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  • NAFA Administrator posted an article
    Avoiding Pitfalls When Exporting Aircraft from the United States see more

    NAFA members, Jonathan M. Epstein and Libby Bloxom, with Holland & Knight, discuss what you need to know regarding exporting aircraft from the United States. 



    • Recent aircraft seizures by U.S. Customs and Border Protection (CBP) and the U.S. Department of Commerce Bureau of Industry and Security (BIS) have highlighted the need to ensure compliance with U.S. export laws.
    • Sellers, buyers, brokers and others involved in the sale or lease of aircraft for operations by foreign parties need to cooperate with each other to ensure exports are done properly and in compliance with U.S. export laws, including making an Electronic Export Information (EEI) filing and complying with any licensing requirements or restricted end-user/end-use limitations under the Export Administration Regulations (EAR).

    There are two common types of aircraft exports: 1) permanent exports – where the aircraft is physically exported (i.e., flown) from the U.S. as part of a sale, lease or transfer of possession and control to a foreign person, or is otherwise intended to be based out of the U.S. for one year or more; and 2) temporary exports – where the aircraft will fly under its own power on a temporary sojourn, such as carrying passengers or cargo from the U.S. to Mexico, where it is intended that the aircraft will return to the U.S. within one year and there is no transfer of control. This Holland & Knight alert focuses on permanent export requirements.1

    There is considerable confusion as to the requirements under customs and export laws for aircraft being sold or leased to a foreign person and exported from the United States (i.e., being permanently exported from the U.S.). Unlike most goods that move in commerce, when an aircraft is sold or leased to a foreign party, it departs the U.S. as its own conveyance. However, many of the same basic export requirements apply, as if the aircraft had been boxed up and sent as freight to the foreign country. This process is confusing for a number of reasons:

    • Parties may confuse requirements such as deregistration with the Federal Aviation Administration (FAA) and issuance of an export certificate of airworthiness with requirements under U.S. customs and export laws, in particular the need to make an Electronic Export Information (EEI) filing.
    • Even aircraft that remain on the FAA registry may be permanently exported for customs and export control purposes. For example, aircraft owned by U.S. lessors (or a U.S. trustee), where the operator intends to base the aircraft outside the U.S., would still be considered a permanent export under U.S. customs and export laws.
    • U.S. export regulations, dictating the responsibility to determine export requirements and make EEI filings, can be confusing and difficult to apply to certain aircraft export transactions.


    What Is an EEI Filing and When Is It Required?

    The EEI is an electronic submission of export data filed through the Automated Export System (AES), administered by U.S. Customs and Border Protection (CBP), although the Foreign Trade Regulations (FTR) governing EEI filings are administered by the U.S. Census Bureau.2 The EEI contains details, such as the parties to a transaction and ultimate consignee, the export classification of the item, value and other data that is both for statistical and law enforcement purposes. The EEI is generally filed prior to the permanent physical export of the aircraft from the United States. For example, an EEI would be required where:

    • the aircraft is sold to a foreign buyer and permanently exported from the U.S.
    • an aircraft departs the country with the intent to base it out of the country for one year or more, such as, for example, a lease of an aircraft by a U.S. lessor to a foreign operator

    Conversely, an EEI would not be required where the aircraft is temporarily exported and intended to be based out of the U.S. for less than one year or where there is no physical export from the U.S. (for example, if an aircraft is sold domestically to a foreign entity in the U.S. that intends to base the aircraft in the U.S.).


    Who Is Responsible for Making the EEI Filing?

    Generally, the U.S. Principal Party in Interest (USPPI) is responsible for making the EEI filing, but will often appoint a customs broker as the "authorized agent" to make the filing on its behalf (except where the transaction is a routed export transaction as described below).

    The USPPI is the "person or legal entity in the United States that receives the primary benefit, monetary or otherwise, from the export transaction. Generally, that person or entity is the U.S. seller, manufacturer, or order party, or the foreign entity while in the United States when purchasing or obtaining the goods for export."3

    • In an aircraft transaction, the USPPI would typically be the actual seller (the entity that receives the financial benefit from the sale). For example, if a U.S. manufacturer sells an aircraft to a U.S. foreign party, the U.S. manufacturer would be the USPPI.
    • The foreign buyer is typically not the USPPI in aircraft transactions, as the foreign buyer is rarely "physically in the U.S." Even if the foreign buyer's pilots take delivery in the U.S., it is insufficient to make the foreign buyer the USPPI, as the pilots are performing only the ministerial task of ferrying the aircraft out of the U.S. Rather, this would be considered a "routed export transaction."


    A "routed export transaction" is an export transaction where the Foreign Principal Party in Interest (FPPI) authorizes a U.S. agent to facilitate the export of an aircraft from the U.S. and make the EEI filing on the FPPI's behalf.

    For example, if a foreign buyer accepts delivery of the aircraft in the U.S. and arranges for contract pilots to fly the aircraft from the U.S. to Mexico, the foreign buyer would be the FPPI and would appoint an authorized agent in the U.S. (e.g., a customs broker) to make the EEI filing on its behalf. In this scenario, the seller would be the USPPI and would be responsible for providing information to the FPPI's authorized agent in order to complete the filing. The USPPI would not itself be responsible for filing the EEI, unless it obtained authorization from the FPPI to make the EEI filing. However, many U.S. manufacturers include the latter authorization in their contracts, as it is prudent for them to oversee such EEI filings, rather than rely on the foreign buyer who may be unfamiliar with U.S. export clearance requirements.

