legal

Dry lease of a business aircraft provides plenty of flexibility but needs to be properly thought through. Gerrard Cowan seeks industry insights into some of the often-overlooked challenges of the arrangement.

Dry leases are a popular choice for business aircraft operators, enabling access to all the benefits of an aircraft without having to acquire the platform. However, they come with unique demands, including a need to source the crew.

In a dry lease, the operator avoids having an aircraft on their balance sheet, along with the capital expenditure involved. However, they must source the crew, fuel, etc., themselves. In the US, dry leases are covered by Part 91 regulations, whereas a ‘wet’ lease arrangement, with the lessor also providing the crew etc., must be a charter arrangement operated under Part 135.

Typically, a dry lease is arranged between owners and their respective companies or close associates, explains Kevin McCutcheon, Founder, President & CEO of Flight Solutions.

“Furthermore, operational control considerations must be carefully reviewed to remain within the FAA and IRS regulations and to ensure proper insurance coverage is in place.”

Dry leasing an aircraft – especially a jet – can pose several unique challenges, according to McCutcheon. For example, securing a qualified flight crew is naturally a priority, and properly screening the right individuals can be challenging.

One option is to use the flight crew that currently flies the aircraft for the owner under a ‘side arrangement’. But this presents potential difficulties, setting the owner up for scrutiny from the authorities because “the lessee under a dry lease must have command and control over their own flights and specifically the flight crew,” McCutcheon notes.

Dry leases are usually low utilization arrangements, he adds, so it can be hard to justify a full-time flight crew. A dry lessee typically hires contractors at a daily rate to operate the aircraft.

“The arrangement must clearly show that the lessee and not the lessor is expressing operational control of its flights,” he adds. “The owner of the aircraft must remain removed from helping to schedule or provide flight crew.

This requires the lessee to have operational knowledge and understanding of the regulations to properly express their ‘operational control’ during dry lease flights.”

One area that is often overlooked is the need for dry lease operators to obtain approvals under ICAO and other licensing and navigation permits when flying internationally. Other areas include aircraft insurance requirements, including the need to ensure that underwriters are involved in all discussions.

“Dry lessees must understand that the operators are responsible, not the aircraft owner. This process can be time consuming and daunting for the uneducated,” says McCutcheon.

Aircraft Dry Lease: Liability Considerations

Dry leases can either cover exclusive use or be non- exclusive, says Keeley Burgess, an attorney at Aviation Legal Group. Each brings its own advantages and disadvantages depending on your position.

“From an owner’s perspective, multiple non-exclusive dry lease agreements can be advantageous because the leases will allow for multiple entities to enjoy operation of the aircraft,” she notes.

“From a lessee’s perspective, an exclusive use dry lease may be preferable because the lessee does not have to coordinate scheduling their use and maintenance of the aircraft with other parties.”

Read full article here.

This article was originally published by AvBuyer on March 20, 2025.

NAFA member, David G. Mayer, Partner with Shackelford, McKinley & Norton, discusses how the ever-shifting U.S. strategy adds complexity and costs to business aircraft transactions.

The new or threatened tariffs announced by the Trump Administration and other countries may cost more than you realize when buying and financing private aircraft. The on-again, off-again U.S. tariff activity has roiled the U.S. financial markets, triggered retaliatory tariffs, alarmed aircraft stakeholders, and created wide uncertainty in global trade.

The Trump Administration has imposed, modified, and/or delayed the imposition of tariffs on specific countries to achieve certain foreign policy and economic goals. To stop massive shipments of fentanyl into the U.S., the Administration has imposed tariffs on Mexico and Canada and a 20 percent tariff on Chinese-origin goods to make U.S.-origin products more price competitive with cheaper non-U.S. origin metal sellers. This tariff may affect the metals used by aircraft manufacturers (OEMs), repair facilities, and their suppliers.

Transacting Steps and Process

Purchasing an aircraft without addressing tariffs is not an option. It is imperative to rely on customs brokers, lawyers and other import/export experts in deal teams to conduct a real-time analysis of potential tariffs, including direct and retaliatory tariffs from the U.S., Canada, or Mexico.

