aviation

  • Tracey Cheek posted an article
    Embraer Bizjet Deliveries Hold Steady in Q1 see more

    NAFA member, Embraer announces steady business jet deliveries in the first quarter.

    Embraer delivered 11 executive jets in the first quarter, remaining on par with 2018 shipments. As in the first quarter of 2018, the Brazilian manufacturer handed over eight "light" jets (Phenoms) and three "large" jets (Legacys/Lineages) in the first three months of the year. Embraer, which delivered 91 executive jets last year, has projected shipments to fall between 90 and 110 executive jets this year.

    While its business jet deliveries held steady in the quarter, Embraer's commercial aircraft shipments slid by three units to 11. Backlog, meanwhile, dipped slightly from $16.3 billion at the end of 2018 to $16 billion by the end of March.

    The first quarter marked the 500th delivery of the Phenom 300, a milestone reached in less than 10 years after the aircraft first entered service in 2009—and one of the few current business jets to reach that delivery level. One of the most-delivered aircraft over the last decade, the Phenom 300 is in operation in more than 30 countries and has accumulated more than 780,000 flight hours.

    Also in the quarter, Embraer announced it had captured the first Phenom 300E and Praetor 600 business jet sales to Brazilian customers. Its delivery lineup is slated to expand this year with Embraer recently receiving Brazilian ANAC approval for the Praetor 600.

    Click here to download the 1st Quarter 2019 report.

    This article was originally published by AINonline on May 6, 2019.

  • Tracey Cheek posted an article
    The Airplane Acquisition Checklist Series: Part One: The Pre-Purchase see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, shares his pre-purchase airplane acquisition checklist.

    Did you resolve to upgrade your current aircraft or to buy your first airplane in 2019? Congratulations!. With low inventory and high demand, how you approach the buying process may be the difference between getting your first-choice or settling for an also-ran.

    Buying an airplane is like flying an airplane. It’s all about planning, crew resource management and checklists. Your “crew” includes your lender, your insurer, your maintenance contractor and AOPA’s Aviation Finance Group. AOPA Finance can match you with the right lender, and our extensive experience can also provide you the additional leverage you may need in a tight market, at no cost to you.

    Like flying, how well you plan, manage your crew and follow your checklists help determine how well the purchase process goes. We’re not talking about pre-flight, flight and post-flight checklists, though. We mean these checklists:

    1. Pre-Purchase
    2. Purchase
    3. Aircraft Delivery

    Let’s start with the Pre-purchase Checklist:

    • Ownership—personally or through a company or LLC?
    • Use—personal or commercial?
    • Loan Pre-approval
    • Escrow
    • Private hangar or shared?
    • Aircraft maintenance contractor

    Ownership. Are you going to own the airplane yourself or through your company? Will you create an LLC, a partnership or some other type of corporate body? Iron out those details first. They guide which lender can pre-approve you and may also influence the length of the pre-approval process. There are advantages and disadvantages to all ownership scenarios.  What’s important to know is that if you decide to change structure at the last minute, it’s a bit like telling your building contractor you want to move a door. At a minimum you know there’s going to be delays in the process and it may completely change the structure.

    We’ve seen too many situations where potential buyers got a loan pre-approval based on one ownership scenario (like a partnership), only for them to change the scenario (like dissolving the partnership). That kind of change will negate the pre-approval process and will force the buyer to start over. It may also necessitate finding a different lender.

    Use—Personal or Commercial? Part 91 transport for you alone, for your company’s employees or leaseback to the local flight school? Decide how you intend to fly your aircraft and commit to it. There is no advantage in telling your prospective lender and insurer it’s for personal use, only to conduct commercial operations once purchased. Should the discrepancy come to light because of an accident, incident or investigation, it could trigger a steep default interest rate, or worse. Transparent communication is the best way to keep this complex transaction simple.

    Now it’s time for:

    Loan Pre-Approval. Getting pre-approved confirms what you can afford and enables you to move quickly on an aircraft, both essential in this seller’s market.

    Some think it’s a waste of time to get pre-approved because the pre-approval is time-limited. True, pre-approval is good for anywhere from 60 to 90 days, depending on the lender. That’s generally enough time to find the right aircraft. But, if the search period does exceed the pre-approval timeframe, it may be possible to extend the pre-approval period.

    Even if the lender won’t extend, re-approval is quicker than an initial pre-approval. So you’re still ahead of the competition.

    While waiting on pre-approval, finish the rest of the checklist:

    Escrow. Have cash ready to put in an escrow account. Escrow gives you an exclusive option on an aircraft within a specific timeframe. When entering escrow, ask for generous restrictions. The more time you can negotiate, the better. It gives your lender, insurer or AOPA Finance space to conduct background checks, damage history and title searches. Also consider keeping extra money in reserve to add to escrow should the seller require an additional incentive.

    Next time: The Purchase and Aircraft Delivery checklist.

    This article was originally published by AOPA Aviation Finance Company on February 21, 2019.

  • Tracey Cheek posted an article
    Continued Global Advocacy Supports Industry Growth see more

    NAFA member Ed Bolen, President & CEO of National Business Aviation Association (NBAA), discusses how continued global advocacy supports industry growth.

    Business aviation has always been a global industry that requires advocacy in all parts of the world.  NBAA understands this mission and works continually, at regional and international levels, to support policies that foster the industry's growth and prosperity. 

    For example, NBAA has been working for over a decade to help international operators comply with the European Aviation Safety Agency (EASA)'s Safety Assessment of Foreign Aircraft (SAFA) ramp check program.  NBAA recently commented on proposed changes in SAFA inspections, making EASA aware of operators' concerns and explaining how business aircraft flying differs from airline operations. 

    Beyond our work in specific regional theaters, the association also advocates for the industry at the global level.  Much of our work in this regard is undertaken in coordination with the International Business Aviation Council (IBAC), business aviation's official observer to the proceedings of the International Civial Aviation Organization (ICAO). 

    As of this writing, NBAA is helping IBAC prepare for the next major meeting of ICAO, which will deal with a variety of important topics that affect business aircraft operators, such as using data-driven risk assessment to enhance safety and facilitating worldwide adoption of innovative air-traffic management initiatives. 

    NBAA and IBAC also continue working to achieve reasonable compliance limits and procedures for ICAO's global aviation emissions plan, known as the Carbon Offsetting and Reductions Scheme for International Aviation, or CORSIA.

    We were pleased that ICAO heard and understood our position on the plan's introduction, that business aircraft emissions represent a tiny fraction of all aviation emissions, and that the segment should be given proportionate consideration under CORSIA.  This understanding led ICAO to grant the vast majority of business aircraft operators a "small emitter" exemption from the policy, greeted with strong support from NBAA and IBAC.  That said, the 2 organizations continue monitoring the voluntary compliance requirements in place for CORSIA, with an eye toward ensuring compliance is workable. 

    Of course, not all of the advocacy work done by NBAA relates to compliance with government mandates.  Business aviation has a long record of support for industry-driven initiatives, and NBAA is active on a number of those as well.  One of the most promising among these is the development and use of Sustainable Alternative Jet Fuels (SAJF), derived from a broad variety of renewable sources and blended with petroleum jet fuel, resulting in a mixture indistinguishable from straight Jet-A. 