    Applying these rules to some aircraft export transactions is difficult, and even experienced customs brokers/government officials can reach different conclusions as to which party should be the USPPI or FPPI and whether a transaction is a routed export transaction or not. However, the aircraft broker receiving a commission only, an owner trustee or a management company providing ferry services generally would not be considered the USPPI or FPPI, as they are not a principal party receiving the primary benefit of the transaction.


    Who Is the "Exporter" and What Are the Restrictions on Exporting?

    The term "exporter," under the Export Administration Regulations (EAR), is defined as "[t]he person in the United States who has the authority of a principal party in interest to determine and control the sending of items out of the United States."4 The exporter is generally the USPPI and is the party generally responsible for determining licensing authority (i.e., determining whether the aircraft export requires a license, falls under a license exception or qualifies for no license required). The principal exception to the USPPI being the exporter is, in a routed export transaction, if the USPPI obtains written confirmation from the FPPI that the FPPI will be responsible for determining licensing authority. In such case, the authorized agent of the FPPI is the exporter under the EAR.5

    The EAR applies to the physical export of civil aircraft from the United States to a foreign country, regardless of whether the aircraft is flying on a temporary basis or for permanent export. However, most civil aircraft do not need a license to export to most countries under the EAR or U.S. economic sanctions. However, exports are generally prohibited to sanctioned countries, such as Cuba, Iran, Syria, Sudan, North Korea and the Crimea region; certain persons on barred entity lists, including the Entity List, Denied Persons List and Specially Designated Nationals (SDN) List; or certain barred end-users/end-uses (such as military end-users/end-uses in Venezuela, Russia and China).

    U.S. parties should properly vet the foreign counterparties (including the beneficial owner of the purchaser as well as the end-user) before transferring title to ensure that the aircraft will not be diverted to an unlawful end-user, end-use or destination in violation of the EAR or U.S. economic sanctions. Even if the buyer is not designated on one of the above lists, U.S. parties should be alert for and cautious of any "red flags" of possible illegal activity, such as funds from various sources not associated with the buyer, a buyer who is evasive about disclosing the end-user or a buyer who refuses to provide information about its beneficial ownership.


    What Are Some Tips to Ensure Compliance with Export Requirements?

    The export clearance process is an inexpensive ministerial process, but failure to follow the procedures can result in fines or even aircraft seizures by the U.S. government. Regardless of your role as seller, buyer, broker, trustee or outside counsel, it is important to collaborate with other parties in the transaction on export clearance in the same way parties work to ensure that deregistration and export certificate of airworthiness issues are properly handled. While not comprehensive, below are some tips for complying with the export clearance process when exporting from the U.S.

    • Confirm that the party responsible for the EEI filing is using a customs broker or other professional experienced in aircraft exports (particularly in routed export transactions). The customs broker or counsel can assist in determining whether a transaction is a routed export transaction and who the USPPI should be (in some cases, in consultation with the Census Bureau).
    • Note that the first page of the airway bill, export shipping instructions or other commercial loading documents (e.g., export manifest) must be annotated with an Internal Transaction Number (ITN), which is the EEI filing identification number automatically generated when the EEI is filed.6
    • The purchase agreement should clearly delineate which party is responsible for arranging and paying for export licensing and clearance, consistent with the restrictions in the regulations (i.e., certain responsibilities may not be contractually disclaimed). In addition, it is recommended that the purchase agreement contain export control language, and a "destination control statement" should be included on the commercial invoice prepared for export purposes.7
    • Be cognizant that an aircraft departing the U.S. (whether for permanent or temporary export) must comply with certain filing requirements, such as pre-filing an electronic manifest. For example, private aircraft must not depart the U.S. to travel to a foreign location until CBP confirms receipt of the appropriate manifest and departure information, and grants electronic clearance via electronic mail or telephone.8 In addition, some foreign countries require filing of advance notice of arrival.
    • In some cases, an aircraft will be loaded with spares or other items that may be considered cargo. If this is the case, check with the customs broker, as such items may need to be separately declared and identified in the EEI for export purposes (and for import into the destination country).
    • Parties should retain records of proper export. Note that the EEI is confidential, and the USPPI and authorized agent generally cannot share the EEI with anyone, including the FPPI.



    1 This Holland & Knight alert provides an overview of customs and export control clearance issues when exporting aircraft from the United States. It should not be construed as legal advice with respect to any particular transaction or export. In particular, the specific facts and circumstances of each transaction/export will dictate the responsibility of each party under U.S. law.

    2 15 C.F.R. Part 30.

    3 15 C.F.R. § 30.1 (defining "U.S. principal party in interest").

    4 15 C.F.R. Part 772 (defining "exporter" and also defining a "principal party" as "those persons in a transaction that receive the primary benefit, monetary or otherwise, of the transaction. Generally the principals in a transaction are the seller and the buyer. In most cases the forwarding or other agent is not a principal party in interest."). The term "exporter" or "exporter of record" is not a term used in the FTR governing EEI filings.

    5 See 15 C.F.R. § 758.3 (Responsibilities of Parties to the Transaction).

    6 See 15 C.F.R. § 30.7.

    7 See 15 C.F.R. § 758.6.

    8 See 19 C.F.R. § 122.22(c).


    This article was originally published by Holland & Knight on February 23, 2021.

  • NAFA Administrator posted an article
    A Holistic Aircraft Purchase Approach see more

    NAFA member, Amanda Applegate, Partner at Aerlex Law Group, discusses the importance of having a complete aircraft purchase plan and team when purchasing your aircraft.

