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  • NAFA Administrator posted an article
    Operational Control And Aircraft Leasing: What’s The Big Deal? see more

    NAFA member, Greg Reigel, Partner at Shackelford, Bowen, McKinley & Norton, LLP., discusses operational control and aircraft leasing.

    From the FAA’s perspective, operational control in aircraft leasing transactions is not just a “big deal”, it is “the” deal.

    What Is Operational Control?

    14 C.F.R §1.1 defines operational control as “the exercise of authority over initiating, conducting or terminating a flight.”  In a “wet” lease situation, since the lessor is providing both aircraft and crew, the lessor maintains operational control of all flights.  And in the absence of a specific exemption (such as under 14 C.F.R. § 91.501(c) the lessor who is operating an aircraft under a wet lease will need to have an air carrier certificate to legally operate the aircraft.

    In a “dry” lease situation, the lessee provides its own flight crew, and the lessee exercises operational control over its flights.  The lessee’s operations may be conducted legally under 14 C.F.R. Part 91 without an air carrier certificate.

    It is important to keep in mind that the FAA will look beyond the actual written agreements to determine who has operational control.  Although a lease may be written as a dry lease and says “Dry Lease” at the top of the agreement, for example, that does not mean the FAA cannot take the position that the arrangement is really being conducted as a wet lease.  And if the FAA takes that position when the lessor who is actually operating the aircraft for the lessee does not have an air carrier certificate, then that will be a problem for the lessor, and potentially for the lessee as well.

    Why Does It Matter?

    If the lessor is exercising operational control, then the flight must be conducted in compliance with regulations that are stricter than Part 91 (i.e. Parts 121 or 135). Those regulations limit the types of airports the lessor may utilize, crew qualifications, crew rest and duty times, maintenance requirements etc.  Additionally, the lessor under a wet lease arrangement is required to remit federal excise tax on the amount charged to the lessee.

    Alternatively, if the lessee has operational control under a dry lease the lessee is permitted to operate under the less restrictive and less costly requirements of Part 91.  And federal excise tax is not due on the amounts paid by the lessee to the lessor, although sales tax is often assessed on the lease rate.

    How Do You Determine Who Has Operational Control?

    The FAA has issued guidance for determining which party has operational control in a leasing arrangement.  Advisory Circular 91.37B Truth in Leasing provides FAA inspectors with an explanation of leasing structures and how they may or may not be compliant with the regulations.  Although AC 91.37B only applies to aircraft subject to the requirements of 14 C.F.R. § 91.23, and it is not regulatory in nature, FAA inspectors also use this guidance when reviewing leasing structures that are not subject to truth-in-leasing requirements.

    Here are the types of questions an FAA inspector will ask when the inspector is trying to determine which party has operational control in an aircraft leasing situation:

    • Who decides crewmember and aircraft assignments?
    • Who accept flight requests?
    • Who actually initiates, conducts, and terminates flights?
    • Are the pilots direct employees or agents for the lessor, the lessee, or someone else?
    • Who is responsible for aircraft maintenance and where is that maintenance performed?
    • Who decides when/where maintenance is accomplished, and who pays the maintenance provider for that service?
    • Prior to departure, who ensures the flight, aircraft, and crew comply with regulations?
    • Who determines weather/fuel requirements, and who pays for the fuel at the pump?
    • Who directly pays for the airport fees, parking/hangar costs, food service, and/or rental cars?

    If properly drafted, an aircraft dry lease agreement should answer these questions and, to the extent the answer for any item is “the lessor”, then the lease should explain that answer and how it does not negate lessee’s exercise of operational control.

    For example, if the aircraft is leased to more than one lessee, it may make more sense for the lessor to retain responsibility for maintenance to ensure that the aircraft is consistently maintained in an airworthy condition.  Similarly, lessor maintaining an insurance policy insuring the aircraft and the various lessees may be necessary to make certain the aircraft is insured appropriately.

    However, responsibility for maintenance or insurance are just two indicia of operational control.  And the lessor’s responsibility for maintenance or insurance does not negate the lessee’s responsibility for ensuring that the aircraft is in an airworthy condition and the lessee’s is properly insured prior to any operations conducted under a lease.  Appropriate language in the lease can explain these issues so an FAA inspector reviewing the lease does not misunderstand and draw the wrong conclusion.

    Also be aware that some FAA inspectors rely upon AC 91.37B but do not fully or properly understand its guidance.  For example, in one instance AC 91.37B states “[t]he FAA has taken the position that if a person leases an aircraft to another and also provides the flightcrew, fuel, and maintenance, the lessor of the aircraft is the operator.”

    This language is sometimes misunderstood by inspectors to mean that a lessee does not have operational control when the lessor is responsible for maintenance.  But that is incorrect.

    The key indicia in the language above is lessor’s providing the flightcrew.  However, lessor’s responsibility for maintenance by itself does not indicate that lessor is improperly exercising operational control over lessee flights.  Although it may indicate that lessor is exercising some operational control, without other indicia of operational control by the lessor, performance of maintenance alone is not conclusive.

