and humidity somewhere. Yeah, yeah. And and and gaining access to that and and just uh inspecting them and taking them out, it's it's more challenging than than it seems, but we need to do it in order to do the the job in full.

Gueric Dechavanne 22:00

So have you found over so if you think about the last three decades, right? Over the last 30 years or plus years, have you found that have you been able to kind of train the lessors to adapt to Mexican law? Or, you know, more so than Mexico, because of the fact that leasing has grown, I mean, globally, but also in Mexico, you know, has has Mexican law changed slightly to account for the fact that more aircraft are leased, or has it just been more lessors have adapted to be able to lease in Mexico?

Carlos Sierra 22:35

I think it's the latter. I would love to say that that at least they would have met in the middle, but that's not true. Mexican law has not really changed. I mean, Mexico it's a it's uh it's a signatory of of the Cape Town Convention, but it didn't make the the declarations. It made some of the declarations that are sort of required in order to access the discounts from XIM and the more favorable financing terms from capital markets in, say, double ETC deals or things of the sort. Uh Mexico has stayed short of making all those declarations in full. So Cape Town is effective here, and in that in some way that has uh adapted Mexican law to the international treaty, but not to the extent it should have been or it it it is expected. So I mean, that being said, there are a number of benefits that Cape Town has brought into the the exercise of remedies in Mexico for a lesor, because there are a number of things that are that were probably less advantageous in Mexican law before that have changed. For instance, choice of law is no longer debatable. It used to be, uh but because of Cape Town, it is no longer questionable. So the parties can choose the law that applies to their contract without controversy. Uh, then there's the interim relief uh that you can obtain from a court in order to immobilize an aircraft when you can when you come to aduse that there is an event of default rather than proving it. So that has worked well. Uh so in that sense, there are some benefits of Cape Town that have proven to be very helpful here, but not all of them. And the other problem is that Mexico has done a poor job at uh passing uh implementing legislation that underneath the international treaty would make uh certain things more uh uh uh practical in terms of the local regulation. Um one of the things that Mexico didn't adopt, for instance, is the IDERA. We don't we we don't we did not uh make the declaration that would enable the IDERA to be effective here. So deregistering an aircraft from the Mexican registry is still a complex task. It did it it didn't used to be that complicated, but with uh the current government environment, it's it's tough. It's it's harder than it used to be. But uh so so I would uh I uh that's why I said I think it's the latter. Les Sources have made a lot of changes in the approach they make to aircraft leases in Mexico, in the documents, in the form in which we document security interests, for instance, and the like, um, in order to make to ensure to the extent possible that these rights are more easily enforceable in this civil law environment. Uh give you an example, for instance. Normally aircraft can be mortgaged and and aircraft mortgages are very common. Well, in Mexico, it's more practical to do a non-posessory pledge, which actually has the same characteristics in terms of the security that it provides, but given procedural rules of Mexican law, it's more easily enforceable. It's easier to enforce a non-poscessory pledge than a mortgage. So these kind of uh little bits are are are good for Lesores. It's it's it's the advice we try to give them, and it it goes a long way when we try to enforce the security interest uh in Mexico um more effectively.

Courtney Miller 26:39

Is this uh you mentioned uh uh Mexican aircraft registration? Is this the reason why I think it's Valaris has quite a few N-registered airplanes? Or I I don't know if those are leased or owned or what, they're just oddly un-registered.

Carlos Sierra 26:55

All of the ones that are unregistered are leased. And uh and and and and the reason is that Mexican Airlines generally register their own aircraft, and many leased aircraft in in uh in Mexico. The problem this dates back to the time when Aeromexico, the first Aeromexico, went bankrupt in 1988. Uh, because normally in all countries, aircraft that are uh uh operated by the local airlines have to be registered in the country. Now, back then when Aero Mexico went bankrupt for the first time, there was a lot of pushback by Les Sources to lease aircraft to the new Aero Mexico if they were to be registered in Mexico because of the difficulties of getting an aircraft deregistered. So, foolishly, in my opinion, the government instead of overhauling the registration system in Mexico and make it more effective or more or easier to access and deregister, they started allowing aircraft to be registered uh outside of Mexico upon prior approval. That was sort of uh just an implicit right that Lesource had and airlines had to request aircraft to be registered outside of Mexico for many years until the new civil aviation law was passed in 1995. When that was uh uh implemented, they wrote an article saying that you're allowed to lease aircraft operated with foreign registration as long as you get a prior approval from the uh civil aviation authority. Um and so at the request of many lesores, some airlines or most airlines have agreed to register aircraft outside of Mexico upon request. It's not that it's not that easy for them because they need to meet certain requirements from the FAA, which large airlines meet easily. Smaller operation operators struggle more with that, and it costs them money. So they don't love it, they don't like it, but sometimes in order to get the deal done, they have to do it. It depends a lot on on the on the upper structure of the of the transaction. I mean, if the if there if there are uh financings in place, if there are lenders, um uh if there are more institutional investors that are more averse to risk, this type of end registration is requested. If if we're talking about a Lesor that knows, I don't know, Aero Mexico very well and with which it already has, I don't know, 10, 15 aircraft, normally they're more comfortable with Mexican registration. And uh uh but but in other certain deals, uh end registry is requested sometimes. And and sometimes not only end registry, uh there's been aircraft with Irish registry and with French registry um before and and and others, not many others, but some others, and um, and that's that's how it goes.

Courtney Miller 30:21

If you were to take a kind of a step back and just look at the globe, from that perspective, how is Mexico most unique from the the side of the business that that you're on? What is it about Mexico that is just the most unique kind of from that global perspective?

Carlos Sierra 30:43

Well, one thing is the size of its aviation industry and the resilience of its aviation industry, uh despite being in an environment in which uh uh aviation policy uh is lacking for many, many years. I mean, thorough aviation policy uh and and and and effective uh laws to permit or facilitate more uh leasing transactions. Despite that, our airlines in Mexico there's there's been many airlines in Mexico that have uh gone in and out. And and currently the aviation uh the airlines that we have are very, very uh good credits and are very resilient. So I I think that's unique about Mexico because if it were for government policy and and and and and other things, Mexico should not have any airlines. I mean, uh aviation should be very complicated here, and yet it has always been. I mean, uh Mexico is one of the countries that that started earlier in aviation. I mean, Charles Lindbergh flew here and and and invested in the Mexican uh in the earlier version of Mexicana that was uh eventually also part of Pan America. So it's aviation has always been uh in Mexico's blood. Uh the other thing that's unique, not to Mexico, but yes, to to Latin America and other countries, including Europe. It's this civil aviation system that needs to be understood more, civil law system, pardon me, that needs to be understood more more uh carefully in order to enforce rights, as I was mentioning before. And another thing that I find unique is how many how many airlines have failed and how how much how how active and contentious aviation is in Mexico. Uh I mean if you go to Colombia, Colombia being Colombia, which is an a large country with a lot of aviation, there's never been a uh a repossession, uh a hostile repossession there. I mean, there are some aircraft that have gone back to Lesource, more um uh in amicable terms, but there's never been proceedings to recover an aircraft. It's interesting. We uh well we've we've recovered nearly 350 more than uh nearly 400 aircraft over so many years, and uh in all sorts of ways. I mean, consensual, friendly, unfriendly, enforcing uh uh court orders, uh uh uh in the middle of the night, you name it. I mean, we've covered the whole spectrum, and uh and and that makes Mexico unique, I think. Uh interestingly, because also Mexico shares uh probably the largest uh aviation uh border crossing, which is with the United States in the world. And uh and and so so the geographical situation of the country makes it unavoidable to have a robust aviation industry in spite of anything against so I I would say that that would be a good idea.

