Your Asset on the Line - Customizing Your Charter Management Contract

NAFA member, David Norton, with Shackelford, Bowen, McKinley & Norton, LLP, writes about customizing your charter management contract.

When seeking to generate extra revenue to help offset the overhead costs of owning and operating your aircraft, you’ll likely hire a properly licensed aircraft charter management company (a “certificated air carrier” in FAA-speak) with the authority to make it available to the public for charter flights.

Normally, you would set up a “dry” lease (a.k.a. “charter management contract”) to that charter operator. While the FAA will impose some restrictions on what such a contract can require, it is your aircraft, so you may seek to impose some guidelines that most charter operators won’t necessarily initially offer to help protect your valuable asset.

Any good charter management contract will have standard clauses dealing with the term and termination rights of the parties, the services the charter operator will provide (crew, maintenance, record keeping, etc.), the basic obligations of the airplane owner to pay for the maintenance of operations of the aircraft (in exchange for receiving most, if not all, of the generated charter revenue), insurance requirements and related indemnification and risk-of-loss issues, key legal provisions such as statements addressing the FAA’s rules on “operational control” of the aircraft, and common “boilerplate” provisions dealing with notice requirements, confidentiality, and so forth.

  • What else might you consider asking for that does not typically appear in the first draft of a charter management contract? Examples of such provisions include:
    Limitations on who can charter the aircraft, such as:
    • “Hard partiers” (e.g. rock bands)
    • Young children
    • Customers who refuse to submit to credit checks.
  • Limitations on substances you might not want on your aircraft:
  • Beyond what is typically covered under aircraft insurance provisions, areas where you may not want your aircraft to be operated, such as:
    • Any region on the U.S. State Department’s Travel Advisory list, or even outside your country at all
    • Into a weather-challenged zone, such as a hurricane area, forest fires, or after a recent blizzard
    • To a country that imposes tariffs that you might end up having to pay after the fact.
  • Specific items you may not want on board, such as:
    • Animals, whether caged pets or exotic species
    • Firearms
    • Other materials you might find objectionable.
  • Additional safety items or restrictions, such as:
  • Any timing limitations on use of your aircraft, such as:
    • The requirement to provide at least 48 hours’ notice before a charter so that you can make sure it won’t conflict with your planned use
    • No weekday charter (if you use your airplane primarily for business during the week), or conversely
    • No holiday weekend charter (if your use is primarily personal).

All of these suggestions are subject to some very important restrictions. The Department of Transportation’s anti-discrimination rules make it very clear that you cannot seek to limit the use of the aircraft based on race or gender, for example. And the FAA has significant rules regarding placing so many restrictions or guidelines on the charter management company that you have, in effect, failed to give them the operational control of the aircraft they are required to maintain.

But it is your aircraft, so discuss with the charter management company just how it will – or will not – use your aircraft. 

This article originally appeared in Business Aviation Advisor September/October 2018.