    Conclusion

    Operational control in aircraft leasing arrangements is, and will continue to be, an area of special emphasis for the FAA.  Although the terms of the lease and other transaction documents are important, the FAA is not bound by those terms when it is making an operational control determination.  Rather, it will also look at the actual arrangements between the parties, as well as the responsibilities of each party, especially if they are inconsistent with the lease.

    When the FAA determines that lessor is exercising operational control in what is supposed to be a Part 91 dry leasing transaction, you can expect that it will act.  Depending upon the circumstances, pilots and operators could be faced with certificate action and civil penalty action.  It is important to understand the indicia of operational control and to be able to determine which party is exercising operational control in an aircraft leasing transaction.  Only then will you be able to ensure that you are operating in compliance with the regulations.

    This article was originally published by Shackelford, Bowen, McKinley & Norton, LLP., on Feburary 5, 2021.

  • NAFA Administrator posted an article
    Industry Advancement Through Regulatory Improvements see more

    NAFA member, Pete Bunce, President & CEO of GAMA, discusses regulatory improvements in the aviation industry.

    For the general and business aviation industry to thrive, it is essential that regulatory improvements keep pace with the continued growth and evolution of the industry. Recently, we have been fortunate to see such positive collaborations between authorities, regulators and stakeholders take shape to progress the health of the industry and its safety. 

    Earlier this year, both the Federal Aviation Administration (FAA) and the European Union Aviation Safety Agency (EASA) issued guidance on the use of remote and virtual assistance technologies to support certain tests, inspections and oversight activities. These technologies have been particularly useful during the pandemic as they facilitate safe and cost-effective options for inspections and certifications to continue in a timely manner. The success of these technologies will rely on the ongoing collaboration between the industry and FAA/EASA to broaden and improve its use where practical and appropriate, especially in the long-term. 

    Just recently, we witnessed EASA issue its first Air Operator Certificate (AOC) to a business aviation operator, Luxaviation Group. For companies that operate in multiple EU member states, including maintenance and training organizations, an AOC permits EASA to become that company’s competent authority, much like the FAA, instead of being overseen by the national authority in each individual country.

    The ability to operate under a centralized authority will assist in streamlining operations and provide more consistency in regulatory interpretation and oversight. As more European companies see the productive environment which comes from operating under an AOC, they will likely begin to follow suit. This will turn will create more opportunities for general and business aviation to thrive in Europe.

    Another significant regulatory advancement was recently reached with the FAA’s notice of availability for Accepted Means of Compliance to part 23 general aviation airworthiness requirements. While this set of consensus standards did take an extended period of time to be published, their release was much anticipated and welcome. These standards will enable and encourage safety and innovation in general aviation airplanes and further developments in advanced air mobility and electric vertical take-off and landing aircraft. This recognition of updated and new standards demonstrates how the collaborative relationships between authorities and industry enables equipage of safety enhancing and innovative technologies into general aviation in a timely manner.

    While these regulatory improvements have been in the works for some time, their current implementation will certainly assist our industry as we continue to navigate through the pandemic, as well as going forward. We applaud both the FAA and EASA for their work in bringing these regulatory improvements into fruition. They will have a profound impact on the growth of the industry, especially when it comes to advancing safety, innovation and technology.

    At the General Aviation Manufacturers Association, we worked with the regulators and authorities to see these regulatory improvements implemented. Our work will continue as we focus on meeting the challenges that our industry faces, both in the short-term and in the long-term. These latest advancements will certainly assist in guiding our industry into the future, which is sure to be bright.  

    This article was originally published in Aviation Pros on December 10, 2020.

  • NAFA Administrator posted an article
    AINsight: How Dry Leases Can Prevent Illegal Charter see more

    NAFA member, David G. Mayer, Partner at Shackelford, Bowen, McKinley & Norton, LLP, discusses how dry leases can prevent illegal charter.

    Is it possible that a subtle shift is occurring away from the pervasive and persistent menace of illegal charter operations? Anecdotally, and perhaps for me just hopefully, I am seeing more aircraft owners, operators, lessees, and lessors asking whether they need some type of leasing or other structure to avoid FAA scrutiny or personal liability.

    Leasing enables a lessee, which may be an individual or entity (person), to lawfully “operate” and thereby exercise “operational control” over an aircraft under the FARs. Only one person has operational control. Leasing offers a broad array of benefits and structures to direct cash flow from lessees to lessors and vendors, manage risk, minimize certain taxes, share aircraft use and cost among unrelated and affiliated parties, and facilitate commercial operations under FAR Part 135.

    But leasing is not an incidental subject, as explained in the General Aviation Dry Leasing Guide developed by NBAA and several other aviation alphabet groups. This 17-page publication informs aircraft buyers, owners, lessors, lessees, lenders, brokers, lawyers, and other advisors about the flexibility, utility, regulatory aspects, and complexity of leasing.