Courtney Miller 34:13

Yeah, that's that's very unique. I mean, Mexico's very unique in its geography too, right? And just in terms of the airlines. I mean, yes, you have the very, very large capital city right in the middle, but it's up at what 8,500 feet, 8,000 feet. Yeah, um, 7,000. Uh high enough that it's hard to breathe. Uh for me, anyway. But but then you have do you have a very large and spread out country, right? To go from Cancun to Tijuana is what six hours, five hours?

Carlos Sierra 34:47

I mean it's it's it's a four and a half hour flight from Cancun to Tijuana. And uh Mexico has, I think, more than 52 airports, and uh and and the orography, the the the mountains, we don't we don't have any trains, any passenger trains. And uh I mean we have a few, but not that many, and uh and and going by road is very painful because the mountains are very difficult to cross. So flying is unavoidable. It's the only way to service some cities. And uh and and and there's a need for aviation, and there's a market for aviation that is also enormous. Because, for instance, in in in Mexico, because of probably because of uh the the income of the people or how much people make uh or or how young the population is, uh low-cost airlines or or the Mexican version of low-cost airlines has thrived enormously. Like uh Bima and Volaris really have a greenfield of potential customers. And and and you see it, if you fly like I fly to can to Mexico City on Volaris or Biva Airlobus, which is uh obviously cheaper and very convenient, they have lots of flights, but you see it in the in the in the people on board the plane. I mean, you can see that there are always many people that have never been on an aircraft. They clap on landing and and and they're scared when the well I guess, but so it's it you can see it. You can you can see it. Well, if you get on an aeromexico airplane, you you see a different demography because the it's it's a sky team, and and you have people from Europe and people from the US and people from Mexico that pay a bit more, and you have business class and the legacy model, and there's there's a market for that too. Mexico is doing well, actually. But but the the potential of the low-cost uh service here, uh it's like Viva Aerobus. Biva Aerobus is owned now by Mr. Alcantara, who used to be uh a partner of uh the Ryan family when it was formed. And uh and and and and he owns uh an enormous uh uh bus company for ground transportation. And and in the in their business model, you can buy an airplane ticket on board one of these buses. They they sell you the plane on Biva Airobus when you're going on the bus, and vice versa.

Courtney Miller 37:25

So how do they do that? They just when you're stuck in traffic, they turn the air conditioning off and then they come through and sell you airplane tickets. I guess that that's how they do it.

Carlos Sierra 37:35

But but it is it is an amazing connection of getting people from the bus onto the aircraft, and uh and it has worked well for the Mexican market. So so I think that those airlines have a large room to expand.

Courtney Miller 37:51

The country that that always uh looked most similar to Mexico for me, and I guess you know Mexico is a little bit more advanced in aviation, but it's India, because you have a very well, India is obviously significantly larger by population, but you have these domestic connections, and in India, you have the rail system, but you also have the bus system. And what I think people miss about Mexico, first of all, there's over 100 million people, so it's three times as many people as Canada. 130 million people, actually. There you go. I that I must have must have counted yesterday, um right? So uh there you go, 130 million people. Let's leave it out last week, but for so four times four times Canada, right? And growing. Um but what what gets what very few people outside Mexico really appreciate about Mexico is just how developed the bus market is. Oh yeah, and the number of people who ride on buses long haul, right? In inner inner city buses, and some of these are like they're overnight buses, so they're like lie flat and beautiful, like some of the best buses in the world, but just the quantity of people who travel on buses is very similar to India, where you have so just so many people traveling, just not necessarily by airplane, right?

Carlos Sierra 39:18

Right, no, that's true, that is true, and and and yes, I've been I've been told by people from from the US and from other countries about the quality of of these buses sometimes because they have these lay-flat almost first glass seats that that that and and and people I mean if you think about it. I'm in Cancun, going to Mexico City from Cancun, as you have to go around the Gulf. Uh we don't we won't name the Gulf, but the Gulf. Uh yeah, dude.

Courtney Miller 39:48

No, no, no. It's all you're you're good. We call it the Gulf of Mexico still.

Carlos Sierra 39:53

Uh but but but you have to travel for 24 hours, maybe more. Wow, yeah, maybe 30 hours on a bus. And uh however comfortable, that's a lot of hours.

Courtney Miller 40:06

Yeah, it's a little what a two-hour flight? I mean it's an hour and 50 minutes to two hours.

Carlos Sierra 40:11

Yeah, that's a huge difference.

Gueric Dechavanne 40:12

Yeah, yeah, yeah. That's crazy.

Carlos Sierra 40:13

It's a huge difference.

Courtney Miller 40:15

But then you got the traffic from the airport to where you're going in Mexico City, so that's another 20 hours.

Carlos Sierra 40:22

Well, you know, I I fly because of where I live in Mexico City, I fly to Toluca Airport. Oh, yes, these days. And that is not a very pretty airport, but it's empty. So it's absolutely wonderful.

Courtney Miller 40:36

So you're like on the Santa Fe side, you drive up the yeah, exactly.

Carlos Sierra 40:41

Yeah, very nice. Right. I live kind of halfway between Toluca Airport and Santa Fe. So and our office is in Santa Fe, so it's it's actually quite convenient. There are not that many flights, but I have the ones I like already, already cherry-picked, and I I I I much prefer to do that than flying to Mexico City. I mean, I don't know, Mexico has lost me as a frequent flyer on account of that, but uh because I don't fly to Toluca.

Courtney Miller 41:08

But to get from the airport to Santa Fe, and it's been a while since I've been to Mexico City, but I mean it could take over an hour, right?

Carlos Sierra 41:17

Three hours easily at certain times of the day, it can take up to three hours. Oh. Easily. Easily. Mexico City, it's a very complicated city for for driving, and uh you you you really need to fly from point A to point B. I I remember we we used to, when we were repossessing from Mexicana in 2010, uh, Gas had 36 aircraft at Mexicana. So they sent a whole bunch of people to campdown in Mexico City, and we were working with the government and the airline and everyone else trying to recover this aircraft. And our office is in Santa Fe, and they always stayed at the JW Marriott in Polanco. Oh, that's what I used to say.

