NAFA Administrator posted an articleOverview of the GAO Report on FAA see more
In March of 2020, at the request of Congressmen Stephen Lynch and Peter King with the Subcommittee on National Security and the Committee on Oversight and Reform, the GAO released its long-awaited report on the FAA Registry’s ability to handle fraud and abuse risks in aircraft registrations. As the title of the report clearly implies, the GAO found that the FAA Needs to Better Prevent, Detect, and Respond to Fraud and Abuse Risks in Aircraft Registration.
More specifically, however, the report found that the FAA needs to better review and vet the actual owners of aircraft. As we all know, the FAA currently takes filed documents at face value, and records them if they meet certain requirements as set by the FAA itself. While the rest of the industry has been subject to more and more demands to Know Your Customer, and to adhere to KYC and OFAC guidelines, the FAA has remained immune. This report suggests that it is time for the FAA itself to do more due diligence and better vet the entities registering aircraft on its registry.
There is also a clear need to allow law enforcement agencies more access to the data contained in the FAA registry. Currently, registration information is mostly provided in .pdf format which is not easily searchable or accessible. Many law enforcement agencies expressed frustration with an inability to have easy access to this information, and the report outlines opportunities for the FAA to be a center point to house data that could help law enforcement agencies to not only have better access to information, but to potentially allow for better cross-agency coordination to crack down on illegal activity involving the registration and use of general aviation aircraft.
The report seems to focus on increasing transparency in “Opaque Ownership Structures” for registering aircraft, which the GAO believes are at the highest risk for fraud and abuse. Opaque Ownership Structures are legitimate business structures that are widely used by corporations and individuals to facilitate commerce as well as for asset and tax management. However, they lack transparency related to aircraft registrations and can create challenges for safety and law-enforcement investigators seeking information about beneficial owners to support timely investigations.
These ownership structures can include the following:
- shell companies, especially in cases where there is foreign ownership that is spread across jurisdictions;
- complex ownership and control structures involving many layers of shares registered in the name of other legal entities;
- formal nominee shareholders and directors where the identity of the beneficial owner is undisclosed;
- trusts and other legal arrangements that enable a separation of legal ownership and beneficial ownership of assets;
- use of intermediaries in forming legal entities, including professional intermediaries.
It is worth noting that the report specifically excludes publicly traded companies, shifting the focus of these security measures away from commercial airlines and towards the general aviation industry.
On pages 58-59 of the report, the GAO outlined 15 recommendations for Executive Action by the FAA. Many of the recommended improvements to the FAA system are expected to be implemented in the FAA’s modernization project, slated to be completed by October 2021. Generally speaking, the modernization project is expected to help streamline and automate the aircraft registration process, and make the FAA records available to the public at all times. The GAO report includes recommendations for using this new system to improve the FAA’s vetting process of owners registering aircraft on the FAA’s system, and using that technology to allow law enforcement officials more access to registry data. Initial conversations with the FAA indicate they are on track to complete this project by the stated October 2021 deadline.
While the GAO has many recommendations to the FAA, there are still many questions to be answered. These are the Top Issues we have identified:
- The biggest unanswered question causing the most consternation in the industry, is the one involving transparency of ownership information. How much transparency will there really be? Will all aircraft ownership information be made available to the public, or only some? Will there be sections of registry data that remain “private” and only made available to authorized government agencies? That remains to be seen.
- Possibly the second largest question includes cost. The report is clear that the $5 filing fee set in 1964 is not enough to cover even today’s operating expenses, much less the costs to modernize the system. FAA has been talking about increasing registration costs for years, so an increase can likely be expected, but the question of how much remains to be answered. How much will it cost to register an aircraft in the future?
- Time is money, so questions about increases in registration time also remain. If FAA will be doing more vetting of its registrants, how much time will that take? How much longer will it take to register an aircraft with the FAA? What will this do to aircraft closing timelines?
- Lastly, there is the issue of international operations. The report expresses clear concern for FAA’s ability to issue Declarations of International Operations without knowledge or consent of specific law enforcement agencies. FAA currently expedites requests for international flights on a daily basis for the general aviation community, but will they be able to do that in the future? Or will there be a more stringent system of checks and balances required to issue Declarations of International Operations? And how long will it take to finally have one issued?
The FAA has yet to officially respond to the GAO’s report, but they have updated their website on the CARES Initiative to enhance and modernize the FAA registration services. To learn more about it, you can go to their website here: https://www.faa.gov/about/initiatives/cares/
Furthermore, on March 30, 2020, they issued their Third Request For Information, requesting information from the industry. To participate, click here: https://beta.sam.gov/opp/8b7d6e20940d4d5b8b4e8e9e76a991b3/view
As NAFA members, it is important that we participate in any proposed changes to the FAA registration process as much as possible. To the extent that you have time to fill out the FAA’s RFI, we encourage our members to do so.
NAFA will continue to monitor the proposed changes and the FAA’s eventual response and will report those to the membership.
The full report can be found here: https://www.gao.gov/assets/710/705505.pdf
Patience Is Key for Successful Aircraft Transactions During COVID-19 see more
NAFA member, NBAA, shares a review of their recent webinar about processing aircraft transaction documents during the COVID-19 pandemic.
The FAA Aircraft Registration Branch continues to process aircraft transaction documents during the COVID-19 pandemic; however, the process has been slowed. In a recent NBAA News Hour webinar, experts discussed how to successfully complete aircraft transactions during these challenging times.
Peter Korns, NBAA’s senior manager of tax, operations and workforce engagement, moderated the webinar. Scott McCreary – shareholder and aviation group leader of McAfee & Taft – and Chris Younger – principal at GKG Law, P.C., – provided expert guidance.
The FAA aircraft registry maintains information on more than 300,000 civil aircraft to facilitate aviation safety, security and commerce. The registry accepts and processes documents to register and operate aircraft in the United States, as well as to “perfect” or validate interests in an aircraft, explained Younger. The registry typically accepts filings by mail or commercial delivery services, via email or in person at the FAA Public Documents Room in Oklahoma City, OK.
Several new, temporary policies are in place to mitigate concerns about COVID-19 exposure and ensure appropriate social-distancing practices for filers and registry employees. The Public Documents Room is currently closed for direct filing, although parties may leave documents in a nearby bin for regular pickup by registry staff. All mailed documents are subject to a 72-hour quarantine period, which means those documents will not be processed or file stamped until at least 72 hours following receipt or acceptance. Filers should be aware that due to this quarantine, the accepted date of the documents is not the same as the file stamp date.