    As I, along with all of my colleagues in the aviation industry, worked through the huge volume of transactions in what I heard referred to as the “December to Remember” it occurred to me once again how important it is to have a complete aircraft purchase plan and team. When purchasing an aircraft the team associated with the purchase can become large: the aircraft broker, lender, insurance provider, accountant, tax advisor, technical representative, escrow agent, management company, crew, and aviation counsel. Each person on the team plays an important role in the aircraft purchase. However, it is imperative that there be a continuous open dialog between the team members so that everyone on the team understands all aspects of the purchase. There are numerous pitfalls that can result when the team is not in constant contact or where one member of the team has knowledge of a particular component of the purchase plan that others on the team are not aware of.

    For example, if the management company and purchaser, during the negotiations of the management agreement, determine that the aircraft will be used for charter when the purchaser is not using the aircraft, this may have an impact on other aspects of the transaction. The lender may limit or prohibit charter use in the loan documents. The charter use may change the tax plan that the tax advisor and accountant are working on. The increase in expected use because of the charter activity may change the inspections that the technical representative would like to have done during the pre-buy inspection to avoid downtime on the aircraft in the near future.

    Another example would be if the crew or management company decides to obtain hangar space in a specific state or states for use by the purchaser once the transaction is closed. By obtaining hangar space for the aircraft in a specific state for the aircraft, the tax advisor and accountant need to look at the state tax implications that result from the decision to base the aircraft in a particular state or states. Furthermore, often times in the hangar space agreement there are very specific insurance requirements. The insurance provider will need to see the hangar agreement prior to execution and make sure the insurance being procured covers or can cover all of the insurance requirements included in the hangar space agreement.

    A final example is if the purchaser determines that a management company is not needed when purchasing a replacement aircraft. In such a case, all functions normally provided by a management company will need to be assigned to a responsible party. The purchaser will need to source the insurance, which can be quite expensive and time consuming during this tight insurance period that we are currently experiencing. The management of all third-party maintenance provider programs will need to be to assigned to a crew member or accountant for processing on a monthly basis. The crew will need to become employees of an entity which could have impact on the aircraft ownership and/or operating structure plan. A decision not to use a management company can significantly alter the plan and instead of being a simple repeatable process, for an existing aircraft owner each item needs to be reviewed to ensure compliance with regulations, insurance and employment laws.

    The above are only a few of the many examples of the interconnection of each item in the purchase of the aircraft, which cannot be over emphasized. If each person performs his or her own tasks in a vacuum, without coordinating with the team and the sharing of information, then there can be serious consequences, including significant federal or state tax consequences, loan covenant breaches, lack of required insurance or unexpected downtime on the aircraft. Finally, since the individual team members may not understand how their tasks and information impact the other team members role, a holistic aircraft purchase approach and good coordination and information sharing among all team members will be far more successful and without pitfalls.

    This article was originally published in BusinessAir Magazine, January 2021, Volume 31, No. 1.

  • NAFA Administrator posted an article
    Aero Asset 2020 Heli Market Trends Report see more

    NAFA member, Aero Asset, shares key findings from their latest Heli Market Trends 2020 report. 


    • As COVID ramped up through Q2 2020, preowned twin engine helicopter retail sales volume dropped by half. The market went into hypotension, but a strong recovery was just around the corner. 
    • Markets showed incredible resilience Q3 & Q4 with retail sales (# units) on par YOY. 
    • Overall, 2020 preowned retail sales volume (# units) rose 10% YOY and 2020 saw the most retail transactions in the last four years. 
    • Following a sharp rise in the number of units available for sale over the last two quarters of 2020, supply for sale (# units) rose 8% YOY. 
    • The overall absorption rate (across all models & asset classes) remains constant YOY with 20.5 months of supply at 2020 trading levels vs. 21 months in 2019. 



    • With the Sikorsky S-92 and Airbus H225 markets both performing strongly YOY, the heavy weight class market saw the biggest rise in transaction volume of all weight classes last year and nearly twice as many retail transactions YOY. 
    • Heavy’s represented 12% of all units sold in 2020 and 20% of the aggregate transacted value. 
    • The Leonardo AW139’s was the best performing medium twin market in 2020, representing 40% of all medium transactions (# unit). Medium twin’s accounted for 30% of all units sold and nearly 40% of the total transaction value (all models/weight classes). 
    • The Bell 429 saw the strongest increase in light twin sales YOY and represented 15% of all light twin sales (#units) in 2020. The light twin market was stable YOY representing 58% of all units sold last year. 


    2021 TREND 

    • After four consecutive quarters of decline, the deal pipeline which tracks the number of preowned twin engine helicopter deals pending at various stages of transaction, saw a rise in the amount of deals pending Q4 2020. It is the writer’s opinion that the resilience noted Q3 & Q4 2020 will continue Q1 2021. 


    Full Heli Market Trends report available here.

    This report was originally published by Aero Asset on March 8, 2021. 

  • NAFA Administrator posted an article
    Can You Finance An Aircraft With Over 10,000 Hours on the Airframe? see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers your aircraft finance questions.

    Question: I am trying to buy this Piper Arrow IV 1979 with only around 450 total time on engine . But the airframe has 15425 total hours on it and the finance company I was going with called and said they could not finance the plane because it has over ten thousand on the airframe. I am trying to see if AOPA or any other companies will finance with that time on the airframe.

    Answer: Thank you for reaching out. We tend to get asked this question a lot by our members. All of our lenders have a 10,000-hour maximum limit on airframes as well. The reason for this is high airframe times reduce the value and make it harder to resell in the event of default. Lenders mitigate their exposure by limiting AFTT.

