Austrian Airlines Oesterreichische Luftverkehrs AG v. UT Finance Corp.

OPINION

During the 1990’s, United Technologies Corporation (“UTC”) was anxious to have Austrian Airlines specify jet engines made by one of UTC’s affiliates for use on new aircraft being ordered by Austrian. It entered into a somewhat complex deal pursuant to which Austrian agreed to do so, and a UTC affiliate, UT Finance Corporation (“UTF”), probably as a “sweetener,” agreed to buy a particular used aircraft from Austrian some years in the future for a price in excess of $30 million. But buying a jet aircraft for future delivery for more than $30 million is considerably more complicated than buying a used car for immediate delivery for quite a bit less money. The purchase agreement understandably made UTF’s obligation to consummate the purchase contingent on satisfaction of a myriad of conditions.

*582 At least in part as a result of the 2001 terrorist attacks on the World Trade Center and the Pentagon, the bottom fell out of the used aircraft market between the time the purchase agreement was signed and the approach of the date for delivery of the used aircraft. UTF allegedly was anxious to avoid buying an aircraft for far in excess of its market value and, in any event, insisted on strict compliance with the contractual requirements. Austrian failed in major respects to satisfy the conditions precedent to UTF’s obligation to purchase, and UTF rejected delivery. Austrian then brought this action for breach of contract, claiming primarily that UTF’s alleged desire to avoid what had become a disadvantageous deal led it to reject the aircraft in bad faith.

The case was tried to the Court without a jury. UTF moved for judgment of dismissal on partial findings at the close of plaintiffs case. The Court now grants the motion and makes the following findings and conclusions.

Facts

I.The Parties

Austrian Airlines Oesterreichische Luft-verkehrs AG (“Austrian”) is a corporation organized under the laws of Austria with its principal place of business in Vienna. UT Finance Corporation (“UTF”) is a Delaware corporation with its principal place of business in Connecticut and is a finance arm of UTC that, among other things, acquires used passenger and cargo aircraft, which it typically then leases or sells to other operators.

II. The Underlying Relationship

The contract at issue in this case arose from an underlying agreement, dated December 23, 1996, between Pratt & Whitney, which is an affiliate of UTC and a major manufacturer of jet engines, and Austrian. Austrian there (1) agreed to place a firm order with Airbus Industrie (“Airbus”) for a minimum of two and up to four of Airbus’s model A330-200 aircraft, each to be powered by Pratt & Whitney’s model PW4168 Propulsion System, (2) took an option to purchase up to four additional A330-200 aircraft from Airbus and agreed, to the extent it exercised that option, to ensure that each was powered by the PW4168 Propulsion System, and (3) took an option to purchase up to two additional PW4168 spare engines for use on its A330-200 aircraft. 1 The price for each PW4168 system was approximately $10 million. 2 The deal therefore was worth between approximately $20 and $100 million to Pratt & Whitney.

III. The Aircraft Purchase Agreement

To induce Austrian to enter into the contract with Pratt & Whitney, a second contract — the Aircraft Purchase Agreement (“APA”) — was formed. UTF there agreed to purchase from Austrian the used Airbus A310 aircraft at issue here for $32 million. 3 The parties agreed further that

“[t]o the extent that the Aircraft is delivered in accordance with the delivery conditions required by [the APA] and to [UTF’s] satisfaction, [UTF] shall make [$1 million] cash credit available to [Austrian] on the Closing Date. To the extent of any non-compliance with the delivery conditions on the Closing Date, [UTF] *583 may accept the Aircraft, in which event [UTF] shall subtract the value of any such noncompliance (to be determined as the amount reasonably required by [UTF] to satisfy the delivery conditions) from such credit; provided, however, that [UTF] shall not be responsible for the value of any such non-compliance in excess of ONE MILLION U.S. DOLLARS. For the avoidance of doubt, [Austrian] hereby confirms and agrees that it is obligated to deliver the Aircraft to [UTF] on the Closing Date in accordance with all of the delivery conditions contained in [the APA] and that [UTF] has no obligation to purchase the Aircraft in the event such delivery conditions are not met.” 4

