Landveld examines crucial provisions in SLM and Global X contract

The SLM Global X contract, according to Minister Raymond Landveld of Transport, Communicatie en Toerisme, must be examined more closely to determine exactly what agreements were made between the two airlines. The minister says he does not yet know the full contents of the agreement and therefore wants to be cautious about drawing final conclusions on the problems surrounding the wet lease.

An important issue for Landveld is what the parties agreed upon when the aircraft deployed by Global X is unavailable. According to the minister, a wet lease may include arrangements for replacement capacity when an aircraft is taken out of service due to technical or other operational problems. Based on the information currently available to him, such a specific replacement clause may not have been included in the agreement.

Landveld first wants to establish what has actually been set down in writing. For the time being, it therefore remains unclear whether Global X was contractually obliged to immediately provide another aircraft when the aircraft for the SLM operation became unavailable. Nor can it be established on the basis of publicly available information that SLM itself breached a contractual obligation.

SLM Global X contract had previously come under pressure

Surinam Airways announced on August 29 that it had made extensive, written arrangements with ACMI partner Global X for the operation of regional flights. SLM stated that, in practice, the operation had in certain respects proceeded differently than could have been expected based on the agreements made and operational premises.

However, the airline did not disclose at the time which specific provisions were involved. Nor did SLM explicitly identify which party was responsible for the deviations. Key News previously reported that there had indeed been deviations in the operation, but that the statement did not allow a conclusion as to who had contractually failed to meet its obligations.

Replacement aircraft central to Landveld’s questions

Landveld’s remarks now focus attention primarily on the content of the contract itself. If a replacement clause is indeed absent, this may be relevant to the question of what obligations Global X had after an aircraft proved unavailable. The mere fact that replacement capacity could not be delivered immediately does not automatically mean that a contractual arrangement was breached.

This first requires determining which services are guaranteed in the SLM Global X contract, which exceptions are included and which responsibilities rest with SLM and Global X. Landveld has indicated that he wants to study these provisions further before delivering a final judgment.

The contract must clarify what SLM and Global X actually agreed regarding replacement capacity.

Regional flights came under severe pressure

The discussion on the agreement is taking place against the backdrop of persistent problems with the national airline’s regional flight schedule. The situation worsened after SLM’s own aircraft, PZ-TCX, was taken out of service in Guyana due to technical problems. Key News previously reported that this put several regional connections under pressure.

SLM subsequently used leased capacity to absorb the consequences of the disruption. Global X was deployed as an ACMI partner. Under such an arrangement, the external airline generally provides the aircraft, crew, maintenance and insurance. Global X likewise describes ACMI wet leasing in documents filed with the U.S. Securities and Exchange Commission as an important part of its business model.

SLM seeks a less vulnerable arrangement

The leased capacity ultimately proved insufficient to prevent all disruptions in the regional network. Passengers faced changed flight times, delays and uncertainty. SLM apologised to travellers and indicated that the situation was reason to reconsider the way external capacity is deployed.

The airline subsequently announced that it was working on deploying two different operators. This should prevent the regional operation from becoming almost entirely dependent on one external party. When one operator is temporarily unable to fly, the second airline should provide more room to still operate some of the flights.

No evidence that SLM breached agreements

Landveld’s new remarks must therefore be carefully distinguished from SLM’s earlier statement. Based on the information currently in the public domain, it cannot be reported as an established fact that SLM failed to honour its agreements with Global X. SLM itself reported that the practical implementation of the written arrangements differed in some respects from expectations, without formally establishing which party was responsible.

Nor can it yet be established without the contract that Global X was legally in default. This requires knowledge of, among other things, arrangements on aircraft availability, technical failures, replacement capacity, minimum capacity, exceptional circumstances and possible sanctions. These provisions have not been made public.

Contract must ultimately provide clarity

Landveld’s announced examination of the SLM Global X contract may therefore become important for the further debate on Surinam Airways’ regional operation. Above all, it must become clear whether the lack of immediate replacement capacity resulted from a contractual shortcoming, or whether such an obligation was simply not sufficiently laid down in the agreement.

The discussion thus shifts from the question of who is directly at fault to the content of the contract and the way the wet lease arrangement was structured in advance. As long as that agreement has not been fully examined, caution remains warranted in statements about which party may not have complied with the agreements made.