Fortunately, the FAA has expanded the ability to file documents by email. McCreary summarized new email filing procedures, including a requirement for documents to be digitally executed through a digital signature program, such as DocuSign. As is the case for mailing documents, an email receipt message does not constitute the date of formal filing with the FAA.
Younger added that import and export processes can also be more complicated as a result of the COVID-19 pandemic. For example, imports from Mexico are subject to a 72-hour quarantine.
The FAA Reauthorization Act of 2018 designated registry employees as “excepted” or “essential employees” in the event of a government shutdown or emergency furlough.
Although it’s unclear if the legislative language is broad enough to cover the COVID-19 crisis, the experts see no signs at this time of a disruption of operations or possible closure of the registry. However, the experts caution this is a fluid situation, and there is no projected timeframe to return to normal registry and transactions procedures.
“In business aviation, there’s always an urgency to get transactions closed,” said Younger. “Now there’s an increased tension because the process is slower to be more protective of FAA employees.”
Aircraft transactions can still be completed, but patience is key.
This webinar, titled “FAA Transaction Guidance During the COVID-19 Crisis,” is just one in a series of educational opportunities NBAA has planned for the coming weeks. Learn more, register for upcoming webinars and view recordings of past webinars on the NBAA News Hour site.
This article was originally published by NBAA on April 13, 2020.
U.S. Transportation Secretary Elaine L. Chao Announces $10 Billion in Relief for America’s Airports see more
WASHINGTON – U.S. Transportation Secretary Elaine L. Chao today announced the award of approximately $10 billion to commercial and general aviation airports from the Trump Administration's newly created Coronavirus Aid, Relief, and Economic Security (CARES) Act Airport Grant Program. The effort will provide unprecedented and immediate relief to American families, workers, and businesses.
“This $10 billion in emergency resources will help fund the continued operations of our nation’s airports during this crisis and save workers’ jobs,” said U.S. Transportation Secretary Elaine L. Chao.
In less than two weeks since the bill was signed into law, the U.S. Department of Transportation’s Federal Aviation Administration (FAA) is ready to deliver CARES Act grants to eligible airports throughout the nation. The grants will provide economic relief to airports around the country affected by the COVID-19 public health emergency.
“Thank you to the dedicated men and women from the FAA’s Office of Airports for creating an entirely new program in record time to assist airport sponsors in desperate need of these funds,” said FAA Administrator Steve Dickson.
This funding will support continuing operations and replace lost revenue resulting from the sharp decline in passenger traffic and other airport business due to the COVID-19 public health emergency. The funds are available for airport capital expenditures, airport operating expenses including payroll and utilities, and airport debt payments.
The FAA encourages airport sponsors to spend the grants funds immediately to help minimize any adverse impact from the current public health emergency. Airport sponsors should work with their local FAA Office of Airports field office on the application and grant-agreement process.
The CARES Act also provides funds to increase the Federal share to 100 percent for grants awarded under the fiscal year 2020 appropriations for Airport Improvement Program (AIP) and Supplemental Discretionary grants. Under normal circumstances, AIP grant recipients contribute a matching percentage of the project costs. Providing this additional funding and eliminating the local share will allow critical safety and capacity projects to continue as planned regardless of airport sponsors’ current financial circumstances.
The FAA will use a streamlined application and grant-agreement process to make this funding immediately available for critical airport needs. The funds will be available as soon as the airport sponsor executes a grant agreement.
The CARES Act provides new funds distributed by various formulas for all airports that are part of the national airport system. This includes all commercial service airports, all reliever airports and some public-owned general aviation airports.
There is additional program information on the CARES Act website.
This release was originally published by the U.S. Department of Transportation on April 14, 2020.
GA Fights for Public Benefit Exemptions, Accommodations see more
NAFA member, AOPA, fights for the general aviation industry public benefit exemptions and accommodations.
As the coronavirus pandemic alters every facet of life and how industries around the globe operate, the aviation sector is trying to find its new normal. The FAA has taken steps to address the heavily impacted operations of commercial carriers amid the COVID-19 pandemic, and now, general aviation continues to ask for the same treatment as it provides vital services to the public and economy while fighting a worldwide crisis.
General aviation is providing vital services to the public and economy during the coronavirus pandemic, as exemplified by Michigan Seaplane flight school instructors Nick Hall and Mike Mato, who have been flying medical face shields to a Michigan hospital in a Cessna 206. AOPA and other aviation groups are requesting exemptions for GA because it is serving a critical role. Photo courtesy of Nick Hall and Mike Mato.
In an April 1 letter to FAA Associate Administrator for Aviation Safety Ali Bahrami, AOPA and seven other industry groups urged the agency to empower the continued health of the multibillion-dollar GA industry through extensions to examinations, certifications, maintenance, and filings. GA has stepped up in many ways to help the nation deal with the COVID-19 crisis through its more than 5,000 public airports across the country, providing transportation and logistical support for needed supplies and personnel.
While the commercial aviation sector has taken center stage as being hard hit throughout the pandemic, the vital contributions of GA often go unrecognized.
General aviation has long been vital to the nation’s transportation and economic infrastructure,” said Christopher Cooper, AOPA director of regulatory affairs. “From providing medical resources to remote locations to supporting millions of jobs and economic activity across the United States, the benefit general aviation provides to the public, especially in times of national crisis, is enormous. Having these exemptions and deviations approved by the FAA will ensure general aviation has limited delay in operations to help the fight against the COVID-19 pandemic.”
The letter also cited a recent PricewaterhouseCoopers LLP study showing that GA contributes 1.2 million jobs and $247 billion in economic activity to the United States. The Cybersecurity and Infrastructure Security Agency (CISA), which falls under the Department of Homeland Security, has designated transportation, which includes GA, as a critical infrastructure sector. Air medical is specifically named by CISA as a critical workforce, and air medical aircraft continue to provide lifesaving missions for those in need whether stricken by COVID-19 or other health emergencies.