Courtney Miller 42:01

Yeah, I know well.

Carlos Sierra 42:02

Right. And they always said, okay, we'll have a team back every day of everything everybody did at the bar at the JW Marriott at 7 p.m. Well, to be there at 7 p.m. I had to leave my office at 5 p.m. in order to make it to the daily meeting.

Courtney Miller 42:20

So just just just the same example. And it's not far, right? From Polanco to South May, it's not far, but there's no way eight miles away or something. Wow.

Carlos Sierra 42:35

Traffic's just horrible.

Courtney Miller 42:37

Wow. Right.

Gueric Dechavanne 42:39

So I I'd love to touch more on, you know, you've obviously mentioned how you've repossessed quite a few aircraft uh or helped, you know, to be able to get that. I mean, so you know, I think you said something around close to 400.

Carlos Sierra 42:51

Yeah.

Gueric Dechavanne 42:52

Can you share any any of the the stories that, you know, the ones that stand out in terms of the most interesting, whether it's been because they were challenging or whether it's like, I mean, because you have to have two good stories. Uh, you know, 400. Definitely. There's definitely something.

Carlos Sierra 43:06

We could be here all day. Honestly, and and some of these stories are so so I mean, funny now because they weren't funny then. Uh, but so so interesting that have been uh I mean our clients have displayed them at in conferences, like uh like there's this I mean the recovery of these aircraft for Jika from Mexicana. I mean, there was a bit of everything. I mean, we recovered the A318s first. First, we recovered ILFC's aircraft, then others. But at some point, the union, and that's another thing that makes Mexico unique, I've found the labor unions started blocking the recovery. And the new owners of the leftovers of Mexicana were favoring them in that sense. So at some point, uh, we had the we had our core. Orders in order to repossess the aircraft. We were gonna pick up a lot of uh this were CRJs and seven one sevenths that were at Mexicana, uh owned by GCAS, and we were uh ready to pull those out, and uh we tried, but the union wouldn't let us. So at some point, we managed to obtain uh uh the necessary permits and all, in order and the court order in order for the police to assist us. And uh and and we came with uh police in riot gear over the airside of the airport.

Courtney Miller 44:40

And so when you say police assistance, you mean like literally walking you to the airplane and making it wow.

Carlos Sierra 44:49

It was funny because we we I mean, this should be hard to to to to to get. We went to the airport with the GKS team, and uh and we talked to the I don't know, the commander of the police there, who was a very severe guy, and we said, Okay, how are we gonna do this? And he said, Okay, we're gonna go earthside with 80 police officers. We're gonna go airside and we're gonna get to the maintenance base through the runways. And I said, Okay, fine. So, where do we go with you? And said, No, no, no, wait a minute. You guys are not coming in our vehicles, you find your way. I was okay, that's easy. So we started calling people. We we found this maintenance company that had a van, like a technician's van with no windows. So we jumped on board that van. There's pictures of it, and it was, you know, the lawyers, the notary, the court officer. Uh and and we showed up in this van. We're sitting on the floor of the van. We showed up in this van, and it looked like we looked like clowns coming out of this van. All of these lawyers. But these police officers lined up, and workers and people from the company started coming out in numbers, blocking the aircraft with pushback trucks and and and other uh uh baggage carts and everything, uh, and not letting us in. And and the situation became at some point very, very tense because uh one of these people apparently hurt one of the police officers, and the commander of the police force was furious, and he was looking at us like people from Jika's and myself, saying, Are we gonna do this or not? And the court officer, are we gonna do this or not? And it was super tense, and at some point, Jas rightly said, No, we're not doing it. We're I mean, people are gonna be hurt here, and we can't.

Gueric Dechavanne 46:55

Yeah.

Carlos Sierra 46:56

So we went out, people were cheering and clapping from the Mexican side, and we left. And and and we eventually were able to enforce that court order by by agreeing with uh with the company and and other people at uh at the behest of the court, and and everything worked out fine. But but there are pictures of that day of all these police officers, and and and Jeek as John Luton and Ed Sherred presented these pictures uh at conferences. That's that's why I'm I'm comfortable talking about it, because everybody was fascinating to see these police officers recovering aircraft. So that one, the other one is uh another interesting one, is uh with with uh with Brian, Brian Reinhardt who was at AWAS back then. We were trying to recover this aircraft from a company called Avolar, which went out of business. So he came to Mexico City with one of the lawyers from AWAS, I forgot her name, but uh she was very kind. And and and and we went to see the CEO of the company of Avolar in Mexico City. And the guy said, Well, fine. We said we want to recover this aircraft, it was one aircraft, and he said, Well, fine, you you I I I I can't say anything about it. You need to go talk to these guys, which were some Armenian guys that had been selling him fuel, and that on account of how much fuel he owed, they took control of the airland. Did you see the Sopranos ever? Well yeah, it sounds very much same thing. So he says, Okay, you have to talk to this guy, uh, it's off my hands. So Brian and also we said, Okay, well, let's go. And we jumped on a plane and we flew to Tijuana to cross to Los Angeles. We went eventually in Los Angeles. This guy was in Los Angeles, so we went to see him. And I don't know, for anyone that knows uh uh how around LAX airport everything is, and you have all of these uh airline offices at Airport Boulevard that are not especially very fancy. These are old offices full of operational uh teams and all. So we went to one of these offices at Airport Boulevard, and uh we walked into the building, we go to the floor, and the whole office was like the Caesar's Palace in Las Vegas. I mean, it had drapes, it had all of this marble, it had bodyguards at the door. Yeah, and uh so we said, Oh well, we're here to see this guy. Uh okay, yeah. Come in. They sit us at this long meeting room table, and all of a sudden comes this guy with his hair up to down to here with an open silk bersach shirt and coat jace, and he sits like this and he says, What can I do for you? We said, Well, okay, we're here to try to recover this aircraft. Yeah, sure. Ivan paid what I'm owed, you can take the aircraft, and then we left. And we were like super shocked about the whole thing because it was so intimidating. And uh we called uh uh our lawyer, John Torriello, who was the the the the litigator that was handling the case in New York, and he he he was a tremendous lawyer. I think he's the best litigator in New York I've ever known. And he he uh uh he told me over the phone we were in we're on the sidewalk, and he said, Well, uh if you can get uh anything in your hands that shows that this guy is taking management decisions in the company as he's a US resident, I can have him deported, we can threaten him with that and close his companies, etc. And I said, Well, that's doesn't seem too easy, but yeah, let's see what we can do. And then out of getting nothing out of our trip, we went back to Tijuana and the AWAS guys, Brian, wanted to see the wanted to see the facilities of the company that were at Tijuana Airport at the maintenance hangar, and I don't know, talk to someone there. So we went really for nothing, and as we were coming down the stairs, I saw this bulletin board, and I saw this paper signed by this Armenian guy telling the workers that they shouldn't worry that the company was being restructured and that everything would be okay. Obviously, the company was out of business by then. So I saw that and I ripped it off the wall and I took it with me. I folded it and I put it in my pocket and it it ripped, so it wasn't even complete. And when I went back, I said, John, this this is all I could find. And he said, That's enough. Just send it to me. Ripped as it is, that's what I needed. Well, the guys returned the aircraft, and I think they paid the debt. I'm not sure about that, but everything was resolved magically. So that was another funny story. Wow, yeah.