    Illustrating the industry's long-standing commitment to reducing its already small emissions footprint, several business aviation stakeholders in May will recognize the 10th anniversary of the Business Aviation Commitment on Climate Change, which identified SAJF among other initiatives for further reducing overall emissions in business aviation. 

    Over the past year, as part of that commitment, a coalition of international business aviation organizations released the Business Aviation Guide to the Use of Sustainable Alternative Jet Fuels, which outlines the pathway toward the adoption and use of SAJF and sponsored a demonstration day in the US to prove these fuels' viability and safety. 

    In fact, the promotion and use of SAJF will be in focus as never before at the 2019 European Business Aviation Convention & Exhibition (EBACE) taking place May 21-23 in Geneva.  The event will include the SAJF-focused technical panel discussion at the EBACE Innovation Zone on the show's opening day, while TAG London Farnborough Airport will host the 1st European SAJF demonstration day on May 18, building on the US event earlier this year at VNY (Van Nuys CA). 

    Clearly, as business aviation continues to grow around the world, NBAA will continue to reflect the industry's needs across multiple areas, engaging with government officials and industry stakeholders to protect and promote business aviation in an evolving global environment. 

    This article was originally published by Professional Pilot Magazine in May 2019, p. 12. 

  • Tracey Cheek posted an article
    Trump Administration Eliminates People-to-People Travel to Cuba see more

    NAFA member Holland & Knight discusses changes in regulations that will have major effects on private aircraft and vessels, including cruise ships.

    Highlights

    • The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce's Bureau of Industry and Securities (BIS) announced changes to the Cuban Assets Control Regulations (CACR) and the Export Administration Regulations (EAR), respectively, that partially implement the U.S.-Cuba policy recently announced by the Trump Administration. The changes are effective as of June 5, 2019. Key impacts include the following:

    • Except for certain travelers who have already booked travel, OFAC has ended the authorization that allowed travel to Cuba under the People-to-People (P2P) travel general license.

    • BIS has terminated an export exception that allowed private/corporate aircraft to depart the U.S. for Cuba (operations that are now prohibited). This does not affect commercial airlines, air-taxi operators and air ambulance operators engaged in commercial operations to Cuba. 

    • BIS has terminated an export exception for private and commercial vessels, including cruise lines, to depart the U.S. for Cuba (operations that are now prohibited). Effectively, only vessels carrying authorized cargo (such as agricultural commodities) are now allowed. Notably, earlier announcements made by the Trump Administration on April 17, 2019, did not provide any warning regarding the ending, in practical terms, of cruise lines' ability to operate in Cuba.

    The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) and the U.S. Department of Commerce's Bureau of Industry and Securities (BIS) on June 4, 2019, announced changes to the Cuban Assets Control Regulations (CACR) and the Export Administration Regulations (EAR), respectively. Both agencies also updated their respective frequently asked questions (FAQs) explaining the amendments, which take effect on June 5, 2019.

    These amendments implement one aspect of the U.S.-Cuba policy announced by the Trump Administration on April 17, 2019: the restriction of non-family travel through the elimination of the P2P travel category (part of the educational travel authorization). However, the changes taking effect on June 5, 2019, do not restrict any other travel category and do not limit money remittances to Cuba or end the use of "U-turn" transactions. It is possible that additional changes to the U.S.-Cuba regulations addressing these matters may be implemented in the near future. 

    On the other hand, the new amendments go beyond what was announced by both U.S. Secretary of State Mike Pompeo and National Security Advisor John Bolton on April 17 because they include an unexpected prohibition on the "exportation" to Cuba (i.e., temporary transportation from the U.S. to Cuba) of most commercial and private vessels (including cruise ships) as well as of private and corporate aircraft. Such change has an immediate, detrimental impact on U.S. cruise lines operating in Cuba.

    This Holland & Knight alert discusses the June 5 amendments to the U.S.-Cuba sanctions regulations as well as their practical effects on U.S. individuals and companies.

    People-to-People Travel Category Completely Eliminated

    The general license under Section 515.565(b) of the CACR that authorized U.S. persons to travel to Cuba under the group P2P travel category is eliminated. Group P2P travel consisted of educational exchanges not involving academic study pursuant to a degree program that was organized under the auspices of an organization that is a person subject to U.S. jurisdiction and that sponsors such exchanges to promote people-to-people contact. This sub-category of authorized travel was part of the Educational Activities broader category under Section 515.565 of the CACR. The "individual" P2P (not requiring to be organized by an organization that is a person subject to U.S. jurisdiction) had been eliminated as of Nov. 9, 2017. 

    Effective June 5, 2019, any P2P travel (both individual and group P2P) needs to be authorized by OFAC under a specific license. However, OFAC FAQ No. 16 sets forth that OFAC will apply a policy of denial with respect to applications for a specific license requesting authorization for people-to-people travel and related transactions.

    Those individual travelers who have completed at least one travel-related transaction (such as purchasing a flight or reserving accommodation) prior to June 5, 2019 will be grandfathered in and, therefore, remain authorized to complete that specific travel. This temporary exception also covers the P2P "sponsoring organizations" to the extent that the proposed travel falls within the scope of the grandfather provision for group people-to-people educational travel. Under these conditions, the P2P sponsoring organization may proceed with sponsoring such travel without applying to OFAC for a specific license.

    The Ability of Certain Vessels and Aircraft to Operate in Cuba Has Been Eliminated

    Under Section 515.572 of the CACR, carriers are still authorized to provide carrier services to, from or within Cuba in connection with authorized travel or transportation, of persons, baggage or cargo. However, effective June 5, 2019, certain carrier services transactions – all of which depend on the ability of the carrier to temporarily export the vessel or aircraft from the U.S. to Cuba (this constitutes an "export" under the EAR) – will require an additional, separate authorization from BIS, an authorization that is subject to a general policy of denial.

    Prior to these new changes, the License Exception Aircraft, Vessels and Spacecraft (AVS) under 15 CFR Section 740.15 of the EAR authorized temporary sojourns to Cuba (i.e., temporary exports of vessels and aircraft) for commercial vessels (cruise ships), private as well as cargo vessels, and commercial, private and corporate aircraft in connection with authorized travel or transportation, of persons, baggage or cargo to Cuba. 

    Under the new rules:

    • Effective June 5, 2019, the AVS License Exception will cover only those aircraft operated by licensed air carriers, including air-taxi and air ambulance operations, and cargo vessels, provided all of the terms and conditions of the AVS license exception are met. 

    • Private vessels, commercial vessels (including passenger vessels and cruise ships), and private/corporate aircraft (not operated by a licensed air-taxi operator) are no longer covered by the AVS License Exception under the EAR and, therefore, the respective carriers will require a specific authorization from BIS to temporarily export the vessel or aircraft to Cuba. 

    In practical terms, this means that starting on June 5, 2019, cruise lines departing from the U.S. will not be able to call on Cuban ports. As stated above, commercial airlines are covered by the AVS License Exception and can continue their operations to Cuba. 

