NAFA member, Aircraft Guaranty Corporation, discusses the FAA Registry Update. see more
NAFA member, Aircraft Guaranty Corporation, discusses the FAA Registry Update.
There are changes ahead that will modernize the Federal Aviation Authority (FAA) – bringing it up to date with the latest technology and security measures. One of the key updates will be to the registry system, which is vital for ensuring aircraft are legally owned, maintained, and operated.
The deadline for the huge overhaul is now October of 2021, which doesn’t seem that far away. The Office of the Inspector General (OIG) recently issued a 29-page report – “FAA Plans to Modernize Its Outdated Civil Aviation Registry Systems, but Key Decisions and Challenges Remain” – regarding the progress the FAA is making in order to meet the modernization mandate.
The OIG delved into what they think the FAA needs in place to complete the required upgrade on time – their report put into question whether it could be accomplished, stating: “The Registry’s systems are outdated, and FAA has yet to develop a detailed plan for modernization.”
The FAA’s plans are not the only consideration in the timeframe though, given the Congress factor. Because “the regulations that govern aircraft registration do not reflect current technology or business practices”, modernizing the FAA’s registration system will require rulemaking by Congress, which can take some time.
A Modern System
This is a significant update to the Registry – many provisions were implemented with the Reauthorization Act of 2018 (HR 302) – which Aircraft Guaranty Corporation covered in more depth in Highlights of the 5 Year FAA Reauthorization Act.
The new registration system, Civil Aviation Registry Electronic Services (CARES), “is expected to streamline processes, allow for the submission of electronic applications and forms, improve controls, automate registration processes, and improve online data availability” according to the FAA. Its key aims are:
- Web-based access to all public data. For the first time in history, the general public will be able to view FAA records online in real time. Currently, what isn’t already electronically maintained is held in the Public Documents Room (PDR) available for those who have access. Any electronic records are only in real time via the computers at the PDR – outside access is limited to information that is updated once daily.
The modernization mandate includes digitizing all aircraft registration documents for real-time, public and web-based access, which means phasing out the PDR at the FAA. Furthermore, using the PDR will incur a fee if the business could have been conducted by electronic means as efficiently.
- Automation of application services (processes and procedures). For the first time in history, the general public will also be able to file any document electronically. Most aircraft registration functions still require paper documents that are manually scanned and reviewed by Registry examiners. Digitizing and automating the registration process means the role of FAA examiners will change, becoming more high-level.
In Order to Proceed
Detailed estimates of technical and operational requirements for the new system are vital right now – anticipating the rulemaking, cost and schedule that will be necessary to successfully complete the expansive project. Some key questions need to be answered:
What are the new components/upgrades needed in the new system? The FAA is considering: automated approvals for low-risk applications; automated verification of fraudulent or incorrect submissions; additional security controls such as crosschecking information with non-agency entities; the registry structure, including combining aircraft and airmen systems; and matters of data storage with a cloud- or server-based system.
How will the FAA fund the new system?It hasn’t been decided yet – funding modernization projects usually comes from its facilities and equipment (F&E) account, but they may be able to use money from its operations and maintenance (O&M) account. This must be decided before it becomes a part of the agency’s budget.
What rulemaking via Congress is necessary in order to proceed?The FAA will have to develop a rulemaking that revises current regulation and allows for the electronic registration of aircraft –to improve controls, strengthen requirements, and implement digital signatures and electronic payments – a complete outline of the new system is needed beforehand to know exactly what rules to change
Now What? – The Challenges
The OIG report contained four main recommendations to the FAA. The FAA accepted and outlined a schedule for implementing them:
- Develop and implement timeline for making key decisions regarding CARES by May 31, 2019.
- Define desired capabilities of CARES by Dec 31, 2019
- Develop and implement a procedure to obtain industry feedback by Oct 31, 2019.
- Develop and implement a plan for maintaining real-time access to data by June 30, 2019.
There are challenges to face though, including: the transfer of a huge amount of data (with a lot of outdated/large files) to a new system; meeting the needs of registry users – aircraft title companies, financial institutions, aircraft manufacturers, airmen, other government agencies etc. – to ensure the operation of aircraft worldwide; and addressing workforce issues arising from role changes.
The Transition & After
The OIG has concerns, but if the FAA stays on track with this schedule, they can meet the October 2021 deadline, barring delays with Congressional rulemaking.
Updating and modernizing the new system will be a great improvement but will not fully alleviate all the pitfalls in submitting documents, electronically or not. With the extensive rules in place for filing documents, there is a good chance it won’t be done correctly without industry knowledge of FAA rules and regulations.
Furthermore, it is paramount to know What to Look for in Owner Trustee Documents to uphold high standards for creating and maintaining the title to the aircraft. It will still be important to hire a company that knows the ins and outs of the FAA system to avoid costly errors that could take time and money to correct.