    Key FAA Leases: Dry and Wet

    It is essential first to understand that a “lease” under the Uniform Commercial Code in part means a transfer by a “lessor” to a “lessee” of the right to possession and use of an aircraft for a term in return for consideration—usually hourly, fixed, and/or variable rent payments.

    In contrast, a true lease might exist when the lessor retains residual value risk—the remaining value of the aircraft at the end of the lease term. Sellers do not take this risk. Finally, a charter is not a lease; it is a service, with no change of aircraft possession.

    Under FAR 91.23, “a lease means any agreement by a person to furnish an aircraft to another person for “compensation or hire, with or without flight crewmembers, that is not a contract of conditional sale.” In this context, the FAA identifies two extremely important categories of leases in Order 8900.1: dry leases and wet leases.

    Dry lease refers to an aircraft transaction in which the lessor provides the aircraft, the lessee independently supplies the crewmembers, and the lessee retains operational control of the flight. FAR 1.1 defines a core regulatory concept of operational control with respect to a flight as “the exercise of authority over initiating, conducting, or terminating a flight.”

    Illegal or unsafe operations may occur when leases or other contracts do not specify who is responsible for operational control of the aircraft and in other circumstances. As such, the FAA focuses on operational control in assessing whether a flight operation is an illegal charter or valid Part 91 operation.

    Operational control under Part 91 does not mean the traveler must fly the aircraft personally. An aircraft owner or lessee typically delegates that responsibility to pilots under Part 91 or charter operator under Part 135. I sometimes refer to the one person that exercises operational control as having the liability target on the person’s back.

    For example, in one of the most common uses of dry leases, an owner enters into a dry lease between a limited liability company (LLC), as the single-purpose aircraft owner entity, to put operational control of flight operations into the hands of one person as the lessee in compliance with Part 91.

    A major business enterprise for profit may be an appropriate dry lessee if the aircraft serves the business of the enterprise whose operations generate substantially more revenue than the operating costs of the aircraft. The LLC owner/member may also agree to an “exclusive dry lease,” with one lessee/operator or “non-exclusive leases” with multiple aircraft lessees/operators under their separate non-exclusive leases.

    The finance world routinely uses exclusive dry leases of various types to enable a lessor to buy an aircraft and lease it to a lessee without crew under a long-term lease. Here, the lessee similarly supplies the crew and assumes all obligations under the lease for the care, custody, and control of the aircraft during the term, including for its maintenance, crewing, operations, cost payments, insurance, and taxes.

    Despite the availability of leasing, new and current aircraft owners still frequently violate the FARs when their LLCs operate the aircraft but have no business other than to own and operate their aircraft, converting the LLCs into illegal “flight department companies.” Such a single-purpose LLC cannot lawfully conduct these operations, share the aircraft for any compensation (anything of value), or offer the aircraft for hire to others unless the LLC obtains an air carrier certificate under Part 119 and operates the aircraft under Part 135. It is quite feasible to use non-exclusive or exclusive dry leases to rectify or avoid these violations.

    In contrast to a dry lease, the FAA defines a wet lease in FAR 110.2 as an aircraft lease whereby the lessor provides both an entire aircraft and at least one crewmember to a lessee. The lessor retains operational control of the flight, unlike a dry lease where the dry lessee supplies its own crew, directs many aspects of flight operations, and retains operational control.

    Another significant distinction exists between Part 91 private operations and Part 135 commercial operations conducted by the air carrier that influences lease structuring. The air carrier (charterer) has the liability target on its back instead of the person that would otherwise exercise operational control under Part 91. This feature appeals to risk-averse Part 91 lessees or owners that want to mitigate the risk of liability for accidents involving their aircraft under their operational control of the aircraft.

    When the Rubber Hits the Runway

    When the conduct of flights blurs the line in determining whether one lessee/passenger has operational control or the lessor/aircraft provider has operational control under Part 91, illegal charter operations may be occurring. Lessees normally must understand and accept operational control and related obligations.

    Although the FAA has no specific criteria to determine when Part 91 dry leases morph into illegal wet leases, lessees should be wary of lessors that offer leases to multiple unrelated parties, induce the parties to hire the lessor’s pilots, and usurp the lessee’s independence in exercising operational control.

    Importantly, the lease parties of large civil aircraft (over 12,500 pounds mtow) must comply with FAR 91.23, the Truth-in-Leasing rules. These rules, which protect and inform lessees, require the filing with the FAA of a copy of the lease within 24 hours of signing and notice to the local FAA Flight Standards office at least 48 hours before the first flight under the lease.

    Conclusion

    There is no excuse for operating an aircraft as an illegal charter, especially when leasing aircraft provides a reasonable way to transfer rights to lessees to possess and use an aircraft under the lessee’s operational control. With the guidance of knowledgeable aviation counsel, individuals and entities can operate safely, lawfully, and knowledgeably under the FARs using leases and other related documentation that will survive FAA scrutiny.

    This article was originally published on AINonline on January 15, 2021.