    Impact and Considerations

    For the cruise industry, these changes will have a substantive impact: 1) because the majority of the travelers using the cruises' services to Cuba do so under the group P2P category of travel, where the cruise line is the P2P sponsoring organization, and 2) because even when the other travel categories are still in place and cruise lines can technically carry authorized passengers to Cuba (other than under P2P), they now are required to apply for and obtain a separate authorization from BIS. The likelihood of obtaining such authorization seems to be very low because BIS will look at the request for authorization under a general policy of denial. Even if such authorization is eventually obtained, the process will likely take months and the cruise lines will have already been unable to comply with the contracts they have in place with the Cuban port agent and other local service providers. 

    To a lesser extent, commercial airlines will also suffer the consequences of the disappearance of the group P2P travel. The greater impact may be on those airlines that fly from cities where there is not a concentration of Cuban-Americans who can travel to Cuba under the still-authorized family visits category.

    As the revised regulations are implemented, it is likely that further clarifications – and possibly adjustments – will be necessary. 

    Holland & Knight's Cuba Action Team

    Holland & Knight's Cuba Action Team has dealt with Cuba-related issues for more than 20 years. The Cuba Action Team includes a number of lawyers from the firm's robust Latin America Practice, International Trade Group and Financial Services Practice. We have extensive experience assisting a wide range of U.S. and non-U.S. clients on Cuban trade embargo issues across diverse industries, including airlines, shipping lines, insurers, and agricultural and pharmaceutical companies and organizations. In addition, Holland & Knight has a Cuban licensed/trained lawyer. For more information on how the recently announced changes could impact your organization specifically, contact the authors.

    This article was originally published by Holland & Knight on June 5, 2019.

  • Tracey Cheek posted an article
    Avoid Overpaying for Your Jet Operation see more

    NAFA member David Wyndham with Conklin & de Decker considers ways for you to safeguard against being taken advantage of when it comes to aircraft bills and ways to manage operating costs efficiently.

    A recent Bloomberg article described how high net worth individuals are potentially being taken advantage of by aggressive overcharges on their aircraft bills. David Wyndham considers this, and highlights ways to understand and manage your operating costs.

    Few specific examples were cited in the Bloomberg article, and unsurprisingly no aircraft owner was willing to attribute their name to such a story, but what it highlighted is that there are many different costs associated with owning and operating an aircraft. These will vary significantly from trip to trip.

    While transparency is offered as one solution to the issue of overcharging, that approach misses one important area: understanding.

    Aviation, like medicine or law, has a complex language that seems designed to confuse the layperson. With medicine and law, you have a professional at your disposal to assist with questions such as, "What do you mean I have hypertension?" or, "Just what is a waiver of subjugation?"

    Many aircraft owners, when faced with complex aircraft bills, have accountants to review and authorize bills for payment. But the accountant often lacks the expertise to fully understand the aircraft costs they are responsible for paying.

    How Should Aircraft Costs be Presented?

    Each bill submitted to an aircraft owner should be itemized with taxes, fees, labor, services and parts. Even with that level of detail, however, many are still unsure as to what the bill means and whether it is too costly.

    I have assisted several owners recently with a detailed review of their costs. While I have yet to come across fraudulent bills or blatant overpricing, it is easy to see why a reasonable question may be, "Why are these bills so high?"

    The first place to start to understand these costs is with a budget. The management company or aviation department must provide a budget based on the expected utilization of the aircraft. At the financial management level there needs to be enough detail so that individual accounts have differentiation, but not so many details that the complexity outweighs the benefits of detail.

    Operating Cost Categories to Consider

    Fuel: A major cost driver for most aircraft, the cost of fuel per gallon will vary and, in many instances, cheap fuel will beget add-on fees away from home. For example, itemized bills will often contain ramp fees and other services.

    Other Trip Expenses: These need to be verified too, and include items such as the catering, hotel and meals for the crew. I had one owner who stayed at high-end hotels. Wanting the crew to be immediately available, he had them stay at the same hotels. As a result, crew travel costs were far greater than what many would consider ‘normal’.

    Maintenance Costs: More detail is required for this within the budget than just one item. Categories should specify whether the bill is for scheduled maintenance (i.e., an 800-hour inspection), or for unscheduled maintenance (i.e. changing a flat tire or replacing a burned-out landing light). 

    Component overhauls and life-limited part replacement should also be noted.

    The annual budget should note the scheduled inspections with the expected flat rate, or the cost to inspect and replace mandatory items, and allow for the on-condition or unscheduled items that may also require service.

    The management company or flight department should get quotes for major maintenance from at least two qualified sources, if possible. And when requesting quotes, you should account for what is included and excluded. If, for example, there are scheduled parts to be replaced, is labor included or only the cost of parts?

    You must also consider time. For example, a low-cost bid that takes 60 days to accomplish may be worse than the higher cost bid with a 30-day return to service.

    Maintenance costs vary from year-to-year and major inspections will cause a large increase in expenditures.

    These major scheduled inspections can occur every 6–10 years on the airframe; sometimes longer. Older airframes exceeding 20 years may see more age-related checks, and these should be accounted for.

    Engines are a separate consideration and require a major service very infrequently. For most private and corporate operations, an engine may have a 4,000-hour mid-life inspection and run 8,000 hours before it gets overhauled. At 400 annual hours, that overhaul is going to occur when the aircraft is 20 years old. Unscheduled events tend to be rare for turbine engines, but they do occur and can be extremely costly.

    How to Make Maintenance Costs Predictable

    Guaranteed hourly maintenance programs (GHMPs), as the name implies, set a fixed guaranteed rate for the maintenance. An engine GHMP is very common for jet engines. In fact, since the financial crisis many lenders and lessors now require them as a standard term of condition.

    There are also airframe and parts-only programs available for many turbine aircraft.

    A GHMP will usually have a contracted price based on utilization and aircraft age and may incur a calendar and hourly fee, or just an hourly fee. A GHMP provides budget stability and peace of mind, as well as added resale value for the aircraft.

    In Summary…

    There needs to be good communication and clear expectations between the owner and management company or aviation department. Cost overruns need to be communicated as soon as they are known, and not after submitting the bill.

    Someone should spend a little time with the owner or accountant to review the major bills and, importantly, ensure there are no surprises. When in doubt, seek the opinion of a professional. Aircraft are complex machines that, when well-maintained, will provide safe and comfortable service for many years.

    More information from www.conklindd.com

    This article was originally published in AvBuyer on May 24, 2019.

  • Tracey Cheek posted an article
    What are the Aircraft Financing Trends in 2019? see more

    NAFA members Martin Ormon, President of Aircraft Finance Corporation, and Dave Labrozzi, Chief Operating Officer of Global Jet Capital, talk with freelance writer Rohit Jaggi about the condition of the aircraft financing market.

    What's the condition of the aircraft financing market? 

    Who is seeking aircraft financing in 2019, and how are they obtaining it? Have the financing trends changed - and what's the outlook going forwards? Rohit Jaggi gets insights from financiers Dave Labrozzi and Martin Ormon.

    Business jet sales tend to follow the money. And the US economy performed unexpectedly well in the early months of 2019. Yet Business Aviation growth is slowing, in the US and the rest of the world, and business jet sales are being hit by a number of factors.