“This letter builds upon an earlier request sent to the FAA on March 17, further explaining why these extensions are justified since general aviation is, indeed, a public good. Regulations and exemptions must be found to be for the public good, and this is the rationale the FAA used to provide exemptions for air carriers and commercial operations. We believe general aviation should also be provided exemptions based on the same rationale,” said Cooper.
Similar regulatory activity has already been enacted by the European Union Aviation Safety Agency in Europe and the Civil Aviation Authority in the United Kingdom, where comparable exemptions have been granted to both commercial and noncommercial operations in their respective countries.
Along with AOPA, the Air Medical Operators Association, the Experimental Aircraft Association, the General Aviation Manufacturers Association, Helicopter Association International, the National Agricultural Aviation Association, the National Air Transportation Association, and the National Business Aviation Association signed the April 1 letter.
AOPA and seven other GA organizations signed an April 1 letter to the FAA requesting a wide range of exemptions and deviations:
- Extension of FAR Part 61 pilot currency requirements, including the flight review and instrument proficiency check.
- Guidance that 709 reexaminations or paperwork inspections in person (such as logbook inspections under FAR 61.51, or maintenance record inspections under FAR 91.417) be deferred or at least be conducted electronically during the current social distancing safety protocols and directives regarding nonessential activities.
- Extensions for certificated flight instructor certificate renewal, expiration, and endorsement periods.
- Extension of knowledge exam expiration period.
- Extensions for applicants on the ability to complete practical examinations.
- Extension for filing documents under FAR Part 13 (Subparts C, D, and G).
- Extensions for aircraft maintenance and continuing airworthiness requirements with necessary mitigation procedures.
This article was originally published by AOPA on April 2, 2020.
Associations Seek Exemptions to Continue Flying During COVID-19 Pandemic see more
Washington, DC, April 3, 2020 – In an April 1 letter to FAA Associate Administrator for Aviation Safety Ali Bahrami, NBAA and other general aviation (GA) groups requested exemptions and other accommodations to ensure continuity of operations and commerce during the COVID-19 pandemic.
Included requests for exemptions or deviations most applicable to NBAA members include:
- Extension of 14 CFR Part 61 pilot current requirements, e.g. flight review, IPC, PIC/SIC proficiency checks;
- Extensions for certified flight instructor certificate renewal, expiration and endorsement periods; and
- Extensions for aircraft maintenance and continuing airworthiness requirements with necessary mitigation procedures.
The group letter notes other aviation authorities have provided similar exemptions for commercial and noncommercial operations.
The April 1 letter highlights the important role general aviation plays in the U.S. and global economy and the significant public benefit provided by the industry. For example, general aviation contributes 1.1 million jobs and $247 billion in economic activity to the U.S. economy and is a literal lifeline to many communities, connecting more than 5,000 public airports, compared to the 500 used by scheduled airlines.
The Air Medical Operators Association, Aircraft Owners and Pilots Association, Experimental Aircraft Association, General Aviation Manufacturers Association, Helicopter Association International, National Agricultural Aviation Association and National Air Transportation Association also signed the April 1 letter to Mr. Bahrami.
General aviation provides extensive air medical services, which are designated by the Department of Homeland Security’s Cyber Infrastructure and Security Agency (CISA) as a critical workforce; monitors pipelines and powerlines; transports critical medical personnel; and conducts important aerial applications in agriculture and pest control programs.
Perhaps most importantly during this crisis, general aviation airmen and aircraft conduct humanitarian flights delivering masks, ventilators and other essential items.
Prior to signing on to this most recent letter, NBAA also sought and received exemptions for certain Part 135 training requirements in March. The FAA also worked with NBAA and other groups to issue a COVID-19-driven exemptionallowing pilots to continue to fly if their airmen medical certificate expires between March 31 and June 30.
“We appreciate the FAA’s cooperation and efforts to provide these exemptions and exceptions, keeping business aviation flying without compromising safety or negatively impacting the National Airspace System,” said Brian Koester, CAM, NBAA’s director of flight operations and regulations. “Business aviation plays an important role as the nation continues its work to contain COVID-19, mitigate the devastation the virus might cause and – eventually – begin nationwide recovery.”
Contact: Dan Hubbard, 202-783-9360, email@example.com
This release was originally published by NBAA on April 3, 2020.
Update: FAA Extends NBAA’s Small Aircraft Exemption Until 2022 see more
NAFA member, NBAA, shares update on FAA's NBAA Small Aircraft Exemption.
The FAA recently approved a 24-month extension to NBAA’s Small Aircraft Exemption until March 31, 2022, allowing NBAA members that operate small aircraft to take advantage of the flexibility usually offered to operators of larger, turbine-powered aircraft. The exemption includes a new item in the Conditions and Limitations section.
The current version of the exemption – officially known as Exemption 7897K, the NBAA Small Aircraft Exemption – provides operators of piston-powered airplanes, small airplanes (those with a gross weight of 12,500 pounds or less) and rotorcraft a number of advantages, including the use of alternative maintenance programs and limited cost-reimbursement for certain flights in accordance with Part 91 Subpart F of the Federal Aviation Regulations.
The cost-sharing benefits of Part 91 Subpart F are typically limited to aircraft with a maximum takeoff weight of over 12,500 pounds, multi-engine turbojet aircraft or fractional ownership program aircraft.
The cost-reimbursement options of Part 91 Subpart F are useful in regards to transportation of a guest on a company aircraft, the use of the aircraft by employees of a subsidiary company and other common scenarios. Time sharing, interchange and joint ownership agreements are also permitted under Part 91 Subpart F.
A new condition is included in the updated exemption.
As of Sept. 27, 2020, no person may operate an aircraft under the NBAA Small Aircraft Exemption unless that person files a “Notice of Joinder to FAA Exemptions No. 7897K.” This requirement can be met electronically and must include:
- Basic contact information for the person,
- The person’s NBAA membership number,
- A statement requesting the FAA appends the Notice of Joinder to the list of NBAA with authorization to use this exemption,
- A statement attesting the person will not conduct operations under this exemption if the person ceases to be an NBAA member, and
- An attestation the person will comply with all conditions and limitations of the exemption.
“Use of the exemption is overseen, in part, by a requirement to notify the local Flight Standards District Office when an operation will be conducted under the terms of the exemption,” said Doug Carr, NBAA’s vice president of regulatory and international affairs. “This notification requires the operator to provide a copy of the time-sharing, interchange or joint ownership agreements, and is an opportunity for the local office to review these documents and details of the operation for compliance.