This provision was unique to this contract. The price adjustment term was included to resolve difficulty in the parties’ agreeing on a purchase price. 5

The APA provided that the “purchase of the Aircraft by [UTF] shall occur on a date to be mutually agreed during the month of March, 2004” 6 and made time of the essence. 7 Moreover, any amendments and modifications to the agreement had to be in writing and signed by both parties. 8

UTF’s obligation to purchase the Aircraft was contingent upon Austrian satisfying conditions set forth in Exhibits C and D of the APA. 9 Exhibit C required Austrian to provide UTF certain records, including in relevant part (1) the “FAA/ DGAC-Approved Airplane Flight Manual” (the “AFM”), which had to be “current and include all temporary revisions,” 10 and (2) miscellaneous documentation, including historical records for certain “life-limited” parts. 11

Exhibit D specified the delivery conditions for the Aircraft itself. Austrian was obligated to deliver the Aircraft (1) “in good operating condition, ready for flight, with all the equipment, components and systems functioning in accordance with their intended use within the limits and/or unrestricted guidelines established by the relevant manufacturers,” 12 (2) with a letter from Airbus “to confirm the Aircraft met the US-Type Certificate Data Sheet (TCDS) at the date of manufacture,” 13 (3) in a condition that complied with all DGAC and FAA airworthiness directives that “have a known due date for compliance falling within twelve ... months following the Closing Date,” 14 (4) in the condition as it was when the parties entered into their *584 agreement, 15 (5) with at least a minimum amount of time left on all life-limited parts, 16 and (6) with an export certificate of airworthiness from the Austrian aviation authority. 17

One of the principal areas of contention in this case arises out of Section (l)(iii) of Exhibit D, which required that the Aircraft

“shall be in the condition required to be 1) fully eligible to receive a DGAC or FAA (at Buyer’s choice) Certifícate of Airworthiness and 2) fully eligible to be promptly registered and operated as a FAR Part 119 or 121 (and DGAC equivalent) 180 minute ETOPS for scheduled airlines, under the laws, rules and regulations of the DGAC or FAA (at Buyer’s choice).” 18

TV. Regulatory Framework Governing the Aircraft

UTF exercised its option under Section (1)(iii) of Exhibit D in September 2002, informing Austrian that the Aircraft would have to comply with FAA standards. 19 This imposed obligations on Austrian, among other things, to deliver the Aircraft in the condition required to be eligible (1) for an FAA certificate of airworthiness and (2) to be promptly registered and operated under Federal Aviation Regulation part 119 or 121.

A. FAA Certificate of Airworthiness

The process by which an aircraft manufactured and registered in the United States is certified as airworthy begins with the approval of the aircraft model’s design. If an applicant is able to demonstrate that the design meets rigorous safety standards, the FAA will issue a type certificate (“TC”) for that model documenting the design and incorporating a type certificate data sheet (“TCDS”), which “prescribes conditions and limitations under which the product for which the Type Certificate was issued meets the airworthiness requirements of the Federal Aviation Regulations.” 20 Any individual aircraft of that model thereafter may be eligible for a certificate of airworthiness if the applicant can demonstrate that the aircraft conforms to the FAA-approved design documented in the TC and is in a condition for safe operation. 21

An aircraft manufactured in a foreign country may be eligible to receive a certificate of airworthiness from the FAA, but the process is different. 22 As an initial matter, the aircraft must be manufactured in accordance with an FAA-approved TC, which can be issued only if (1) the United States has a bilateral agreement for the acceptance of aircraft for import and export with the country of manufacture, and (2) the country of manufacture certifies that the aircraft has been determined to meet, inter alia, “[t]he applicable airworthiness requirements of [14 C.F.R. § 21.17], or the applicable airworthiness requirements of the country in which the product was manufactured and any other requirements the [FAA] may prescribe to provide a level of safety equivalent to that provided” by the Federal Aviation Regula *585 tions. 23 The foreign aviation authority must certify that the aircraft in question conforms to the approved design and is in a condition for safe operation. 24 The FAA may rely on that certification but may conduct additional inspections to determine whether the aircraft meets U.S. safety standards.