Their objectives should include determining the application, percentage, and effective dates of the tariffs on the aircraft being purchased. Second, they should calculate the tariff based on the purchase price if tariffs apply. The analysis should consider such tariff-based factors as the country of origin or transformation of an aircraft or specific product codes under the U.S. Harmonized Tariff Schedule (HTSUS). HTSUS is the primary resource for identifying tariff rates on aircraft imported into the United States. Third, they should try to structure the importation timing and terms to minimize the tariff cost.

As a byproduct of tariffs, the parties should brace for higher transaction costs and processing delays from the pre-tariff duty-free norm. The deal team will also negotiate purchase or financing documentation and interact with U.S. Customs and Border Protection officials.

Read full article here

This article was originally published by AIN on March 14, 2025.

Contact Information: 
 

Tracey Cheek  
TLC@NAFA.aero  
405.285.7005 
 

Drew Coats 
281.681.8239 
coats@coatsaviationlaw.com 
www.coatsaviationlaw.com  
 

NAFA Welcomes New Member: Coats Aviation Law 

Edgewater, MD — March 27, 2025 - The National Aircraft Finance Association (NAFA) is excited to announce that Coats Aviation Law has joined its distinguished network of aviation professionals. 

 “NAFA members facilitate the financing of general and business aviation aircraft on a global scale,” said Ed Medici, NAFA President. “We welcome and support Coats Aviation Law’s services that play a role in advancing the interests of NAFA members within the aviation industry.”  

Specializing in aviation transactions, litigation, and regulatory compliance, Coats Aviation Law provides expert legal counsel to aircraft owners, operators, pilots, and aviation businesses. Their transactional practice covers aircraft acquisitions, financing, co-ownership structuring, and risk mitigation, while their litigation expertise includes commercial disputes, aviation tort defense, and FAA enforcement matters. Additionally, they offer advocacy solutions across public, media, and governmental forums. With a comprehensive approach to aviation law, Coats Aviation Law is a valuable addition to the NAFA community. 

About Coats Aviation Law: 
Coats Aviation Law represents aircraft owners, operators, aircraft lenders, aviation businesses and service providers, and pilots in aviation transactions, disputes, regulatory compliance, risk management, and tax mitigation matters. We also provide advocacy solutions in a variety of public, media, and governmental forums. 

To learn more, visit coatsaviationlaw.com.   

About NAFA:  
The National Aircraft Finance Association (NAFA) is a professional association that has been promoting the general welfare of aircraft finance for more than 50 years. Our network of members is comprised of lenders and product service providers who work together to finance general and business aviation aircraft. NAFA sets the standard for best practices in aviation finance by educating its members with the most up-to-date industry trends and best practices. Government legislation, market influences and industry insights allow member companies to provide the highest quality services the industry has to offer. 

Many purchasers and financiers fail to appreciate the implication of how an aircraft will be operated post closing, whether under FAR Part 135 or Part 91, during the sales process. Parts 135 & 91 apply to operations of aircraft and the particulars of these parts will govern not only how, when, and where the aircraft can be operated post-closing, but also what equipment, certification and licensing the aircraft and crew will need as well as the availability of aircraft and engine support programs. In addition to the FARs, depending on the proposed operation, the economic aviation regulations of DOT may also need to be considered.

From on-demand air taxi operators to private non-commercial operators, operational issues can be complex and can create challenges for structural arrangements that purchasers as well as financiers may not anticipate. This may be particularly true if the intent is for operation of the aircraft not only domestically, but also internationally. While international operations may present unique challenges, such challenges can be overcome without jeopardizing the value or security of the aircraft.

In this webinar, we will discuss:

• What lessors/financiers need to know about commercial/non-commercial and domestic/international operations and the implications of these operations on leases and security interests.

• What questions transaction attorneys should consider during the sale/purchase process in counseling purchasers and financiers regarding the intended post-closing operation of an aircraft.

• What insurance brokers need to know for proper underwriting and to ensure proper coverage based upon the post-closing operations of the aircraft and equipment, certification and licensing required for aircraft, operators, and crew.

In this webinar, we will explore ways to ensure the conformity and enforceability of aircraft purchase, financing, and operational agreements, including purchase agreements, lease agreements and security agreements. The webinar is also designed to allow time for attendees to ask questions that may be particular to their specific situation and facts.

This webinar will benefit anyone involved in the operations of aircraft, but could be particularly beneficial to people not directly involved in the closing process:

• Credit officers
• Document processing staff
• Insurance companies
• Insurance brokers
• Transaction attorneys
• and more...