“The FAA is bringing additional compliance checks and scrutiny to all exemptions, so it’s important that NBAA members understand this additional submission to the docket will ensure the NBAA Small Aircraft Exemption continues to be valid and is utilized appropriately,” said Carr.
NBAA will create a form to allow members to easily comply with the new requirements of the exemption. This form will be available prior to the Sept. 27, 2020, notification date.
“This NBAA-provided form will ease the burden of compliance and allow small aircraft operators who need the exemption to operate as they are currently, in compliance with regulations and the exemption conditions,” said Carr.
This article was originally published by NBAA on April 3, 2020.
FAA Responds to NBAA’s Call for COVID-19 Accommodations on Part 135 Training see more
NAFA member, NBAA, shares FAA's response to call for COVID-19 accommodations on Part 135 Training.
Faced with an unprecedented situation driven by the escalating COVID-19 pandemic, the FAA has answered NBAA’s call for the agency to take unprecedented steps to ensure that many charter operators are able to continue flying through the crisis.
On March 25, the agency issued the following four exemptions in effect through May 31, 2020, and applicable to most Part 135 operators:
- FAA-2020-0291, exempting Part 135 operators from the requirement that crewmembers don protective breathing equipment or oxygen masks during recurrent and upgrade training, testing and checking.
- FAA-2020-0292, allowing Part 135 ground personnel and crewmembers to complete recurrent training and qualification activities up to three calendar months after the month that the activity was due to have been completed, for requirements that were due to be completed through May 31, 2020.
- FAA-2020-0307, exempting Part 119 certificate holders, including some Part 135 operations, from the requirement that crewmembers don protective breathing equipment or oxygen masks during recurrent and upgrade training, checking and evaluation.
- FAA-2020-0308, allowing Part 119 certificate holders, including some Part 135 operations, allowing ground personnel, crewmembers and dispatchers to complete recurrent training and qualification activities up to three calendar months after the month that the activity was due to have been completed, for requirements that were due to be completed through May 31, 2020.
“We thank the FAA for its responsiveness to our request for these accommodations to ensure that business aviation operators will be able continue flying through this unprecedented and challenging situation,” said Brian Koester, NBAA director of flight operations and regulations. “As we continue to adapt to the realities of the COVID-19 environment, NBAA will work to ensure our industry is fairly represented in these and other actions taken to maintain our nation’s aviation infrastructure.”
In issuing these exemptions, the FAA noted that the agency has circumvented the typical publication process in the Federal Register, as “delaying action would have an adverse and potentially immediate impact on [the] continuity of critical aviation operations essential to the public interest.”
This article was originally published by NBAA on March 26, 2020.
FAA Makes Changes to Public Documents Room Due to COVID-19 see more
NAFA member, Debbie Mercer-Erwin, President of Wright Brothers Aircraft Title, Inc., shares the latest update on the FAA Civil Aviation Registry and Public Documents Room.
In light of the continued spread and impact of COVID-19, or Coronavirus, the FAA Civil Aviation Registry has issued new procedures affecting the Public Documents Room (PDR) in the Mike Monroney Aeronautical Center.
The change in processes comes in an attempt to minimize exposure to employees, permit-holders who regularly access the PDR, their families and the public at large.
The FAA intends to keep the PDR open and “provide essential services while maintaining social distancing and restricting physical public access.”
There are now temporary measures in place, effective as of 8:00 am, Thursday, March 19, 2020, to help slow the spread of Coronavirus and maintain efficiency at the Registry.
While the PDR remains open for their usual hours, 7:30 to 4:00 CDT, the “filing” window has been closed, which removes the ability to immediately file documents.
For now, document submissions will be collected from drop boxes located directly outside the PDR – hourly for those qualifying as “priority” and twice a day for those that do not.
During this time the Registry will not provide “minute-by-minute” filing stamps. Digital submissions are allowed if all closing documents are digitally signed and less than 20 pages.
Documents can still be mailed via the usual means, but there is now a temporary email option as well.
Documents can be emailed following certain requirements: all digitally signed, attachments 20 pages or less per document, one aircraft per email, and priority indicator.
Another notable change is that the FAA cannot guarantee “in by 11 out by COB” expedited processing of documents for imports.
There are also changes to payment services, which should now be completed online at pay.gov. A receipt can be generated to be submitted to the Registry if filing documents via email.
It may be a while before we fully see the effect these changes have on document filing and transactions, but there will certainly be some delay while we become accustomed to the new procedures.
While disruptions inevitably continue for industries worldwide, we are encouraged by the actions our leaders and communities are taking to protect our health and help businesses continue to run.
This is a summary of details regarding the FAA’s PDR changes. For more information and assistance please contact your local agent.
This release was originally published by Wright Brothers Aircraft Title, Inc. on March 20, 2020.
GATS! Coming Soon to a Country Near You see more
NAFA member, Wright Brothers Aircraft Title, discusses the Global Aircraft Trading System (GATS).
The Global Aircraft Trading System, or GATS, is an initiative stemming from one of the most successful multi-country treaties. The Cape Town Treaty, signed in 2001, set up uniform rules and regulations to help facilitate asset-based financing and leasing of aviation equipment worldwide.
As discussed in our previous blog, The History behind the International Registry (another initiative of Cape Town), the treaty established a set of laws more favorable to lenders that would expand international financing opportunities and open doors for new market entrants around the globe.
The Aviation Working Group (AWG) was a central participant in this process as a not-for-profit legal entity contributing to the development of policies, laws and regulations that advance international aviation financing and leasing.
Their latest project, coming soon to a country near you, is GATS, which specifically aims to “increase the transparency of and confidence in aircraft trading, and further protect rights, by introducing a secure, live and searchable electronic ledger displaying details of ownership and security interests.”
Both the International Registry and the Global Aircraft Trading System are designed to modernize and facilitate, via electronic registries, the efficient and secure trading and financing of aircraft equipment, while protecting the rights of all parties. GATS, however, focuses on “reducing the burdens on lessees, lessors and financiers” and even more so, protecting the lessee’s rights.
Out of necessity, the trading and financing of aircraft equipment subject to leases continues to grow in the aviation industry. Likewise, the need for trusts. You can read more about this in the blog Why an Aircraft Should be Registered in Trust, by our sister company, Aircraft Guaranty Corporation.