The FAA had issued a TC for the Airbus model A310-325 on March 22, 1996, in accordance with the bilateral agreement between the United States and France. 25 Accordingly, from that point onward, any given A310-325 would have been eligible for an FAA certificate of airworthiness provided the particular aircraft conformed in all material respects with the TC and any other applicable requirements.

B. Federal Aviation Regulation Part 119 or 121180 Minute ETOPS

Federal Aviation Regulation (“FAR”) part 119 governs the certification of air carriers or commercial operators engaged in air commerce, and part 121 governs the operations engaged in by those certified under part 119. 26 Part 121 governs also extended range operations (“ETOPS”) flights, which are defined as flights that are conducted “over a route that contains a point farther than one hour flying time at the normal one-engine inoperative cruise speed ... from an adequate airport.” 27

The FAA approval process for ETOPS flights is extensive and generally involves two stages. 28 The first is a determination that the airframe and engines for a specific aircraft model are sufficiently reliable to engage in safe extended flights. 29 During this stage, the FAA develops a standard for configuration, maintenance, and procedures (“CMP”) of the aircraft, which defines the minimum requirements necessary to establish the suitability of an airframe-engine combination to engage in ETOPS flights. 30 If the FAA approves an airframe-engine combination for ETOPS flights, such approval “is normally reflected by a statement in the FAA-approved [AFM] and Type Certificate Data sheet or Supplemental Type Certificate ..., which specifies the CMP standard requirements for suitability.” 31 The second stage involves a determination whether the operator that will conduct ETOPS flights has the ability to maintain and operate the aircraft in a safe manner during those flights. 32 This latter approval is granted only to United States operators.

*586 V. The Events Preceding March 200k

A UTF and Austrian Jointly Inspect the Aircraft

In early 2003, UTF hired Patrick Stur-belle, an FAA-eertified designated airworthiness representative (“DAR”), 33 to begin working to ensure that the Aircraft and its associated records met the APA’s delivery conditions. He and Wolfgang Fieglmüller, Austrian’s project manager for the transaction, conducted a visual inspection of the Aircraft on April 22, 2003, at Lemwerder Aerodrome in Germany, at which time Fie-glmüller concluded that the Aircraft was in poor condition with “large parts of the cabin [needing] to be refurbished.” 34

UTF subsequently hired Raimund Phi-lipp of Philipp Aviation Consulting & Engineering GmbH (“PACE”) as a technical consultant to assist with the delivery of the Aircraft. 35 He, Sturbelle, and Helmut Bachhofner, another PACE employee, conducted a second visual inspection of the Aircraft on July 28, 2003, principally to determine the manner in which it was being stored and maintained. UTF and Austrian met the next day to discuss the more than 150 deficiencies that needed correction to bring the Aircraft into compliance with the APA. 36 Fieglmüller’s minutes of the meeting noted that Austrian’s “situation [was] even more precarious ... than [he] had originally assumed.” 37

B. Austrian Investigates the Approval Status of the Auxiliary Center Tanks

One of the discussion items at the July 29 meeting concerned the need for Austrian to contact the FAA regarding the Aircraft’s two auxiliary center fuel tanks (“ACTs”) because they were not part of the FAA-approved design of the A310-325. Both parties were concerned that this design deviation would affect the Aircraft’s ability to obtain a certificate of airworthiness.

Airbus contacted the FAA on Austrian’s behalf on August 1, 2003, and the FAA confirmed that the ACTs were not listed in the TCDS and therefore were not part of the approved design type. While the FAA recognized that it theoretically might have approved the tanks by an alternative method, neither it nor Airbus was able to locate any documentation to demonstrate that the FAA actually had done so. 38

C. The Parties Assess Austrian’s Obligations

Manfred Komposch, the director of Austrian’s aircraft asset management depart *587 ment and the person who negotiated the APA on behalf of Austrian, received an internal report on September 22, 2003, indicating that the APA was “subject to being serviced in accordance with the approval guidelines of the U.S. FAA. This means that the aircraft must conform to the FAR 121 guidelines.” 39 The report concluded that there were “going to be a few places where the [Ajircraft [did] not clearly conform to the contract.” 40 Austrian then met with UTF, which indicated that it was expecting (1) the Aircraft to be “immediately approvable [sic ] under FAR121” and (2) “FAA ETOPS approval.” 41 Austrian noted only that compliance with the FAR part 121 requirement would be “difficult” but otherwise concluded that “[everything must be considered from the viewpoint of the FAA.” 42

