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    • NAFA Administrator posted an article
      Strategic Thinking When Acquiring or Selling An Aircraft
      Strategic Thinking When Acquiring or Selling An Aircraft see more

      In this podcast, NAFA member, Rene Banglesdorf, CEO of Charlie Bravo Aviation, discusses with NAFA member, Tony Kioussis, President and CEO of Asset Insight, LLC, several of the key topics connected with acquiring or selling an aircraft.

      René Bangelsdorf discusses aircraft acquisition and disposition strategies, and her firm’s comprehensive suite of Business Aviation services: In-Depth Research, Marketing & Sales, Acquisitions, and Advisory Services.

      Topics covered include: 

      • Determining the best aircraft to meet a first-time buyer’s private air transportation requirements. 
      • Points to ponder in determining whether to acquire a new, versus a pre-owned aircraft. 
      • The benefits one can secure by utilizing an aircraft Acquisition Consultant and/or a Sales Broker. 
      • Factors to consider when deriving the Offer Price for an aircraft. 
      • The challenges of refurbishing or upgrading an in-service aircraft prior to its acquisition. 
      • The pre-purchase inspection – how much scrutiny is enough. 
      • The costs and benefits associated with Professional Aircraft Management. 
      • Chartering your aircraft – does it really reduce your operating cost? 
      • Determining the optimum time to replace your aircraft. 
      • Optimizing the value, and marketability, of the asset at the time of sale.

      About René Banglesdorf

      René is co-founder and CEO of Charlie Bravo Aviation, an Austin, TX-based company that buys, sells and leases corporate aircraft worldwide. She applies a background in business journalism and marketing from several industries to the company she started in 2008. Charlie Bravo works with government entities, non-profits, corporations both large and small, and private individuals, and has closed deals in more than 40 different countries ranging from hundreds of thousands to $30m+. 

      René is part of an elite group—only 4-6% of high-level aviation positions are held by women in North America and Europe. René serves as a spokesperson for Business Aviation and women in aviation in speaking and press appearances all over the world. René serves on the Advisory Board of the International Aviation Women’s Association. In 2018, she held organized and emceed the IAWA Inaugural GA Women’s Leadership Forum, with more than 100 female leaders from the industry in attendance—and in 2020, took that same forum virtual. 

      In 2020, René was selected by US Secretary of Transportation Elaine Chao to join 29 other women on the DOT’s Women in Aviation Advisory Board. The purpose of the WIAAB is to develop strategies and recommendations that would encourage women and girls to enter the field of aviation. The WIAAB will assess education, training, mentorship, outreach, and recruitment of women in the aviation industry and make recommendations to the President and Congress. 

      René is an active member of the National Business Aircraft Association and the National Air Transportation Association. She serves as an advisor to the Ohio University Department of Management and Strategic Leadership. René also sits on the advisory board of Wingform, an aircraft transaction software company. 

      In November 2019, René was named as a Business Accelerator Coach for Michael Hyatt & Co, one of the fast growing and most widely recognized leadership training companies in North America. Along with the rest of the team, René helps overwhelmed, successful leaders get the focus they need to win at work and succeed at life. 

      To satisfy her passion for writing, René is an editorial contributor to several aviation business publications. Her latest book, Stand Up: How to Flourish When the Odds are Stacked Against You (April 2019) is available on Amazon, or anywhere books are sold. René also hosts a podcast called Defying the Status Quo, on which she interviews women who are crushing it in male-dominated industries. She launched a video podcast with AvBuyer in April 2019 interviewing corporate jet pilots about the planes they fly and their adventures in aviation. View the latest Insiders Guides with René Banglesdorf video series.

      To read a transcript of this podcast, click here.

      To listen to the podcast, click here.

      This podcast was published by Asset Insight. LLC.
       April 14, 2021
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    • NAFA Administrator posted an article
      Operational Control And Aircraft Leasing: What’s The Big Deal?
      Operational Control And Aircraft Leasing: What’s The Big Deal? see more

      NAFA member, Greg Reigel, Partner at Shackelford, Bowen, McKinley & Norton, LLP., discusses operational control and aircraft leasing.

      From the FAA’s perspective, operational control in aircraft leasing transactions is not just a “big deal”, it is “the” deal.

      What Is Operational Control?

      14 C.F.R §1.1 defines operational control as “the exercise of authority over initiating, conducting or terminating a flight.”  In a “wet” lease situation, since the lessor is providing both aircraft and crew, the lessor maintains operational control of all flights.  And in the absence of a specific exemption (such as under 14 C.F.R. § 91.501(c) the lessor who is operating an aircraft under a wet lease will need to have an air carrier certificate to legally operate the aircraft.

      In a “dry” lease situation, the lessee provides its own flight crew, and the lessee exercises operational control over its flights.  The lessee’s operations may be conducted legally under 14 C.F.R. Part 91 without an air carrier certificate.

      It is important to keep in mind that the FAA will look beyond the actual written agreements to determine who has operational control.  Although a lease may be written as a dry lease and says “Dry Lease” at the top of the agreement, for example, that does not mean the FAA cannot take the position that the arrangement is really being conducted as a wet lease.  And if the FAA takes that position when the lessor who is actually operating the aircraft for the lessee does not have an air carrier certificate, then that will be a problem for the lessor, and potentially for the lessee as well.