    Question: We have a 1979 Navajo Chieftain, N27888.   We have recently upgraded all of the avionics for ADSB compliance and repainted and completed a complete interior replacement. We are going to repower and will need to replace both engines. Do you finance a transaction such as this or just complete airframes? 

    Answer: Yes we can certainly finance the engine replacements. The entire aircraft will be held as collateral. Lenders will finance up to 80% of the cost of the replacement or the total upgraded value of the aircraft, whichever is less. Please give us a call at 800.627.5263 and one of my team members can get you started with an application.

    This article was originally published by AOPA Aviation Finance Company on January 7, 2021.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance & Marketability Analysis – January 2021 see more

    NAFA member, Tony Kioussis, President & CEO of Asset Insight, LLC, shares the Used Aircraft Maintenance & Marketability Analysis for January 2021.

    January revealed that strong sales continued into the New Year, leading to another sizeable inventory reduction. Ask Prices also decreased for the third consecutive month to post a 12-month low figure – but which models were impacted the most? Tony Kioussis explores.

    Asset Insight’s January 29, 2021 market analysis covering 134 fixed-wing models, and 1,146 aircraft listed for sale exposed the seventh consecutive monthly contraction (8.7%) of Asset Insight’s tracked inventory fleet.

    At the same time, the high transaction level led to a significant inventory mix change, but the Quality Rating changed very little, improving from December’s 5.348 to 5.351, thereby remaining within the ‘Excellent’ range (per Asset Insight’s scale of -2.5 to 10). It has been in the ‘Excellent’ range since January 2020.

    January’s Aircraft Value Trends

    The tracked fleet’s average Ask Price decreased for the third consecutive month, and January’s 2.1% reduction created a 12-month low figure, with all four groups losing ground. Specifically:

    • Large Jet average Ask Prices fell 2.0% to a 12-month low after increasing 0.8% in December.
    • Mid-Size Jet prices lost 1.8% to post a 12-month low, in addition to their 8.4% drop in December.
    • Light Jet ask prices decreased 2.4% to a 12-month low, after falling 1.5% in December.
    • Turboprop ask prices dropped 1.1%, after losing 0.7% in December.

    January’s Fleet for Sale Trends

    Asset Insight’s tracked fleet has now posted seven consecutive monthly availability decreases, and inventory was down by 8.7% (166 units) during the month of January.

    • Large Jets: Inventory decreased 8.1% (35 units), and 6.9% of the active fleet is listed for sale.
    • Mid-Size Jets: Recorded a 9.2% decrease (48 units), with inventory at 10.1% of the active fleet.
    • Light Jets: Inventory decreased 8.1% (45 units), the group’s seventh consecutive monthly decline, and active fleet availability now stands at 8.9%.
    • Turboprop: The group’s sixth consecutive monthly decrease, this time 9.3% (38 units), resulted in just 6.3% of the active fleet seeking buyers.

    January’s Maintenance Exposure Trends

    Similar to the Quality Rating, Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) saw surprisingly little change considering the high number of January transactions, worsening only 0.3%. By group, the figures were as follows…

    • Large Jets: Worsened/increased another 1.6%, following December’s 1.2% rise.
    • Mid-Size Jets: Rose a nominal 0.2% thereby adding to December’s 0.5% increase (deterioration).
    • Light Jets: Improved/decreased 3.9%, after worsening/increasing 2.5% in December to post the group’s 12-month worst/highest value.
    • Turboprops: Decreased/improved another 0.7% to post the group’s fourth consecutive 12-month low/best figure.

    January’s ETP Ratio Trend

    The overall tracked inventory’s ETP Ratio improved/decreased to 71.6%, but remains between the 12-month high/worst and average figures. The ETP Ratio calculates an aircraft's Maintenance Exposure as it relates to the Ask Price. This is achieved by dividing an aircraft's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by the aircraft's Ask Price.

    As the ETP Ratio decreases, the asset's value increases (in relation to the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market (DoM) increases, in many cases by more than 30%.

    During Q4 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale 64% longer than assets with an ETP Ratio below 40% (277 days versus 454 days). How did each group fare during January?

    • Turboprops: For the fourteenth consecutive month, Turboprops registered the best/lowest ETP Ratio. January’s 39.8% was only marginally higher/worse than December’s 39.5%, and represented the group’s second consecutive month below the 40% excessive Maintenance Exposure point.
    • Large Jets: At 59.7%, the group maintained second position, and the figure was only 0.3% higher/worse than the 12-month low figure.
    • Mid-Size Jets: While better-than-average, and an improvement from December’s 71.8%, the group’s 70.9% ETP Ratio will create challenges for many sellers.
    • Light Jets: By posting a Ratio of 104.3% the group improved over December’s 106.8% record high figure. But that will not help most sellers.

    Excluding models whose ETP Ratio was over 200% during one of the previous two months (considered outliers), following is a breakdown of the business jet and turboprop models that fared the best and worst during January 2021.

    Click here to view the full report.

    This report was originally published in AvBuyer on February 18, 2021. 

  • NAFA Administrator posted an article
    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.


    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.

  • NAFA Administrator posted an article
    Top 5 Myths About Business Aircraft Operating Leases see more

    NAFA member, Global Jet Capital, explains myths commonly associated with business aircraft operating leases.