UTF began its in-depth inspection of the Aircraft and its records in November 2003 and immediately notified Austrian that the Aircraft failed to meet the delivery conditions in a myriad of respects. In particular, UTF was concerned with the approval status of (1) the ACTs and (2) the Aircraft for use in 180-minute ETOPS flights. 43 Austrian recognized internally that, “[a]c-cording to the current status of things, the contractually stipulated FAA 180 min ETOPS limit according to the FAA cannot be achieved” 44 and informed UTF that the Aircraft would comply only with the 180-minute ETOPS requirements that existed in Europe 45

Richard Ferris, who negotiated the APA on behalf of UTF, made plain that he “expect[ed] the technical approval for ETOPS operation, per FAA regulations, to be granted for th[e] aircraft in the configuration” in which it was delivered and recommended that Austrian, either by itself or with Airbus, consider the possibility of approaching the FAA for such approval. 46 Austrian, however, did not have enough time to get the requisite approval due to the approaching delivery deadline. 47 Moreover, Komposch was concerned that the ETOPS issue was only one of many deficiencies and hoped that the “great ■many things” of which Austrian was “just becoming aware ... [could] be cleared up in time” for March 2004. 48

Austrian finally began to address the delivery conditions in January 2004 when Steven Whelan, a consultant working on behalf of Austrian, 49 contacted the FAA to inquire about the available means for obtaining ETOPS approval because “the aircraft [had to] be part 121 compliant and be *588 eligible for 180 min. ETOPS at the time of delivery” but “no provision for ETOPS for this series A310” existed. 50 The FAA responded that (1) its Advisory Circular 120-42A outlined “the acceptable means for obtaining ETOPS approval,” (2) “it [was] possible for the type design portion of the evaluation to be done separately from the operational portion,” and (3) this could be done by Airbus on behalf of Austrian. 51

Austrian then requested that Airbus seek FAA approval of the ACTs and the A310-325 for use in ETOPS flights. 52 Airbus responded that the ACTs already had been approved on behalf of the FAA by the DGAC. 53 In any case, Airbus did not apply for ETOPS approval because the FAA informed it that resource constraints prevented it from considering such an application unless Airbus identified a United States operator who would conduct the flights after approval. 54

D. UTF Weighs its Options

The parties met on February 18, 2004, at which time UTF informed Austrian that it would (1) assist Austrian and “represent its position as a future owner” in the ETOPS approval process and (2) “accept an FAA letter stating the FAA TCDS update was not required” in order to establish approval of the ACTs. 55 Five days later, Klaus Stoeger, Austrian’s executive vice president, inquired of the UTF inspection team in Lemwerder whether UTF would be willing to negotiate a reduction in price of the Aircraft in exchange for contractual shortfalls. 56 UTF then began to discuss internally whether it should refrain from negotiating any concessions on the delivery conditions until after the March delivery deadline had passed so as to capitalize on the “opportunity to restructure the agreement to reflect the current market conditions and to adjust some of the delivery conditions to be acceptable to both parties.” 57

Thus, it appears that both sides understood by February that Austrian would not deliver in conformity with the APA and were considering the possibility that UTF would waive some of the conditions in exchange for financial concessions by Austrian. As will appear, no such agreement ever was reached.

VI. March 200i

A. Austrian Unilaterally Sets a March 25 Delivery Date

On March 10, 2004, Komposch sent a fax to Ferris in which he stated that Austrian would deliver the Aircraft on March 25. 58 Ferris rejected that date, in large part because the APA provided UTF with a 15-day period prior to delivery during which it could inspect the Aircraft and its records. That 15-day period, however, could *589 not begin until all work was completed on the Aircraft, which could not have preceded the March 19 final test flight. Ferris recognized that this might push delivery into April but noted that he would be willing to consider such a possibility if the parties could “agree on financial compensation for the time delay that our inspection period extends beyond March 31.” He concluded that “consent to this delay shall not be taken as [UTF’s] willingness to consider any further delay.” 59

Austrian asserted that UTF was not entitled to a 15-day inspection period because it had been inspecting the Aircraft continuously since November, and it reiterated its intent to deliver the Aircraft on March 25, 60 a proposal that UTF again rejected. 61 Austrian responded that it (1) believed that the Aircraft could be delivered on March 25 but (2) understood UTF would not permit that to occur. It therefore suggested that UTF propose an agreeable delivery date. 62 UTF did not do so.