     

  • NAFA Administrator posted an article
    Insights From An FAA Illegal Charter Investigation see more

    NAFA member, Greg Reigel, Partner at Shackelford, Bowen, McKinley & Norton, shares insights from an FAA illegal charter investigation. 

    Recent FAA press releases have publicized the enforcement actions the agency is taking against those involved in illegal charter.  However, what is not publicized is how the FAA is investigating these cases.  A recent case in the U.S. District Court for the Southern District of Indiana provides an interesting glimpse into one such investigation.

    The Case

    In Elwell v. Bade et al., the FAA received complaints regarding alleged illegal charter activity.  In response, the FAA opened what has turned out to be a six year investigation.

    During its investigation, the FAA issued three sets of subpoenas over a three year period.  The last set asked for production of all documents related to agreements associated with use, ownership, and/or leasehold interest in certain aircraft under investigation for a specified period of time.  The recipients of the subpoenas (the “Respondents”) objected and refused to produce any documents.

    The FAA filed a petition with the U.S. District Court requesting enforcement of the subpoenas.  The Respondents objected to the subpoena by filing a motion to quash the subpoenas.  The Court refused to quash the FAA’s administrative subpoenas and ordered their enforcement.

    The Court concluded that “(a) the matter under investigation is within the authority of the issuing agency, (b) the information sought is reasonably relevant to that inquiry, and (c) the requests are not too indefinite.” However, the Court’s analysis and rationale also provide insight into some of the things the FAA can do, and when it can do them, in an illegal charter investigation.

    Here are some of the key takeaways:

    The FAA Has Authority To Issue Subpoenas In Connection With An Investigation

    Under 49 U.S.C. § 46101(a), the FAA may investigate violations as long as the agency has “reasonable grounds.”  Neither an enforcement action nor a lawsuit is necessary.  When a court reviews an agency’s subpoena requests, the court must make sure the agency does not exceed its authority.  And the threshold for the relevance of the documents/information requested by the administrative subpoenas is relatively low. The court must also confirm that the requests are not for an illegitimate purpose.

    In illegal charter investigations such as the Bade case, the FAA typically asks for

    • aircraft flight logs
    • flight summaries
    • aircraft lease agreements
    • operating agreements
    • interchange agreements
    • pilot services agreements
    • pilot payrolls
    • operating invoices
    • receipts etc.

    And, as in Bade, a court will likely hold that such requests are proper and do not exceed the FAA’s authority.

    Stale Complaint Rules Do Not Bar Subpoenas During An Investigation

    As you may know, stale complaint rules act to bar the FAA from acting in certain situations after a period of time.  For example, in certificate actions heard before a National Transportation Safety Board Administrative Law Judge, 49 C.F.R. § 821.33 may prevent the FAA from acting if it does not initiate the case within six months of advising the respondent of the reasons for the proposed action.  Similarly, in a civil penalty case, a case may be dismissed under 14 C.F.R Part 13.208(d) if the FAA does not initiate action within two years.

    However, these stale complaint rules do not apply to ongoing investigations where no action has been initiated.  According to the Bade court, the “FAA may conduct an investigation to assure itself that its regulations are being followed, regardless if it ultimately determines civil enforcement or formal charges are not warranted.”

    Similarly, the FAA may investigate a target who is “engaged in a continuing violation of [FAA’s] safety regulations.”  In Bade, the FAA argued it was not investigating stale claims.  Rather, it believed the respondents were engaged in continuing violations where “the statute of limitations restarts every day.”  And the Court agreed.

    (Interestingly, the Court did not address whether this analysis, and its decision, would have changed if the aircraft involved had been sold and/or the flight operations had ceased.  As a result, it is unclear whether the investigation would have been moot if applicable stale complaint rules prohibited enforcement action.)

    The FAA Does Not Have To Tell The Target Of An Investigation About Subpoenas

    Under 49 U.S.C. § 46104(c), an agency must only give notice to “the opposing party or the attorney of record of that party.”  However, an investigation has no “record.” As a result, since the target of the investigation is not the one being deposed nor is counsel to those targets being deposed, the target does not have a statutory right to receive notice of third-party depositions.

    The Bade court also noted that “’failing to receive notice of one or more depositions does not prove that the FAA’s investigation is a sham,’ and has ‘nothing to do with the enforceability of the Subpoenas or the motive of the FAA in conducting this investigation.’”

    So, potential respondents do not get to participate at third-party depositions or receive copies of documents produced in response to subpoenas. This certainly makes defending against an illegal charter investigation a more difficult task.

    The FAA’s Order 2150.3C Is Only “Guidance”

    In Bade the Respondents argued that the FAA had not followed its own policies when conducting the investigation.  Specifically, they argued the FAA failed to follow FAA Order 2150.3 – FAA’s Compliance and Enforcement Program. However, the Court rejected the argument.  It observed that Order 2150.3 is not regulatory.

    Rather, Order 2150.3 merely provides guidelines to FAA personnel for performing their duties. Thus, the Court concluded that the FAA’s failure to strictly adhere to Order 2150.3’s “guidance” did not negate its authority to investigate. Nor did it mean the FAA was pursuing the investigation for an improper purpose.