    There are more options today for accessing a business aircraft than ever before: from charter, to fractional ownership, to operating leases, to traditional financing. When dealing with large, highly-regulated assets that could cost tens of millions—or more—to own, weighing the options to find what makes sense for your specific requirements can be difficult. To make navigating the sometimes-complex landscape of business aviation a little easier, we’re going to clear up five common myths around operating leases—and explain some of the advantages of this frequently misunderstood financing option:


    Operating leases let you keep your aircraft for the duration of the lease, which means consistently using your crew, being able to leave your personal effects on board, and enjoying the experience of ownership while putting your capital to better use. Some restrictions on customization that could potentially impact residual value and other usual lease terms apply, but limitations fall within normal patterns of ownership. With the right lessor, you can expect contract terms that are flexible and fit your unique needs, which make the experience of having an operating lease feel anything but restrictive.

    Additionally, an operating lease with a predictable term makes disposition as simple as turning the aircraft back over to the lessor at end of lease—no additional planning or contingencies needed. Compare that to attempting to sell an aircraft when it’s time to upgrade or make changes to your operations. From hiring a broker, to waiting for months (or even years, in extreme cases) to find a buyer, to paying the costs of maintenance, insurance, and storage in the meantime, you may be looking at millions lost in the process.


    It’s true that operating leases are contractual, while owning a business aircraft outright is not. But, contracts can be created that adjust easily to a changing mission—including allowing for moves to larger or smaller aircraft, the option to extend, or the option to prematurely end the lease altogether. With the right financing partner, you can expect a flexible, custom-tailored contract that feels right.

    In fact, ownership may have risks and limitations that exceed the limitations of a contractual obligation in an operating lease. If a major uptick in your international markets means that your newly purchased mid-range aircraft is no longer up to the task of supporting your business goals, you bear the risk of waiting a long time to sell with capital tied up in an asset that doesn’t suit your needs. When you’re finally able to sell and need to purchase a new business aircraft with a longer range, you’re looking at a potentially lengthy process to secure traditional financing from a lender, coupled with a much larger capital outlay than the refundable security deposit for a lease.


    Even if there is a strong resale market or low interest rates when you choose to purchase an aircraft, consider the risk that you’re taking on with the large outlay of an aircraft purchase. Traditional financing typically requires large down payments and due to volatile geo-political situations, emerging technology, and the natural realities of market fluctuation, there’s no guarantee that a strong resale market for your aircraft will be there when you choose to sell. That low interest rate environment may be gone, which won’t help entice buyers to purchase your pre-owned aircraft. In the meantime, you may have paid more for a depreciating asset.

    Operating leases eliminate residual value risk and provide predicable costs for the duration of the lease. Budgeting stays precise, liquidity stays high, and the future becomes clearer. The resale market doesn’t come with any guarantees—an operating lease contract does.


    Whether you have your eye on a new or pre-owned aircraft, or if the pre-owned aircraft you’re interested in is a little older than what you would typically expect for a leasing arrangement, there are very few limitations to what can be obtained with an operating lease today.

    Specialists in business aviation financing like Global Jet Capital look to spread risk across a large portfolio, encompassing aircraft from every major manufacturer, every global market, and a variety of age ranges.


    If privacy is important to you, a leased aircraft may actually provide an additional layer of anonymity. An operating lease reduces visibility to an aircraft’s end user, as the public records of the FAA identify the lessor as the owner of the aircraft, giving you greater privacy.

    This article originally appeared in Business Jet Traveler, February 2021.

  • NAFA Administrator posted an article
    Impact of COVID-19 on the Business Aviation Market Part II see more

    NAFA members, General Aviation Services and AMSTAT, share their Business Aviation Market Report.

    To view the full report, click here

    This report was originally published by AMSTAT on December 19, 2020.

  • NAFA Administrator posted an article
    Four Common Mistakes That Can Delay Your Aircraft Purchase: Ways To Keep Headaches To a Minimum see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares tips for making sure your aircraft purchase goes smoothly.

    You found the right airplane for your mission; you have a lender and now you are days away from your final goal—landing the aircraft of your dreams. Out of nowhere, you get a phone call from the lender. A last-minute mix-up now threatens to stall or upend the deal. What happened? Here are four common trip-ups:

    1. Last-minute ideas
    Did you change your mind midway through the deal regarding how you wish the airplane to be owned, or how the airplane will be used? One of the biggest delays comes from buyers who suddenly decide their airplane should not be personally owned but instead owned by an LLC. 

    First, you’ve now altered the financial picture from which the lender is basing the parameters of the loan. Second, you’ve just added complexity to the deal. Complexity adds time. Third, an aviation LLC is different than other LLCs. The nuances are significant enough for us to suggest you contact AOPA Legal, or an aviation attorney before initiating the paperwork.

    2. Title issues
    Did you forget to order a title search from a reputable title company? Missing logbook signatures, an unqualified person making a logbook signoff, the presence of a heretofore unseen lien are all examples of items that can put a “cloud” on a title. Before the title can be cleared, a title company must do due diligence. 

    3. Pre-buy inspection
    What could possibly go wrong with a pre-buy inspection? How about the aircraft is stuck overseas? How about a dispute between the seller and buyer as to where the pre-buy will occur? How about a pandemic that shuts down business operations and air travel for an unspecified amount of time? From the mundane to the previously unimaginable, myriad things can affect the pre-buy. That’s why a Pre-purchase Agreement is vital. In it, all the parameters of a pre-buy are codified and agreed to prior to, hopefully mitigating as many possible obstructive circumstances as possible.

    Even with that, the pre-buy inspection will invariably uncover some addressable item. That item’s resolution will then have to be negotiated into the price if it’s not an airworthy item, or fixed and inspected prior to, if it is an airworthy item.