Subsequently, the need for more efficient lease and trust transactions has become increasingly important, especially in commercial aviation where ownership interests in leased collateral changes hands on a frequent basis. Every time the ownership changes, the lease between lessor and lessee must also change, creating a heavy burden on the lessees.
An airline employee once complained that they had to alter a lease agreement 11 times in 2 years. Placing aircraft in trust transfers the burden of these ownership changes to an owner trustee, allowing lessees to focus on operating their airlines. While the benefits of GATS can clearly be seen in the commercial airline realm, the benefits to the business and general aviation sector remain to be seen.
The fully electronic system will be voluntary and open to all industry participants. With e-signatures, e-delivery of documents and use of a secure e-ledger to record transactions, the platform will detail the trust history of aircraft that are registered on GATS.
The new registry could be another tool for aviation escrow services to use in Clearing Clouded Aircraft Titles, similar to an FAA title search. While this could increase safety and transparency in international aircraft transactions, it will also increase costs. It may also increase the time it takes to close, depending on how quickly and efficiently the new GATS registry system can be searched.
At first, any GATS trust will be formed in Ireland, Singapore or the U.S., and subject to the applicable jurisdiction for the creation and transfer of security interests. Available jurisdictions may expand in the future.
The rights of lessees will be specifically protected by prohibiting transfers unless agreed upon conditions in favor of the lessee have been met. GATS will also further “reinforce ‘no increased obligations’ lease provisions in favor of lessees”.
The GATS platform for electronic trading is practically here. The static URL was activated on December 10, 2019, and from March 1st to 31st a ‘simulated transaction period’ will be open. The full launch is targeted for April 1, 2020.
With the FAA issuing an opinion on January 22nd concluding that “the GATS transitional trust documents comply with applicable federal law and will support aircraft registration in the name of a GATS trustee”, it appears that GATS is ready for takeoff.
Stay tuned for more GATS developments. For more information on GATS, visit awg.aero/project/gats/.
This article was originally published by Wright Brothers Aircraft Title on February 10, 2020.
The Difference between Filed and Recorded FAA Documents & Why it Matters see more
NAFA member, Aircraft Guaranty Corporation, discusses what you need to know about filed and recorded FAA Documents.
There is a difference between the filing and recording of documents at the Federal Aviation Authority (FAA), and it matters when it comes to properly registering your aircraft in trust. This article explores the differences between the two and the effects both unrecorded and improperly recorded documents can have on an aircraft’s title and therefore registration in the U.S.
How are documents filed at the FAA?
The FAA has strict rules about how documents being filed need to look. The seller’s name must match the FAA records, only certain titles under signatures are acceptable, there are boxes to check for buyers, and lenders need help releasing outstanding loans or filing new ones. If any documents are not properly filled out when filed, the FAA could refuse to record them, causing problems for a buyer or owner trustee on down the line.
The FAA reviews all documents that are filed at or received by the central registry in Oklahoma City, Oklahoma. For the time being, there is a window in the Public Documents Room (PD Room) where anyone can walk up and hand in a document for filing. The window attendant will stamp the document with the date and time it was received. This document has now been filed at the FAA.
With the digitization of all records, required by the FAA Reauthorization Bill passed on October 3rd, 2018, the PD Room is likely to be less of a factor in timely filings. However, whether in person, by mail, or via the internet, the rules and processes for filing documents remain the same.
How does the FAA record documents that have been filed?
Filed documents are put through a rigorous review process, which can take up to six weeks to complete. The FAA has an extensive list of rules and regulations that documents must meet in order to be eligible for recording. If you’re not familiar with the rules, specifically those that apply to your situation, there’s a good chance that your document will not be in the proper recording format.
Documents that meet all the requirements are stamped a second time with the new date and time reflecting that the document has been recorded by the FAA. They are then placed in the main aircraft file.
Interestingly, in most cases, the priority of recorded documents relates back to the filing date, giving “first in time, first in right” status to recorded documents based on the time they were filed, not recorded. In other words, generally, first to file wins (although this is ultimately decided by a court of competent jurisdiction).
If a document is rejected by the FAA because it doesn’t meet their regulations, it is not stamped as recorded and it is placed in a separate file called “suspense”. The suspense file is publicly available, so anyone can view what was filed and by whom, but questions always arise about the validity of these rejected documents.
Any unrecorded documents that remain in the suspense file of an aircraft create a “cloud” in the title that will have to be addressed before registering in trust. These unrecordable documents have a profoundly negative effect on an entity’s title, and they can be costly and time consuming to fix.
Are all documents that are recorded with the FAA valid?
While the review process is thorough and careful, it is not always the case that a document is properly recorded. In other words, just because a document is recorded doesn’t mean it’s 100% accurate or valid – clouds may exist even for documents that have been recorded by the FAA.
In general, the FAA does not validate the documents that are filed or recorded there. Rather, the registry will record documents if they are submitted correctly and within the allotted time frame.
The validity of all documents is ultimately determined by a court of law in the relevant jurisdiction, but you can be pretty sure that there will be challenges to the validity and priority of documents that have not been recorded by the FAA.
What does this mean to an aircraft owner in trust?
Navigating the rules and regulations related to filing documents with the FAA can be tedious at best. The filing of documents is not necessarily the difficult part of the process – meeting all the necessary FAA requirements to get them properly recorded though is a challenge without industry knowledge and experience.
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. The main role of an owner trustee is to represent the interests of the beneficiary, and as such, it is our responsibility to ensure that all documents filed at the FAA are recorded and kept up to date.
This article was originally published by Aircraft Guaranty Corporation on January 8, 2020.
Hot Topics for Bizav in 2020 see more
NAFA member, David G. Mayer, Partner with Shackelford, Bowen, McKinley & Norton, LLP, shares the top-five challenges in business aviation for 2020.
The U.S. finished 2019 at the top of the world of business aircraft transactions and it is well-positioned to continue its leadership this year. Of course, every year presents important challenges and there are five that I believe will affect many aircraft owners, lessors, lenders, managers, insurance and buy/sell brokers, technical consultants, and other industry participants in 2020. Here are my top-five challenges for this year:
ETHICAL BUSINESS TRANSACTIONS
The International Aircraft Dealers Association (IADA) expects its member brokers and other aircraft transaction professionals to abide by professional standards and ethics rules under IADA’s code of ethics. To put its standards into practice, among other steps, IADA admits new members under an accreditation process administered by an independent outside firm.