B. The Aircraft’s Condition as of March 31

There is no serious dispute that the Aircraft failed to comply with Section (l)(iii) of Exhibit D as of March 31, 2004. 63 Nor is there any dispute that it had other significant deficiencies.

1.The Airplane Flight Manual

The Aircraft did not have a current FAA-approved airplane flight manual (“AFM”) as required by Exhibit C because it did not list the additional fuel capacity afforded by the ACTs. 64 Although Austrian initially contended that the AFM already included reference to an ACT and therefore did not need updating, 65 on March 20 it requested that Airbus amend the relevant pages to include the tanks. 66

2.The Passenger Cabin

The passenger cabin failed to comply with FAA standards and therefore did not comply with the APA. Many seats needed new cushions and covers and those then had to be inspected to ensure compliance with FAA regulations concerning flammability. Fifty-three seats had damage to their legs that exceeded the maximum allowed under the relevant maintenance standards. 67 Footrests needed to be reinstalled and deactivated on certain seats. 68 And the layout of the cabin had to be completed and approved. 69

3.Records for Life-Limited Parts in the Landing Gear

Some of the documentation accompanying the Aircraft did not comply fully with *590 the delivery conditions. For example, although Austrian was required to provide “historical data including traceability for all life limited parts” 70 and provided it for some, it failed to do so for eleven life-limited parts in the landing gear. Instead, Austrian provided a conservative life calculation because back-to-birth records did not exist for those parts. 71

A The Enhanced Ground Proximity Warning System

The APA required that the Aircraft “be in compliance with ... FAA airworthiness directives and standards which, in each case, have a known due date for compliance falling within twelve (12) months following” the delivery date. 72 Because a March 31 delivery would have occurred after March 29, 2004, Austrian was required to install an enhanced ground proximity warning system (“EGPWS”) because the FAA required all turbo-powered aircraft to be so equipped by March 29, 2005. 73 Austrian, however, had not installed the EGPWS, notwithstanding its understanding that it was required to do so. 74

VII. April to May 2001

Austrian continued to work on the Aircraft notwithstanding the passing of the March 31 deadline, requesting once again that Airbus seek FAA approval of the ACTs and the revisions to the AFM. 75 UTF, meanwhile, provided Austrian with status reports concerning its view of the progress being made on the Aircraft. 76 Moreover, on April 20, UTF sought to retain Philipp to “represent UT Finance, at ... Lemwerder ... and in Vienna as required to inspect the aircraft structure, structural repairs and associated records to assure the aircraft is in compliance with the contract.” 77

At the end of April, Austrian, UTF, and Pratt & Whitney met in an effort to finalize the transaction. Following the meeting, Vagn Srensen, the chief executive officer of Austrian, sent a letter to Robert Leduc at Pratt & Whitney confirming that

“as per 3 May, 2004, the [AJircraft will comply with all agreed Delivery Conditions of the Purchase Agreement subject to [sic ] following qualifications:

“1. All time controlled parts will be compliant at the date of delivery.

“2. As to the eligibility of the Aircraft for the 180 minutes ETOPS-operations, I can confirm that the aircraft complies with the French DGAC — CMP configuration standard in DOC AI / EA 3000 (latest revision). An equivalent CMP by *591 FAA for 180 minute ETOPS does not exist.