Ultimately, the changes ahead will modernize the FAA’s registry system, helping to bring the aviation industry up to date in technology and security measures. There is significant work to do, but we’re confident that every entity involved in this important endeavor will fulfill expectations.
This article was originally published by Aircraft Guaranty Corporation.
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.
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:
- 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.
- 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.
FAA Plans To Modernize Its Outdated Civil Aviation Registry Systems, but Key Decisions and Challenges RemainFAA Plans To Modernize Its Outdated Civil Aviation Registry Systems, but Key Decisions and Challenge see more
FAA plans to modernize its outdated Civil Aviation Registry Systems, but key decisions and challenges remain.
Requested by the Chairman of the House Transportation and Infrastructure Committee and its Subcommittee on Aviation and the Chairman of the Senate Committee on Commerce, Science, and Transportation
Federal Aviation Administration | AV2019052 | May 8, 2019
What We Looked At
The Civil Aviation Registry (The Registry) processes and maintains ownership information on approximately 300,000 private and commercial aircraft and records on almost 1.5 million airmen. The Registry is critical for ensuring aircraft are legally owned, maintained, and operated, and many users in law enforcement, safety, the aviation industry, and the public rely on the accuracy and timeliness of its data. The Chairman of the House Transportation and Infrastructure Committee and its Subcommittee on Aviation requested that we assess FAA’s overall management of the Registry and public access to certain Registry elements. We received a similar request from the Chairman of the Senate Committee on Commerce, Science, and Transportation. Our audit objective was to assess FAA’s management of the Civil Aviation Registry. Specifically, we assessed FAA’s
(1) progress in modernizing the Registry and (2) policies for providing public access to Registry-related activities.
What We Found
The Registry’s systems are outdated, and FAA has yet to develop a detailed plan for modernization. The Registry’s current systems cannot support online access outside of the Registry’s offices in Oklahoma City, OK. While FAA is in the early stages of developing plans to modernize the Registry’s systems, the Agency has not yet made key decisions regarding the system. Consequently, the cost and timeframes for Registry modernization remain uncertain, even though FAA is mandated to complete Registry upgrades by October 2021. In addition, the regulations that govern aircraft registration do not reflect current technology or business practices, and FAA will likely need to conduct a rulemaking in conjunction with Registry modernization. If FAA does not complete the rulemaking in coordination with the development of the new system, the Agency risks spending resources on a system that lacks key capabilities.
Due to the current system’s limitations, users who need to access aircraft registration information in real time must access the system through the use of Government-owned computer terminals located at the Registry’s Public Documents Room (PDR) in Oklahoma City. For users who cannot or do not want to travel to Oklahoma City, they can obtain aircraft information online, but that information is updated once a day, rather than in real time. Moving towards a more efficient process hinges on modernizing the Registry, but FAA has not yet developed a plan for allowing real-time access to aircraft information.
FAA concurred with all four of our recommendations and proposed appropriate actions and completion dates.
All OIG audit reports are available on our website at www.oig.dot.gov.
For inquiries about this report, please contact our Office of Congressional and External Affairs at (202) 366-8751.
Click here to read the full report.
This report was originally published by the U.S. Department of Transportation, Office of the Inspector General on May 8, 2019.
FAA Prohibits Use of Registered Agent’s Address for US Registered Owner of Aircraft see more
Aircraft registered with the FAA Aircraft Registry must be registered in the name of the actual owner of the aircraft (which is not always the operator), and the owner/applicant for registration must provide its physical address/location on the AC Form 8050-1, Aircraft Registration Application ("Application"). In a recent interpretation, the Federal Aviation Administration Aeronautical Center Central Region Counsel ("ACCRC") has confirmed that the address of the "registered agent" of the owner/applicant is not the address of the actual owner/applicant for purposes of registering the aircraft with the FAA Aircraft Registry. The ACCRC has determined that a registered agent’s address is not the mailing address of the owner/applicant, and the registered agent’s address is not the physical address of the owner/applicant for registration.
The ACCRC further concluded that if the owner/applicant's correct physical address is not provided the Application is not completed in accordance with 14 C.F.R. §47.31(b)(1). In addition, 14 C.F.R. §47.45 requires the registered owner’s physical address be provided to the FAA following any change of address where a new mailing address is not also the physical address of the registered owner.
Parties should take care to provide the correct physical address or location of the owner/applicant when registering aircraft with the FAA Aircraft Registry. Failure to provide the correct physical address or location may cause the Application to be rejected or the aircraft registration to otherwise not comply with Federal Aviation Regulations.
Feel free to contact the aviation team at McAfee & Taft if you have any questions or comments.