Gueric Dechavanne 52:18

That's a little, yeah, that's a little uh I'm convinced. I mean, you know, you don't want to get the the knock on the door to be like, hey, remember me?

Carlos Sierra 52:27

No, I don't. Right? This was ages ago, so I'm happy. Yeah. Wow.

Courtney Miller 52:34

There needs to be uh no, okay, go ahead. I want to hear this.

Carlos Sierra 52:37

No, I was just gonna mention one more recent in which we recovered one of the Russian-operated aircraft for Ercastel.

Courtney Miller 52:45

That's funny. So we go from the Armenian mobster. Where can you go from there? Well, the Russian aircraft.

Carlos Sierra 52:54

Well, uh that that is funny, and and I can mention names and all because uh uh actually Steve Queen from Ercastel and and Chris Beers presented that at Istat in uh a couple of years ago. Well, when it happened, and uh and and this was so funny because I was just enjoying my Saturday one day at 11 in the morning, and I get this call from Steve Queen saying, Hey Carlos, how are you doing? Listen, we have a Russian aircraft operated by one of the Russian airlines in Mexico City right now, a 777, no less. And uh and what can we do to grab it? And said Steve, I don't know. I mean, he said, okay, let me complicate things for you a little bit more. The aircraft is supposed to leave in an hour and a half. So we have one hour and a half on a Saturday to see what we can do.

Courtney Miller 53:49

So wait a minute. No, listen. So here's what you said. I I'll end the story. You got all those Mexicana former employees to park baggage carts behind the airplane, right? And they all stood out and faced down the cops.

Carlos Sierra 54:00

That would have been that that that was that was option one. That was option one. No, but he said, listen, what can we do about this? And and and then we started brainstorming, and he said, Well, you need to go to the airport authorities and tell them that the lease is in default. And I said, Steve, that's not gonna fly. I mean, they don't care about the lease, much less of a Russian aircraft. They don't care about the lease of a Mexican airline, much less about a Russian aircraft that's fully authorized to operate. So we started giving, going in circles, and at some point I said, Well, we need to give the authorities a story that makes the aircraft not airworthy, that that tells them that they shouldn't approve the flight. So we started going around and said, Okay, what about insurance? So Steve said, Well, that that sounds good. Maybe they because the sanctions from the European Union had just been enacted. So we started saying, well, maybe this invalidates the insurance. Well, then we found that the insurance was Russian, but then we said, okay, the reinsurance. And we started gathering information. There was not much. There was some newsflash or bulletin issued by Clifford Chance by then, mentioning that possibly because of the sanctions, and we started getting everything we could. We got I got some people from our team at the office to make a big binder and on a filing. So we wrote a letter to the director of aviation at the uh AFAC, and we filed it at the airport, and we got a stamp saying we filed this on time. So we we started calling the director of aviation from AFAC. We got him out of a party by this time it was a bit later in the day, and we said, you can't let this aircraft go because there is no insurance. And he said, Oh, you're gonna be kidding. There is insurance, and I mean the plane is fully authorized, I can't stop it. And we said, Well, we've already we've already made this filing, and uh and and and we've proved provided evidence that there is no insurance coverage, and it's it's it's it's a safety item, it's an airworthy item, so you can't let it go. But if you let it go, it's fine. If it falls in the middle of the ocean, it's really on you because we told you already.

Courtney Miller 56:32

Oh wow.

Carlos Sierra 56:36

And the guy said, Okay, it won't go. So wow, yeah.

Courtney Miller 56:42

Okay, so this whole story took place in an hour and a half?

Carlos Sierra 56:47

Yeah, a bit more because there there was a delay in the departure, fortunately. I don't know on account of what, but that the plane took a bit longer to depart. So maybe maybe three hours. And uh that's wow.

Courtney Miller 57:01

So so you were you you are putting together binders and getting documents signed, and they're boarding the flight.

Carlos Sierra 57:08

Well, it was not it was not a passenger flight because it was one of these aircraft that flew. It was a passenger airliner, but it wasn't flying passengers because it was one of these flights that operated during COVID with uh only medical equipment and uh you know masks and things. So it had cargo and it was parked at the cargo apron at Mexico City. So uh so that was that was funny. We we managed to recover. And and then yeah, we took it, they took it to the Mexicana MRO, and then the aircraft was repossessed. And then we we with a similar argument, we snatched two others from other lessors. So two two other triple sevens operated by by a Russian airline.

Gueric Dechavanne 57:55

Yeah.

Carlos Sierra 57:56

Wow.

Courtney Miller 57:56

So that's a great one of the few jurisdictions in which that was uh uh able to happen. Okay, maybe that answers my question. I was just curious if if any this type of situation played out anywhere else other than Mexico, because the problem here wasn't Mexico, it was Russia, right? It was the Russian uh sanctions, and since were they were they in default, were they not paying the lease? Or how well they couldn't do that. I don't know.

Carlos Sierra 58:25

I think they were in default under the lease for some reason, yes. And uh and and also, well, there had to be some some some justification because these aircraft were going back to Russia to never go out again. And and remember what Russia did at that moment is that it it without deregistering the aircraft, which mostly most of the Russian-operated aircraft were registered in Bermuda, uh, for some reason the Russian registry was not widely used. But at the time this happened, the Russian authorities instructed the registration of all these aircraft in Russia without canceling the Bermudan registration. But in order for the Russian airlines to continue operating them wherever they could without being sanctioned. And uh, and and that's what happened. So many aircraft, you know, you know, this resulted eventually on aircraft that were uh uh that stayed in Russia uh forcefully. This resulted in a very large insurance case brought up by many lesores that has just been resolved recently. And um and yeah, so so so that was that that was the problem.

unknown 59:38

Yeah.

Carlos Sierra 59:38

Yeah.

Gueric Dechavanne 59:39

And that's I mean, it's it's fascinating to me because that and and that actually that can only that could have only happened with I think today's technology of being able to track your airplanes. Yeah, because I'm sure I'm sure right they were just tracking all the aircraft that they were just and and it's like it just happens to be, oh, you know, this isn't a jurisdiction where we feel we could have a chance to take it. But yeah, think 20 years back, right, you wouldn't have right, you know, unless you had somebody at the airport that'd be like, hey, by the way, I think this is your airplane.