“8. With respect to the ACT — certification to FAA standards, we have received a guarantee from Airbus Industries that this condition shall be complied with within four months, i.e. by 31 August, 2004 at the latest, by issuance of a DGAC-approved Service Bulletin, acceptable to the FAA. This includes the FAA-approved AFM.” 78

He noted also that the landing gear had to be overhauled and the EGPWS installed. 79

Austrian received the requisite approvals for the passenger cabin, 80 and Whelan issued a statement on May 3 in which he asserted that the Aircraft was “eligible for U.S. airworthiness certification and operations under CFR Part 121” save for one relevant exception — the “Aircraft auxiliary center tank fuel system (ACT 1 and 2)[was] not yet FAA approved.” 81 UTF, however, did not accept delivery of the Aircraft.

VIII. Post-May S Events

A.The Airplane Flight Manual

The FAA informed Airbus on May 11 that the temporary revisions to the AFM were satisfactory and could be approved by the DGAC on behalf of the FAA. 82 The DGAC granted that approval on July 19, 2004. 83

B. The ACTs

Although Airbus contended that the FAA had approved the ACTs, on October 22, 2004, it applied for approval of the ACTs for use on the A310-325. 84 Pursuant to FAA regulations and the bilateral agreement between France and the United States, the DGAC confirmed that the tanks complied with the U.S. type certification basis and the FAA issued its formal approval on November 30, 2004. 85

C. ETOPS Approval Status

In August 2004, Airbus applied for FAA approval of the model A310-325 for use in 180-minute ETOPS flights. Austrian failed to establish at trial that any such approval was granted.

D. Lease and Sale of the Aircraft

Austrian leased the Aircraft to Air Atlanta Icelandic from December 2004 through February 2007. 86 It then sold the Aircraft to SATA Air for $12.5 million in March 2007. 87

IX. The Position of the Parties

Austrian contends that it was not obliged to tender the Aircraft by March 31, 2004, because UTF waived its right to *592 enforce timely delivery. It argues further, notwithstanding its view that the Aircraft failed to conform strictly to the APA, that UTF then acted in bad faith when it ignored alleged industry custom and rejected Austrian’s delivery of the Aircraft on May 3, 2004. UTF’s real motivation, Austrian asserts, was to avoid paying $32 million for an aircraft that had only one-third that value. Austrian seeks damages arising from this alleged breach of contract as well as reasonable attorneys’ fees and costs pursuant to Section 10.4 of the APA.

UTF contends that it never waived any of the contract’s provisions. Nor did it breach the APA because the Aircraft did not comply with the delivery conditions. It seeks reasonable attorneys’ fees and costs.

Discussion

I. Legal Standard

The APA provided that the agreement was to be “governed by and construed in accordance with the laws of the State of New York (notwithstanding the conflict of laws of the State of New York).” 88 New York courts generally enforce choice of law provisions, 89 and the parties in any case assume the applicability of New York law here.

To establish a breach of contract claim, a plaintiff must demonstrate (1) the making of a contract, (2) plaintiffs performance, (3) defendant’s breach, and (4) plaintiffs damages. 90 Moreover, Article 2 of the New York Uniform Commercial Code (the “UCC”) governs the contract because the APA involved the sale of a good between merchants. 91

II. Did Austrian Tender a Conforming Aircraft by March 31 ?

Austrian concedes, consistent with overwhelming evidence, that the Aircraft did not comply with the delivery conditions in many material respects as of March 31, 2004. 92 This typically would dispose of the matter because New York recognizes the “perfect tender” rule. 93 Austrian contends, however, that UTF waived its right to enforce the APA’s March 31 delivery deadline.

As an initial matter, Austrian does not assert that the parties changed the delivery deadline in writing, as the APA would have required. 94 Rather, it contends that UTF waived the delivery deadline through its statements and conduct. 95 *593 For conduct to amount to waiver, however, “it ‘must not otherwise be compatible with the agreement as written[.]’ [R]ather, ‘the conduct of the parties [must] evidence[ ] an indisputable mutual departure from the written agreement.’ ” 96

Austrian points principally to four pieces of evidence to support its contention that UTF waived its right to enforce timely delivery.