    Sales of new and used jets saw an uptick in 2018 as US tax cuts and changes in the rules on accounting for airplanes took effect. Increasing demand and steadier prices for used jets also signalled the return of some big banks and financiers to the sector, after having their fingers burnt following the financial crisis of 2008.

    But does that mean financing private jets is becoming easier for buyers? And are specialist lenders being frozen out by competition from the big players? Two companies that play to their strengths in different parts of the business jet financing market illustrated the challenges.

    Dave Labrozzi is chief operating officer of Global Jet Capital, which focuses on aircraft aged 15 years and younger.  He says that the big finance corporations are focusing on their high-net-worth clients and the biggest corporate names, but their interest flags when it comes to complicated deals, or anything other than loans secured on the value of the aircraft.

    Martin Ormon, whose Aircraft Finance Corporation services a US market for older aircraft with loans of $1m to $7m, is more scathing. “[The big bank lenders] believe their model is the best model – and it puts a noose around the customer’s neck.

    “They still want to make it an asset-based loan. An aircraft is not an asset – it depreciates from the second you step in the door and fire the engines up. Far more so than an automobile.”

    Playing to Strengths

    Ormon’s niche is credit-based, 20-year loans that keep the cost of payments down and are based on the customer’s ability to pay. Offering the example of a customer for whom he refinanced a loan on a Bombardier Challenger 605, Ormon reveals the customer had been paying a bank $70k a month.

    “With us that became $29k a month,” he illustrates. “Who is going to default first? A guy with a $29k monthly payment, or a guy with a $70k monthly payment?”

    It’s also true that those who don’t really need to borrow can do so more easily. “The high-net-worth individuals we do business with can dig into their pockets for the $50m-$60m cost of a jet,” says Labrozzi.

    “But they don’t – they prefer to put their money into their business and get double-digit returns.” The leasing deals Global Jet Capital can put together allow them to do that and have a jet.

    What’s Different About Today’s Aircraft Financing Market?

    Labrozzi is confident that there is not too much froth in the market. That was part of what happened after the financial crisis where lenders were spooked by falling asset prices into calling in their loans.

    That helped produce a cycle of further price deterioration and an increasing number of repossessions. “I don’t see that perfect storm,” says Labrozzi. “What is different this time is that the major manufacturers are building significantly fewer airplanes.” And that should help maintain values.

    But another factor helps here: A shortage of high-quality used/pre-owned jets. “Low-hour, clean airplanes are hard to find,” Ormon notes. “In the pre-owned jet market the products are not as high-quality as they were just a couple of years ago. The really great airplanes are out there, but they’re hard to find.”

    Was the US Tax Cuts Impact on Aircraft Sales Limited?

    A natural question is whether the effects of the US tax cuts and accounting changes, signed into law at the end of 2017, have already fed through?

    “The tax law change did give the industry a shot in the arm,” says Labrozzi. But it wasn’t the benefit that many thought: “People bought a jet before the end of the tax year, but then found it was a lot more difficult to deploy the tax benefits.”

    As a result Global Jet Capital has done a lot of sale and leaseback deals, because, as a leasing specialist that turns over a lot of aircraft, it can utilise the full tax benefits. “The bottom line is that it’s helped our business,” Labrozzi says.

    According to Ormon the buying ability of his customers and potential customers has not been significantly dented.

    “These guys are buying Hawker 850 for $16k a month. They’re putting $400k down. Sure, you could pay first class for $16k a month, probably non-stop around the world, but that’s not their mentality. Our clients have the cashflow, they’ve got the cash, and that’s what they want to do.

    “So – with $200k a year in payments and another $700k a year to maintain the airplane and fly it (pilots and everything) – that’s less than $1m a year to own a Hawker.”

    Looking Ahead for Aircraft Financing

    Global Jet Capital’s Q1 2019 market briefing points to trade tensions and fears of market volatility, but sees demand for new business aircraft rising at the same time as a shortage of high-quality used jets impacts the number of used aircraft sales.

    Labrozzi expects a steady market over the next couple of years. His customers are responding to economic and trade uncertainty by putting the tools in place they need to do business (including private aircraft).

    He also believes that the sector is in a trade-up replacement cycle. “A lot of my customers are getting ready to take delivery of an airplane they ordered two years ago and it’s time to move their existing airplane,” he says.

    Moreover, some highly desirable airplanes (such as the Dassault Falcon 7X) were undervalued recently when there were a lot on the market. Now the market is absorbing them quickly, Labrozzi says – they are likely to be on the market for only an average of six months.

    Ormon paints a slightly different picture. “I’d say that lending is down 15%. The aircraft sales are there – there are a lot of people paying cash for $2m and $3m airplanes, because interest rates have been low for a while and companies have just received a tax cut. Companies are awash with cash that they are not necessarily putting back into the business.”

    So the number of deals Ormon is doing is down. “Our biggest year, 2017, was 56 deals, with an average value of about $3.2m,” he says. “Our 2018 average was $2.9m, and today we’re probably doing around 35-40 deals a year. I don’t see anything changing unless we have a major financial crisis. I think this is the new norm.

    “The outlook for my sort of financing is good,” Ormon concludes. “The Hawker 800 is becoming a thing of the past and now we’re getting [better-quality] Hawker 850s and 900s that are in that price range.”

    Labrozzi is also optimistic. “There’s always plenty of business to go around,” he concludes. “I just want to get my unfair share of it…”

    More information from www.aircraftbanker.com or www.globaljetcapital.com

    This article was originally published by freelance writer Rohit Jaggi in AvBuyer on June 5, 2019.

     

  • Tracey Cheek posted an article
    NAFA members Mark Bloomer and Brant Dahlfors of Jet Transactions share the latest Q1 2019 Dassault M see more

    NAFA members Mark Bloomer and Brant Dahlfors of Jet Transactions share the latest Q1 2019 Dassault Market Update.

    Welcome to another year of uncertainty fueled by declining Global GDP, trade wars and geo- political concerns in major trading markets around the world. The drop in trading activity in the last month of Q4-18 certainly dribbled into early Q1-19. By late-January however activity clearly increased to Oct/Nov levels raising hopes that 2019 would actually show positive growth across new and used aircraft. By the end of Q1 market signals are mixed at best. Charter activity is showing signs of decline as we start the year. This is something to pay close attention to as charter activity is often a “canary in the coal mine” signal.

    New aircraft deliveries are down quarter over quarter which is consistent with the seasonality effect as OEMs pull as many aircraft into the fourth quarter as possible. The major OEMs all have new models starting with deliveries beginning from mid-2018 through mid-2020. With low starting production rates, the industry will not see the full effect for another year and a half to two years. On the positive side the OEMs crystal balls all indicate there is a solid market for new high tech models with more range, speed, cabin space and efficiency. In spite of the 8+ new models recently, or soon to be certified, we expect several new exciting airplanes to be introduced before year-end.

    How does this affect the Dassault pre-owned market? Dassault products saw another consecutive quarter of decline in pre-owned inventory levels, dropping a further 10% over Q4/18. Sales activity dropped by more than half for both factory new and pre-owned sales, not uncommon to see in the beginning of the year albeit not normally at this rate. Average ask prices firmed up in several of the models we track, and the majority of models benefited from lower average sales cycles. With an estimated two years to go before first flight and another year after that before first delivery, the upcoming Falcon 6X will help to fill a gap left behind with the abandoned 5X project. The Falcon 7X has seen deliveries slow down nearly in parallel with the rise of 8X sales.