Whether you are new to the industry looking to learn more about the nuances of the trade or an experienced professional looking to stay up to date on what you need to know, this webinar is for you!
 

View NAFA Webinar here
 

This NAFA webinar originally aired on March 12, 2025.

What can buyers of business and private aircraft in the USA hope for in 2025 in terms of potential tax benefits from their purchases? Experts share their insights with Chris Kjelgaard.

Aircraft buyers based in the US who plan to use their new and used planes primarily for business purposes have entered 2025 with reasons for hope that the year might prove favorable in terms of the tax treatment the US Federal Government affords their newly acquired aviation assets.

That hope is new, and it follows a year in which the tax picture at both US federal and state level for aircraft buyers began to show early signs of darkening.

In 2024, under what proved to be the outgoing Biden Administration, the US Internal Revenue Service (IRS) pronounced that it would direct greater scrutiny toward finding out to what extent owners were using their aircraft for business purposes – as legislation conferring tax benefits on purchases of aviation assets meant them to do.

The IRS further indicated it would put that scrutiny into practical effect by conducting increased numbers of tax audits on owners of new and used business and private aircraft.

That planned intensification of IRS focus would mean those owners who couldn’t document clearly that at least 50% of the flying they conducted with their aircraft during the year would be ineligible for the bonus depreciation schedule available, under the 2017 Tax Cuts and Jobs Act.

As matters stand today, the act’s provisions for bonus depreciation on aircraft and various other purchased assets are scheduled to end in 2027.

But the dawning of 2025 – and with it the assumption of power by the Trump Administration – has brought what is widely expected to be a dramatic sea change in the US Government’s regulatory ethos as it affects many areas of business. That sea change is expected to include a relaxation of tax legislation, and perhaps a contraction in the size and oversight power of the IRS.

As of this early-February writing, it remains to be seen to what extent the Trump Administration will honor the political promises the incoming Administration made during last year’s Presidential campaigning process.

Read full article here

This article was originally published by AvBuyer on March 5, 2025.

NAFA member, Stewart H. Lapayowker, Esq., President of Lapayowker Jet Counsel, P.A., shares his recent article regarding personal use of corporate aircraft.

The tragic homicide of Brian Thompson, CEO of UnitedHealthcare, has highlighted critical vulnerabilities in the safety and security of corporate executives. This event was a grim reminder that high-ranking executives often face unique security risks due to their prominence and visibility.  This heartbreaking incident underscores the urgent need to rethink how security measures are reported and prioritized in disclosures mandated by the Securities Exchange Act of 1934, and whether it is equitable to continue to tax executives for personal use of corporate aircraft mandated by the Board for his or her safety and security.

Specifically, this article advocates for creating a "security measures" category within “All Other Compensation” in executive compensation tables, thereby  largely eliminating the inclusion of “personal use of corporate aircraft” within the “perquisite” category, to enhance transparency and better reflect modern corporate realities.

A Shift in Perspective: Corporate Aircraft as a Security Tool

Traditionally, the personal use of corporate aircraft by executives has been framed as a luxury or perk (i.e., a personal benefit not generally available on a non-discriminatory basis to all employees that is not integrally and directly related to the performance of the executive’s duties). However, in light of escalating security threats, this perspective is outdated; executives’ safety and security is essential to their ability to perform their duties. Corporate aircraft offer a secure, safe and controlled mode of transportation that significantly reduces executives' exposure to risk. 

Public travel increases the likelihood of executives being tracked, confronted, or targeted by individuals with malicious intent. Corporate aircraft eliminate these vulnerabilities by providing a secure, private, and direct mode of transportation.[1] Additionally, these aircraft can be equipped with enhanced security measures tailored to the specific risks executives face, including real-time threat assessment systems and secure communication tools.

Read full article here

This article was originally published by Lapayowker Jet Counsel, P.A. on Lexology on February 27, 2025.

NAFA Member, Amanda Applegate, Partner at Soar Aviation Law, shares Part II of The Complexities of Cross-Border Aircraft Transactions. 

Last month we explored purchasing a foreign registered aircraft and the necessary steps to move the aircraft onto the United State registry. This month we will examine the steps when an aircraft owner is selling their aircraft to a buyer who will be moving the aircraft from the United States registry to a foreign registry. While each country is different, certain key factors should be considered when an aircraft is being deregistered from the United States registry and registered elsewhere upon closing.

