A long-running commercial dispute involving Vietnamese aviation giant, Vietjet, and a distressed debt investor, FitzWalter Aviation, has become muddled by a series of claims and counterclaims across jurisdictions.
To make sense of these ongoing developments, one must examine the context in which the dispute arose, the contractual history, the circumstances of the obligation, and the legal proceedings that gave rise to this fascinating issue.
FWA has won its case against Vietjet in the English courts. But for banks, lessors and airlines, an investor’s reputation also depends on how it exercises its creditor rights after securing a legal victory. FWA’s pursuit of enforcement measures that could affect operating cash flows raises a direct commercial question: Can counterparties trust FWA in a long-term transaction, particularly when the market faces a major shock and all parties need to work together on restructuring?
Following a series of operational disruptions caused by the COVID-19 pandemic, including stringent travel restrictions imposed by the Vietnamese government, Vietjet experienced operational difficulties and fell behind on lease payments for four Airbus A321 aircraft. The airline entered into restructuring negotiations with its financing banks to seek extensions to its payment obligations. Those discussions came to an end in October 2021, when the banks reached an agreement to sell their positions to FitzWalter. FWA subsequently sought to terminate the lease agreements, repossess the aircraft and recover the resulting outstanding amounts.
Distressed debt acquisitions are a normal feature of financial markets. What warrants scrutiny in this case is the manner in which FWA exercised its rights following the assignment, at the height of the global COVID-19 crisis. As of May 31, 2023, Vietnam had recorded 43,206 COVID-19 deaths, according to the World Health Organization (WHO). This figure illustrates the scale of the tragedy the country endured. Against this backdrop, choosing to terminate the leases and repossess aircraft while the airline was seeking to restructure its debt represents an approach that the aviation industry should be loath to accept as a precedent.
The timing of FWA’s decision to repossess the aircraft is precisely what makes its conduct worthy of scrutiny. When travel restrictions caused revenues to collapse, aircraft were also essential assets that would enable the airline to rebuild its network and generate the cash flow needed to repay its debts once the market reopened. Enforcing termination rights during that period may have protected the immediate interests of the debt purchaser, but it also risked undermining the airline’s recovery and shifting additional risks onto employees, suppliers and financing partners. Counterparties are entitled to ask how fully FWA considered these consequences before choosing to repossess the aircraft in the middle of a global pandemic.
BNP Paribas and Natixis must also account for their decisions. The two original financing banks had negotiated a restructuring with Vietjet before agreeing to sell their positions to FitzWalter Capital in October 2021, while the aviation industry was still grappling with the pandemic. Their decision raises questions about professional ethics in aviation finance. When selecting an assignee during a crisis, to what extent did the banks consider the prospects for continued restructuring, the preservation of airline operations and the protection of the borrower’s future debt-servicing capacity?
After demanding the return of the aircraft and payment of amounts arising from the lease terminations, FWA brought the dispute before the High Court of England and Wales. The proceedings commenced in August 2022.
The liability judgment, dated July 31, 2024, was largely in FWA’s favour. The Court of Appeal dismissed Vietjet’s appeal, and the UK Supreme Court refused permission for a further appeal. According to the September 30, 2026 judgment concerning the appointment of receivers, Vietjet had paid approximately US$18.8 million in outstanding rent, interest and costs pursuant to orders issued following the liability judgment. This development should be taken into account when assessing the overall debt recovery process.
The dispute subsequently moved into the enforcement phase. FWA’s initial application for a freezing order was refused. On September 30, 2026, the High Court ordered the appointment of receivers. A freezing order was subsequently granted.
The original dispute concerned four aircraft. However, when enforcement measures extend to cash flows generated by overseas ticket sales, counterparties must assess the potential impact on transactions that support day-to-day airline operations. Banks need to know which cash flows may be available for debt repayment. Suppliers need clarity on whether amounts falling due can be paid on schedule. Prospective aircraft financiers need to understand whether an old dispute could affect the completion of their transactions. Each party has reason to factor in additional costs and protective conditions if the scope of potential exposure becomes difficult to predict.
Following the issuance of the freezing order, the case attracted extensive media coverage, prompting questions about Vietjet’s operations and expansion plans. For aviation partners, the immediate concern is how enforcement measures could affect the cash flows required to maintain flight schedules and meet obligations to banks and suppliers.
An aircraft’s economic value depends on its ability to be deployed in service, sustain flight schedules and generate cash flow. If repossession or enforcement measures undermine those cash flows, the resulting costs could extend beyond the original transaction to other creditors, business partners and passengers. This is the kind of risk commonly associated with so-called “vulture investing”, where debt recovery is prioritised over the operating value that sustains the very source of repayment. FWA needs to explain why the enforcement measures it is pursuing are proportionate to its recovery objectives and how their impact on third parties can be contained.
FitzWalter Capital was established in 2020, just one year before this transaction. As a relatively new market participant at the time, FWA faces a longer-term commercial question: How willing will airlines, lessors and banks be to do business with FWA if they perceive it as a party that amplifies instability whenever a financing arrangement encounters difficulties? How FWA handles this case will shape the level of confidence counterparties place in the firm in future transactions.
For FWA, its reputation will ultimately be judged by its ability to turn its legal advantage into a workable settlement. It should move promptly towards substantive negotiations on a payment schedule, performance guarantees and any necessary adjustments to enforcement measures to preserve ongoing airline operations. A settlement backed by clearly identified payment sources and defined timelines would give all parties a basis for assessing the prospects of recovery, while demonstrating to the market that FWA can resolve a distressed debt situation without destroying the value of the underlying aviation business.