McAfee & Taft
This article was originally published by Scott McCreary with McAfee & Taft on April 10, 2019.
Aircraft Guaranty Corporation Turns 30! see more
FOR IMMEDIATE RELEASE
OKLAHOMA CITY, Okla. – Feb. 26, 2019
Aircraft Guaranty Corporation (AGC), one of the most well-respected trustee service providers in the aviation industry, is excited to announce their 30th year in business. Founded in 1989 by Dr. Connie Lee Wood and his wife Mary, AGC began in order to simplify the aircraft registration and re-registration process for entities who cannot meet the Federal Aviation Administration (FAA) citizenship requirements, providing a safe and lawful way to do so.
The formation of Aircraft Guaranty Corporation responded to the need for informed and personable trust companies. Trusts were initially established for use by airlines, which are publicly traded, and foreign aircraft manufacturers that have facilities in the U.S. Both are essential for the operation of aircraft in the U.S., but neither meet the citizenship requirements for registering at the FAA. Trust structures evolved since this early construct to legally benefit more than just airlines and manufacturers, continuing growth and development in the aviation industry.
Based on the founders’ strong work ethic and impeccable service standards, Aircraft Guaranty Corporation has grown to be a renowned trust company led by Debbie Mercer-Erwin, who bought the company in December of 2014. AGC now controls over one billion in aircraft value across sixty countries. With 30 years of experience and over 2000 aircraft registered in more than 160 different countries, the company handles their clients’ transactions with knowledgeable, dependable and responsive service.
AGC’s professional team has vast experience in aviation, international business and tax law, ensuring that their clients’ aircraft is properly registered at the FAA in Oklahoma City. The company’s straightforward procedures, attorney-created documents, and easy to use website make aircraft registration as secure, uncomplicated and timely as possible. Aircraft Guaranty is highly reputed for adhering to FAA, state and federal regulations in registering and maintaining the titles of their clients.
Owner and President of AGC, Debbie Mercer-Erwin, embraced the opportunity to grow this business and infused it with her trademark passion for serving clients and building long-standing relationships. She attributes much of her success in the industry to personalized, prompt service. Debbie is also the owner and founder of Wright Brothers Aircraft Title, one of the most well respected, recognized Title & Escrow Companies in Oklahoma City. With her knowledge of aviation, keen insight and reputation for integrity, continued growth is expected for both businesses.
About Aircraft Guaranty Corporation:
Founded in 1989, Aircraft Guaranty Corporation has become one of the most well respected and trusted Trustee Service providers in the aviation industry. Over this long tenure, they have registered over 2000 aircraft on behalf of clients from over 160 different countries worldwide. AGC prides itself on service and expertise, with a professional team of employees and legal advisors well equipped to make their clients’ transactions run as smoothly as possible. For more information about AGC, visit agcorp.com.
This release was originally published on Aircraft Guaranty's Blog on March 1, 2019.
Changes Coming for U.S. Aircraft Registry see more
There are changes ahead for the U.S. aircraft registry due to new provisions in the recently passed FAA reauthorization bill, as well as anticipated recommendations stemming from ongoing investigations by the DOT Inspector General (IG) and Government Accountability Office (GAO), panelists said yesterday at Corporate Jet Investor Miami 2018.
Under the reauthorization bill, the FAA’s Oklahoma City-based aircraft registry is required to become fully digitized within three years, including all non-digital registry information and manual-/paper-based processes, business operations, and functions. The agency must also install systems that allow digital submission of information and conduct any transactions electronically.
Further, the reauthorization bill will allow the FAA to charge a manual surcharge “for certain matters conducted in person” and prevents a government shutdown from affecting the registry. It also directs the FAA to initiate a rulemaking by early February that would extend the duration of general aviation aircraft registrations from three years to seven.
Meanwhile, the DOT IG and GAO audits, spawned by last year’s Boston Globe reports that criticized the registry, will cause even more, yet-to-be-determined changes. A DOT IG audit report on the efficiency of the FAA registry is imminent, while one on security is expected next year. The GAO report is also anticipated to come out next year.
This article was originally published in AINonline on November 14, 2018.
Shutdown Delays FAA's Runway Safety Meetings see more
To help reduce wrong surface incidents, the FAA is planning “special focus” meetings this year at various airports hosted by the agency’s runway safety action team (RSAT), but the ongoing U.S. government shutdown has put these events on hold. A meeting previously scheduled at Philadelphia International Airport (PHL) on January 9 has already been postponed, as has another that was expected on January 30 at Nashville International Airport.
The purpose of these meetings will be to discuss the factors that are contributing to recent wrong surface events at airports, including attempted wrong surface arrivals and departures, and “to assess if the current mitigations are adequate,” the agency said. “Wrong surface landings occur at a rate of approximately one every other day and nearly 90 percent are committed by general aviation pilots.”