1. Export Certificate of Airworthiness The buyer will likely require, under the aircraft purchase and sale agreement (the “APSA”), that the seller deliver the aircraft with an export certificate of airworthiness. The cost of this should be borne by the buyer. The inspection facility will be responsible for producing the export certificate of airworthiness. As such, when selecting the inspection facility, it is imperative to understand the inspection facility’s experience with the types of inspections necessary to produce an export certificate of airworthiness. In addition, when the export certificate of airworthiness is issued, there may be exceptions listed on the certificate. As a seller, you do not want to be obligated to pay to resolve any exceptions. Therefore, if the buyer is allowed to resolve any exceptions prior to closing, necessary protections need to be built into the APSA.
2. Aircraft Improvements Prior to Closing Under the APSA it must be clear that the aircraft is being sold as a United States registered aircraft. Any modifications to the aircraft that may be necessary in order for the aircraft to be registered in a foreign jurisdiction are (i) completed after the sale occurs and (ii) at the expense of the buyer. However, circumstances and/or negotiations of the APSA may not allow for the foregoing limitations. If certain modifications are permitted prior to closing, protections for the seller (in the event the closing does not occur) need to be included in the APSA. Furthermore, prior to seller committing to such obligations, it is important to understand the amount of time any modifications will take and parts availability, as the timing of closing could be delayed as a result of the modifications. As an example, I have been involved in several transactions where the parts necessary to convert the aircraft were not readily available and such delay impacted the closing date.
3. Customs Export Aside from the deregistration process with the United States registry (FAA), there is a customs export process that must be accomplished with a United States customs broker. Seller has a duty to make sure the aircraft is property exported from the United States. The APSA should designate who hires and pays the United States customs broker, what role the parties will assume in the export process and, if possible, identify the specific customs broker.
4. Closing Location The closing location of the sale will be important to both parties and will be negotiated and documented in the APSA. Generally, as a seller you do not want to have the aircraft moved outside of the United States to a foreign jurisdiction prior to closing due to the risks of not closing and unfamiliarity with the closing process and tax consequences in a foreign jurisdiction.

Read full article here

Part I of this article can be found here.

This article was originally published by Soar Aviation Law on February 26, 2025.  

The FAA is Implementing Major Regulatory Updates to Aircraft Registration Procedures and Certificates

The FAA announced two technical but transformative, pending regulatory changes, possibly effective January 17, 2025, as it continues to modernize its aircraft registration and certification processes. These regulatory changes, detailed in two final rules published in the Federal Register (Docket Nos. FAA-2024-2764 and FAA-2024-2765), streamline procedures and align them with the capabilities of the FAA’s new and improving Civil Aviation Registry Electronic Services (CARES) system.

Key Changes

Modernized Aircraft Registration and Recordation Procedures

Federal Register :: Public Inspection: Aircraft Registration and Recordation Procedural Updates: Original Documents and Stamping 

Electronic Submissions: To “provide administrative relief from the requirements for submitting original documents” the FAA has determined original documents (i.e. manually executed originals of documents) are no longer required to be filed in many instances, although they will continue to be accepted. Accordingly, the FAA has modified 14 CFR Parts 47 and 49 to allow the FAA flexibility to accept manually executed scanned or digitally signed documents electronically.  The FAA further provided “For some documents and materials, a photocopy or digital image may be acceptable; for others, a true or certified copy may be required (see, e.g., §§47.8(a)(1), 47.11(b)(2), 49.31(a), and 49.33(c), as amended). The regulatory relief provided will enable persons to upload copies of ink signed documents and digitally signed original documents for submission via CARES and a successor system.”

End of Document Stamping for CARES Submissions: To “sunset the FAA’s practice of stamping documents” the FAA will discontinue stamping incoming documents submitted though the CARES system as CARES digitally records submission times.  Presumably documents filed by mail, email or physically though the FAA Public Documents Room will continue to be file stamped.

Enhanced Flexibility for True Copies: Previously, under 14 CFR § 49.21, the FAA allowed parties to submit an originally certified paper copy of an original document along with the actual original document.  The FAA would then record the originally certified copy and return the original to the party making the filing if requested.  The FAA has revised § 49.21 to specifically allow the FAA flexibility to accept true or certified copies of documents without the requirement that the original be filed, streamlining processes.