Carlos Sierra 1:00:11

Like you wouldn't have to Mexicana, back to the Mexicana, of course, 2010. Uh we there there was this Lesour, big Lesour, wanting to uh repossess a number of aircraft, and uh he wanted to know where these aircraft were flying to, because the airline was still flying them in the very last few days, and some many of them were flying to the United States, so they wanted to know where they could snatch them. So he calls me and says, I need to find out where all of our aircraft are flying to, and say, Well, yeah, but how do we do that? I said, Well, buy tickets, get boarding passes, and get people to the gates.

Courtney Miller 1:00:51

And we did, see where they go, and and okay, so you had people at the gates looking at tail numbers and where they're going at the window. Oh, geez.

Carlos Sierra 1:01:03

Say, okay, aircraft registration so-and-so is flying to Chicago, and aircraft registration so-and-so is flying to Miami. Oh, that's hilarious! And uh, and and and and literally the way to know, I mean, absent this technology that Gary was mentioning, was to buy tickets, get boarding passes, go to the gates, that's genius, look out the window.

Courtney Miller 1:01:28

Wow, and then and not get on the airplane. They probably just called uh and said, Okay, this airplane's going here, this is going there.

Carlos Sierra 1:01:36

Yeah, no, we I mean, our people, our team with the people we sent to the airport to do this did not fly. They did just walk around. Yeah, yeah, that's hilarious. Went back home.

Courtney Miller 1:01:46

Wow, yeah, yeah. This is this is uh the next uh uh generation of the TV show Suits, if you're familiar. Like Suits Mexico. I'm telling you. Suits Mexico. This is this is that that level of I I mean, when you think about the term we use is like thinking outside the box type of thing, like that's it. Buy a ticket, look out the window, see what it says.

Carlos Sierra 1:02:16

Absolutely, and we did that, and uh plus many other things. I mean, we've had to carry boxes out. I mean, I've had I've had lawyers that work for us saying at some point, okay, I'm I wasn't I wasn't hired to carry boxes, and said, shut up, you carry the box.

Gueric Dechavanne 1:02:34

Just keep walking and don't look back.

Carlos Sierra 1:02:35

And $400 an hour, I don't care to carry these boxes out of here. And we literally did that. I mean, it's you know, repossession, it's it's it's it's an adventure, and this is where really uh it gets real. I mean, you can have your leases, you can have everything written down, but uh and and I get asked the question over and over again: how long will it take me to recover my aircraft? How long will it take me to win in court? How how many months? How many hours? It's very difficult to say. It's always very circumstantial. You can walk in and find the aircraft in pieces with the engines in shops, on wing on other aircraft, uh parts just thrown around there, the record somewhere. Uh I mean from Interjet we recovered an aircraft. The last A320 we recovered, we recovered 65 aircraft uh from there. The last A320 we recovered was in the middle of a of a major uh maintenance service. So it was totally disassembled. And then we had the union impeding the repair. So it was it was complicated to finally get the court order and all to be able to assemble the aircraft, find the parts. The Lysor had to send engines down, uh because one of them, because I think their other engine was around, uh it it was very complicated to in that environment to just pull an aircraft back together.

Courtney Miller 1:04:18

Yeah.

Carlos Sierra 1:04:19

And uh uh, but we we we were able to do that.

Courtney Miller 1:04:22

Yeah.

Speaker 5 1:04:23

Yeah.

Courtney Miller 1:04:23

Speaking of interjet and Russian airplanes, whatever happened to the super jets? Well, they're sitting there.

Carlos Sierra 1:04:31

They're still they're still in Mexico? Yeah, I'm I'm not at liberty to talk much about that one. Fair enough. That's a live case.

Courtney Miller 1:04:39

But but the airplanes are still there.

Carlos Sierra 1:04:41

They're the planes are still there. Wow. Uh yeah, it's it's it's amazing because those aircraft uh are are a disaster. I mean, the the since the company acquired them, uh they were not fully certified to fly. The problem I was told was that the the the aircraft as a whole was certified by EASA, because you know these aircraft had European engines and and and it was a consortium. And what apparently happened is that when as they took them early and they were not fully certified, what was not certified individually were the parts. So for instance, the plane was fly was operating, and if I don't know, uh a latch or a door or something became uh had to be replaced, that door was available but was not certified by EASA yet. So they couldn't install it, they couldn't fly it. So they had to park this aircraft uh pretty much new because of all the lack of a tiny part that was not properly certified yet. That's what I was told by Interjet.

Courtney Miller 1:05:52

I I don't wanna I don't wanna say that's absolutely right, but that's that's what I was told at some point. I mean, I remember. But when when those aircraft were flying, so I'm in the Dallas area. I remember seeing a superjet in Dallas, and I thought they were not certified in the US, but I guess that didn't matter because they they were uh flying from another comp uh country, so it wasn't a domestic flight. Uh yes. So yeah, who knows with the parts, but that's that's fascinating.

Carlos Sierra 1:06:23

So then I'm sure you that was a strange aircraft to get on uh to fly on. I I I I I tried to not fly on those planes, but for some time, but then I was taking an integ flight and that the plane the aircraft was replaced by one of these, and uh and I flew on it. It was it was very funny feeling. It was like a it was like flying on a on a on a on a Volkswagen. It was like a small, very noisy aircraft. It was it was like very, very weird. Yeah. Wow.

Courtney Miller 1:06:57

But well, I mean that's it it's also so distinctly Mexico, right? There are all of these stories everywhere, you know, still like you said, airplanes still kind of parked, you know, off to the side somewhere. You still find old 727s parked here and there. We were talking about that before we started. Um, and I know very so there was Interjet, but then after Interjet really nothing until most recently, Magna Charters, or was there was there one in between?

Carlos Sierra 1:07:32

Oh, we we have Iromar, yeah, in the middle, uh which uh were aircraft that we recovered for for export credit agencies that ended up owning them. And uh and we re we went through the full process and we were able to recover possession. And we've had some issues with the union. The unions placed an attachment on those aircraft that we had to get rid of. We managed to get rid of that. And and I mentioned these unions because that is another thing that's unique here. Uh uh the the the rights of workers are always alleging things that obviously are not valid, but that in this current environment are entertained by by the government authorities. So we were able to dismiss those attachments because they were illegal, but it took us some time, which is is bad for the industry here because the the time frame that that that it takes to accomplish a repossession has uh increased. When we recovered from Mexicana, we recovered 77 aircraft from Mexicana in 2010 in total, out of a fleet of 104. We were able to recover, nine of which were owned by the company, and the rest were owned by people we didn't represent. But we recovered 77 in a time frame of four months. All of them. Wow. Wow. That's interesting. While now I I mean that was a record I wanted to keep, and and in this environment, with Interjet and Aromar, we have not been able to really meet that mark anymore. The situation legally has deteriorated.