First, it argues that Ferris expressed UTF’s willingness to extend the March 31 delivery deadline in an email to Austrian on March 11, in which he stated

“Assuming there are no maintenance items resulting from the test flight, March 19 is the earliest projected date that the aircraft could be ready. [UTF] would be willing to consider a delivery date that is at least 15 days after the aircraft and records are ready. If this delivery date is beyond March 31, 2004, we must agree on financial compensation for the time delay that our inspection period extends beyond March 31. Our consent to this delay shall not be taken as our willingness to consider any further delay.” 97

Ferris’s statement, however, was entirely conditional—UTF’s willingness to accept a delay was contingent on an agreement for financial compensation. No such agreement ever was reached. In fact, Austrian rejected Ferris’s suggestion and “renew[ed its] notice that the Aircraft [would] be ready for delivery March 25, 2004.” 98 These communications therefore do not evidence an “indisputable mutual departure” from the APA.

Austrian argues next that UTF exchanged status lists with Austrian on multiple occasions in April and retained its inspection team beyond the delivery deadline. 99 This conduct, however, is not necessarily incompatible with the APA. It is equally plausible that UTF considered Austrian to have breached the agreement but nonetheless decided to continue the work with a view toward the settlement negotiations that occurred at the end of the month. 100

Austrian further asserts that UTF had not commenced marketing the Aircraft at the time of the delivery deadline, thereby indicating that timely delivery was not essential. 101 Austrian, however, introduced an exhibit at trial showing that UTF received no fewer than 12 inquiries regarding sale and lease opportunities for the Aircraft, 102 inquiries that only could have been made in response to UTF’s marketing efforts. The Court therefore rejects Austrian’s contention.

Finally, Austrian contends that Jeff Lynn, UTF’s vice president of aircraft re-marketing, admitted during his deposition that time was not an essential element of *594 the contract, quoting the following excerpt from the transcript:

“Q. Okay. Well, if there was no lessee lined up for the aircraft and no purchaser identified for the aircraft, and if, in fact, the aircraft was going to be parked in Victor-ville, was time of the essence?

“A. No.” 103

Austrian’s reliance on this excerpt, however, is highly misleading.

As an initial matter, the Court is not persuaded that Lynn actually uttered the word “No.” As will appear, an attorney at that point said “Note my objection,” and it appears to the Court, based on viewing the video of the deposition, that the reporter erred in transcription. 104

But there is no need to rely on this view because Austrian has lifted this exchange, assuming it occurred, entirely out of context. The full passage of the transcript reads:

“Q. Okay. Well, if there was no lessee lined up for the aircraft and no purchaser identified for the aircraft, and if, in fact, the aircraft was going to be parked in Victor-ville, was time of the essence?

“A. No.

“MR. TORIELLO: Note my objection.

“A. That’s not the point. The point is it was in the contract. I mean, it was put into the contract in 1996. You can’t forecast the contingency you just described that happened in 2004. We’re not smart enough to know that in '96.” 105

Thus, Austrian omitted Lynn’s insistence that the contract made time of the essence as a matter of law regardless of whether in 2004 strict compliance was of practical importance to UTF.

In sum, the contract provided that time was of the essence. Austrian failed to prove that UTF waived its right to enforce timely delivery. Accordingly, Austrian breached the contract when it failed to tender the Aircraft in conformity with the delivery conditions by March 31, 2004. In consequence, Austrian cannot succeed on its breach of contract claim. But the result would be the same even if UTF had waived its right to timely delivery.

III. The Status of the Aircraft on May S, 2004.

Austrian contends that the Aircraft conformed in all material respects to the delivery conditions as of May 3, 2004, 106 and that UTF acted in bad faith when it rejected delivery. But UTF maintains that the Aircraft (1) did not satisfy the delivery conditions specified in Section (l)(iii) of Exhibit D and (2) was not accompanied by an applicable AFM, even by May 3, 2004.

A. Certificate of Airworthiness

Section (l)(iii) required in part that Austrian deliver the Aircraft “in the condition required to be ... fully eligible to receive a ... FAA ... Certificate of Airworthi *595 ness.” 107 UTF maintains that the Aircraft did not satisfy this condition, even as of May 3, 2004, because it had the ACTs, which were not included in the TC for the Airbus model A310-325 and had not otherwise been approved by the FAA. Austrian responds by claiming (1) the FAA approved the ACTs prior to the delivery deadline, whatever it was, and, in any event, (2) the APA required only that the aircraft be delivered “in a physical condition that would enable the aircraft to be eligible for a certificate of airworthiness in the United States,” 108 not that any regulatory requirements actually be satisfied.