Click here for full article

This article was originally published by Scott McCreary with McAfee & Taft on January 17, 2025.

Fly privately on your own aircraft for less.

Would you be interested if you could buy a portion of an aircraft or rotorcraft as if you acquired it all but at a fraction of the price? If you plan to fly more than 25 hours per year but do not need or want a whole aircraft, an aircraft fractional share may make sense.

Whole aircraft demand constant attention whether you use them or not. For example, you still must monitor and pay constantly for the operations, maintenance, insurance, crew, management, scheduling, and taxes associated with them.

Although a fractional share may entail premium costs over other travel options, the overall economics may work when you analyze your anticipated “missions” compared to other flight options, including owning, chartering, buying a jet card, or leasing a whole aircraft. A mission refers to your specific and/or general expected plans for business or personal use, including the passengers you bring on board.

Like air charter, fractional share program aircraft can provide supplemental or primary lift, as well as security and privacy. Compared to operating your own whole aircraft, fractional use may mitigate the risk of intruders tracking your program aircraft using publicly available flight-tracking technologies.

What Is Fractional Ownership?

FAR Part 91K applies to and regulates management services and operations of a fractional ownership program. Program managers may, and often do, operate the aircraft under Part 135 (commercial operations), with higher safety standards than Part 91 (private flights), where the program manager has “operational control” but may instead allow a fractional owner to exercise operational control under the FARs.

Aircraft fractional programs allow you to use the same or different aircraft types in a program fleet. A fractional share program consists of two or more airworthy aircraft with one or more fractional owners, but one program aircraft must have more than one owner.

As a core principle of fractional share programs, you acquire an “undivided interest” in a “program aircraft”—a type of property interest that can be leased or purchased. You can buy with cash only and/or with a loan. Each interest carries an agreed number of hours annually corresponding to the size of the share.

For example, based on a total of 800 flight hours per year per aircraft, an owner or lessee can acquire as small as one-sixteenth interest in a “subsonic, fixed-wing, or powered-lift program aircraft” for 50 “occupied hours” (hours in a seat traveling) and a fractional ownership interest of at least one-thirty-second interest of at least one rotorcraft program aircraft for 25 hours.

Read full article here

This article, written by David G. Mayer, Partner at Shackelford, McKinley & Norton, LLP, was originally published by AIN on January 10, 2025.

More scrutiny is needed by buyers in back-to-back aircraft deals.

Due diligence in private aviation has never been more important in today’s dangerous world populated with bad actors. Increasingly, fraud, cybercrime, money laundering, and terrorism compound the risks in standard (two-party) and back-to-back used aircraft purchase transactions.

Despite these concerns, some purchasers and sellers understandably feel frustrated that due diligence for them is repetitive or unnecessary. After all, they negotiate an aircraft purchase agreement to minimize their risk and memorialize their business agreement. It’s hard to disagree even as aircraft transactions become increasingly complex.

However, a myopic focus on the aircraft purchase agreement rather than broad risk management efforts may subject the deal participants to government inquiries, enforcement actions, or civil and criminal penalties. It is not hyperbole to say that deal participants should regard regulatory agencies as serious stakeholders in due diligence failures with substantial power and seemingly unlimited enforcement budgets.
 

Defining Due Diligence

Due diligence basically means doing your homework around buying or selling a private aircraft. That type of due diligence differs from diligence in selecting an aircraft management company, an FBO or MRO, or buying a company that holds a Part 135 certificate. And diligence for banks varies from other entities due to vast regulations, “know your customer” (KYC) rules, and internal policies.

Due diligence is not one-dimensional. It is a team sport that combines the efforts of deal experts for the parties. It is a dynamic process and adjusts to its purposes and findings.

Each relationship involving the parties must withstand and pass rigorous legal and practical assessments. An odd or troubling fact or finding, such as a suspicious seller, generically called a “red flag,” should lead to further questioning and an acceptable course of action in the transaction as part of the due diligence.

Read full article here

This article was written by David G. Mayer with Shackelford, Bowen, McKinley & Norton and published by AIN on November 8, 2024.

The FAA Aircraft Registry issued a notice today to the FAA Public Documents Room Permittees, copy attached. The notice confirms that in an effort to keep personally identifying information that may be in the documents confidential parties will no longer be able access Work in Progress files.