Courtney Miller 1:09:23

Do the labor unions, the represented employees, do they have some sort of claim to credits in Mexico that you don't see in other bankruptcy courts?

Carlos Sierra 1:09:36

They are a preferential creditor, the workers. And they they they have, I mean, if in insolvency proceedings, firstly go anyone holding a security interest, then the workers, then the tax authorities, then everyone else. And the workers have a claim against assets uh uh uh of the company, but not against assets that are not owned by the company. And uh and and this this uh uh type of attachments that they placed in this case were illegal because they were placed by labor authorities that are ignorant, I have to say, of the circumstances of the ownership of the aircraft and how they're operated by the airline. So they some some officer from the labor tribunal comes along and says Iromar and slaps an attachment on it, and then you have to go to court to get rid of it, yeah, which is ridiculous. And and and on and honestly, the only thing you have to prove, which is not that complicated, is that uh the aircraft is not owned by Iromar. And that's that's it. Uh but but it takes a long time. The problem with the Mexican legal system, as with all civil law systems also in Latin America, is that uh the civil law system is very formalistic. So everything you do has to be filed in court, has to be reviewed by the judge, everything has to be translated into Spanish, attached with an apple still, with ink signatures. There is no fast track to those types of uh formalities and issues. You have to have a valid power of attorney. Uh uh every time you file a power of attorney, the counterpart will always challenge it just for the fun of it. That wastes time. Yeah. It's it's it's very slow because all of the paperwork and and the whole proceeding is very, very, very complicated. And you cannot, in Mexico, you cannot exercise self-help remedies as you can in common law countries. I mean, you all of these programs you see about people repossessing cars in the US and things like that, that they just come with a with a crane and take the car away. You can't do that here. I mean, and uh neither cars nor aircraft nor anything. It's uh it's a crime. You can go to jail if you don't have a court order to repossess. And getting the court order takes a while. So uh it's it's it's not as easy as it seems.

Courtney Miller 1:12:16

See, you keep saying it takes a while, but what I hear is bull billable hours.

Carlos Sierra 1:12:22

Oh well, I wish, but no, yeah, the the the the the source know better, they don't let you being out of control. But but but yeah, it's it's it it requires a lot of work. Yeah, it does require a lot of work and and and a lot of effort to to circumvent all of these all of these difficulties. And that is that is what uh uh at the beginning of our conversation I was saying, that it's important for for lesors and and and financiers to take into account so as to uh ensure that the document is the proper tool to enforce this rights. For instance, if you say, okay, this the this this contract is governed by New York law and and and you can only resolve controversies under the courts of New York, then you go to a court in Mexico and the judge declares that it is incompetent and that it has he or she has no jurisdiction to hear the case, because the contract says New York courts. If you go to New York and get a judgment which could be quick and easy, and you bring it down to Mexico, to validate that court judgment could take a process that would last, I don't know, six years. Because it has to be made compatible with Mexican law, which is very difficult because judges in New York don't issue their judgments in the way in which Mexican judges issue their judgments. So to enforce a foreign court judgment in Mexico, it's a nightmare. So what I tell all my clients is what you need to do is to have the contractual provisions that make it easy for you to stand before a Mexican judge and enforce your remedies here. Because that's the quickest way. And it's unavoidable. If the aircraft is sitting in Mexico and nobody wants to give it back to you, before or after, you're gonna have to stand before a Mexican judge. So the easier that is made by the transaction documents or allowed by the transaction documents, the faster you will get your aircraft out. That is absolutely certain. So those are the kind of things that we advise our clients to take into account. And they do. And and in many, many cases, but because of the of having sound documents, we've succeeded in repossessing very effectively in many cases.

Gueric Dechavanne 1:14:53

So I'd like to touch uh briefly on there's a lot of talk today about the advancement of technology, right, the use of AI and that kind of stuff. And to me, the the the air castle scenario, right, where you've got a limited amount of time trying to figure out all the different things that you're you're you could do, right? Do you do you today utilize you know the advanced in technology, things like that, to be able to figure out what are all the different things that we can do in a in a more efficient manner, right? Is that is that something that or is it just more like, hey, let's just get you know guys that have had the experience and let's just see who who comes up with what? I I'd love to, I don't know, you know, how how do you kind of take advantage of technology today to try to kind of make those kinds of speedy decisions like faster?

Carlos Sierra 1:15:46

Well, to try to find out where the aircraft is going or where it is now with technology, it's very easy. And uh we've also used databases to try to find uh the the the ownership record of the aircraft or or some information about prior operators and other things. Um really what has no technological substitute yet it's having to sit before the judge or the aviation uh authority people and and and just beg them to do their job. That that there's AI hasn't figured out a way around that one. Yeah. But uh but to the extent we can in terms of research of arguments and things, we we we try to to use technology, you know, AI technology and law are are are a difficult mix because AI is substituting the work that lawyers do very rapidly. So we need to see how that evolves eventually.

Gueric Dechavanne 1:16:53

Yeah.

Carlos Sierra 1:16:54

But at least when when the part of the law the lawyer's work that you do is going and roll up your sleeves and get your shoes dirty, getting the aircraft out, I think that has to be done live at the airport. That there there's there is yet no other way. Yeah, yeah, yeah.

Gueric Dechavanne 1:17:14

Well, and and look, I I think there's still no substitution for experience, right? I mean, it's one thing to be able to just have you know a tool that looks at all right what has been said or look at the language or things like that.

Carlos Sierra 1:17:26

But you for somebody to be like, well, I remember when we did this, and this is what got us to resolve this issue, or I mean, you still can't find that in you know the Aircastle example is a good one because we were able to find the information on to make a reasonable uh case that insurance was lacking. And and for that, we had to procure information that we found over websites and and and and over the the internet. It would have been very difficult in in the old days to get that information so quickly and so accurately, because uh, I mean all the information about the EU sanctions on Russia and and and and arguments related to the effectiveness of insurance and precedence and everything we could find and gather within an hour or two uh was available uh uh in uh in databases that were non-existent ten years ago.

Speaker 5 1:18:29

Yeah.

Courtney Miller 1:18:30

But that's not the that wasn't the impressive part of that story for me. The what was impressive for me was you knew who to call and you got him on the phone and he came out of the party. Yeah, well, yeah. And we knew that you got him to pick up the phone and make a decision, and then you knew exactly what to do once that verbal decision was made. I I I find there's no substitute for that.