IADA is far from alone in its important efforts. By issuing its statement regarding ethical conduct, the National Air Transportation Association (NATA) strongly asserts that every member company should use these guidelines to enforce high levels of ethical behavior, safety, integrity, accountability, and respect for others. NATA urges its diverse general aviation members to use these guidelines to enforce compliance and deter wrongdoing. Further, NBAA published ethical business aviation transactions guidelines to establish core ethics and business conduct standards in transactions between buyers and sellers of business aircraft products and services.
It’s no secret that some industry participants believe others act outside such ethical guidelines. Still, each person has a new opportunity in 2020 to renew his or her efforts to play by the applicable rules urged on them by their respective associations regardless of inconsistent or questionable behavior of others.
After seeing the FAA take multiple actions against illegal charters in 2019, you might conclude that illegal charter operations will be unstoppable in 2020. Not so.
In my experience, most charter and on-demand flight services operate legally, will happily demonstrate their capabilities, and explain how they comply with the FARs. Unfortunately, other operators test the limits or flat out operate illegally in violation of the FARs.
The FAA focuses on safety and enforces the FARs. Two big buckets of rules in the FARs, among others, cover legal operation of business aircraft: private flight operations under FAR Part 91 and commercial or on-demand flight operations under FAR Part 135.
A Part 135-compliant operator must obey stringent operational, training, and other rules designed to assure passenger safety. Part 91, not so much; an operator has fewer requirements under the FARs in part because they do not, if in compliance, transport persons or property for compensation or hire as permitted for certified operators under Part 135.
Anyone, including prospective passengers, can help curb illegal flight operations in 2020 by doing modest diligence on charter operations you observe or might use. For example, as a prospective passenger, you can potentially identify violators, reporting your concerns to the FAA and taking your charter business elsewhere. NATA’s website posts a hotline telephone number for customers or others to report violators.
One tell-tale sign of a potential problem might appear if the price of a flight is much lower than one provided by another operator. Although that may be good news for your wallet, it might also reveal an illegal operation that lowers its prices to edge out operators that incur higher costs to comply with FAR Part 135.
If a charter operator tells you, or you discover, that you, and not the charter operator, will exercise “operational control” of the flight, that is a red flag warning of a potential illegal charter operation under the FARs. Operational control means you will be responsible for the initiation, conduct, and termination of the flight (14 CFR 1.1), a position that puts you in the personal liability hotseat should certain things go wrong with the flight.
Although a bit different than illegal charter, I have seen and discussed with many colleagues illegal private operations under Part 91 categorically called “flight department companies.” Often taking the form of limited liability companies (LLCs), LLC members sometimes erroneously believe that the LLC, which has no business enterprise, can operate its aircraft and receive “compensation” from family, friends, associates, or others that “borrow” or “use” the LLC’s aircraft.
Compensation is a very broad term in the FAA’s view and occurs in many ways, including when passengers share expenses or reimburse the LLC for aircraft operating costs. With very limited exceptions, these flight operations are illegal, prohibited under the FARs, and subject to FAA enforcement action.
Expect both illegal charter and flight department company operations to be on the FAA’s radar in 2020, likely more so than you have ever seen before.
BONUS DEPRECIATION AND OTHER TAX PLANNING
A buyer committed to purchasing an aircraft should make a New Year’s resolution to analyze primary tax aspects of owning, operating, and storing the aircraft, and tax minimization structures, ideally, before signing a letter of intent to buy an aircraft. This analysis should at least cover federal income, state sales/use, and local property taxes to calculate the total tax costs of, or potential tax write-offs with respect to, acquisition and ownership of an aircraft.
Typically, clients start with questions on claiming 100 percent “bonus depreciation,” which continues to be available in 2020. For this year, the Tax Cuts and Jobs Act of 2017 allows aircraft owners, with limitations for personal use, temporarily to take 100 percent bonus depreciation deductions on new and preowned aircraft against gross income if the taxpayer uses the aircraft in its trade or business or for production of income. (For more, see AINsight: Maximize Aircraft Bonus Depreciation in 2019 and AINsight: 100% Depreciation and Aircraft Personal Use.)
Early in the buying experience, many buyers also express an understandable aversion to paying any property, sales, or use tax—and often believe they can avoid these taxes entirely. It is imperative to consider recent changes in law and tax rates that came into effect on January 1 and how to eliminate or reduce these taxes.
To advance your planning, determine the expected storage/hangar location(s), project the use outside of the aircraft’s home state, and consider various structures to lease your aircraft. Also, determine if or when local tax law imposes an annual property tax on the aircraft for possible tax planning relating to the location of your aircraft on that date. Using all this information, talk with your advisors for structures and strategies that may defer, allocate, eliminate, or otherwise minimize the property, sales, and use taxes.
Once a purchase closes, always keep accurate, clear, complete, and contemporaneous records on relevant tax-oriented facts for all federal, state, and local tax authorities. Don’t wait for an audit letter to update your books.
ADS-B OUT PRIVACY
The ADS-B technology mandate, which became effective January 1, has great merit for safety, flight communications accuracy, and other reasons.
However, private third-parties can—using inexpensive, commercially available receivers—pick up the aircraft’s broadcast of its unique ICAO address and thereby capture information directly from ADS-B transmissions that an aircraft operator might prefer to remain confidential. Such information includes an aircraft’s identification, altitude, GPS positional data, and velocity.
To address these privacy concerns, ADS-B operators should quickly evaluate and, if using 1090-MHz ADS-B equipment, decide whether to participate in the FAA’s Privacy ICAO Address (PIA) program, starting this month. In December, the FAA established an application process for operators to use and periodically change temporary ICAO aircraft addresses that aren’t tied to an operator in the Civil Aviation Registry (CAR).
The PIA program is limited to U.S. domestic operations to avoid potential conflicts with other ICAO member states that currently do not offer this capability. That means privacy breaches might still occur on flight operations outside the U.S.