One of the most serious incidents occurred on August 10 when a Part 135-operated Gulfstream IV, on a visual approach at night and cleared to land on PHL’s Runway 35, instead lined up on an adjacent, occupied taxiway. The GIV pilots performed a go-around, overflying four airliners. Last July, the flight crew of an Air Canada Airbus A320 mistook a taxiway for a runway at San Francisco International Airport and nearly crashed into four other airliners on the ground.
Throughout the year, the FAA plans to schedule future RSAT special focus meetings at other airports. Also, pilots are encouraged to view the recently released FAA video “Wrong Surface Landings,” which discusses the precursors of wrong surface landings and provides several risk-mitigation measures.
This article was originally published in AINonline on January 7, 2019.
FAA Actively Pursues Illegal Flight Ops see more
NAFA member, David G. Mayer with Shackelford Law discusses unauthorized air charter and the FAA.
Unauthorized air charter—often called gray charter and even “Part 134 1/2” operations—has long been illegal. Yet some aircraft operators still flout or inadvertently violate the FARs involving proper on-demand or charter operations. Continuing to operate such disguised charters with impunity or in obscurity might be short-lived, however, as the FAA has recently ramped up its investigations and enforcement actions against such offenders.
These illegal operations frequently occur when an operator with one or more aircraft holds itself out for hire or receives any compensation (not just monetary) for carrying people or property without the required certification or other approvals from the FAA and the U.S. DOT. As a result, the offender might fail to meet the operations criteria under FAR Part 135 and the certification requirements under FAR Part 119.
To illustrate, the FAA might probe companies that operate flights without the required certificates; operate aircraft for charter where the aircraft has not been placed on the operator’s Part 135 operating specifications as required; or enter into a sham dry leasing arrangement, purporting to lease an aircraft with no crew when, in reality, the lessor enters into a prohibited commercial wet lease since the lessor actually insisted the customer use its crew and aircraft.
Determined by a complex matrix, “Order 2150.3C-FAA Compliance and Enforcement Program” allows the FAAand Department of Justice (DOJ) to impose high-dollar civil penalties, including approximately $33,333 per incident for flight operations in violation of the FARs. The FAA has many tools to carry out its mission of “promot[ing] safe flight of civil aircraft,” including the ability to investigate any aircraft use, propose civil penalties and revoke Part 119 operating certificates.
Even though an operator assumes he or she has put proper lease, timeshare, or other agreements in place, the FAA can, and will, make its own decision (substance over the form) on whether the operator has conducted a lawful or disguised charter business. It does take into account specific and complex exemptions in Section FAR91.501 and Part 119 that allow certain commercial operations.
The FAA identifies offenders, in part, using information supplied by legal Part 135 operators, FAA personnel, and others. And the National Air Transportation Association (NATA) and NBAA publish a hotline phone number and other information that facilitates contacting the FAA and educates customers, operators, and other industry participants to recognize and conform their operations to Part 135 or Part 91, as appropriate.
Powerful allies help the FAA deter and punish offenders, including the DOJ and the FAA’s own version of SWATcalled Special Emphasis Investigations Team (SEIT). SEIT has interagency partners, including multiple law enforcement agencies, to take and coordinate enforcement actions against offenders. Although the FAA has wide prosecutorial discretion, Order 2150.3C, issued on September 18, guides the FAA’s actions.
Last year, the FAA and DOJ sent a message loud and clear to illegal charter offenders and to the business and general aviation industries—not in words—but in the following, diverse enforcement cases, among many others:
• Timesharing Violations. In a June 29 press release, the FAA announced a proposed $3.3 million civil penalty, its largest ever for a private company, against The Hinman Co. of Portage, Michigan, operating through its wholly owned subsidiary Hincojet LLC. Hincojet allegedly conducted 850 commercial aircraft operations in violation of the FARs by using timesharing agreements involving six unrelated third persons.
The FAA alleged that Hincojet overcharged customers, invoicing for more than the specific costs allowed for timesharing agreements in Part 91; failed to operate flights under Part 135 as a commercial operation; failed to meet the FAA’s Part 135 requirements for recordkeeping, including pilot records and load manifests, for each flight; had no Part 135 pilot training program; did not possess proper certification under Part 119 or economic authority from the DOT; and used pilots to operate flights without authorization to conduct the flights under Part 135. Importantly, the FAA has also investigated the pilots with a view toward commencing enforcement actions against them.
On October 4, the DOJ filed an enforcement lawsuit against Hinman for alleged illegal charter activity with fines of up to $11,000 per violation. Order 2150.3C dictates such a referral to DOJ when the proposed civil penalty exceeds $50,000. Hinman is a clear example of the FAA looking beyond the form of the arrangements to the actual substance of the operation.
