English High Court recognises Spanish airline restructuring, grants protection against aircraft lessors

The High Court of England and Wales has recognised the Spanish pre-insolvency proceedings of Volotea S.L., an airline facing a €70.6 million emissions compliance liability and mounting financial difficulties, granting the company protection against creditor enforcement in England while it negotiates a restructuring. ICC Judge Agnello KC held that proceedings commenced under Article 585 of the Spanish Insolvency Act qualified as foreign main proceedings under the Cross-Border Insolvency Regulations 2006 (CBIR), notwithstanding that they represent a preliminary stage of the restructuring process rather than formal insolvency proceedings. The Court also modified the resulting stay to mirror the moratorium available in an English administration, subject to protections for aircraft creditors under the Cape Town Convention. The order was made on 8 October 2026, with reasons published on 29 October.

Volotea, which operates 41 Airbus aircraft across European and North African routes and employs approximately 1,945 people, began experiencing financial difficulties in early 2026 after falling into a negative equity position. In March, the company agreed to a restructuring involving a €15 million capital contribution and the conversion of certain shareholder and investor loans into equity. However, rising aviation fuel prices further weakened its financial position, while an immediate cash flow shortfall arose from approximately €70.6 million in EU emissions trading allowances, with the Spanish government refusing a request to defer payment.

On 17 September, Volotea commenced proceedings under Article 585 of the Spanish Insolvency Act, a debtor-in-possession mechanism providing an initial three-month moratorium against enforcement over assets essential to the business. The Spanish Court subsequently designated the company's aircraft leases and related contractual rights as essential to its operations and restricted aircraft deregistration and export requests. Although the proceedings were automatically recognised in participating EU Member States, they had no equivalent automatic effect in England, where all 41 aircraft leases were governed by English law and most allowed lessors to pursue claims before English courts. Volotea therefore sought recognition to prevent enforcement or repossession while restructuring negotiations continued.

The central question was whether the Article 585 procedure constituted a qualifying foreign proceeding under the CBIR, given that Volotea remained under management control and had not entered formal insolvency proceedings. Judge Agnello concluded that the process satisfied the statutory requirements because it was collective in nature, addressed insolvency or severe financial distress and remained subject to judicial supervision. The Court emphasised that the procedure prevented creditors from seeking liquidation, allowed challenges to the designation of essential assets and formed part of a framework leading either to a court-sanctioned restructuring plan or formal insolvency proceedings.

Having recognised the proceedings as foreign main proceedings, the Court granted additional relief under Article 21 of the CBIR, replacing the automatic stay with a broader moratorium equivalent to that available under paragraph 43 of Schedule B1 to the Insolvency Act 1986. However, the relief was expressly subject to the UK's implementation of the Cape Town Convention and Aircraft Protocol, which generally entitle aircraft creditors to recover possession after a 60-day waiting period unless the debtor cures relevant defaults and agrees to perform its continuing contractual obligations.

The Court also acknowledged that any future Spanish restructuring plan seeking to compromise obligations under Volotea's English-law aircraft leases could face difficulties under the Cape Town Regulations and the rule in Re Gibbs. Judge Agnello declined to determine that issue, distinguishing recognition of the preliminary moratorium from the enforceability of any subsequent restructuring plan.

Richard Fisher KC and Edoardo Lupi, both of South Square, instructed by Hogan Lovells, appeared for the applicant.