      Why Does It Matter?

      If the lessor is exercising operational control, then the flight must be conducted in compliance with regulations that are stricter than Part 91 (i.e. Parts 121 or 135). Those regulations limit the types of airports the lessor may utilize, crew qualifications, crew rest and duty times, maintenance requirements etc.  Additionally, the lessor under a wet lease arrangement is required to remit federal excise tax on the amount charged to the lessee.

      Alternatively, if the lessee has operational control under a dry lease the lessee is permitted to operate under the less restrictive and less costly requirements of Part 91.  And federal excise tax is not due on the amounts paid by the lessee to the lessor, although sales tax is often assessed on the lease rate.

      How Do You Determine Who Has Operational Control?

      The FAA has issued guidance for determining which party has operational control in a leasing arrangement.  Advisory Circular 91.37B Truth in Leasing provides FAA inspectors with an explanation of leasing structures and how they may or may not be compliant with the regulations.  Although AC 91.37B only applies to aircraft subject to the requirements of 14 C.F.R. § 91.23, and it is not regulatory in nature, FAA inspectors also use this guidance when reviewing leasing structures that are not subject to truth-in-leasing requirements.

      Here are the types of questions an FAA inspector will ask when the inspector is trying to determine which party has operational control in an aircraft leasing situation:

      • Who decides crewmember and aircraft assignments?
      • Who accept flight requests?
      • Who actually initiates, conducts, and terminates flights?
      • Are the pilots direct employees or agents for the lessor, the lessee, or someone else?
      • Who is responsible for aircraft maintenance and where is that maintenance performed?
      • Who decides when/where maintenance is accomplished, and who pays the maintenance provider for that service?
      • Prior to departure, who ensures the flight, aircraft, and crew comply with regulations?
      • Who determines weather/fuel requirements, and who pays for the fuel at the pump?
      • Who directly pays for the airport fees, parking/hangar costs, food service, and/or rental cars?

      If properly drafted, an aircraft dry lease agreement should answer these questions and, to the extent the answer for any item is “the lessor”, then the lease should explain that answer and how it does not negate lessee’s exercise of operational control.

      For example, if the aircraft is leased to more than one lessee, it may make more sense for the lessor to retain responsibility for maintenance to ensure that the aircraft is consistently maintained in an airworthy condition.  Similarly, lessor maintaining an insurance policy insuring the aircraft and the various lessees may be necessary to make certain the aircraft is insured appropriately.

      However, responsibility for maintenance or insurance are just two indicia of operational control.  And the lessor’s responsibility for maintenance or insurance does not negate the lessee’s responsibility for ensuring that the aircraft is in an airworthy condition and the lessee’s is properly insured prior to any operations conducted under a lease.  Appropriate language in the lease can explain these issues so an FAA inspector reviewing the lease does not misunderstand and draw the wrong conclusion.

      Also be aware that some FAA inspectors rely upon AC 91.37B but do not fully or properly understand its guidance.  For example, in one instance AC 91.37B states “[t]he FAA has taken the position that if a person leases an aircraft to another and also provides the flightcrew, fuel, and maintenance, the lessor of the aircraft is the operator.”

      This language is sometimes misunderstood by inspectors to mean that a lessee does not have operational control when the lessor is responsible for maintenance.  But that is incorrect.

      The key indicia in the language above is lessor’s providing the flightcrew.  However, lessor’s responsibility for maintenance by itself does not indicate that lessor is improperly exercising operational control over lessee flights.  Although it may indicate that lessor is exercising some operational control, without other indicia of operational control by the lessor, performance of maintenance alone is not conclusive.

      Conclusion

      Operational control in aircraft leasing arrangements is, and will continue to be, an area of special emphasis for the FAA.  Although the terms of the lease and other transaction documents are important, the FAA is not bound by those terms when it is making an operational control determination.  Rather, it will also look at the actual arrangements between the parties, as well as the responsibilities of each party, especially if they are inconsistent with the lease.

      When the FAA determines that lessor is exercising operational control in what is supposed to be a Part 91 dry leasing transaction, you can expect that it will act.  Depending upon the circumstances, pilots and operators could be faced with certificate action and civil penalty action.  It is important to understand the indicia of operational control and to be able to determine which party is exercising operational control in an aircraft leasing transaction.  Only then will you be able to ensure that you are operating in compliance with the regulations.

      This article was originally published by Shackelford, Bowen, McKinley & Norton, LLP., on Feburary 5, 2021.
       March 01, 2021
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    • NAFA Administrator posted an article
      Extended Downtime? How to Maintain Your Jet
      Extended Downtime? How to Maintain Your Jet see more

      NAFA member, George Kleros, Sr. Vice President, Strategic Event Management & Fleet Support at JSSI, discusses COVID-19's impact on the economy, flight department extended downtime, and the maintenance needs of business aircraft.

      If you are one of the flight departments anticipating some extended downtime, following are some areas to give attention to regarding the day-to-day maintenance needs of your aircraft...

      As we begin to consider what the new normal entails on the other side of the coronavirus crisis, it’s clear this will not be an instantaneous recovery for Business Aviation. However, it’s unlikely we will see a return to what we experienced in 2009, one of the most difficult years our industry has ever faced.