    Click here for the full market update.

    This market update was originally published by Jet Transactions on April 30, 2019.

  • Tracey Cheek posted an article
    5 Tips to a Speedy Aircraft Approval see more

    NAFA member Adam Meredith, President of AOPA Aviation Finance Company, shares five tips when financing your aircraft.

    1. Be Organized

    Aircraft financing requires documentation similar to mortgage financing. Having easy access to W2’s, tax returns, paystubs, business tax returns and K1’s will help move the process along quickly. The number one reason for delay in approval is missing documents. 

    2. Full disclosure

    Fill out the application with as much detail as possible. You will need to provide documentation in the form of tax returns, bank statements, etc to verify income and down payment.

    3. Understand your credit and financial picture

    Being aware and able to explain any past issues on your credit report will help limit additional underwriting questions. Using free credit tracking services is a good way to understand what might show up on your credit report.

    4. Calculate your ability to afford the loan 

    Make sure you have added the expected monthly payment to your current debt payments. Most lenders are not only going to want to see that you can handle the monthly payment but can also afford the operational and insurance costs on top of your current obligations.

    5. Determine Ownership Structure

    Having an understanding of how you want the aircraft to be registered will help the approval and closing process go smoothly. LLC or corporate ownership adds additional complexities to the closing. Establishing these entities early on in the process helps keep things moving during the final stages.

    Competitive rates and terms. Custom financing options. Helpful and responsive reps. Three good reasons to turn to AOPA Finance when you are buying a turboprop or turbine airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

    This article was originally published by AOPA Aviation Finance Company on February 5, 2019.

  • Tracey Cheek posted an article
    Jet Transactions Releases Q1 2019 Bombardier Market Update see more

    NAFA member Brant Dahlfors, co-founder of Jet Transactions, shares the Q1 2019 Bombardier Market Update.

    Welcome to another year of uncertainty fueled by declining Global GDP, trade wars and geo- political concerns in major trading markets around the world. The drop in trading activity in the last month of Q4-18 certainly dribbled into early Q1-19. By late-January however activity clearly increased to Oct/Nov levels raising hopes that 2019 would actually show positive growth across new and used aircraft. By the end of Q1 market signals are mixed at best. Charter activity is showing signs of decline as we start the year. This is something to pay close attention to as charter activity is often a “canary in the coal mine” signal.

    New aircraft deliveries are down quarter over quarter which is consistent with the seasonality effect as OEMs pull as many aircraft into the fourth quarter as possible. The major OEMs all have new models starting with deliveries beginning from mid-2018 through mid-2020. With low starting production rates, the industry will not see the full effect for another year and a half to two years. On the positive side the OEMs crystal balls all indicate there is a solid market for new high tech models with more range, speed, cabin space and efficiency. In spite of the 8+ new models recently, or soon to be certified, we expect several new exciting airplanes to be introduced before year-end.

    How does this affect the Bombardier pre-owned market? After a strong end to 2018, Bombardier saw an about average seasonal slowdown of factory new sales, dropping to 9 new units delivered in the first quarter of the year. The total number of pre-owned units for sale rose 11%, and while the older Globals have all crossed above 10% of their respective fleets for sale, the Challenger markets have stayed strong across the board with less than 5% of their respective fleets for sale. With the first GL7500 now in service and many more gearing up to be delivered in the coming months, Bombardier should continue to see strong demand for both pre-owned and new inventory this year.

    Click here to view the full market update.

    This market update was originally published by Jet Transactions on April 30, 2019. 

  • Tracey Cheek posted an article
    Equity Bank Joins National Aircraft Finance Association see more

    FOR IMMEDIATE RELEASE

    FORT LAUDERDALE, Fla.– May 28, 2019 – National Aircraft Finance Association (NAFA) is pleased to announce that Equity Bank has recently joined its professional network of aviation lenders. “NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome Equity to our growing organization as we head to our 50th anniversary,” said Jim Blessing, President of NAFA.

    Founded in November 2002 in Andover, Kansas by current Chairman and CEO Brad Elliott, Equity Bank has grown through a combination of organic growth and acquisitions, and now has $4.1 billion in assets. Equity Bank strives to provide an enhanced banking experience for customers with sophisticated banking products and services tailored to meet their needs, while delivering the high-quality, relationship-based customer service of a community bank. Parent company Equity Bancshares, Inc. trades on the Nasdaq Global Select Market under the ticker symbol EQBK.

    Equity Bank has now launched a business aviation division, headed by Morgan Littell, industry veteran and former NAFA member through UMB Bank. The division will focus on providing tailored financial solutions for business aircraft acquisitions. 

    “We’re proud to provide financing solutions that are tailored to the needs of our customers, including our dedication to the aviation needs of our clients,” said Craig Anderson, Executive Vice President and Chief Operating Officer of Equity Bank. “We’re pleased to have a professional leader like Morgan join our team, and she will be an asset to our customers.”

    Much like NAFA, Equity Bank is focused on community and growth in financial services, and that now extends to the business aviation industry. Equity and NAFA foster an environment in which passionate, knowledgeable and committed professionals can lend their expertise and high standards of service to the financial community.

    For more information about Equity Bank, visit equitybank.com.

    About NAFA:  

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

  • Tracey Cheek posted an article
    Tip to Tail—Buying New vs. Used Bizjets see more

    NAFA member David G. Mayer, Partner at Shackelford, Bowen, McKinley & Norton, LLP, shares what you need to know when buying a new versus used business jet. 

    Purchasing a new business jet from the manufacturer (OEM) is a far different transaction than buying a used aircraft from a private third party. And planning for aircraft ownership is also part of this story.

    The contrast in new versus used aircraft is especially pronounced when the used aircraft does not comply with the FAA’s January 1, 2020 Automatic Dependent Surveillance-Broadcast (ADS-B Out) mandate. The lack of ADS-B Out compliance almost certainly will alter the negotiation for such used aircraft and, if the aircraft is not compliant by 2020, it could morph into a fancy paperweight. New OEM aircraft already comply with ADS-B Out requirements.

    This blog covers a few significant strategic, legal, and negotiating differences relating to new and preowned aircraft sale deals and briefly touches on ownership tax planning, risk management, regulatory compliance, and financing/leasing. This blog also briefly touches on OEMs’ perspectives on negotiation and dispute resolution.

    WHAT'S FOR SALE?

    The big-money aspects of a new aircraft deal start by selecting the right aircraft from the OEM and negotiating the aircraft purchase price. Unlike used aircraft deals, OEM agreements include terms on such items as upgrades, installment payment amounts, and pilot and technician training.

    The used aircraft market enjoyed a record year of sales in 2018 that depleted much of the desirable inventory. However, some experts suggest that the cost of ADS-B equipage and a slowing global economy may cause more used aircraft to come to market in the near term; and the lack of ADS-B Out technology may prolong or complicate buy/sell negotiations even if more aircraft become available.