    4. Paperwork
    Illegible logbook documentation, missing paperwork, documents missing a notary’s required imprint— are a partial list of paperwork problems that could slow the closing process. AOPA Aviation Finance can help build a paperwork checklist early that will help prevent this pitfall.

    This article was originally published by AOPA Aviation Finance Company on November 23, 2020.

  • NAFA Administrator posted an article
    JetBrokers' February 2021 Market Update see more

    NAFA member, JetBrokers, shares their recent market update showing improving trends despite the COVID pandemic.

    With the vaccine rolling out, JetBrokers forecasts 2021 will be a strong year for business aviation with ultra-high net individuals (UHNWIs) continuing to seek safer travel options to fulfill their personal travel needs in Q1. Corporate travel is expected to pick up again in Q2. 

    Jet Comparisons by JetBrokers     Jets for Sale by JetBrokers

    After increasing in 2019, overall inventories of preowned private jets and turboprops dropped in 2020, after increasing 2019. Inventories of light to medium jets are now below levels in January 2020. Inventories of heavy jets have increased. 

    Average Asking Price Trends for Jets and Turboprops

    After increasing in 2019, business aircraft sales prices dropped in 2020 while still remaining higher than 2018. The preowned jet and turboprop market will continue to improve as the vaccine continues to roll out. As ultra-high net worth individuals (UHNWIs) - who entered the market as first-time buyers in 2020 realize the value of business aviation - the market will continue to stabilize with steady growth projected for pre-owned transactions.

    Jet Comparisons by JetBrokers

    During the second half of 2020, aircraft prices for jet and turboprops trended upward despite the COVID pandemic. We expect demand for light to medium jets to remain steady and demand for heavy jets to return to previous rates in increase in 2021.

    Jet Comparisons by JetBrokers     Jets for Sale by JetBrokers


    The BCI (Business confidence index) for the United States is higher than the world at large, despite the COVID pandemic, with increased confidence in near future business performance.

    Pre-owned and new aircraft sales were on different trajectories in first three quarters of 2020. Sales volumes were down over the previous year with pre-owned transactions showing less impact than new aircraft deliveries. In contrast to their overall share of dollars, light jets continue to make up an important portion of the market in terms of aircraft delivered. 

    Forecast 2021 and Beyond

    In 2021, new business aircraft models in development or close to release are AirBus ACJ TwoTwenty, Dassault Falcon 6X, Gulfstream G700, SyberJetSJ30i, Beechcraft King Air 360/360ER, Beechcraft King Air 260, Cessna Citation Hemisphere, Cessna Denali and Cessna SkyCourier.

    Business aircraft asking prices are stabilizing with inventories either plateauing or falling. Demand for private jets and turboprops is expected to rise. The preowned market is improving with mostly robust demand indicators for business aircraft. Global aircraft market demand and usage varies depending on the overall needs of the region. Europe has pent up demand for light to medium jets while the Asian market has steady need for larger, long-range aircraft.

    Industry forecasts for new business jet deliveries are valued between $217.5bn to $236bn for the next ten years with projections of between 6584 aircraft (per JETNET iQ) and 7404 aircraft (per Aviation Week). 

    Click here to download JetBrokers February 2021 Market Update PDF.

    This report was originally published by JetBrokers in February 2021.  

  • NAFA Administrator posted an article
    The EVA Podcast: The Resilience of the Business Aviation Industry with JSSI's Neil Book see more

    NAFA member and JSSI President and CEO Neil Book joins Chris Notter to discuss JSSI and the resilience of the business aviation industry during these challenging times. HEAD OVER TO EVA for more from this series, or listen to the podcast below:

    This podcast was originally published by JSSI on November 17, 2020.


  • NAFA Administrator posted an article
    Aero Asset's Helicopter Market Trends Q4 2020 Report see more

    NAFA member, Aero Asset, shares key findings from their recent Heli Market Trends Q4 2020 report.


    · Retail sales volume continued to rise Q4, up 22% vs Q3 20, but still down 25% vs Q4 19 

    · Supply for sale remained stable but still 10% higher than Q4 19 

    · Absorption rate continued to improve Q4, but remained 50% higher than Q4 19 

    · Deal pipeline bounced back Q4, surpassing Q4 19 level 



    · Light Twin engine market was stable Q4 after a strong rebound the previous quarter 

    · Deterioration ended in the Medium market with a strong uptick in sales and a stable level of supply 

    · Heavy market was at a standstill Q4 after a decent Q3 



    · VIP market segment was stable vs Q3, but sales volume remained 15% below Q4 19 

    · UTILITY & EMS represented 36% of all sales Q4, VIP configurations accounted for the rest 



    · The most liquid preowned markets Q4 20 were the Airbus H135 & H145 markets tied at 1st place 

    · 2 of 12 markets in the lineup saw no trades Q4, both in the heavy weight class 

    · The least liquid market with trading activity was the Bell 412EP which continued to suffer from soft demand 



    · After 4 consecutive quarters of decline in the number of deals pending at various stages of transaction, the deal pipeline grew Q4 

    · Deal pipeline bounced back 60% higher than Q2 20 level, to surpass Q4 19 level 


    Click here to download the full Heli Market Trends report.


    This report was originally published by Aero Asset in December 2020.

  • NAFA Administrator posted an article
    Five Things to do Before Buying see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares five quick tips to have a positive airplane buying experience.