    Conclusion

    Illegal charter is a high priority for the FAA at the moment, and will be for the foreseeable future.  As a result, the agency will continue to investigate complaints of illegal charter.  It is important to understand how the FAA conducts these investigations and the extent of its authority.

    And it is imperative for aircraft owner or operator who is the target of an illegal charter investigation to know its rights. If you believe you are the target of an illegal charter investigation, contact us now so we can help you navigate the investigation and protect your rights.

    This article was originally published by Shackelford, Bowen, McKinley & Norton, LLP on June 23, 2020.  

  • NAFA Administrator posted an article
    Does the FAA Aircraft Registry Recognize a “mailbox rule”? see more

    NAFA member, Scott McCreary, Vice President at McAfee & Taft, discusses the "mailbox rule" and the FAA Aircraft Registry.

    Many people are aware of the old common law concept known as the "mailbox rule", whereby placing a document in the mail is considered under certain circumstances as tantamount to delivering or filing the document under applicable law. Unfortunately, some practitioners try to apply the mailbox rule generally to documents filed with the Federal Aviation Administration Aircraft Registry (“FAA”). Although it is true documents can be mailed to the FAA, 14 CFR § 49.19 confirms a conveyance (i.e. document that is recordable with the FAA) is considered filed for recordation with the FAA upon the date and at the time it is received by the FAA, not when placed in the mail. Likewise although a document may not be recorded by the FAA for days or even weeks after it has been filed/received, pursuant to 49 USC 44108 perfection relates back to the date and time of receipt by the FAA.  Thus the FAA filing stamp placed on the document denoting the date and time the document is received is controlling for purposes of perfection under the 49 USC Section 40101, et seq., as amended (“Act”).

    One limited exception to the foregoing is highlighted in a 1966 opinion (“1966 Opinion”) from FAA Associate General Counsel, Regulations and Codification Division, dealing with the filing of a bill of sale and AC Form 8050-1 Aircraft Registration Application (“Application”). Under 14 CFR § 47.31(c), an applicant for registration of an aircraft last previously registered in the United States must carry the second copy of the Application from the new owner in the aircraft as temporary authority to operate the aircraft within the United States. This temporary authority is valid for a period of up to 90 days after the date of the Application pending the FAA processing the documents and issuing a new certificate of aircraft registration in the name of the new owner. Before operating under this temporary authority, the applicant must comply with 14 CFR § 47.31(a) by “submitting” to the FAA an Application, evidence of ownership, and the applicable filing fee. In the 1966 Opinion, the FAA determined that for the limited purpose of operating an aircraft on a copy of the Application, for purposes of 14 CFR § 47.31(a) submission is satisfied by depositing the documents in the mail (the “FAA Mailbox Rule”).

    It should be noted the FAA did not determine the FAA Mailbox Rule applies to all documents/conveyances filed for recordation with the FAA. Simply mailing documents to the FAA by itself does not perfect rights created by the conveyances that are filed and recorded with the FAA under 49 USC 44108. The documents/conveyances must be received and recorded by the FAA, and the perfection relates back to the time of receipt by the FAA, not mailing. As such parties mailing documents to the FAA run obvious risk that other documents/conveyances may be received by, and considered filed with, the FAA before the mailed documents. Also at the time the 1966 Opinion was issued, the primary method of filing documents with the FAA was by mail. There has always been a presumption the use of an express courier services would be treated as placing the documents in the “mail”, but until recently the FAA has not confirmed the same. 

    Pursuant to COVID 19 the FAA modified its normal procedures for accepting documents. The FAA now accepts documents properly submitted by email. Furthermore, prior to COVID 19 parties could submit documents directly through the FAA Public Documents Room and obtain immediate file stamp copies of the documents. The FAA modified this procedure and documents are no longer filed directly, but placed in a filing bin outside the FAA Public Documents Room and picked up and processed throughout the day. In both instances the FAA has confirmed the documents are not officially filed/received until file stamped.

    Expanding on the 1966 Opinion, the Office of the Aeronautical Center Counsel, Central Regional Counsel of the FAA issued a new legal interpretation in June 2020 to Allison McGrew of McAfee & Taft. The new opinion confirms: (i) the completed copy of the Application becomes effective as temporary authority to operate an aircraft within the United States upon the submission or delivery of the Application, evidence of ownership and applicable filing fee to the FAA Registry; and (ii) consistent with the 1966 Opinion, provided the requirements of 14 CFR §47.31(a) are met, the copy of the Application becomes effective at the time the Application is sent via Priority Courier, sent via email, or delivered to the FAA via the FAA’s modified paper filing procedures. The new opinion is limited in scope to temporary authority to operate an unregistered aircraft under 14 CFR §47.31.

    This article was originally published by McAfee & Taft on August 10, 2020.