• Gray Charter Violations. In a December 4 press release, the FAA announced a proposed $624,000 civil penalty against Steele Aviation of Beverly Hills, California, for allegedly conducting 16 customer-carrying jet flights “for hire” when the company did not have the air carrier certificate required for these operations and allegedly used unqualified pilots. The case illustrates how the FAA will pursue charter operations that appear normal but blatantly fail to qualify for charter services under Parts 135 and 119.
• Leasing Violations. In a November 13 press release, the DOJ announced that James Johnson of Oklahoma City and his company, Interstate Helicopters Inc., pleaded guilty to failing to report to the FAA under the “Truth in Leasing” requirements from 2014 to 2016. This case is important because it shows how the FAA will investigate and prosecute operators under civil and criminal laws for not complying with the Truth-in-Leasing disclosure to lessees (under Advisory Circular 91-37B)-opening a back door to investigating leasing arrangements generally.
Offenders should not look to insurance as a safety net, because insurance rarely, if ever, pays government penalties or related costs, including attorneys’ fees, which can run sky high. An insurer could refuse to cover claims that involve an unqualified pilot. If the aircraft owner is a limited liability company (LLC), the shield against personal liability of the LLC owner could collapse under FAA legal pressure and expose the owner to personal liability for civil monetary penalties (see AINsight: Piercing the Aircraft LLC Veil).
Overall, offenders should weigh the legal risks of engaging in a protracted and expensive dispute with the FAAand DOJ against the cost of realigning their operations to comply with the FARs. Given the heightened interest of the FAA in punishing disguised charters, it should be obvious that, on balance, every operator should opt for compliance with the FARs in consultation with knowledgeable aviation counsel.
This article was originally published by AINonline on January 10, 2019.
Industry Leaders Voice Growing Concerns about Shutdown see more
Business aviation leaders are expressing growing concern about the increasing ramifications of the prolonged partial U.S. government shutdown. “It is clear that the shutdown’s impact is being felt,” NBAA said in an update to its members today, pointing the cessation of activities such as the issuance of new pilot certificates and letters of authorization.
In addition, training centers are concerned about the possibility for expiration of authorizations for evaluators and flight training devices, and certification of aircraft and equipment is affected. Further, the association has been concerned that Customs and Border Protection is not processing requests for new overflight exemptions.
The FAA has indicated plans for a number of safety inspectors to return to work, but details about which functions will resume remain unclear, the association said, adding the primary focus is anticipated to be on safety surveillance.
“Since the partial government shutdown began on December 21, our nation’s aviation system has functioned safely and efficiently thanks to the hard work of dedicated FAA professionals,” said NBAA president and CEO Ed Bolen. “That said, general aviation is a highly regulated industry, so it’s no surprise that some service disruptions are becoming visible.”
NATA agreed, saying the aviation industry is one of the hardest hit because of safety and security requirements. “The shutdown has halted work on new aircraft certification, interactions between FAA and other nations, some aircraft registrations, commercial drone flight authorizations, aircraft mechanic licenses, introduction of new air traffic technology and airport construction approvals.”
The effect has been “very real” for controllers and other workers missing paychecks, NATA said.
The association further pointed to specific disruptions, such as a member company that has had two aircraft stranded in Canada, awaiting FAA approval to return. Others have had issues with ferry permits and/or special flight permits, both domestic and international-bound flights and NetJets has not been able to add new aircraft into its operations, NATA added. Training companies, including FlightSafety International, have reported multiple delays and cancellations.
GAMA president and CEO Pete Bunce, meanwhile, warned during a recent rally that even though the aircraft registry is open, the FAA and DOT have taken a narrow view of what is authorized registry activities, hampering its full use. If the shutdown was to continue in the next few weeks, the costs could run into the billions, he added.
The associations were among the more than 30 organizations signing a letter last week to leaders on Capitol Hill, outlining some of the many ramifications and urging them to work to end the shutdown.
Another signatory of that letter, NATCA, meanwhile, has taken a multipronged effort to put pressure on the government to end the shutdown, through a rally, leaflet campaign, and lawsuit. The organization, however, did welcome passage and signing into law of the Government Employee Fair Treatment Act of 2019, which guarantees back pay to federal employees affected by the shutdown. But NATCA president Paul Rinaldi added, “There is no reason to keep employees home and furloughed now that they are guaranteed their pay. Our elected leaders need to be responsible stewards of American taxpayer dollars and end this shutdown immediately.”
He added that the shutdown is “eroding the layers of redundancy and support necessary” for the National Airspace System.
This article was originally published on AINonline on January 17, 2019.