      In recent weeks JSSI has been performing claims oversite for insurance underwriters in addition to appraisals, lease returns and aircraft default recoveries for financial institutions.

      Based on the cases we have seen so far, it is apparent that many similar issues that occurred in 2009 have resurfaced.

      For example, although they may not intend to immediately sell their aircraft, many owners have no plans to fly for the foreseeable future, and the overarching behavior at this time is to severely reduce expenses wherever possible.

      There are several important factors to consider when making the decision to cut operating costs and pause aircraft utilization. Here are five areas you should consider as part of financially responsible decision-making during a period of extended downtime.

      Aircraft Inactivity Choices

      When an aircraft sits unused, you have two choices:

      1. Exercise the aircraft, or
      2. Preserve the aircraft.

      In the short-term, exercising the aircraft is going to represent better value for money. Proper preservation of the engines, avionics, APU and airframe requires an extensive, labor-intensive process that involves special equipment to perform correctly.

      Furthermore, several preservation steps will need to reoccur periodically throughout the downtime for certain items.

      At some point, there will be a need to fly the aircraft again, or there may be an opportunity to sell the asset which will require a quick turn to return to airworthiness.

      The process to take an aircraft out of preservation is equally extensive and requires additional labor hours because of all the operational checks involved. The complex process makes sense if you plan to store the aircraft for more than six months, but it is not cost-effective for anything less than that.

      In addition, taking steps to exercise the aircraft will help ensure all systems are working correctly and any issues can be addressed as and when they are discovered, not at the last minute.

      Inspections Remain Necessary

      When an aircraft is parked, it is obviously not accumulating hours or landings. This means hourly or landing-driven inspections are no longer accomplished because they are not due.

      Despite this, it is still highly recommended to keep up with all scheduled calendar inspection events. These are in place for several important reasons, including to control corrosion and keep parts lubricated to prevent future damage.

      The inspection of particular areas of the aircraft at specific intervals is pre-determined by OEM engineers and is based on their findings that a potential issue is most likely to surface within that period. Timely corrective action will allow for the issue to be resolved as efficiently as possible.

      It should also be noted that performing inspections too early might mean missing an underlying problem that is not yet serious enough to be detected and treated. 

      Waiting until the next time the inspection is required may then put you past the critical point, ultimately requiring extensive repairs and special engineering that may contribute to a loss in aircraft value.

      On the other hand, choosing to push the inspection out beyond the scheduled time could lead to the same scenario and extensive damage being incurred from not addressing the problem sooner. This is especially true for aircraft that spend most days outside on the ramp.

      It is therefore highly important to follow the Chapter 5 calendar schedule and always remain within the designed inspection schedule for your specific aircraft.

      Click here to read the full article.

      This article was originally published by AvBuyer on May 11, 2020.
       January 28, 2021
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    • NAFA Administrator posted an article
      Asset Insight Podcast: CorporateCare Enhanced, Technology and Digital Advancements from Rolls-Royce
      Asset Insight Podcast:CorporateCare Enhanced, Technology and Digital Advancements from Rolls-Royce see more

      NAFA member, Andy Robinson, Senior Vice President Services & Customer Support for Rolls-Royce North America discusses the company’s CorporateCare Program, as well at the company’s technology and digital advancements with host and NAFA member Asset Insight's Anthony Kioussis.

      Specific topics covered include:

      • The importance of an engine Program and the true value of CorporateCare.
      • What led Rolls-Royce to upgrade CorporateCare to Corporate Enhanced?
      • The additional benefits now offered by CorporateCare Enhanced.
      • Technology and digital advancements made by Rolls-Royce, in 2020, and what the industry should expect to see in 2021.
      • Electronic Engine Health Monitoring – how it works and why it is important.
      • Virtual Training, and how it is improving customer support.
      • Sustainable Aviation Fuel, and where does Rolls-Royce stand in this initiative.

      Click here to listen to the podcast.

      This podcast was originally published by Asset Insight, Season 1, Episode 28.
       January 18, 2021
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    • NAFA Administrator posted an article
      Aircraft Management: The Aviation Professionals Every Jet Owner Needs
      Aircraft Management: The Aviation Professionals Every Jet Owner Needs see more

      NAFA member, Joe Barber, Vice President of Fleet Development with Clay Lacy Aviation, discusses aircraft management and what you need to know.

      Savvy business jet owners know how to maximize operational efficiency and safety, in the air and on the ground, while minimizing costs, complications and inconveniences. In short, how to enjoy the full benefits of jet ownership.

      How to own a private jet?
      There are five key people you need to have on your team to own a private jet.
      1. Aircraft broker to help you find and buy the right jet.
      2. Aviation attorney to provide critical guidance on ownership structure.
      3. Aircraft manager to oversee daily operations, employ crew-members, and maintain the jet.
      4. Flight crew to fly your jet.
      5. Aviation CPA to ensure you avoid unnecessary tax liabilities.

      Each professional fulfills a specific, highly specialized purpose—working in harmony to consistently and proactively insulate the client from liability and surprise costs, minimize tax exposure and operate efficiently and safely. Let’s take an in-depth look at the roles these aviation specialists play, and how they interact with an aircraft owner, and with each other.