  • NAFA Administrator posted an article
    FAA Prohibits Use of Registered Agent’s Address for US Registered Owner of Aircraft see more

    NAFA member, Scott McCreary, Vice President at McAfee & Taft, shares information from the FAA.

    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.

    This article was originally published by McAfee & Taft on April 10, 2019.

  • NAFA Administrator posted an article
    Lease Agreements! But Wait, There's More! see more

    NAFA member, Air Law Office, P.A., shares two more steps you should consider regarding your aircraft lease agreement.

    You’ve set up your operational structure for your “large civil aircraft” and you have your Part 91 lease in place, what now?  Whether you have purchased a new-to-you aircraft, or you are changing up your operational structure, you’ve found a new lessee to use your aircraft on a Part 91 basis, there are 2 more steps that you have to take.  Many owners and lessees think that the work is finished once the lease agreement is signed, but they are wrong.  The FAA requires that 2 separate copies of the lease agreement must be sent to 2 separate offices of the FAA before the aircraft flies under the new lease agreement.

    First, under FAR §91.23 within 24 hours of execution, a signed copy of the lease agreement shall be mailed to the FAA Aircraft Registration Branch (AFS-750), Attn: Technical Section, P.O. Box 25724, Oklahoma City, OK 73125.  Note: filing the lease agreement with Registry to satisfy this truth-in-leasing requirement does not constitute filing under 14 CFR part 47 or 49 to register the aircraft, or to record for public notice.

    Second, again under FAR §91.23, the lessee must notify the FSDO closest to the aircraft’s departure airport at least 48 hours prior to the first flight under the lease agreement.  This notice can be in-person, via telephone, via fax or via email, depending on the requirements of that FSDO.  The notice must include the identity of the departure airport and the proposed time of the departure of said first flight.

    The Bottom Line:  Be sure to send a copy of the executed lease to Oklahoma City, send a copy to the appropriate FSDO and be sure to carry a copy on-board the aircraft during all applicable operations!  Check in with your legal team ASAP to be sure you are in compliance!  Remember, this article is intended to inform you about issues that you should discuss with your financial and/or legal team and is not intended as legal advice or opinion, you should not act on any information contained in this (or any other) article without directly consulting legal counsel.

    This article was originally published by Air Law Office, P.A. on August 14, 2020.

  • NAFA Administrator posted an article
    GAO Report: FAA Needs to Better Prevent, Detect, and Respond to Fraud and Abuse Risks in Aircraft Re see more

    NAFA member, Scott McCreary, Vice President at McAfee & Taft, shares the GAO Report.

    Today the U.S Government Accountability Office issued its long awaited report regarding the audit of the FAA Aircraft Registry. The report, titled "Aviation: FAA Needs to Better Prevent, Detect, and Respond to Fraud and Abuse Risks in Aircraft Registration" and can be found at www.gao.gov/products/GAO-20-164. The audit was extensive and ultimately provides the following recommendations:

    1. The Administrator of FAA should conduct and document a risk assessment that considers inherent and residual fraud and abuse risks that may enable criminal, national security, or safety risks. (Recommendation 1)
    2. The Administrator of FAA should determine impact, likelihood, and risk tolerance as part of a risk assessment. (Recommendation 2)
    3. The Administrator of FAA should develop a strategy that outlines specific actions to address analyzed risks, including periodic assessments to evaluate continuing effectiveness of the risk response. (Recommendation 3)
    4. The Administrator of FAA should collect and record information on individual registrants, initially including name, address, date of birth, and driver's license or pilot's license, or both, with subsequent PII elements informed by the risk assessment, once completed. (Recommendation 4)
    5. The Administrator of FAA should collect and record information on legal entities not traded publicly—on each individual and entity that owns more than 25 percent of the aircraft; for individuals: name, date of birth, physical address, and driver's license or pilot's license, or both; and for entities: name, physical address, state of residence, and taxpayer identification number. (Recommendation 5)
    6. The Administrator of FAA should verify aircraft registration applicants' and dealers' eligibility and information. (Recommendation 6)
    7. The Administrator of FAA should increase aircraft registration and dealer fees to ensure the fees are sufficient to cover the costs of FAA efforts to collect and verify applicant information while keeping pace with inflation. (Recommendation 7)
    8. The Administrator of FAA should ensure, as part of aircraft registry IT modernization, that information currently collected in ancillary files or in PDF format on (1) owners and related individuals and entities with potentially significant responsibilities for aircraft ownership (e.g., beneficial owners, trustors, trustees, beneficiaries, stockholders, directors, and managers) and (2) declarations of international operations is recorded in an electronic format that facilitates data analytics by FAA and its stakeholders. (Recommendation 8)
    9. The Administrator of FAA should link information on owners and related individuals and entities with significant responsibilities for aircraft ownership through a common identifier. (Recommendation 9)
    10. The Administrator of FAA should, as part of IT modernization, develop an approach to check OFAC sanctions data on owners and related individuals and entities with potentially significant responsibilities for aircraft ownership for coordination with OFAC and to flag sanctioned individuals and entities across aircraft registration and dealer systems. (Recommendation 10)
    11. The Administrator of FAA should use data collected as part of IT modernization as well as current data sources to identify and analyze patterns of activity indicative of fraud or abuse, based on information from declarations of international operations, postal addresses, sanctions listings, and other sources, and information on dealers, noncitizen corporations, and individuals and entities with significant responsibilities for aircraft ownership. (Recommendation 11)
    12. The Administrator of FAA should develop and implement risk-based mitigation actions to address potential fraud and abuse identified through data analyses. (Recommendation 12)
    13. The Administrator of FAA should develop mechanisms, including regulations if necessary, for dealer suspension and revocation. (Recommendation 13)
    14. The Administrator of FAA, in coordination with relevant law-enforcement agencies, should enhance coordination within the Aircraft Registry Task Force through collaborative mechanisms such as written agreements and use of liaison positions. (Recommendation 14)
    15. The Administrator of FAA, in coordination with relevant law-enforcement agencies, should develop a mechanism to provide declarations of international operations for law-enforcement purposes. (Recommendation 15)