    On the one hand, the airplane buying experience is thrilling and full of adventure. You’re embarking on an upgrade, or it’s your first-time taking control of your business or personal air travel. On the other hand, the airplane buying experience can be full of adventure and an unintentional thrill ride. You’re embarking upon a transaction process that if left to chance may reveal hidden turbulence. So how to have the best experience? Here are five quick tips:

    1. Define your mission first. How do you envision using the airplane? Are you going to travel someplace? Are you going to be using to travel someplace with other people? How long are these trips going to be? Where will they be? At what time of year will they be? These will define the type of aircraft that fits your need best. At the very least, this exercise will help you understand what airplanes you don’t want.
    2. Define your intended aircraft’s support community. Who owns the same aircraft at your local airport? Does that airplane have an associated club or online community? Tap into those human resources to get real world intelligence. Combining what they know from actual flying with your defined mission can help further narrow your choices. For instance, Find out from friends or other owners (e. g. Comanche 400 vs. Cirrus)
    3. Define the aircraft’s true cost. There is the acquisition price, yes. And you may have clear picture of fuel burn, hangar, database updating, etc. But those aren’t the only cost. What really is the reserve? How easy are parts to obtain? What’s the access like to get a good qualified mechanic who is expert on your make and model? A generalist vs. an expert means down time. What’s your airplane’s down time going to be based on mechanic and parts availability? That analysis may cause you to consider buying a new plane with a warranty on it. Which brings us to #4.
    4. Define whether a used or a new airplane is your best value. If you own your own business and you can also utilize bonus depreciation to write the purchase off as a business expense, and if your price includes a manufacturer’s warranty for a new plane, that slightly higher cost may mitigate all the issues raised in point #3. This option may also be worthwhile to non-business owners, too.
    5. Define your financing options. Pre-approval vs. paying cash. What is your opportunity cost vs. financing? How would your return compare between an all cash deal and taking a loan while investing the cash? What’s your comfort level in having cash flow and leverage vs. owning an aircraft outright? Firm knowledge in where you stand on the leverage risk tolerance scale opens or focuses how you’re willing to pay for the airplane.

    And last of all, reach out to AOPA Finance. If we don’t know the answers, through the rest of AOPA, we can help point people to other resources and get them those answers.

    This article was originally published by AOPA Aviation Finance Company on January 7, 2021.

  • NAFA Administrator posted an article
    Nine Things to Know When Leasing an Aircraft see more

    NAFA member, George Kleros, Sr. Vice President, Strategic Event Management & Fleet Support at JSSI, shares information on aircraft leasing.

    When leasing an aircraft, what are your maintenance obligations during and at the end of the lease term to ensure that the returned aircraft maintains its value? 

    Focused on that residual value, the lessor will designate a qualified inspector or auditor to perform periodic records reviews and/or asset inspections, throughout the lease period. The intent is to verify the aircraft’s general condition and ensure it remains in compliance with lease requirements.

    After each check, the inspector will send the lessor a report with the graded condition of the aircraft and any specific findings. If anything can or might affect the residual value, you’ll be required to take corrective action to bring the aircraft into compliance.

    At term end, the lessor will conduct an “off-lease” inspection (similar to a pre-purchase inspection) at a factory-owned or authorized service center. All components and systems must be in full working order; or repaired if not. If the major components are near their life limit, you’d be responsible for covering these costs: either a pro-rated percentage based on time consumed, or 100% of the cost to overhaul if it’s close to the event.

    If the aircraft requires repairs for damage or corrosion, you are responsible for the repair cost. Once any repairs required by the lease are completed, any diminution in value due to damage history will be the lessor’s responsibility.

    So what can you do to preserve the value of the aircraft?

    Do …

    • Review the lease document fully to understand the operation, maintenance and return of the aircraft requirements. A good lease-return scenario always starts with a well-defined and documented set of return conditions. Ask questions for clarification prior to signing, to be sure you fully comprehend the broad scope of your obligations.
    • Keep the aircraft clean and polished to protect from corrosion and paint deterioration. Unprotected aircraft deteriorate faster than you might expect. The aircraft interior will be inspected for wear, cleanliness, and damage. The exterior will be checked for oil leaks, paint condition, and structural damage.
    • Store the records in a secure, dry, fireproof storage cabinet or safe. Damaged or missing records devalue an aircraft and will change residual value. The lessor will come out either annually or bi-annually to see the aircraft and review the records for accuracy and airworthiness.
    • Keep up with routine and scheduled maintenance tasks, even if the aircraft is not flying for extended periods of time.
    • Address interior and exterior wear items immediately. Waiting can compound the problem and cost more to correct.

    Don’t …

    • Assume the lease document allows for the aircraft to operate under different regulations or use than originally defined.  If the aircraft flies only for you under FAR Part 91 regulations, don’t move your aircraft into a for-hire Part 135 air-taxi arrangement without consulting the lessor; it may not be allowed.
    • Leave the aircraft outside. Store it in a hangar when not in use. Sun, humidity, and high temperatures deteriorate interiors and paint exterior, diminishing the residual value.
    • Let the aircraft sit inactive for long periods of time. Your aircraft still needs to be flown and systems exercised to keep systems lubricated and reduce risk for damage.
    • Ignore missing paint and erosion strips. This leads to corrosion and will be expensive to correct.

    The lessor always requires hull insurance at a specific dollar amount, and generally seeks high liability insurance limits.  If you acquire an hourly cost maintenance program (HCMP), it can help ensure that the aircraft meets return conditions. The lease should state clearly that the maintenance program was current at lease inception and that the HCMP will be transferred to the lessor. An HCMP is very desirable in a lease transaction. It helps preserve the aircraft’s residual value, and helps you avoid penalties and extra costs. 