Government shutdown update: pre-owned fine but problems with new aircraft deliveries see more
NAFA member Alasdair Whyte, Editor and Co-Founder of Corporate Jet Investor, shares government shutdown update and how it affects new aircraft deliveries.
The US Federal Aviation Administration has resolved a technical issue stopping new title searches.
The Registry Modernization System (RMS) in Kansas City stopped working on Friday evening but was restored within a few hours.
This is great news and means that pre-owned aircraft transactions can be completed again.
However, there are big issues getting Certificates of Airworthiness (CofA) for new aircraft. Right now, the Designated Airworthiness Representatives (DARs) have blanket authority to act independently, which resolved the issue on used aircraft CofAs.
But the Aircraft Certification Offices are still closed, so no new aircraft can be certified, which is required before the DAR can issue the CofA.
Part of the issue is that the FAA systems themselves are very old and prone to frequently breaking. IT staff at the Kansas City facility where the FAA mainframe is located, have also been furloughed.
No reasons were given for the RMS outage. NAFA, the National Aircraft Finance Association, said in a release that inclement weather in Kansas City could have played a role in the outage.
One lawyer suggested that the FAA might not even know themselves how the issue was fixed “They probably sent somebody back in the back and they slapped it a couple times.” He said.
The FAA said: “Due to the lapse in government funding, we are unable to respond to media questions at this time."
This article was originally published by Corporate Jet Investor on January 16, 2019.
FAA Recalling Furloughed Safety Personnel see more
More than 2,000 FAA inspectors and engineers furloughed due to the partial government shutdown that began on Dec. 22 have been recalled to work, according to an FAA statement made on Tuesday. The latest revision of the Department of Transportation’s (DOT) plan for operations during the shutdown (PDF) now categorizes a total of 3,113 Aviation Safety positions as necessary for life and safety and therefore excepted from furlough. The previous version (PDF) of the plan listed only 216 life-and-safety excepted Aviation Safety positions.
"We are recalling inspectors and engineers to perform duties to ensure continuous operational safety of the entire national airspace," said an FAA spokesperson in Tuesday’s statement. "We proactively conduct risk assessment, and we have determined that after three weeks it is appropriate to recall inspectors and engineers." According to the DOT’s revised shutdown plan, some previously suspended activities will also be resumed including “certain evaluations, audits and inspections” and “certain certification activities.”
As with other federal employees still at work, the recalled personnel are not expected to receive paychecks during the shutdown. More than 24,000 jobs at the Air Traffic Organization, which is responsible for providing safe and efficient air navigation services in the U.S., make up the majority of life-and-safety excepted positions at the FAA. 13,944 FAA employees will remain furloughed of a total 44,687 positions.
This article was originally published by Kate O'Connor with AVweb flash on January 18, 2019.
Highlights of the 5 Year FAA Reauthorization Act see more
NAFA member, Aircraft Guaranty Corporation, shares highlights of the 5 Year FAA Reauthorization Act.
There were several proposals put forward for the Federal Aviation Administration (FAA) Reauthorization Act of 2018 (HR 302), but not all of them made it through. While privatizing air traffic control will not be happening, the rules regarding re-registration have once again been changed. The bill also includes an edict that all documents will be digitized soon, along with opening records electronically to the public for the first time. The 462-page bill passed on October 3rd, 2018 contains many provisions, a few of which we’ve highlighted here. There are changes on the horizon, and while the overall effects are uncertain, we can surmise some of the possibilities.
In years past, registration was only required once per owner of the aircraft. In 2010 that changed in an attempt to make FAA records more current, with re-registration required every 3 years. While this involved more work, the change helped update and maintain more accurate information on aircraft owners. In Section 556 of the 5 Year Reauthorization Act, reregistration is changed to every 7 years, to be enacted within 180 days of the bill passing. We can’t be sure why the FAA is modifying the requirement to less frequent updates once again but are optimistic that the integrity of registration records will not be affected.
There are already a lot of FAA documents consistently digitized, making some functions involving registration and record searches more efficient. What isn’t electronically maintained is held in the public documents room at the FAA and available to those who have access to that room. Section 546 of the new bill states that everything will be digitized within the next 3 years, including all registry information such as paper documents, microfilm images and photographs, as well as the registry manual, business operations and functions, and all paper-based processes. It’s certainly an earth-friendly endeavor but could produce some complications of its own regarding access and security.
Public Electronic Database
Possibly the most significant aspect covered in Section 546 of the bill and happening within 3 years is that the FAA records will be made electronically available to the public. For the first time in history, the general public will be able to view any record and file any document they want at the FAA. Furthermore, anyone using the public documents room to perform any acts that could have been done with the same efficiency by electronic means, will be charged a fine. The implications of this switch could be quite far reaching.