    If implemented, these changes will clearly affect many individuals and companies that own and operate aircraft. The lawyers in the McAfee & Taft Aviation Group will continue to provide updates as the industry digests this information.

    This article was originally published by McAfee & Taft on March 25, 2020.

  • NAFA Administrator posted an article
    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 Aircraft Registry's position on digital versus 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.

    This article was originally published by McAfee & Taft on September 9, 2019.

     

     

  • NAFA Administrator posted an article
    The GAO Report Affects Dealers Too see more

    NAFA member, Debbie Mercer-Erwin, President of Wright Brothers Aircraft Title, discusses the latest report from the Government Accountability Office (GAO) regarding the FAA Registry practices.

    The much-awaited report from the Government Accountability Office (GAO) regarding Federal Aviation Administration (FAA) Registry practices was released in March, and the title is telling: “FAA Needs to Better Prevent, Detect, and Respond to Fraud and Abuse Risks in Aircraft Registration”.

    The FAA is responsible for issuing aircraft registration to individuals and entities meeting certain requirements: US citizenship, permanent/physical address, completed application, and bill of sale, among others. 

    They are also permitted to issue dealer certificates, or licenses, in support of aviation commerce – the same requirements apply, with the addition of substantial engagement in manufacturing or selling of aircraft.

    The main purpose is to allow manufacturers and dealers to conduct test flights for prospective buyers. To this effect, dealers can obtain more than one certificate, as well as use a certificate for any aircraft they own. The license is also generally valid for a dealer’s agent, employee, or prospective buyer.

    In 2018, approximately 71,000 registration applications and nearly 10,000 dealer certifications were processed at the FAA. Registering an aircraft for a 3-year period brings a $5 application fee, while a 1-year dealer license is $10 (plus $2 for additional certificates).

    At such a low amount – that in fact hasn’t changed since 1964 – FAA operating costs associated with processing applications aren’t even covered. This has left US taxpayers funding the Registry for decades. 

    Likewise, there has been nothing left over, or even earmarked, to enable the FAA to increase vetting of registrants, which is a top priority in the GAO’s report. Specifically, the report was based on analysis of FAA Registry function and ability to handle fraud and abuse risks in aircraft registrations, including dealer certificates.

    It’s well known that the FAA has generally relied on self-certification of registration applicants’ eligibility, requiring limited personally identifiable information (PII) that typically isn’t verified – the GAO’s report covers this factor in full, saying that the FAA’s focus on the completion of required documents limits their ability “to prevent fraud and abuse in aircraft registrations, which has enabled aircraft-related criminal, national security, or safety risks”.

    The GAO also discovered that the FAA does not routinely consider data from the Office of Foreign Assets Control (OFAC) in the application process – which discounts individuals or entities who are currently under sanctions.

    Similar happens with dealer certificates – the FAA does not verify identity, check for prior violations, or enforce requirements. In fact, FAA regulations do not contain any “enforcement mechanisms to ensure continued dealer eligibility once approved or at the time of renewal”.

    Because of these issues, as the GAO analysis discovered, fraud can occur. In one case, discovered years after the scheme had been enacted, a broker used falsified registration applications and bills of sale (with forged signatures for over 20 aircraft) to acquire $3 million from a bank.

    The broker wanted to save his failing aircraft sales company, and essentially pledged 22 aircraft he didn’t own as collateral to do so. This person was also a licensed dealer who even renewed his certificate while implementing the scheme. Unfortunately, the FAA’s application process didn’t catch the fraud, and resulted in some of the rightful aircraft owners being temporarily grounded.

    What does all of this mean for dealers though? In the end, the GAO made fifteen recommendations to the FAA. While they are all pertinent to the issues GAO discovered, a handful will affect dealers directly.

    To begin, collecting and recording information on individuals and legal entities not traded publicly (including each individual and entity that owns more than 25% of an aircraft), with subsequent PII elements possibly required (see Recommendations 4 & 5).