    When purchasing a new or used aircraft, the parties should engage a team of knowledgeable business aviation experts, consisting primarily of an experienced aircraft broker, a technical inspector/analyst, accounting tax advisor, aviation counsel, aircraft management company, insurance broker, and capable title company or special FAA counsel. A non-aviation participant on the buy or sell side can make transactions more difficult or inefficient for experienced buy/sell teams and their principals.

    Every used aircraft should (but surprisingly does not always) undergo a “pre-buy” inspection before a purchase occurs. The inspection should involve technical experts that delve into the records of the aircraft, ADS-B Out compliance, and the physical/mechanical condition of and required repairs to the aircraft. Counsel should conduct or order title, lien, and other searches at the FAA and on the International Registry with a focus on understanding the domestic and any international ownership since birth of the aircraft.

    For new OEM aircraft, the pre-buy inspection process is dissimilar to preowned aircraft, so much so that OEMs often say that an independent inspection of a factory-new aircraft is unnecessary and the OEM can handle everything from contract to delivery.

    Although some purchasers accept exclusive OEM oversight, all purchasers should still consider engaging a technical expert to interact with the OEM’s teams and inspect the aircraft during construction, knowing that OEMs usually will facilitate such inspections but with appropriate limits. Fundamentally, the expert can assure the purchaser that the aircraft conforms to the agreed specifications and the OEM delivers the aircraft in pristine condition. Also, the parties should always conduct legal diligence similar to a used aircraft sale.

    CONTRACT NEGOTIATIONS AND DISPUTE RESOLUTION

    Contractual provisions for used and OEM purchases have some common terms as well as major differences. OEMs believe the form of purchase and sale agreement they provide to their customers works well with few changes. Consequently, the extent of document revisions negotiated and accepted by an OEM may, but not always, pale in comparison to extensive changes drafted into used aircraft purchase agreements.

    OEM contracts personnel, most of whom are not lawyers, have flexibility to make reasonable contract revisions, but their authority has well-honed limits. For example, their authority probably does not extend to accepting unusual revisions, settling a dispute, or altering fundamental OEM liability protections. Accordingly, purchasers should expect these contracts people to seek authority from senior managers or general counsel for revisions to obtain policy or legal guidance on an acceptable contract revision or dispute management.

    For OEMs, each customer and its sale agreement is unique. As such, OEMs uniformly frown on aviation counsel using as precedent sale agreement provisions negotiated in other unrelated transactions with the selling OEM or other OEMs. However, aviation counsel can add value in serving their clients by using their prior experiences to negotiate appropriate terms in the current deal.

    If a customer alleges material breaches by or makes serious litigious claims against the OEM, most OEM general counsel or his/her inside litigation counsel step in and try to reach an accommodation or, if necessary, circle the wagons to protect the OEM’s interests.

    OWNERSHIP PLANNING

    Under the Tax Cuts and Jobs Act of 2017, buyers of new aircraft, like used aircraft buyers, may use 100 percent bonus depreciation if the aircraft buyer qualifies for the tax benefit. Planning for ownership is critical to successful tax structuring. For more, read AINsight: 100% Depreciation and Aircraft Personal Use and AINsight: Maximize Aircraft Bonus Depreciation in 2019.

    A purchaser of a new aircraft can potentially obtain a financing benefit that does not apply to used aircraft. Lenders and lessors often agree to fund installment payments to the OEM as the OEM invoices the customer during construction and upon delivery of the aircraft. In addition, these lenders or lessors are often willing to convert the installment payment arrangement into a long-term loan or lease. Either financing or leasing provides substantial benefits to the parties but requires some additional effort to negotiate the agreements. For more, read  AINsight: Should You Finance or Lease a Bizjet?.

    Business aviation insurance brokers not only place appropriate insurance coverage but also can negotiate effectively with aviation underwriters. Purchasers of used and new aircraft generally understand that insurance is a crucial piece of protecting themselves from liability and property damage. However, they may not fully appreciate that a limited liability company (LLC) that buys the aircraft may not provide the LLC owner with the anticipated liability protection. For more, read AINsight: Piercing the Aircraft LLC Veil.

    Operations of private aircraft under Part 91 (private use) or Part 135 (charter use) in the U.S. demand compliance with the applicable regulations by owners and operators of all aircraft. For example, owners of all aircraft must keep their aircraft in the condition required by the applicable regulations for flight operations, not conduct illegal charter operations, and meet technology requirements, including ADS-B Out. Importantly, the FAAis looking for violators of the regulations, in part as described in AINsight: FAA Actively Pursues Illegal Flight Ops.

    Although purchase transactions of new and used aircraft share certain similar elements, they differ in significant respects. Assisted by knowledgeable professionals, a purchaser can and should address business, tax, financing/leasing, risk management, and regulatory issues as part of each deal. A reasonable and pragmatic approach to these transactions should foster amicable negotiations and ultimately produce the right travel solution for the purchaser.

    This article was originally published by AINonline on May 9, 2019.

  • Tracey Cheek posted an article
    Adam Meredith, President of AOPA Finance, shares prebuy tips when financing a turboprop. see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, shares prebuy tips when financing a turboprop.

    We highly recommend getting a pre-buy inspection. It could save you thousands of dollars over time. Here we’ve summarized some important points to consider as you move through the purchasing process.

    1. ALWAYS have a prebuy done. No bank should let you finance a plane without it.
    2. The shop doing the prebuy should specialize in the type of airplane you are buying. We also recommend selecting a shop that has no ties to the airplane.
    3. Give yourself plenty of time to get the prebuy done. Typically, they take 1-2 days, however you might want to add a buffer so you don’t end up getting rushed as a closing date approaches.
    4. Typically, the buyer pays to reposition the airplane and the seller will pay for correcting any maintenance issues relating to airworthiness.
    5. Use the Purchase & Sales agreement to define the sales price plus conditions such as the amount of time to complete the prebuy, who pays for what, and who pays to move the airplane.
    6. Don’t forget to ask for a fresh annual during the prebuy. This is oftentimes required by banks unless one has been completed recently.
    7. If you end up with a reduced purchase amount after the prebuy, that doesn’t mean you can reduce your down payment by that amount. Most lenders require the lesser of loan to value OR loan to purchase amount.

    Competitive rates and terms. Custom financing options. Helpful and responsive reps. Three good reasons to turn to AOPA Finance when you are buying a turboprop or turbine airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

    This article was originally published by AOPA Aviation Finance Company on February 4, 2019.

  • Tracey Cheek posted an article
    Aircraft Transactions see more

    NAFA member YYZlaw discusses the three main categories of aircraft transaction agreements.

    Aircraft transactions are complicated processes that require detailed knowledge of aviation regulations, business practices, taxation of aircraft assets, and international law – knowledge that YYZlaw has been steadily building over many decades. These processes can be boiled down to three main categories of agreements: i) contracts of purchase and sale, ii) lease or finance agreements, and iii) aircraft management agreements.

    Contract of Sale Negotiations – Aircraft Purchase Agreement

    The acquisition of an aircraft, whether for business or personal use, requires consideration of multiple financial, regulatory and transactional components. Depending on the types of parties involved, different risk considerations will need to be assessed.