Carlos Sierra 1:19:01

No, I think so. And that I I'll say specifically about that guy. We that that that's that's someone we had I personally had been dealing with for the past, I don't know, 15 years since he has been at uh AFAC and before DGAC, and uh and and and he had several jobs. And at some point, I remember that I was in the negotiations of the bilateral agreement between Luxembourg and Mexico with him across the table. So we we we know each other. I mean, you know, aviation, it's a lot about relationships. It is, yeah. I mean uh I don't want to flatter myself, but I don't know if he could have come out of the party for anyone else. I mean, it's right.

Courtney Miller 1:19:44

That's that's what relationship does.

Carlos Sierra 1:19:48

It was a party and he didn't have to get out of it.

Courtney Miller 1:19:50

Correct. Yeah, yeah, but knowing that you called the story. Which was helpful.

Carlos Sierra 1:19:57

Yeah, yeah. That's funny.

Gueric Dechavanne 1:19:59

Yeah, it's great.

Carlos Sierra 1:20:00

So yeah, but you know, that is that is a lot of what aviation is. I mean, aviation, it's uh a close knit of professionals in every area, technical, uh, scheduling, uh, legal, finance, you name it, that that work together and know each other. I mean, aviation, it's a it's a huge worldwide network, not so huge, but it's it's a it's a very close-knit worldwide network of of people that that always share the same problems and the same pains and and and uh and and resolve things together. So even even here that plays a role. Yeah, yeah, yeah.

Gueric Dechavanne 1:20:43

Now, so when you when you look at your career being in Mexico, what would you say are are the the positives of the industry in the Mexican market over those last 30 years, right? What's I mean we you know we we talked about law and how it's hasn't changed too much, but like you know, I mean that that's one thing about I love you know about aviation is that it does evolve over time based on the consumer, based on technology, based on the regions, right? So what from you know where you stand, what have you seen over the last 30 plus years?

Carlos Sierra 1:21:15

Well, I have seen uh an industry that has evolved for the better. Uh I mean, after all of these uh airline failures between 2000 and 2010, uh and after the previous era where airlines Mexicana and Aero Mexico were owned by the government. Um, I have seen an aviation industry that has become more sophisticated, better financed, uh uh more professional, more responsible, providing better service, more reliable with better aircraft. Um and I guess I'm a little bit proud to have facilitated that to the to the extent I can in what I do to be a reliable source of service that that that facilitates these transactions, it's it's good. And I think I have seen that change over the years. I was saying at the beginning that when I started doing this, I I saw there there was there was a need for uh Lesour and Airlines to communicate better, uh to understand each other better, and to be able to work out better deals. And uh and that was needed. That has changed. I think also the authorities have, well, I have to say, in recent years, have gone backwards, but up to a certain point they had become more knowledgeable of what an aircraft lesore is. I mean, back when I when I worked at Mexicana in the early 90s, you went to see the the head of the DGAC back then, the general director of the DGAC, and he didn't know that aircraft were leased. And they didn't know that that that that not all aircraft were owned by the airlines. I mean, we're talking a little bit after the days when aircraft were purchased in cash by airlines. I mean, I I remember there was when I worked in Mexicana, there was a story about the the CEO, the the Manuel Sosa, who lasted for many, many decades as CEO of the company, had this little wooden boxing in his office, and every time he went to Boeing to pick up an aircraft, he would take the check in this little box and pay for it. Right there. In Seattle. And he would pull out the check, somebody would run to the bank immediately, I guess, but he would he handed a check for the full value of the aircraft back in the 80s. So if you compare that with, I don't know, PDP financing and OVTCs and uh ABSs and and all of the structures we see and live through today, that has changed. And and and and Mexico has not been absent from it. Yeah. And uh and and I like to see that that I mean these Avolars, like the one we the plane we recovered for AWAS, plus many others, Aladia, Azteca, Aviaxa, Nova Air, uh, all of these airlines from the past that were so unprofessional and so unreliable, owned by all these shady individuals uh that ran away with whatever they could and left everybody stranded. That has changed. You would never see Volaris or Arabico or Viva ever attempt that at all. I mean, these airlines are run by professionals that have been around for years that are equivalent to anyone around the world.

unknown 1:25:11

Yeah.

Courtney Miller 1:25:12

Well, the the teams are professional, but the owners are like they are very well known. They tend to be very well-known people with other businesses. So the idea of just kind of disappearing or or just allowing things to fail, um it it would affect other other businesses. You mentioned what was it um Alcatra at um Right. Uh Viva, yes. At Viva. I mean, you had um uh who was the Interjet? Um well you have the Aleman family.

Carlos Sierra 1:25:49

Oh, Miguel Aleman, that's right. Very respectable, but at some point they they sailed to run out, right? Yeah, right. They ran out. Yeah, but I mean, Aeromexico is a public company. Volaris is a public company. Mr. Alcantara, as you will said, has many, many business endeavors that he would not risk for anything. Viva is now merging, well, not yet, but they've announced that they will be uh merging eventually with Volaris. And uh that will create a very large airline uh in this environment. And uh I would assume they will go public as well, and uh and and and that means many people own these these these businesses, plus they operate aircraft that are owned by institutional investors from around the world that that trust them, uh trust the the airlines' credit. I've I've seen, for example, Mexico, as I was saying, uh came short to make all of the gratifying declarations of Cape Town, which would enable uh the capital markets to do WTC deals. And yet the airlines credits are so strong that I've been called by people in capital markets before trying to say, okay, is there a way in which we could circumvent this Cape Town requirement so we could do a deal of this nature in Mexico? Because we like the airlines credit. We want to do this type of business with them. So I think that that that that would solve the issue because once you have a strong credit and good financiers on the other side, you find a way. And and and a lot of that passes through give them certainty that however difficult this environment might be, everything is solvable if you take the right steps and and and you can have a reliable lease in a reliable environment. And that that that is what has come a long way, I think, over the past 30 years. That's great.

Courtney Miller 1:28:00

So uh one a quick question for you. As uh a Mexican citizen who flies often, now that we have uh let's assume the Viva Valaris merger goes through, is Mexico too large of an aviation market for a duopoly? Or do you think it can those Aero Mexico and I don't even know what they're gonna call it going forward, those two large airlines will be enough for Mexico, or do you think you'll see more startups?