The PIA program differs from the FAA’s new Limiting Aircraft Data Displayed (LADD) program. Operators that do not wish to allow the FAA to share aircraft data the FAA receives, including tail number, call sign, and flight number, can submit LADD requests via FAA’s dedicated LADD website. The LADD program, which replaces the Block Aircraft Registry Request (BARR) program, does not impact the ADS-B broadcast data, which, as noted, transmits information directly to capable receivers.
For maximum privacy domestically in the U.S., sign up for both the PIA and LADD programs.
INSURANCE TURBULENCE FOR OWNERS, OPERATORS, LESSORS, AND LENDERS
If you plan to buy or renew insurance coverage in 2020, buckle up. Plagued by years of huge payouts and financial losses, some insurers have exited the market, resulting in reduced liability insurance capacity for all aircraft and much higher premiums (anecdotally, 20 percent to up to 300 percent of 2019 rates).
The best operators should still be able to maintain or even improve coverage in 2020 at higher premiums provided their insurers agree that the customers have a stellar safety record, outstanding training programs, and experienced pilots with high hours in the type of aircraft insured by the carrier. The story is different for single-pilot, owner/operated aircraft or new pilots who might not be able to find insurance at any price or, if insurance is available, must accept reduced liability limits at higher premiums than in 2019.
Lenders and lessors might have a different predicament. From transactional activity in 2019, it seems financiers generally required and successfully obtained yesteryear’s high liability insurance limits. In 2020, lenders and lessors may have to ease back on their demands for such high liability insurance levels and concentrate more on property damage coverage.
In supporting this easing, lenders and lessors can point to a 2018 federal law amendment that might facilitate approving transactions with reduced liability insurance limits. Under 49 U.S. Code § 44112, Limitation of liability, Congress provided a preemptory shield of business aircraft lessors and lenders from personal injury and property damage liability if they do not have possession or control over the aircraft at the time of the accident.
Customers should contact specialized aviation insurance brokers well before signing a purchase agreement in 2020, to allow much more time than the week before closing to find insurance with the best terms and lowest cost. (For more, see AINsight: Limiting Risk as Liability Insurance Tightens.)
Amid the many challenges that business aviation will face in 2020, rather than debate the topics above for long, it is more important to take action now and throughout the new decade for the benefit of clients, customers, and colleagues involved in the business aviation industry. Will you take action and suggest others do too?
This article was originally published by AINonline on January 10, 2020.
David Norton, with Shackelford, Bowen, McKinley & Norton, LLP, discusses ADS-B Out & RVSM airspace. see more
NAFA member, David Norton, Partner with Shackelford, Bowen, McKinley & Norton, LLP, discusses ADS-B Out and RVSM airspace.
The FAA just made your life a little easier. As of January 22, if your aircraft is properly equipped with ADS-B Out, you are automatically authorized to fly in domestic RVSM airspace.
What Does That Mean?
A key air traffic control function is to keep aircraft safely separated. A basic way of doing so is to have aircraft fly at different altitudes. But this works only if everyone’s aircraft altimeter – the instrument that tells you your altitude – is accurate. Altimeters originally were very accurate at lower altitudes; less so the higher you flew. So the norm was for air traffic control (ATC) to instruct different aircraft to fly at specific altitudes that were at least 1,000 feet apart from each other when flying below 28,000 feet, and at least 2,000 feet apart when flying above 28,000 feet.
That would ensure enough of a safety buffer between what the altimeter was saying and what the aircraft’s actual altitude might be, to be sure two airplanes were not inadvertently flying at the same altitude (even if their instruments said they were 2,000 feet apart) when above 28,000 feet. But flying above 28,000 feet, where half as much airspace is available, typically is where you want your jet aircraft to be in order to maximize air speed and fuel efficiency.
By the early 2000s, technology had improved to the point that ATC could begin to use only a 1,000 foot separation above 28,000 feet (thus doubling the airspace available to jet aircraft), but this would work only if all aircraft in that airspace had the new, more accurate technology. The FAA therefore issued a rule stating that if an operator wanted to fly in this newly “reduced vertical separation minimum” (RVSM) airspace, that is, the airspace above 28,000 feet and below 43,000 feet, then specific permission was needed.
If the operator demonstrated an ability to meet all applicable technical requirements, the FAA would grant a “letter of authorization” (LOA). Periodically, the operator would have to fly over specific ground stations able to measure the actual altitude of the aircraft, to confirm that the technology was actually working. Unfortunately, the ongoing problem has been that obtaining these LOAs can be extremely difficult and time consuming, and you can’t cruise in RVSM airspace until you have one.
During the last ten years, however, two key things have happened. First, most of today’s aircraft meet all of the original RVSM requirements. Second has been the simultaneous development of a much larger, more comprehensive set of technologies to significantly improve the overall safety and efficiency of the U.S. air traffic control system.
Key to this effort is “Automatic Dependent Surveillance-Broadcast Out” (ADS-B Out), which is much more accurate than ground-based radar, and which allows the FAA to track very accurately the aircraft’s actual position, altitude, velocity, identification, etc. – in real time. Federal Aviation Regulation (FAR) 91.225 governing ADS-B Out equipment and use requires that all aircraft operating in U.S. airspace have a certified GPS position source teamed with a transponder that is capable of automatically transmitting data from the aircraft to the ATC without input from the pilot. ADS-B also gives pilots immediate access to air traffic and weather services.
To its great credit, the FAA realized that, as aircraft operators install this new ADS-B Out technology, it can safely and automatically grant permission to those operators to fly in domestic RVSM airspace. This saves both the FAA and each operator an enormous amount of time and energy, reducing paperwork and processing requirements, while maintaining a higher level of safety, better situational awareness, and more efficient, direct routing.
The new RVSM rule is a further great incentive to encourage you to install ADS-B Out in your aircraft before the January 1, 2020 deadline.
This article was originally published by Shackelford, Bowen, McKinley & Norton, LLP on March 11, 2019.
Ongoing Privacy Concerns with Implementation of ADS-B see more
NAFA member, Amanda Applegate, Partner with Aerlex Law Group, discusses ADS-B and privacy concerns.
ADS-B stands for Automatic Dependent Surveillance – Broadcast. By January 1, 2020, the majority of aircraft operating within the United States will be required to have ADS-B Out capabilities – and for aircraft registered internationally, some compliance deadlines are even sooner. Aircraft lacking ADS-B Out capabilities after that date will be effectively grounded or severely limited in where and how they can fly – perhaps for months!