As an initial matter, Austrian has not established that the ACTs had received FAA approval. 109 Austrian’s argument that these had been FAA approved rests on anecdotal reports that a small number of other aircraft registered and operating in the United States had ACTs, a premise from which Austrian would have the Court infer that the FAA approved not only the ACTs on those aircraft, but the ACTs on the Aircraft at issue here. But the anecdotal reports, even if credible, are so sketchy that they leave the Court unpersuaded that there were ACTs identical or even similar to those on this Aircraft on comparable aircraft. And even if there were, it is entirely possible that those other aircraft did not comply in all respects with relevant FAA rules and procedures. In short, the anecdotal evidence, if it established anything at all, would be entirely consistent with the view that any other such aircraft “slipped in mistakenly.” 110 Indeed, when Airbus finally did apply in October 2004 for approval of the ACTs, the FAA reacted in a manner inconsistent with Austrian’s contention that the agency previously had approved them.

Austrian’s contention that the Aircraft was in “a physical condition that would enable the aircraft to be eligible” for an FAA certificate of airworthiness depends on its contention that Section (l)(iii) bore only on the physical condition of the Aircraft, not its regulatory status, and that its physical condition made it eligible for such a certificate. But the argument is unpersuasive.

As an initial matter, it bears noting that the word “physical” upon which Austrian relies so heavily does not appear in Section (l)(iii). It has been injected into the discussion by its counsel’s inaccurate paraphrase of the contract. But Austrian’s argument would lack merit even if the word “physical” actually were in Section (l)(iii).

The physical condition of the Aircraft, in relevant part, was that it was equipped with ACTs. The presence of the ACTs resulted in the Aircraft’s failure to conform to the TC for the Airbus A310-325. This failure thus resulted in the Aircraft being in a physical condition that made it in eligible for the issuance of an FAA certificate of airworthiness.

Austrian is well aware of this. The record amply demonstrates that it consistently recognized prior to March 2004 that it was required to obtain approval for the ACTs in order to comply with the APA. Indeed, the evidence demonstrates Austrian’s attempts to have Airbus obtain such approval from the FAA in August 2003 *596 and again in February 2004. 111 It developed its current position only after realizing that it would not be able to obtain that approval prior to the delivery deadline.

In sum, the Court finds that the Aircraft was not in compliance with Section (l)(iii) of Exhibit D on May 3, 2004.

B. FAR Part 121 180 Minute ETOPS

Section (l)(iii) of Exhibit D mandated also that the Aircraft “be in the condition required to be ... fully eligible to be promptly registered and operated as a FAR Part 119 or 121 (and DGAC equivalent) 180 minute ETOPS for scheduled airlines, under the laws, rules and regulations of the ... FAA.” Austrian contends that it was obliged neither to satisfy the requirements of FAR part 121 nor to obtain the FAA approval necessary for the Aircraft to be used in 180 minute ETOPS flights. It asserts in the alternative that the A310-325 had been approved for use in such operations. Neither of these contentions has any merit.

Austrian’s current position regarding FAR part 121 compliance and ETOPS approval, much like its position regarding the ACTs, is belied by the position it consistently took throughout most of the delivery process. 112 It changed that position only after it realized that it had delayed obtaining the approvals for too long 113 and after learning that the FAA had refused to consider its approval application. 114 Moreover, Austrian could not reasonably have believed that it was not required to obtain the design approval for the use of the A310-325 in ETOPS flights. The approval process is a lengthy one that would have precluded the Aircraft from being “promptly registered and operated” as such upon delivery if it had to be undertaken after delivery. 115

Austrian contends in the alternative that the A310-325 had been approved to engage in ETOPS flights notwithstanding the fact that the approval had not been granted through the normal procedure. Frederick Leonelli, Austrian’s expert on ETOPS, contended that an Airbus A310-325 bearing manufacturer’s serial number 674 (“MSN 674”) and equipped with a model PW4152 engine had been approved by the FAA to engage in 180 minute ETOPS flights. The MSN 674 subsequently was serviced at an FAA-approved re