      Aircraft broker: More than buying and selling.
      An aircraft broker sets the tone and lays the foundation for a smooth acquisition of the aircraft. The broker might be the client’s first contact within the business aviation industry, or introduced by an aviation attorney, aircraft manager or other professional. Aircraft brokers are often mischaracterized as simply wanting to make the sale, but keep in mind that they have a responsibility to the client beyond advising on the best type of aircraft that to meet their needs. An important part of their job is providing direction on building a team to facilitate a smooth acquisition and create long-term owner satisfaction. Ideally, aircraft brokers would like to be involved early on in the process to establish a productive dialogue with the owner, as well as communication with an aviation-focused attorney, management company and CPA.

      Aviation attorney: Guiding you through a maze.
      New aircraft owners might assume that they do not need an attorney who specializes in aviation. After all, they may already be represented by an excellent law firm or corporate legal department. The reality, however, is that aviation law is a highly complex field, demanding mastery of a bewildering array of separate laws, rules and regulations governing every aspect of ownership. It’s very much analogous to the world of medicine, where you might have a great internist, but you would seek a board-certified cardiologist to treat any heart issues.

      The aviation attorney works closely with other team members—especially with the aviation CPA/tax specialist. This helps assure the correct structuring of all ownership and operational aspects. optimization of available tax benefits and compliance with aviation regulations—all of which requires considerable effort and experience.

      An aviation attorney will have a less prominent role in the ongoing management and operation of a jet but is essential in the initial phases of aircraft ownership and delivery. This is when multiple team members are involved simultaneously and effective communications are so critical.

      Aircraft manager: Your 24/7 trusted advocate.
      A constant resource is the aircraft manager, who works for the aircraft management company and helps oversee every aspect of the jet ownership experience. Among many responsibilities, the aircraft manager assists in crew recruitment and management, aircraft scheduling and charter coordination, financial reporting, maintenance, avionics and cabin upgrades. “The best aircraft management is not the most expensive nor the least,” says Joe Barber, VP of Fleet Development at Clay Lacy Aviation. “Rather, it is the one who deals fairly, advocates in the client’s best interest and does what is right when action is required.”

      Flight crew: On the job even on the ground.
      It is paramount to set in place an experienced and personable flight crew—pilots, flight attendant and maintenance technician—that the owner likes and trusts. Once the operation and certificates are established, the flight crew has the most direct contact with the aircraft owner on a daily basis. The flight crew will work closely with the aircraft manager to handle the operational aspects and logistics of owning an aircraft—such as supporting scheduled maintenance events, advising on upgrades, crew performance review, and general maintenance and outfitting of the plane.

      Aviation CPA/tax specialist: Helping you save money.
      In the aviation industry, tax laws are not only complex and intricate, they often conflict with federal aviation regulations. Due to this fact, it is essential that the team include an aviation CPA who will provide guidance on how to lower or eliminate their tax exposure on a variety of federal, state and local issues, such as personal use of company aircraft, sales and use tax exemptions, property tax assessments and appeals, excise tax on transportation and fuel, and many other areas.

      The aviation CPA coordinates with all of the professionals on the team and helps identify the specific needs and interests of the aircraft owner that must be considered to identify the proper structure. Just because a particular structure works for one client, doesn’t mean it will work for another.

      Experience the full benefits of jet ownership.
      Whether an owner has one plane or multiple jets— from an Embraer Phenom 300 to a Gulfstream G700— having the right team of aviation professionals in these five key roles is critical to an enjoyable, cost-efficient aviation experience. The sooner that team is in place, the better. Scott Cutshall, SVP Business Operations at Clay Lacy, stresses the importance of keeping time on an owner’s side. “Assemble your team early,” says Scott. “I can’t emphasis the importance of that enough. By putting your team in place early, before a letter of intent is drafted, an aircraft owner will save significant time and money.”

      This article was originally published by Clay Lacy Aviation on July 15, 2020.
       December 04, 2020
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    • NAFA Administrator posted an article
      The Complete Guide to Corporate Flight Department Administration
      The Complete Guide to Corporate Flight Department Administration see more

      NAFA member, Michael J. Moore, Executive Vice President of Essex Aviation, discusses options for managing your assets.

      Businesses that own private aircraft (or, in some cases, a fleet of aircraft) find themselves faced with two options when deciding how best to manage their assets: Either hire a management company to take over operations or establish their own in-house flight department. Both come with unique advantages and disadvantages, so it’s important to carefully weigh all the travel, logistics, operational and management support requirements before deciding between the two. That said, it’s undeniable that an in-house flight department is an attractive option for organizations whose top priorities are privacy and more direct internal control over their aircraft operations and management.

      In this article, we’ll explore everything that goes into forming a flight department, so that you can make the most informed decision whether it’s the right choice for your business.

      Table of Contents

      What is a Flight Department?

      A flight department is the people and processes responsible for the ongoing management, maintenance and aircraft operations on behalf of its owner. A flight department can vary from a single pilot to an entire facility with an organization staffed by a wide range of aviation experts. Though these examples stand at opposite ends of the spectrum, they are essentially the same in that they involve qualified professionals tasked with overseeing business aviation operations on behalf of the owner.