The ADS-B Out requirements are just one element of the Federal Aviation Administration’s (FAA) Next Generation Air Transportation System (NextGen), which is being implemented in phases between 2012 and 2025. The purpose of NextGen is to transform America’s antiquated air traffic control (ATC) system from a radar-based system to a satellite based system.
What is ADS-B Out? ADS-B is technology that uses an airplane’s onboard global positioning system (GPS) to transmit the current position, speed, flight number and, most importantly, whether the airplane is climbing, descending or turning. The current radar-based system is not able to recognize and process information regarding climb, descent or turns. The transmitted information is sent to ATC and other aircraft. The current radar system sends updates once every two to twelve seconds. However, aircraft equipped with ADS-B Out capabilities transmit data every second. So, not only do the transmitted updates contain more information, including data on climb, descent and turns, but the updates also take place far more frequently.
Upgrading the system on an aircraft to incorporate ADS-B Out capabilities allows both ATC and pilots of other aircraft with ADS-B In to see the aircraft nearest to them with a graphical representation. While Traffic Alert and Collison Avoidance Systems (TCAS) currently provide some of this information, the additional data generated by ADS-B Out will make the information far more accurate.
With ADS-B Out equipped aircraft broadcasting not just their flight plans but their current position, speed, and flight number, aircraft can be tracked much easier. While there are many advantages to ADS-B Out, using this newly available information means it is easier for the world to know who is flying where.
There are two important steps that can be taken in order to minimize the public disclosure of aircraft locations:
1. Ownership structure. Using options such as a finance lease, owner trust or sole purpose entity to hold title could help preserve anonymity if structured properly.
2. Registration Number Blocking. In 2013 the FAA issued a notice that allows owners and operators to limit the display of aircraft situation display to industry (ASDI) data. Owners and operators can request the blocking of the flight tracking information. While this does not include data now available because of ADS-B, it can help. The process for opting out of this flight data feed can be found here:
While many associations, including National Business Aviation Association (NBAA) and the Aircraft Owners and Pilots Association (AOPA) have been vocal about the privacy concerns linked to ADS-B data, a solution is not known or planned for the immediate future. As a result, planning and implementing a favorable ownership structure at the time an aircraft is purchased has become more important, as well as taking advantage of registration number blocking made available by the FAA.
Please contact Amanda Applegate at 310-392-5200 or firstname.lastname@example.org.
This article was originally published in BusinessAir Magazine, July 2019, Volume 29, No. 7., August 13, 2019.
FAA Aircraft Registry Reaffirms its Position on Digital v. Electronic Signatures. see more
NAFA member, Scott McCreary, Vice President at McAfee & Taft, discusses the FAA's position on digital and electronic signatures.
The United States Federal Aviation Administration (FAA) issued a Memorandum to the FAA Public Documents Room on September 9, 2019, reiterating the position that it would accept documents with digital signatures, but not accept documents executed with only the electronic signature methodology. The Memorandum provides that “An electronic signature is a method of signing a document whereas a digital signature is the encryption/decryption technology of which an electronic signature is built. The digital signature secures the data associated with an electronically signed document.”
The Memorandum confirms that in the past the FAA Aircraft Registry (Registry) may have unknowingly accepted documents with merely electronic signatures. The most common electronic signatures filed with the Registry were produced with DocuSign or Adobe, but the Memorandum confirms both programs have a digital signature option that could be utilized.
By way of background, in May of 2016 the FAA issued a Notice of Policy Clarification for Acceptance of Documents With Digital Signatures (81 FR 23384). The Policy Clarification confirms that the Registry will accept printed duplicates of electronic documents that display legible, digital signatures that are filed in compliance with Parts 47 and 49 of the FAA Regulations (14 CFR parts 47 & 49). The Policy Clarification is clear that only digital signatures, as compared to the broader classification of electronic signatures, are acceptable. The Registry expands on the distinction between digital signatures and electronic signatures in its AFS-750 Change Bulletin 16-03, which further references FAA Order 1370.104, Digital Signature Policy.
The Policy Clarification goes on to provide that "A legible and acceptable digital signature will have, at minimum, the following components: (1) Shows the name of the signer and is applied in a manner to execute or validate the document; (2) Includes the typed or printed name of the signer below or adjacent to the signature when the signature uses a digitized or scanned version of the signer’s hand scribed signature or the name is in a cursive font; (3) Shows the signer’s corporate, managerial, or partnership title as part of or adjacent to the digital signature when the signer is signing on behalf of an organization or legal entity; (4) Shows evidence of authentication of the signer’s identity such as the text ‘‘digitally signed by’’ along with the software provider’s seal/watermark, date and time of execution; or, have an authentication code or key identifying the software provider; and (5) Has a font, size and color density that is clearly legible and reproducible when reviewed, copied and scanned into a black on white format."
Prior to the Policy Clarification, the Registry would only accept originally, ink signed documents. The use of digital signatures has certainly been a great benefit to the industry and very helpful for closing aircraft transactions which require filings with the Registry.
It is often difficult to determine if a document has been digitally executed, and different programs (such as DocuSign and Adobe) identify digitally executed signatures differently. Parties should be careful to make certain any documents filed with the Registry are ink signed originals or digitally executed in compliance with the Registry requirements.
Feel free to contact the aviation team at McAfee & Taft if you have any questions or comments.
This article was originally published by McAfee & Taft on September 9, 2019.
GAMA Welcomes Dickson Confirmation as FAA Administrator see more
Washington, DC — July 24, 2019 — The General Aviation Manufacturers Association (GAMA) President and CEO Pete Bunce today issued the following statement on the confirmation of Steve Dickson to serve as the next Federal Aviation Administration (FAA) Administrator:
“We congratulate Steve Dickson on his confirmation by the U.S. Senate. GAMA and its member companies look forward to working with him as the next leader of the FAA.”
“GAMA also strongly endorses Congress passing a waiver to ensure Dan Elwell continues to serve as FAA Deputy Administrator. Mr. Elwell has proven to be a very effective manager and leader at the FAA and will provide important continuity and support as Mr. Dickson takes over as Administrator.”
For additional information, please contact Paul Feldman, Vice President, Government Affairs, +1 (202) 393-1500 or email@example.com.
This release was originally published by GAMA on July 24, 2019.