    Further, Recommendation 6 says the FAA “should verify aircraft registration applicants’ and dealers’ eligibility and information”.

    As stated above, PII elements are currently limited and not verified by the FAA, but with these recommendations, would be verified and possibly increased based on an initial risk assessment – requiring more documentation (and time) to obtain a license, but reducing the risks associated with limited review of ownership information.

    Recommendation 7 is also a huge factor in future dealer certifications, calling for increased registration and dealer fees to cover the cost of collection and verification efforts. 

    The FAA readily agreed to the GAO recommendations, having already begun massive modernization efforts under the Civil Aviation Registry Electronic Services (CARES) Initiative to increase efficiency and security.

    CARES is scheduled for completion by October of 2021 and is widely expected to streamline and automate the aircraft registration process, along with dealer certification, by making FAA records electronically, and publicly, available. 

    The goals: allow submission of electronic applications and forms, improve controls, automate registration processes, and improve online data availability – which will expand FAA’s ability to secure against fraud, and make it easier to perform cross-agency checks. 

    Stemming from the FAA Reauthorization Act of 2018 (check out our highlights), and followed by the Office of the Inspector General (OIG) report on implementing the update, the Registry is well on its way. 

    It is always important, however, to hire a company that knows the ins and outs of the FAA system to avoid errors in closing that could take time and money to correct – and it is especially so now. There are plenty of questions surrounding the accomplishment of all these efforts and recommendations, including: 

    How much ownership information is going to be made public, or government-access only? How much will registration and dealer certification fees increase to appropriately cover operation costs? Will FAA be tasked with more oversight and enforcement, and if so, how much time will that add to the registration process, and closing times? 

    Ultimately, the changes ahead will modernize the FAA’s Registry, helping to bring the aviation industry up to date in technology, efficiency, and security. There is still work to do, but we remain confident that every entity involved in this endeavor will fulfill expectations.  

    The FAA has not officially responded to the GAO’s report, but they have updated their website regarding the CARES Initiative.

    This article was originally published by Wright Brothers Aircraft Title on June 16, 2020.

  • NAFA Administrator posted an article
    Filing Aircraft Registration Documents With The FAA Registry During The COVID-19 Pandemic: What You see more

    NAFA member, Greg Reigel, Partner with Shackelford, Bowen, McKinley & Norton, LLP, discusses filing documents with the FAA Registry during the COVID-19 Pandemic.

    In another instance of a “new-normal” resulting from COVID-19, the window at the FAA Registry, where real-time filing of aircraft registration documents used to occur, has closed.  Although the FAA Registry is still open (for now), it has implemented new procedures for filing of aircraft registration documents.  Three options are now available for recording documents:

    Document Drop Bins.

    The FAA has placed two bins outside the Public Documents room.   One bin will be marked “Priority” and one bin will be for “Normal” processing (i.e. not priority).  The FAA will retrieve documents from the Priority Bin every hour. It will retrieve documents submitted for normal processing twice a day.

    Documents are filed when they are placed in one of the bins. However, will not be possible to obtain an immediate filing time for the documents as was the case in the past.  Actual filing times will only be available after the documents are indexed in, scanned and available for viewing online.  It is presently unclear how long that process will take.

    E-Mail Filing To An Electronic Portal.

    The FAA has a new e-mail filing process available subject to a number of limitations. Submitted documents must be digitally signed (i.e. Docusign, Adobe Sign, etc.) and each document must be 20 pages or less. Only one aircraft may be submitted in each e-mail and filing fees must be pre-paid at Pay.gov.

    After submission, FAA will send an e-mail acknowledging receipt.  However, documents will be processed during normal business hours with filing times available the same as when documents are filed via the bins.

    Filing Via Mail.

    As has always been the case, documents can still be filed via U.S. Mail, FedEx and UPS. And similar to the bin and e-mail filing, actual filing times will only be available once the documents are processed and in the FAA Registry’s system.

    These new processes will also impact timing for receiving a “fly-wire” and for receiving Form 135 needed to accomplish International Registry filings.  But it is unclear how much longer it will take to receive these back from the FAA.

    Conclusion.

    The good news:  The FAA Registry is still open and processing aircraft registration documents (for now). The bad news:  These updated procedures will result in some delays in closing transactions, and a little less certainty regarding when documents were actually “filed” by the FAA. For example, in a transaction transferring risk of loss at the time of filing, that could present a problem.

    Parties to aircraft transactions should review their documents to determine whether they are consistent with the new procedures. If they aren’t, parties should amend as needed.

    This article was originally published by Shackelford, Bowen, McKinley & Norton, LLP. on March 23, 2020.

  • NAFA Administrator posted an article
    Overview 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

     

  • Tracey Cheek posted an article
    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.

    VIEW THE RECORDED NBAA NEWS HOUR WEBINAR

    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.

  • Tracey Cheek posted an article
    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.

    Requested exemptions

    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.

  • Tracey Cheek posted an article
    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.

    Review the current version of the NBAA Small Aircraft Exemption.

    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.