The ability to submit documents electronically might make it more appealing for anyone to do individually, but it does not mean they should. While the FAA is opening their records, they are not changing the rules for submitting documents to them. With the extensive rules in place for filing documents, there is a good chance it won’t be done correctly without industry knowledge of FAA rules and regulations for filing of documents.
Furthermore, as the registered owner of the aircraft, an owner trustee is going to want to maintain high standards for creating and maintaining the title to the aircraft. They would therefore be filing all documents affecting title in accordance with their own standards. It would likely mean an unrecordable document otherwise. They also know What to Look for in Owner Trustee Documents, and would never rely on documents created or filed by someone else. They would also perform any title searches since an outstanding lien or break in the title can be easily missed without an experienced eye, resulting in the need for Clearing Clouded Aircraft Titlesas discussed by Wright Brothers Aircraft Title.
The Owner Trustee’s Role
There are many possibilities for error in the registration process, increasing the amount of time and money spent. It’s complicated and requires experts for error-free and timely filings. There are many Benefits to Registering an Aircraft in Trustsince the main role of an owner trustee is to represent the interests of the beneficiary. It is the owner trustee’s responsibility to ensure that all documents filed at the FAA are recorded and kept up-to-date. For an owner trustee then, less frequent re-registration filings do not mean less work since they are regularly in communication with their clients.
In sum, the changes coming forward could be both helpful and harmful. We’re hopeful that all will go smoothly for the FAA and progress will continue. The risks involved with registration, title searches and filing documents will not change though, and representation by an experienced owner trustee company is key.
This article was originally published by Aircraft Guaranty Corp. in January 2019.
GKG Law Successful in Vacating Aircraft Liens see more
NAFA member, GKG Law, writes about their success in vacating aircraft liens.
In August 2018, GKG Law reported on the risks posed by service providers filing liens on aircraft for amounts owed for storage, repairs, maintenance or other services relating to an aircraft. In that article, we noted precautionary measures that can be taken to minimize the risks posed by such liens, and that defenses may exist to such liens. GKG Law recently was successful in vacating such liens in a case filed in the United States District Court for the Eastern District of Virginia. In the case, the service provider filed two separate liens with the Federal Aviation Administration (FAA) and with Florida regulatory authorities asserting liens for approximately $450,000. We were successful in not only having both liens vacated, but our client also was awarded almost $50,000 in damages resulting from the invalid lien filings. The result highlights the fact that although lien statues may serve a valid purpose, such as ensuring that mechanics and other aircraft service providers are compensated for services they performed at the request of the aircraft owner or operator, aircraft owners are not defenseless when such liens do not have a valid basis or when the lien filings fail to comply with statutory requirements.
GKG Law’s extensive experience in all aspects of the business aviation marketplace makes it particularly suited to aggressively protect your rights in such commercial disputes. Please contact Brendan Collins at GKG Law if you would like to discuss any potential aircraft related disputes. Brendan may be reached by telephone at (202) 342-6793 or by email at firstname.lastname@example.org.
The original article was published by GKG Law on October 2, 2018.
The Realities of the Pilot Shortage see more
NAFA member, Rene Banglesdorf, CEO of Charlie Bravo Aviation, discusses how good pilots are hard to find and how the realities of the pilot shortage are starting to affect the aviation industry.
Gone are the days when aviation departments sort through a huge stack of resumes for pilots – though a few still do. Nowadays, good pilots seem to be hard to find. And the realities of a pilot shortage are finally starting to affect the aviation industry.
High pilot training costs, several years of earlier hiring freezes in top markets, and the threat of technology replacing pilots in the not-too-distant future has deterred the next generation of talent.
By my math, the number of pilots retiring exceeds the number of new entrants by more than 100-percent – with an increasing demand from commercial, cargo and private operators. To us that signals a critical shortage – and if the airlines are feeling it sharply, general aviation will be too.
Already we hear about American or Canadian pilots being recruited to the Middle East and Asia at salaries double or greater the averages in North America. Larger carriers are offering signing bonuses, 20-percent-plus pay increases and better benefits to attract and retain experienced pilots.
Boeing’s job forecast
In its most recent jobs forecast, Boeing indicated an unprecedented 20-year demand for pilots at 790,000 – double the current workforce. And according to their report, 80,000 pilots in the US alone will age out in that same timeframe.
“Despite strong global air traffic growth, the aviation industry continues to face a pilot labour supply challenge, raising concern about the existence of a global pilot shortage in the near-term,” said Keith Cooper, Vice President of Training & Professional Services, Boeing Global Services. “An emphasis on developing the next generation of pilots is key to help mitigate this. With a network of training campuses and relationships with flight schools around the globe, Boeing partners with customers, governments and educational institutions to help ensure the market is ready to meet this significant pilot demand.”