When documents are filed with the FAA they are file stamped with the date and time of filing. The documents are then quickly indexed against the equipment involved, normally within a few hours, thus providing notice to the public that a filing exists. This is important because priority of the conveyance filed under the FARs relates back to the date and time the documents are filed, not when they are recorded or show up in the FAA record for an aircraft/engine/propeller/spare part location.

Historically filed documents were moved to Work in Progress or “loose documents”, yet we could access copies of the documents from the FAA Public Documents Room. There is no way to know with certainty what documents were filed, parties involved, etc., by just looking at the FAA index.

Under the new process when parties run an index and determine documents were recently filed, they won’t be able to access the Work in Progress or “loose documents” for about 12 days +/-.  This won't affect every deal, but there are many transactions where documents may be showing up on the index, but not processed, prior to a closing. It will likely affect matters involving imports, where the notice of cancellation received by the FAA may not be available for days. Cancellation notices often contain references to filings or other parties that create clouds on title. In some instances law firms will not be able to provide clean opinions until the documents are processed and moved out of work in progress, which will likely delay closings.

The Registry has worked with the aviation industry to address similar issues in the past, and we expect they will provide solutions where possible.

Please reach out to the McAfee & Taft Aviation Group if you have questions.

This article was originally published by Scott McCreary with McAfee & Taft on October 31, 2024.

NAFA member, Aero Law Group, discusses things you should consider if you are contacted by the FAA that you may be under investigation.

If you spend enough time in the aviation industry in nearly any capacity, from being a pilot, mechanic, or flight attendant, to running an airline, management company, flight department or airport, contact with the FAA is nearly inevitable. Most of these interactions are routine, however, on occasion, members of the industry may find themselves, their employees, or their company under investigation by the FAA.

While most FAA investigations are closed with informal action, should the FAA inspector determine that an issue of non-compliance cannot be addressed with informal action, the inspector can issue a warning letter or refer the violation to the FAA’s legal division for further action. The FAA legal team can either request suspension or revocation of an airman’s, airline’s, or other aviation organization’s certificates, or levy a civil penalty.

When dealing with FAA personnel, the most important thing to remember is to be polite and truthful. FAA inspectors are experienced industry professionals just like the rest of us, and they have a job to do. However, it is still important to remember that much like speaking with police officers, statements you make to the FAA can subsequently be used against you. Except under limited circumstances, FAA personnel are required to issue airmen under investigation a “Pilot’s Bill of Rights” notification. This written notification informs airmen of the rights they have with respect to speaking with FAA investigative personnel, including the right to not speak with the inspector.  When an individual or entity is under investigation, they will be typically be issued a Letter of Investigation (“LOI”) from the FAA, although sometimes inspectors will begin an investigation by informally gathering information prior to issuing a LOI.

Read full article here

This article was originally published by Aero Law Group on September 17, 2024.

NAFA member Juan Carlos Ferrer, Partner with Holland & Knight, discusses the important differences between domestic and cross-border aviation finance transactions.

Though there are some similarities between financing an aircraft registered in the U.S. versus financing an aircraft registered abroad, in truth those similarities are vastly outweighed by the differences and complexities associated with a cross-border aircraft financing. The following is an overview of some important differences between domestic and cross-border aircraft finance transactions, as well as some practice pointers to assist in navigating the potential pitfalls of financing a non-U.S.-registered aircraft.

Cape Town Convention

Financing an aircraft registered in a country that has ratified the Cape Town Convention (CTC) can provide comfort to aircraft financiers that they will ultimately be able to timely foreclose on the aircraft should a default occur. Many countries have ratified the CTC, but a surprising number of countries have not. And even among those countries that have ratified the CTC, it is important to fully understand what elections the ratifying country has made to govern creditors' rights in relation to aircraft. Countries that have opted for Alternative A of the CTC afford far greater protections to creditors than those that opt for Alternative B or for reliance on that country's existing insolvency laws.

Owner Registry vs. Operator Registry

The U.S. Federal Aviation Administration (FAA) registry is an "owner-based" registry where the eligibility requirements for obtaining U.S. registration for an aircraft are determined based on the citizenship of the owner of the aircraft. The citizenship of the operator is irrelevant for purposes of registering an aircraft in the U.S. However, most foreign aircraft registries are "operator-based" registries that look to the citizenship of the operator – and not the owner – of an aircraft in order to determine eligibility to register an aircraft in that jurisdiction. Understanding these types of nuances and how to deal with the challenges, as well as the opportunities that they present, is key to properly structuring cross-border aircraft finance transactions.