      A flight department’s responsibilities include, but are not limited to:

      • Trip analysis
      • Flight planning
      • Ongoing maintenance
      • Overall operations
      • Aircraft scheduling
      • Flight planning
      • Crew management
      • Operational cost management
      • Regulatory oversight and management
      • And more

      Flight Department vs. Management Company

      As mentioned earlier, corporations that own private aircraft have their pick of either forming their own in-house flight department or working with a management company. Before you take any additional steps to research the option of establishing a flight department, it’s important that you understand the difference between the two, as well as the benefits and drawbacks to each.

      Let’s start with the basics: Both flight departments and management companies are responsible for overseeing day-to-day activities involved in aircraft maintenance, management and operation. The only substantial difference between the two is that, with a flight department, the owner and their flight department assumes full responsibility for business aviation operations, whereas with a management company, a third-party entity assumes the responsibility.

      Read the full article here.  

      This article was originally published by Essex Aviation on August 1, 2020.
       December 02, 2020
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    • NAFA Administrator posted an article
      7 Avoidable Mistakes in Acquiring a Bizjet
      7 Avoidable Mistakes in Acquiring a Bizjet see more

      NAFA member, David G. Mayer, Partner at Shackelford, Bowen, McKinley & Norton, LLP, discusses mistakes to avoid when acquiring a private jet aircraft.  

      Acquiring a private jet aircraft is fraught with the potential to make expensive mistakes. Yet, a qualified aviation team can help a purchaser achieve optimal results by avoiding these seven missteps:

      GOING IT ALONE

      Assembling the right aviation team admittedly entails some cost and initial effort. But most purchasers quickly realize that buying a jet is not like buying a car, real estate, or other assets. Rather, a jet purchase or lease is complex and requires the assistance of aviation experts who excel in the subject matter and interact seamlessly on a deliberate closing schedule. Tax-intensive, cross-border, and novel purchases may require additional expertise beyond the core team members described below.

      Aircraft broker. Purchasers buy aircraft solo, and that can work out. However, a purchaser might suffer buyer’s remorse or experience negative outcomes such as unnecessarily incurring taxes on the purchase. A skilled broker focuses on the purchaser’s needs and wants, knows the “market,” identifies the best available aircraft for the purchaser, and negotiates business and other terms with the team.

      Consultants and pilots. Various consultants perform visual and record inspections, appraise aircraft, supervise pre-buy inspections, organize flight departments (Part 91-private aircraft operations), provide insights into choosing Part 135 managers (commercial/charter use), and may provide broker services. Pilots may support, perform, or lead on some tasks but must collaborate with the other team members.

      Aviation lawyer. Aviation law is challenging, so non-aviation counsel should not act alone in aircraft purchases. Instead, they should hire an experienced aviation legal team that understands and regularly structures acquisitions amid conflicting tax, regulatory, liability, risk management, choice of owner entity, and other complex rules. They must also regularly draft and negotiate aviation-specific agreements and, importantly, have even broader financing expertise than just aircraft loans and leases.

      Aviation insurance broker. The aviation insurance market is no place for a generalist broker. Aviation insurance brokers know how to navigate aircraft insurance markets and negotiate complex policy terms. 

      Escrow agent and FAA counsel. With few exceptions, purchasers and sellers should use escrow agents, comprised of escrow companies and FAA lawyers. These agents hold and disburse funds, collect and file documents at the FAA, register interests and parties on the International Registry, and may issue title insurance. FAA counsel can also offer legal advice, write title opinions, and draft multiple documents.

      NOT SELECTING THE RIGHT AIRCRAFT 

      Despite the unquestionable benefits of owning or leasing a whole jet aircraft, notably during Covid-19, a prospective purchaser should first rule out other workable options to fly privately, such as chartering or buying a fractional share of a jet. After that, a purchaser should concentrate first on the aircraft/user’s “mission” before deciding on which new or used whole aircraft to buy or lease.

      Generally, the term “mission” is aviation speak for a purchaser’s effort to identify aircraft that will serve all or at least most of the private travel the purchaser envisions. When completed, the mission profile informs the search by purchasers and their brokers in today’s active market with numerous jet makes and models for sale.

      NOT PLANNING FOR TAXES BEFORE SIGNING AN LOI

      Private jets attract the interest of tax authorities at the federal, state, and local levels. Before signing a letter of intent () to acquire a jet, if possible, a purchaser should use accountants and lawyers to develop tax minimization strategies and structures under federal tax law, including the use of bonus depreciation and other business deductions, state sales/use tax laws, and local property laws. Solid planning may be slower than purchasers expect but failing to do so can wreak tax and financial havoc. 

      NOT CREATING A LEGAL OR STRONG AIRCRAFT OWNERSHIP/OPERATING STRUCTURE

      A purchaser should determine the person or entity, often an , that will own the jet, and then structure the operations of the jet in compliance with the s. An owner that violates the s invites FAA scrutiny and, sometimes, enforcement litigation by the FAA or the U.S. Department of Justice, easily causing owners to incur sky-high legal fees. 

      One of the most common problems stems from illegal charters, which take various forms. One rampant violation occurs when Part 91 operators lease their aircraft to many unrelated travelers, which is really a fake charter operation. Another violation often occurs when an LLC with no business enterprise operates the aircraft it owns or leases. The FAA views these flight operations as creating an illegal “flight department company.” When structured improperly, neither the leasing nor the LLC operator (allegedly) holds mandatory FAA certifications as commercial operators under the FARs. 