Carlos Sierra 1:28:35

I think those two large airlines will be hard to challenge. If sure if if if unless someone comes up with a lot of money and with a very sound business plan. It's not like in the old days in which I don't know, a guy that owned hotels would think, oh, I want to have an airline, would buy a couple of old 727s, fly them on till they went bust and disrupt the market with very low fares and then go out of business. That that I don't think will happen again. That that being said, there there are some areas of air transportation in Mexico that will or might need to be serviced better. Like there were there were models before of uh charter airlines that serve the US on Canada-Mexico market that could still surface. I think that is underserved. And I mean the legacy carriers took that space after 2008 or nine or so, because there were there used to be all of these other airlines like Ryanair, Trans, not Ryanair from Ireland, Ryan International from Wichita. Oh, that's right, yeah, and Transmeridian and Champion Air and uh USA 3000, and you named it. All of these airlines used to fly all of this leisure uh market to Mexican beaches and Caribbean destinations, and then they were taken over by the legacy carriers and then the USLCs. But now maybe there's a niche for this type of market again. That's one thing. The other is the regional uh regional market in the in the west part of the country, northwest part of the country, that used to be served ages ago by another defunct airline called Iro California, uh, that had at some point about 20 aircraft or so. And I think there's there might be space for someone to start uh servicing there. Although Aeromexico and Volaris and Viva perhaps would disagree with me because I think they do a good job in in every market. You know, there's there's also a well-balanced mix because Aro Mexico it's it's a legacy carrier with that type of service, and it's uh it's a Hubbard-spoke system in which it they fly primarily out of Mexico City from around the world. They service Asia and Europe, and they fly people in the US, of course, South America. They fly people through Mexico City everywhere else. And Iromexic um uh Volares and Biba are point-to-point. They have smaller hubs, but they they do a lot of the direct flying, for instance, to Toluca, as I was saying, uh uh out of Cancun. Aeromexico cannot service Toluca efficiently because they have to go through Mexico City. But but it's it's a mix of both types of service, and I think it works for both. And uh so I don't know. I mean, there's always someone willing to open an airline. Well, the government just did open it. Mexicana, of course, talking about new Mexicans is a disaster. It's a disaster. I mean, they have it's it's run by the military. They have they will have 20 brand new Emperor aircraft. They right now, I think, have around seven or eight that they've taken delivery of. And they they can't manage to get a share of the market that makes that business meaningful. It's just a waste of government money and and and a waste of time, uh uh uh and and effort. And I don't think it's gonna go anywhere until I don't know, a future administration maybe sells it off or or or closes it down. I I don't know, but that they're not they're not causing any any any damage to the current market distribution. They have less than one percent. It's it's incredible. And and and that's because of this obnoxious decision of flying out of the new Mexico City airport that's super far away and nobody flies from. So it's just I mean, that that's why I was saying that I'm always surprised about how resilient the Mexican aviation industry is. Because I mean, we were on the verge of having a world-class mega hub airport being built on which, for instance, I know Aeromexico was betting its future to become, I don't know, the next Turkish airlines. Because of how well they could connect uh uh uh as a hub of so many people that may not be able to go through the United States or not want to from Asia, South America, and Europe, etc. It would have been a fantastic airport. In the master plan of that airport, it would eventually have had six runways. Wow. So it was an enormous project.

Courtney Miller 1:33:54

And it it started, right? I mean, you can still see where they were moving dirt, and yeah. I think they even laid like foundations and stuff.

Carlos Sierra 1:34:01

30% built. Wow. When they shut it down. Yeah. 30% built. It it it it was it was probably the worst error I've ever seen anybody, uh a president from anywhere in the world, make. It was it was a disaster. Because besides, it was funded uh through bonds issued in the in the United States and elsewhere by by a lot of investors, it was privately funded. And to shut that project down, the government had to indemnify all of these bondholders and is still doing so today. So it it it was so so how can you conceive that if an airline is betting its future on this type of infrastructure, then this is cancelled, and then it has to change gears and do something else and still be doing well today, as they are. So I mean, how many times in aviation you have to just change mode because of enough it is with COVID, wars, fuel prices, you name it, and then to have all of these unpredictable uh situations in Mexico makes it very hard.

Courtney Miller 1:35:19

I mean, there it Garrick, if you ever have time with nothing to do and an internet connection, uh just scroll into random airports in Mexico on Google Maps. Um but this airport that is it's just it's just east northeast of Mexico City Airport. It's an airport. Like if you look at it on the map, there are the runways, I see where the terminal is going. It and there's nothing around. I mean, I think those are like uh kind of. Are we talking about the new at the new airport or the new no no no the one that wasn't finished? No, not AIFA.

Carlos Sierra 1:35:58

Um, it was turned into an echo park, supposedly. What's that mean?

Courtney Miller 1:36:06

The wall size they just left it there.

Carlos Sierra 1:36:10

They floated it, so it becomes a lake. Oh, wow, okay that will attract ducks, I guess, or I mean it's kind of an airport.

Gueric Dechavanne 1:36:22

It's sort of an airport, right? Right, exactly. Yeah. Technically, it is. It is, yeah. You do have things that fly that land there. So therefore, it's an airport. It's an it's a it's a yeah, that's right. Environmental airport.

Courtney Miller 1:36:36

You're right. Where they dug out the foundation for the terminal, which you can see is actually water.

Carlos Sierra 1:36:41

Wow. Yes. There are some people talking here about eventually if if uh the government, I mean politics allow it, eventually reviving that project. But I I don't know if it's already destroyed beyond beyond salvation.

Gueric Dechavanne 1:36:59

Yeah, water will do some pretty good damage. Yeah.

unknown 1:37:02

Wow.

Carlos Sierra 1:37:02

A lot of money, a lot of money uh underwater there. Literally. Literally. Literally, literally, yeah. Wow. Because besides the construction techniques for that airport were very sophisticated because the land there is not very stable. But I mean, some airports have been built on water, so it's it's totally doable. Yeah, but uh yeah.

Courtney Miller 1:37:25

And then if you look just east off the off the east end of the runways for Mexico City Airport today, you will see a lot of basically Carlos's resume parked in Tails. Yeah, some of those are there. Some of those are there. Wow, some of the Aero Californians, yeah, those DC nines, yeah.

Carlos Sierra 1:37:50

Yeah, they're but but those are not really the ones I like to look at. I like to look at the ones that left. The ones that left it, yeah, that made it. Actually, those are probably the ones we didn't have a chance to work on.

Gueric Dechavanne 1:38:03

Yeah, yeah, probably. Yeah, wow. Well, look, Carlos, it it's been fantastic talking to you. I'm so glad that Mr. Rhino introduced you to you because it's been fascinating. You know, it's uh you've got a great career, and we appreciate you sharing that with us today. So thank you for making the time to speak with us.

Carlos Sierra 1:38:21

Thank you for having me. As I said at the beginning, it's it's an honor to have chatted with you guys and uh and and to portray how it is how it is down here that I think a lot of my colleagues around the world uh need to take a look and see how how things happen when they get real.

Gueric Dechavanne 1:38:40

That's right. Well, you always hear versions of the stories, right? So it's nice to be able to hear it from somebody that's lived through it and is trying to you know get his customers to go through the process and successfully. So it's definitely uh very nice to hear.

Courtney Miller 1:38:54

That's our job. So thank you so much for for the conversation. It's been wonderful. Thanks, James. Thank you very much, Carlos.