    When dealing with Original Equipment Manufacturers (OEM) such as Bombardier, Dassault, Embraer, Gulfstream, Textron, etc., it is important to ensure that the deal negotiated between the OEM and the purchaser is adequately reflected in the ultimate aircraft purchase agreement. The negotiation and inclusion of allowances relating to maintenance and parts programs, initial and recurrent training offerings for pilots and aircraft maintenance engineers, and future trade-in options and upgrade eligibility need to be accounted for as well. Liquidated damages provisions in aircraft purchase agreements need to also be carefully assessed to ensure that such clauses are reasonable in the circumstances.

    When an aviation transaction doesn’t directly involve an aircraft or engine manufacturer and is concerning a pre-owned aircraft, the purchase negotiation will need to account for the validity of title and any registered or hidden defect in title. This process can be complicated where an aircraft is owned by a seller in one jurisdiction, with the aircraft registered in another jurisdiction, and the buyer being located in yet a third jurisdiction. At all stages it is important to be mindful of the taxation and importation challenges which need to be managed.

    In most aircraft purchase negotiations, the condition of the aircraft is assessed and verified through a pre-purchase inspection. Typically, this process doesn’t commence until the aircraft purchase agreement has been entered into, however, there are transactions that occur differently and which require customized legal structures to protect the interests of the parties. Despite any such pre-purchase inspection verification, the vast majority of transactions involving pre-owned aircraft make no representations or warranties other than those relating to the aircraft’s state of title.  These transactions are considered “as-is, where-is” transactions as the seller makes no warranties as to merchantability, functionality or fitness for purpose, and it remains entirely the obligation of the purchaser to satisfy itself as to the condition and functionality of the aircraft being purchased. To protect the purchaser, title and lien searches against the aircraft are recommended before the conclusion of the sale. Depending on the national state of registration of the aircraft, such searches may include domestic title/security registries (Personal Property Security Registry (PPSA) or the Quebec Register of Personal and Movable Real Rights (RPMRR)), and the International Registry. Finally, registration of the aircraft with the appropriate national civil aircraft authority is necessary before it may be operated, and it is our advice that the purchase of such assets is also registered on the International Registry. It is important to note that the ownership and lien status of a Canadian registered aircraft cannot be reliably determined by the information contained on the Canadian Civil Aircraft Registry (CCAR).

    All purchase negotiations, irrespective of the parties involved, must deal with various documents: A letter of intent, an aircraft purchase agreement and a warranty bill of sale are all typical documents, in addition to the establishment or maintenance of the corporate vehicle of the purchasing entity, if one hasn’t already been formed.

    Lease and Finance Negotiations

    The purchase of aircraft assets involves a high upfront capital investment; companies may either require financing or select to finance a purchase for various tax considerations. Depending on the risk profile and the lending institution, this aircraft financing usually takes the form of either an aircraft lease or a securitized loan. Certain financial institutions offer asset-based financing, while others assess an aircraft purchaser’s creditworthiness to make lending decisions. Regardless of the type of financing obtained for an aircraft acquisition, such financing will inevitably require consideration of the choice of law, and the repossession and enforcement rights available to an aircraft financier. While insolvency and delinquency are not ordinary occurrences, these are perhaps some of the most important provisions in a lending/lease agreement that must be ascertained, in addition to the economics of the deal. When purchasing an aircraft with financing, whether a lease or loan, restrictions may be placed on the aircraft in question and additional time is necessary to complete the transaction.

    Aircraft Management Negotiations – Aircraft Management Agreement

    While some private buyers are pilots or companies with existing in-house flight departments, most corporations require an aircraft management company to provide crew and maintenance services. YYZlaw can act as a liaison between the purchaser and the management company, ensuring that the company acquiring the aircraft asset fully understands its rights, fees and obligations under such aircraft management agreement. This document may also be referred to as an aircraft services agreement.

    While some companies have and wish to use an established in-house legal team, advice from a third-party expert, such as YYZlaw, can increase the efficiency of a transaction and provide assurance to both the seller and the purchaser from the letter of intent through to the delivery of the aircraft.

    This article was originally published by YYZlaw on June 22, 2018.

  • Tracey Cheek posted an article
    TUE and PUE: Closing the Gap Between the FAA and IR see more

    NAFA member, Debbie Mercer-Erwin, President of Wright Brothers Aircraft Title, writes about closing the gap between filing at the FAA and registering at the International Registry.

    In previous blogs we have discussed the paperwork gaps that can occur around aviation escrow transactions and how Wright Brothers helps to Close the Gaps, whether between the time you pay for an aircraft and the time the necessary documents are filed with the Federal Aviation Authority (FAA), or between documentation  Filing and Recording  at the FAA.  

    There is also a gap between filing at the FAA and registering at the International Registry (IR). In each of these scenarios, an escrow agent, as a “PUE”, can help close the gap with a more seamless transaction for a “TUE”, ensuring representation for each party. In the gap between the FAA and IR specifically, “The Closing Room”, a virtual safekeep for all notices between parties, can be a key factor and a huge help. 

    TUE? PUE? – The Differences 

    The terms TUE and PUE are often used in the world of aviation escrow, but what do they mean? A TUE is a Transacting User Entity, such as a buyer or seller, lender or debtor, whereas a PUE is a Professional User Entity, like Wright Brothers for example. Why is this important in terms of filing at the FAA or registering an interest with the IR?  

    While a TUE is the party named in the filing or registration, a PUE is not. A Professional User Entity can however file or register on behalf of a Transacting User Entity. Representation by a PUE, like WBAT, can ensure that the correct steps for both filing at the FAA and registering at the IR are followed, securing the interests of all parties involved and only upon the approval of each. 

    Between the FAA and the IR – Possible Repercussions 

    Documents are filed at the FAA for recording, and notices of interest are registered at the IR. In general, a U.S. document is filed with the FAA first, where a code is then issued to register the notice of that same interest with the IR.  

    What happens if you file at the FAA and not the IR? The IR was granted super priority over the FAA, and the IR gives “first in time, first in right” status to all notices registered there. This basically means that if you file at the FAA but do not register the notice at the IR, and someone else files a notice of a competing interest at the IR before you get there – they win.   

    The same is true if you file at the FAA and intend to register at the IR, but someone registers a competing interest before you do. They got there first, so they win. This makes the gap between filing at the FAA and registering at the IR extremely important.   

    The Closing Room – How it Helps Save Time 

    The Closing Room is an IR function that allows a coordinator, a PUE like Wright Brothers, to set up a virtual space for the interested parties (sometimes PUEs and TUEs) to hold all registrations until they are approved and ready to process. This space allows the PUE to “preposition” registration information in conjunction with any other claimed interests before submitting them. It allows for all PUEs and TUEs to view each registration and requires the approval of each in order to “close” the room, which then releases all registrations. Closing the room and filing at the FAA can thus happen almost simultaneously.  

    In this way, “The Closing Room” helps close the time gap between the registering of an interest at the IR and the filing of documents at the FAA, especially if there is a competing claim. Of significant note here is that in order to lessen the number of “hands in the pot” and really streamline the process and close the gap, the PUE should be handling all FAA filings and IR registrations on a regular basis so that all documents among all parties are handled correctly. Having interests preapproved and consented to before closing is always a good thing. 