      Owners also frequently believe the same  provides a liability shield for its owners (members) from third-party liability claims. However, in general, the LLC will not protect the owners from any lawsuit or liability that may ensue from illegal aircraft flight operations or violations of federal or state laws. Although insurance helps mitigate this risk, it is a false premise that insurance suffices or will respond to alleged liability. More risk mitigation structuring and financial exposure analysis can pay off.

      SKIPPING AIRCRAFT INSPECTIONS

      Although I have seen prospective purchasers bypass independent inspections in buying a new or used aircraft, that omission has led to surprises or disputes without an adequate legal remedy. Purchasers typically arrange a visual inspection of a jet and a review of its records.

      If all goes well, an agreed maintenance facility then performs a pre-buy inspection, an in-depth aircraft checkup, and delivers an inspection report to the parties. This report identifies discrepancies that a seller usually fixes before the purchaser accepts or rejects the jet and closes the purchase. Leaving out this step is at best unwise. Beware—finding a facility and completing an inspection may push beyond a closing schedule. 

      NOT EXPLORING AIRCRAFT MANAGEMENT ARRANGEMENTS EARLY AND OFTEN

      Aircraft management companies hold the life of jet owners and passengers in their hands. These companies differ significantly in size, experience, and services. It is critical to conduct due diligence on at least two companies covering safety, service, transparency, integrity, pricing, and FAA status. Choosing based solely on the lowest cost or a referral may needlessly raise personal, asset, and operational risks. 

      A purchaser that does not consult a manager during an initial jet inspection may forfeit valuable hands-on knowledge about the operations and maintenance of the subject aircraft. In contract negotiations, a purchaser, with certain team members, should secure balanced terms in such key areas as safety practices, including Covid-19 protocols, expense controls, travel scheduling, and services provided. 

      NOT CONSIDERING FINANCING BEFORE SIGNING A PURCHASE AGREEMENT

      Even if a purchaser intends to buy a jet with cash, it is still worthwhile to inquire about leasing or borrowing to finance a jet acquisition before signing a purchase agreement. Most purchasers earn far more from their investments or businesses than the current very low rates. It is ideal to close a lease or loan at the purchase date, but either financing can occur later. Using a non-aviation lender or lessor is feasible, but may result in higher transaction fees, slower negotiations, and sub-optimal terms. 

      CONCLUSION

      With the support of an experienced aviation team, a purchaser can complete a simple or complicated acquisition of a business jet smoothly and correctly. As aircraft deal activity rises amid Covid-19 safety concerns, it is worth understanding where mistakes can occur and how to prevent them.

      This article was originally published by AINonline on November 13, 2020.
       November 23, 2020
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    • NAFA Administrator posted an article
      Choosing Your Aircraft Management Company: Five Keys to Successful Due Diligence
      Choosing Your Aircraft Management Company: Five Keys to Successful Due Diligence see more

      NAFA member, Joe Barber, VP Fleet Development, CAM with Clay Lacy Aviation shares five keys to successful due diligence when choosing your aircraft management company.

      In a perfect world, the due diligence process to select the right aircraft management company would be straightforward and objective. Competing proformas would be formatted identically with the same terms for every line item. There would be no hedging or ambiguity. No hollow promises or questionable guarantees. No missing budget variables that appear as unpleasant surprises on the first invoice. Clients could easily compare and contrast, and make better informed decisions.

      Instead, welcome to the real world, where proposals to manage business jet aircraft vary widely in organization and terminology, where the emphasis is often on salesmanship and showmanship, looking good rather than being thorough and transparent, and where the lowest estimate might end up costing you tens of thousands more in unexpected fees.

      This should not be a beauty contest—but it often is.

      Charles Porteus, president and founder of Seefeld Group, a leading business aviation marketing and research firm, notes that client surveys often show aircraft management is viewed as a “commodity.” For clients, there is little—or at least difficult to discern—differentiation among competing companies. The result is more like a beauty contest than the meticulous presentation and review of high-end business services to manage, operate and maintain a multi-million-dollar capital asset.

      There’s a reason they call it due diligence.

      The dictionary defines diligence as “persistent work and effort.” That sums up the challenge for business jet owners and their advisors as they seek to find not only the answers to questions, but to ensure that the right questions are being asked in the first place. Here are five guidelines that together are the key to finding the ideal aircraft management company for your specific needs.

      1. Focus on objective metrics—yours as well as theirs.

      You begin with the basics, of course. How many years has the company been in operation? How many aircraft do they manage? Part 91 vs. Part 135? Locations? Pilots? Management fees? Insurance? And so forth. Then dig deeper. Create constants for your comparison so you are comparing apples to apples. Fundamentally, you are conducting a gap analysis so you can more thoroughly understand what is being offered, what is different and what is missing.

      Each company should be able to demonstrate objectively why they are a better choice than their competitors—although beware if they seem to be “tearing down” other companies in order to build themselves up. Turn the tables and ask what competitors might say about them.