To this end, Boeing touts its Pilot Development Program – an accelerated training program that guides future pilots from early stage ab-initio training through type rating as a first officer – to help operators meet their growing pilot needs.
That’s great for companies or people operating Boeing’s aircraft, but it may not factor down into providing a pipeline of pilots for general aviation, especially piston or turboprop operators.
The competition is on
Regional airlines have doubled starting salaries and bonuses in recent years, which heralds stiff competition for lower-time pilots, as regional airlines typically serve as time and tenure builders for younger pilots.
Private aviation flight departments are getting more competitive as well. Recent news of airline compensation increases has encouraged some firms to bump salaries by 30 or 50 per cent to avoid pilot turnover.
The pilot shortage that’s affecting commercial and private aviation is affecting the military, as well, as fighter pilots are leaving the military in droves for cushier, better-paying jobs in commercial and private aviation.
“Despite strong global air traffic growth, the aviation industry continues to face a pilot labour supply challenge, raising concern about the existence of a global pilot shortage in the near-term.” ~Keith Cooper
In order to compete with the airlines and private flight departments, the military is taking steps to improve benefits to their pilots in addition to increasing pay, including more cockpit time, increased flexibility in assignments, more career options, and shorter deployments.
Many flight departments and airlines are doing the same.
While I’m all for more competition among operators – especially with my daughter in expensive flight training – the bigger question here is how can we make training less cumbersome or costly?
Flight schools, like Flight Safety International, where my daughter is in training for her airline transport pilot (ATP) license, are competing for certified flight instructors to keep up with demand for training. When there aren’t enough instructors, training is delayed, pilot trainees are discouraged, and expenses increase – all deterrents to increasing the numbers of pilots entering the workforce.
According to a 2017 study conducted by CAE, a civil aviation training provider, the global airline industry will require 255,000 new pilots in order to meet the demand of airline growth and pilot attrition over the next 10 years. “The largest requirement will come from the Asia-Pacific region which alone will need 90,000 new pilots, followed by the Americas which will need 85,000,” said Kinda Sarrage, Regional Sales Manager for the Middle East, Northern Africa and South Asia.
“The largest requirement will come from the Asia-Pacific region which alone will need 90,000 new pilots, followed by the Americas which will need 85,000.” ~Kinda Sarrage
“Many regions have been experiencing a higher than usual turnover of experienced pilots or captains leaving them for the Asian carriers as they offer more competitive packages, tax benefits, and flexible work rotations. To compensate for this loss, airlines should establish second officer recruitment schemes. Though some airlines have begun implementing programs to attract lower hour pilots, it is at a much slower rate than that which is required. If airlines established such programs several years ago, they would have a steady pipeline of first officers coming through that would be upgradable to captains today. The reality is that the pool of available captains is shrinking, and this is becoming apparent as airlines struggle to recruit and train pilots to meet their demands,” Sarrage said.
In the US, Senators James Inhofe and Tammy Duckworth are co-sponsoring bipartisan legislation aimed at helping the general aviation community.
The Securing and Revitalizing Aviation (SARA) Act of 2018 (S.3270) calls for the creation of an Aircraft Pilot Education Program that would allow high school students to get a head start on their flying careers by taking aviation-related courses for credit, according to a press release from the National Business Aircraft Association (NBAA).
The bill also includes reforms to existing Federal Aviation Administration (FAA) regulations to ease the shortage of qualified designated pilot examiners (DPE) needed for initial and recurrent pilot training.
Additional provisions would enhance existing due process protections for pilots; extend limited liability coverage for FAA designees performing agency duties, but who are not covered under immunities for government employees, as well as for pilots performing volunteer missions; and grant the National Transportation Safety Board (NTSB) the authority to review denials of airman certificates by the FAA.
The Aircraft Owners and Pilots Association (AOPA) has worked diligently for years for medical requirements reform, facilitating the renewal of licenses for more than 5,000 “rusty” pilots.
The AOPA You Can Fly High School Initiative ninth-grade STEM curriculum was tested in 29 high schools during the 2017-2018 school year. It has proved popular with teachers and students alike because it engages youth with hands-on activities and exposes them to the world of aviation and potential careers. The program, created in partnership with educators, curriculum developers, and aviation experts, offers four-year study options in aviation career pathways and is aligned with rigorous math and science educational standards already in use.
Each of us should be working toward attracting as many pilots and mechanics as possible to aviation –and then working to keep them here!
General aviation flight departments are beginning to awaken to a reality that pilot salaries, bonuses and flexibility are changing. What are you doing to adapt?
Rene Banglesdorf is the CEO of Charlie Bravo Aviation, a worldwide aircraft brokerage based in Austin, Texas. She is an author, speaker and podcast host.
This article was originally published in Altitudes Magazine on October 14, 2018.