    This article was originally published by Wright Brothers Aircraft Title on May 21, 2019.

     

  • Tracey Cheek posted an article
    How Brexit Could Affect European Aviation Operations for US Registered Aircraft see more

    NAFA member, Aircraft Guaranty Owner Trustee, discusses the affect of Brexit on European Aviation Operations.

    Brexit is undoubtedly a considerable topic with worldwide implications – people from all corners have been surmising at length – what will take place and when? Meanwhile, negotiations continue with no clear end in sight. The United Kingdom was due to leave the European Union on March 29, 2019, but that has now been extended to October of 2019.   

    We can’t say exactly what will happen, but we have a pretty good idea of what the new UK regulations will look like if and when that change transpires. The general information outlined here will likely survive whatever agreements the UK makes with the EU. 

    Fair warning, according to Howard Dyer, Director and Lead Consultant at Howard G Dyer Ltd, “Brexit before breakfast is bound to cause heartburn throughout the rest of the day.” The coming changes in regulations outlined below may have the same effect on our readers.   

    The UK within EU Regulations 

    Since 2008 and the establishment of the European Aviation Safety Agency (EASA), the EU has been moving toward an aviation safety regime based upon the United States’ model, with the EASA following many of the principles of our own FAA. This includes universal recognition of certificates issued by the EASA and freedom to fly between States.  

    Some of these freedoms extend to associated States like Iceland, Norway, Switzerland and some of the new Balkan countries. This establishes a virtual aviation neighborhood over most of the landmass of Europe, known as the European Common Aviation Area (ECAA). Britain has been a key and influential mover in all this but is now aiming to leave. 

    Currently, aircraft registered in the UK intending charter flight operations to, from, within or via this “European Aviation Neighborhood” need no special permits to operate to and from the UK and the rest of Europe, or within the UK proper. When (if?) the UK leaves the EU, UK-registered air carriers will no longer be considered a part of the neighborhood.  

    One look at the map and a glance at the economic figures for European aviation, and it is clear that the UK is a still a major piece of real estate. Nevertheless, UK air carriers will have to be considered Third Country Operators (TCOs) and will need to hold an EASA-issued Foreign Carrier Permit (FCP) and a Part-TCO Certificate prior to undertaking any commercial flight from the UK to anywhere in the European Aviation Neighborhood (just as the FAA requires to certify foreign carriers in the US). 

    Currently, N-registered aircraft intending flight operations to, from, within or via the UK are already considered TCOs and must hold the EASA-issued FCP and the Part-TCO prior to any commercial flight being taken. This includes charter operations. This will not change, and if an owner/operator has these permits now, they will still be valid after the UK leaves the EU and will not need to be updated.

    Post-Brexit, aircraft registered elsewhere in the European Aviation Neighborhood and operating to, from, or within the UK, will now be considered foreign operators for the UK Civil Aviation Authority (CAA). This also applies to N-registered aircraft. The CAA will therefore begin issuing their own TCO certificates called a UK Part-TCO.   

    The UK Aviation Regulations and the Block Permit 

    After Brexit, the UK will implement new aviation regulations largely mirroring the EU laws – essentially allowing aviation to continue as it did before. The procedures are in place, with few changes, to maintain free passage between States of Europe and the United Kingdom.   

    These new UK laws are comparable to FAA Part 129, which “prescribes rules governing the operation within the United States of foreign air carriers appropriately authorized by the Civil Aeronautics Board or the Department of Transportation (DOT)”.  

    The new rules include the UK Part-TCO mentioned above, but once purchased, operators will then be able to further obtain one of two permits which pertain to where they can operate and how often: 

    1. Foreign Carrier Permit – Operators will still have the option to obtain a Foreign Carrier Permit for either scheduled or unscheduled commercial operations, which will specify where they can go and how often. 
    1. Alternatively, Operators can obtain a Block Permit – which will be a new product offered by the UK. The block permit will not be flight specific and can allow TCO aircraft to go between the UK and European Aviation Neighborhood for an initial period of 3 months, with a potential extension of up to 9 months.  The extension will depend largely on the reciprocal traffic rights granted by the other parties to the agreement.   

    Furthermore, the CAA currently issues ad-hoc charter permits to EU carriers covering either one or a short series of flights on a route-by-route basis for services between the UK and countries outside the European Aviation Neighborhood. This process will remain unchanged and can apply to aircraft registered in the United States.   

    The CAA will have the responsibility to not only issue all TCOs for commercial services, but accordingly, monitor travel rights to and from countries in the European Aviation Neighborhood. The CAA wishes to ensure a minimum regulatory burden is placed on air carriers and is therefore developing a streamlined process for EU carriers.  

    Most commentators recognize all this as a gesture to meet minimum requirements, but with the option to go hard on neighbors who don’t throw soft balls back over the fence. 

    Exceptions to the Block Permit  

    This permit does not apply to aircraft operating purely private flights, meaning zero payment for services (even gas for the flight), to, from, or within the UK – all of which will not need a Block Permit.  

    The requirement also makes exception for: “overflights; state flights from a foreign government or military-registered aircraft; positioning flights, ferry flights or delivery flights; flights for the purpose of undertaking repairs, alterations, maintenance, or salvage; and test flights”. For instance, a carrier flying from Spain to Ireland, crossing over England, wouldn’t need a Block Permit. 

    During any transition period, EU law will still be applicable to the UK, and the UK would still be subject to EU-negotiated Air Transport Agreements.  In that instance, UK or European Aviation Neighborhood members would not need a Permit or any TCOs for operations to, from, or within the UK.   

    What it Means for US Aircraft Owner Trustors 

    These changes mostly apply to charters operators of aircraft of less than 19 seats – most private flights are exempt from the rules outlined above. The bottom line is that post-Brexit, members of the European Aviation Neighborhood will be considered “foreigners” to the UK, and vice versa. Likewise, US registered aircraft will be foreigner to both, which will mean that N-registered aircraft operating in both Europe and the UK will need all permits – the EASA-issued Foreign Carrier Permit, the EASA-issued Part-TCO and the CAA-issued UK Part-TCO.  Again, if you already have the EASA-issued permits, new ones will not be necessary, but the additional UK permit will be mandatory to operate in the UK. 

    It’s important to know the exact requirements during this transition. Without the right documents in place, certain US-registered aircraft operating in the UK could have permits removed, fines invoked, or potentially even be grounded. In the end, if you’ve made it this far reading, you likely have the “Brexit before breakfast heartburn” – it’s as complex as promised – but eventually we’ll figure it out.  

    Many thanks to Howard Dyer, who helped unravel the “Euro-speak” used to explain this new process to the EBAA earlier this year. 

     Howard is an English safety consultant who worked for many years in the UK CAA and was responsible for getting all UK aircraft compliant with the new EASA regulations when they came into force in September 2008.  

    He tells us that it took him years to understand EASA rules written in Euro English. He now tells us that the CAA’s own rules for coming out of the EASA are even harder to untangle. 

    This article was originally published by Aircraft Guaranty Owner Trustee on May 22, 2019.