      2. Listen to what they are asking you.

      At the same time, play close attention to the questions they are asking you. They should be probing to fully understand your unique requirements, mission profile, where you travel, how often and who goes with you. Your expectations of a management company, needs and preferences for meals and amenities, international issues, and other key details and concerns. If they are not asking these questions, you have to wonder if they are truly focused on your best interests.

      3. Seek expert insights.

      There are numerous professionals within the business aviation industry: the list includes aviation attorneys, CPAs and other financial advisors, aircraft brokers, insurance providers. Their knowledge of the industry and the major players, as well as their specific expertise, can be a valuable resource for you as you narrow your choices. Poll their opinions, while keeping an eye out for any possible conflicts of interest.

      4. Challenge any “guarantees.”

      The only thing that can be guaranteed is that nothing can be guaranteed. Not only is aircraft ownership inherently complex, our world is filled with variables. Who, for example, could have anticipated COVID-19? So it is wise to challenge any guarantees from a prospective management company.

      Guaranteed charter revenue. How can they promise that? Instead, ask the company to demonstrate how they will work to generate charter revenue to meet your agreed-upon goals.

      Guaranteed maintenance costs. Really? Ask them to show how will they work to minimize your maintenance costs without sacrificing quality or safety.

      5. Watch out for what might be missing.

      If a proposal is dramatically lower than others, it could be a sign that one or more variable budget items has been omitted or significantly underestimated. For example, international handing and other fees related to foreign travel. Or warranty and subscription costs. There are any number of candidates that can fluctuate wildly based on a number of variables specific to your use of the plane. This is the time to ask questions and demand answers. Otherwise you might find that the lowest bid was ultimately the most costly choice—a fact you might not discover until you see your first invoice.

      Otherwise you might find that the lowest bid was ultimately the most costly choice—a fact you might not discover until you see your first invoice.

      The bottom line is that this due diligence is worth it. With the right aircraft management company you will have an invaluable partner. Working closely with you, they can lower your ownership costs, add value, maximize efficiencies and ensure your asset is operated and maintained to the highest standards—so you can experience all the benefits and enjoyment of business jet ownership.

      This article was originally published by Clay Lacy Aviation on July 9, 2020.
       November 16, 2020
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    • NAFA Administrator posted an article
      PODCAST: Aviation Insurance: How to Navigate Today’s Challenging Market
      PODCAST: Aviation Insurance: How to Navigate Today’s Challenging Market see more

      NAFA member, Stephen Johns, the Partner at LL Johns Aviation Insurance responsible for leading the company and managing daily operations, discusses what is, by all accounts, a challenging period in the insurance industry. Topics covered include:

      • The state of the current market, and how the Business Aviation industry got here.
      • What today’s market means to an aircraft owner and what can they expect going forward. 
      • The entities, or types of owners, that have been hit the hardest.
      • The types of owners that have been impacted the least.
      • Best practices owners and operators should follow to best navigate the current market.

      Click here to listen to the podcast

      This podcast was originally published by Asset Insight on August 4, 2020.
       October 05, 2020
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    • NAFA Administrator posted an article
      Webinar: Client Feedback: Managing Current Aircraft vs Replacing Aircraft
      Webinar: Client Feedback: Managing Current Aircraft vs Replacing Aircraft see more

      NAFA members Robert Lebano with Wells Fargo Equipment Finance and Michael Smith with Scope Aircraft Finance discuss managing current aircraft vs replacing aircraft. 
       August 04, 2020
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    • NAFA Administrator posted an article
      Asset Insight Launches Podcast Series Focusing on the Aircraft Ownership Lifecycle
      Asset Insight Launches Podcast Series Focusing on the Aircraft Ownership Lifecycle see more

      July 7, 2020 – Asset Insight today announced the launch of a new podcast series, available through the company’s website (www.assetinsight.com) and across all podcast platforms, free of charge. The library of episodes is stocked with 15 to 30-minute sessions focused on all segments of the Business & General Aviation aircraft ownership lifecycle – Acquiring, Financing, Operating, Maintaining and Selling. Host Anthony Kioussis visits with expert guests from numerous industry organizations and sectors who offer best practices, timely advice, proven principles, and explore specific aspects of the business aviation industry.

      The Asset Insight Podcast library presently features 8 episodes, including sessions with Jay Mesinger at Mesinger Jets; Jim Blessing at Air Fleet Capital; Shelly Svoren at First Republic Bank; Lee Rohde at Essex Aviation; Jim Simpson at First Republic Bank; René Bangelsdorf at Charlie Bravo Aviation; Janine Iannarelli at Par Avion Ltd; and Ryan Waguespack with NATA. More podcasts will be made available each week.

      “Asset Insight is in a unique position to bring aviation professionals together to hold timely discussions in short, interesting, educational and entertaining on-demand podcasts.” said Tony Kioussis, president of Asset Insight, LLC and host of the series. “This new aviation podcast series offers our community the opportunity to select episodes and topics on their schedule, and according to their interest and business segment. As many of us work from home to maintain safe social distancing, our podcasts allow people to remain connected. The podcasts can also assist new personnel entering the industry; people that would otherwise find it challenging to secure such information.”

      Asset Insight Podcasts are available on Apple Podcasts, Spotify, Stitcher, Google Podcasts, www.assetinsight.com,  http://www.assetinsightpodcast.com, and wherever you get your podcasts.