    This JSSI article was originally published in Business Aviation Advisor November/December 2020.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance & Marketability Analysis – December 2020 see more

    NAFA member, Tony Kioussis, President & CEO of Asset Insight, shares the latest Used Aircraft Maintenance & Marketability Analysis.

    Although 2020 had its challenges, the year closed with strong sales activity, and pre-owned inventory ended the year substantially below the June peak. Lower Ask Prices reflected the sellers’ desire to close deals before year-end, but which models were impacted the most? Tony Kioussis explores.

    Asset Insight’s December 31, 2020 market analysis of 134 fixed-wing models, and 1,912 aircraft listed for sale revealed the sixth consecutive monthly contraction (9.4%) of Asset Insight’s tracked inventory fleet. Which models were impacted the most, though...?

    While the statistics were mixed for the jet groups, ongoing buyer focus on lower quality assets (aircraft with more, and more costly, upcoming maintenance events) was evident for Turboprops.

    The overall Quality Rating came down from November’s 12-month 5.371 high (best) figure to 5.348, but ensured the inventory stayed within the ‘Excellent’ range for the entirety of 2020 (per Asset Insight’s scale of -2.5 to 10).

    December’s Aircraft Value Trends

    The tracked fleet’s average Ask Price decreased for a second consecutive month, after increasing three months in a row. The 4.7% December decrease equated to a 2.4% value reduction for Q4, and a 3.9% decrease for the calendar year. By aircraft group:

    • Large Jet average Ask Prices increased 0.8% during December, and 1.8% during Q4. However, the group’s Ask Price was down 11.9% for the calendar year.
    • Mid-Size Jet prices fell another 8.4% in December; 10.4% in Q4; and 6.4% for 2020.
    • Light Jet ask prices decreased 1.5% in December and 5.4% for Q4, but was the one group to post a gain for the year at 3.0%.
    • Turboprop ask prices lost another 0.7% in December, and, although up 0.6% during Q4, lost 1.5% during 2020 calendar year.

    December’s Fleet for Sale Trends

    Following its peak in June, Asset Insight’s tracked fleet has posted six consecutive monthly availability decreases (-63 units in December), and, Year-to-Date (YTD), inventory was down by 12.4% (270 units) compared with December 2019.

    • Large Jets: Inventory decreased 12.9% (64 units), ending the year with the exact same inventory figure as for December 2019.
    • Mid-Size Jets: Recorded a 10.8% decrease (63 units), ending 2020 with a 20.9% decrease (138 units).
    • Light Jets: Inventory decreased for the sixth consecutive month, this time 6.6% (39 units), leading to a YTD inventory decrease of 13.9% (89 units).
    • Turboprop: Through its fifth consecutive monthly decrease, the group’s inventory decreased 7.5% in December (33 units), resulting in a YTD decrease of 9.6% (43 units).

    December’s Maintenance Exposure Trends

    Buyer focus on jets with lower levels of Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) raised/worsened figures for the remaining inventory. Meanwhile, turboprop buyers clearly focused on lower Quality assets, possibly due to their price. The resulting figures, by group, were as follows…

    • Large Jets: Worsened/increased 1.2% during December to a figure slightly worse than the 12-month average (as well as 3.7% YoY).
    • Mid-Size Jets: Rose 0.5% to a figure only slightly better/lower than the 12-month high/worst value, although the group’s YoY figure improved by 4.0%.
    • Light Jets: Worsened/increased another 2.5% to post the group’s 12-month worst/highest value, while concurrently worsening the YoY figure by a massive 46.4%.
    • Turboprops: Improved an additional 1.9% to post the group’s third consecutive 12-month low/best figure, while recording a Maintenance Exposure decrease/improvement of 17.7% during the year.

    December’s ETP Ratio Trend

    The overall tracked inventory’s ETP Ratio worsened/increased to 72.8%, only one point better than the 12-month worst/high figure. It compares negatively with October’s 69.8% and November’s 70.1% lower figures.

    The ETP Ratio calculates an aircraft's Maintenance Exposure as it relates to the Ask Price. This is achieved by dividing an aircraft's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by the aircraft's Ask Price.

    As the ETP Ratio decreases, the asset's value increases (in relation to the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market (DoM) increases, in many cases by more than 30%.

    During Q4 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale 64% longer than assets with an ETP Ratio below 40% (277 days versus 454 days). How did each group fare during December?

    • Turboprops: For the past 13 months, Turboprops have registered the best/lowest ETP Ratio. In December, the group’s 39.5% (its fourth consecutive best 12-month Ratio) represented the first time in years that any group posted a figure below the 40% excessive Maintenance Exposure point.
    • Large Jets: Maintaining second position with an ETP Ratio of 61.0% – yet again better/lower than the group’s 12-month average – the Large Jets’ ETP Ratio was, nevertheless, worse than November’s 59.4%.
    • Mid-Size Jets: Posting a better-than-average figure, the Mid-Size Jets’ ETP still rose/worsened to 71.8% from October’s 12-month low/best 68.9% and November’s 69.0%.
    • Light Jets: Continued making history by registering a second consecutive record high/worst figure, this time 106.8%, compared to November’s 102%.

    Excluding models whose ETP Ratio was over 200% during one of the previous two months (considered outliers), following is a breakdown of the business jet and turboprop models that fared the best and worst during December 2020.

    Click here to read the full report.

    This report was originally published by AvBuyer on January 20, 2021.