Read full article here

This article was originally published by Holland & Knight on September 23, 2024. 

NAFA member David G. Mayer, Partner with Shackelford, McKinley & Norton LLP, discusses what it takes and who it takes to successfully complete an aircraft purchase.

No one should buy a used aircraft on the fly. But that does not mean the parties cannot, or should not, move quickly and efficiently to close a purchase. Some prospective purchasers treat buying an aircraft as if it is just like acquiring real estate, a car, or a boat. However, those purchases do not trigger similar complex and intersecting regulatory, liability, tax, risk management, financing/leasing, and technical equipment issues.

Sometimes trying to pace or schedule an aircraft purchase from any point in the deal continuum to closing seems more aspirational than practical. After more than four decades of practicing law, it seems no deal is the same; no deal is “simple;” and few purchases occur without external factors complicating decisions such as the U.S. presidential election, turbulent geopolitics, and economic conditions. How, then, does a purchaser start this buying journey, and what should the purchaser expect to happen?

Transaction Teams

First and foremost, a potential purchaser should hire an aircraft broker with aircraft market knowledge, strong business aviation industry relationships, team-oriented negotiating skills, and economic analysis capability. Some technical consultants also function well as brokers. Such brokers know and, in real-time, can apply to purchase decisions such factors as increasing aircraft inventories, constraints on pilot availability and high compensation, declining interest rates, and fluctuating prices in different aircraft makes and models.

Second—or first to help assess team members—a purchaser should select an aviation lawyer with deep aviation legal knowledge and deal experience, wide industry contacts, and a sense of urgency aligned with the client’s objectives.

Third, the lawyer and broker can and should recommend other appropriate aviation resources, including aviation insurance brokers, tax accountants, technical consultants, FAA counsel, and escrow and trust companies. These people, acting concurrently with the lawyer and broker, can help pick up the pace, facilitate a smooth closing, and enhance the quality of services to the parties.

Aviation professionals understand how to work rapidly, interactively, and responsively in tight coordination with their seller and purchaser clients while avoiding mistakes like those I previously identified (see “AINsight: 7 Avoidable Mistakes in Acquiring a Bizjet”).

Unfortunately, in my experience, some purchasers seem reluctant or decline to incur the expense for these resources, even in large aircraft purchases. They believe their inside counsel or other non-aviation lawyer alone can manage the process and aviation issues. Through no fault of those lawyers, the choice may result in significant mistakes such as operating the aircraft in violation of the Federal Aviation Regulations (FARs), incurring sales tax, structuring to limit personal liability, and reducing federal income tax benefits.

Read full article here

This article was originally published by AIN on September 13, 2024.

Leases are a popular option for aircraft operators, providing flexible access to a platform without the need for large capital investments. But what are the big questions would-be lessees should ask before signing on the dotted line? Gerrard Cowan finds out.

Lessees have different motivations for why an aircraft lease is right for them, so the questions they need to ask will vary depending on why they want to lease in the first place, says Mike Christie, Head of Sales, Americas at Global Jet Capital.

Confirming that the chosen structure will achieve your objectives is a good place to start, he adds.

Global Jet Capital is a major US-based provider of leasing (and other lending solutions) for business aircraft. These include operating leases, where the aircraft is owned by the lessor for the duration of the lease and handed over at the end of the term; finance leases, through which the lessee can take eventual ownership of the asset; and sale and leaseback arrangements, where an owner sells their platform to the lessor and then leases it back, enabling them to free up capital while retaining the use of the aircraft.

What are the Return Conditions at Lease-End?

One of the great benefits of a lease is the ability to simply return the aircraft to the lessor at the end of the lease term. It’s therefore very important to understand the return conditions and process of the lessor, says Christie.

“Do they use internal experts or outside contractors? Is the language clear on what is expected? Are there barriers that may make a return difficult or expensive?”

On top of this, you should ask about potential operational restrictions. Are there annual hour limitations, geographical restrictions or limits on chartering the aircraft? And it can also be insightful to ask the lessor about their commitment to leasing.

Read full article here

This article was originally published by AvBuyer on August 21, 2024.