      This release was originally published by Asset Insight on July 7, 2020.
    • NAFA Administrator posted an article
      NAFA Webinar: Managing An Aircraft Portfolio During a Pandemic
      NAFA Webinar: Managing An Aircraft Portfolio During a Pandemic see more

      Managing An Aircraft Portfolio During a Pandemic from Tracey Cheek on Vimeo.
    • NAFA Administrator posted an article
      Webinar: Ready to Buy & Fly?
      Webinar: Ready to Buy & Fly? see more

      Educational Webinar Covers Best Practices & Acquisition Strategies Teaming Strategies

      Are you thinking about purchasing an aircraft? It can be an overwhelming experience, especially if you’re a first-time buyer, but there are experienced industry professionals who are ready to help.

      In a free educational webinar on May 28 2020, Essex Aviation President and CEO Lee Rohde joined GKG Law Principal Chris Younger to talk about everything you need to know when it comes to purchasing an aircraft.

      The webinar, Ready to Buy & Fly? Best Practices & Teaming Strategies for a Successful Aircraft Acquisition, includes resources, tips, and information on the following topics:

      • Steps to a successful aircraft transaction (including a week-by-week timeline!)
      • The necessary parties you should include when it comes to purchasing a plane, including:
        • CFO, CEO, and the COO
        • Corporate general counsel
        • An aircraft technical consultant
        • Commercial lender
        • And many more
      • Key closing checklist items
      • Potential post-closing issues
      • Net operating loss (NOL) carrybacks and The Coronavirus Aid, Relief, and Economic Security (CARES) Act

      Essex Aviation handles everything from new and pre-owned aircraft acquisitions to private jet charter counseling and membership. GKG Law works with purchase and sale transactions, aircraft ownership, federal and state tax planning, aircraft ownership trusts, and more.

      To find out more about purchasing an aircraft or to ask our industry experts any questions, contact Essex Aviation today.

      View Webinar Here

      This webinar hosted by Essex Aviation and GKG Law originally aired on May 28, 2020.

       
    • Tracey Cheek posted an article
      Keyvan Havacilik A.S. Joins National Aircraft Finance Association
      Keyvan Havacilik A.S. Joins National Aircraft Finance Association see more

      FOR IMMEDIATE RELEASE

      EDGEWATER, Md. – April 22, 2020 – National Aircraft Finance Association (NAFA) is pleased to announce that Keyvan Havacilik A.S. has recently joined its professional network of aviation service providers. 

      “NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome Keyvan Aviation Group to our growing organization as we head to our 50th anniversary,” said Jim Blessing, president of NAFA.

      Keyvan Aviation works with current and prospective aircraft owners when making important decisions. The team’s approach to providing aircraft consultancy services begins with combining a comprehensive analysis of the client’s travel needs, objectives for aircraft features, and ownership arrangements.

      In Keyvan Aviation Group, the focus is on making the ownership experience smooth with the best solutions for transportation needs. Their services include consultancy, pre and delivery audit and valuation reports, financial services support and registry services, flight crew assembly, aircraft maintenance programs, and taking care of major maintenance events or upgrade modifications.

      Much like NAFA, Keyvan Aviation Group is dedicated to providing highly qualified experts. Keyvan and NAFA foster accurate data and accurate methods throughout the aviation industry. 

      For more information about Kayvan Aviation, visit nafa.aero/companies/keyvan-havacilik-as.

      About NAFA:  

      The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit NAFA.aero.

       
       April 22, 2020
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    • Tracey Cheek posted an article
      The Flight Department Company Trap
      The Flight Department Company Trap see more

      NAFA member, Greg Reigel, Partner with Shackelford, Bowen, McKinley & Norton, LLP., discusses regulatory issues with owning or operating aircraft.

      Businesses and individuals face many regulatory issues in connection with owning or operating an aircraft. Aircraft owners or operators who are unfamiliar with the limitations imposed by the applicable regulations may unnecessarily expose themselves to liability for non-compliance.

      For example, aircraft owners or operators commonly attempt to shield their liability by creating some form of business entity that is a subsidiary of the “real” operating company to own the aircraft.  Or, rather than forming a subsidiary, they create a business entity to own the aircraft that is solely owned by the individual who really wants to use the aircraft.

      In either scenario, the aircraft is the sole substantive asset of the company, and the business entity is used to maintain and fly the aircraft for the benefit of the parent company or individual owner of the business entity. By structuring the ownership and operation of the aircraft in this manner, the aircraft owner and/or operator has just fallen into the “flight department company trap.”

      I recently presented a continuing legal education program on this very topic for Lawline.  In my presentation, I discussed the various rules and regulations promulgated by the Federal Aviation Administration that have a significant impact on how businesses or individuals are permitted to utilize private aircraft, as well as how to identify the flight department company trap, understand the consequences of creating a flight department company, and available alternatives to avoid falling into the trap and legally conduct private aircraft operations.

      If you would like to learn more, you can view a short clip from the CLE here. Otherwise, you can find other posts discussing this topic here on The Pre-Flight Brief or on our Aviation Law Articles page.  And, of course, if you have specific questions or would like to discuss this topic further, please feel free to contact me.

      This article was originally published by Shackelford, Bowen, McKinley & Norton, LLP. on October 18, 2019.
       March 04, 2020
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