AIN Staff

<p><em>AIN’s 2024 Corporate Aviation Leadership Summit (CALS) East brought together a selection of business aviation thought leaders to examine and discuss some of our industry’s pressing issues. The session’s topics included Legal, Metrics, Safety, Managing Generational Differences, Insurance, Sustainability, Mental Performance (health), Maintenance, and Retention.</em></p>
<p>Like en-route weather, the legal landscape impacting business aviation seems to change hourly. Whether it’s the renewed focus on Truth in Leasing documentation, aircraft sharing guidelines, or rules protecting aircraft and passenger privacy, navigating today’s legalities has become more challenging than ever.</p>
<p>To provide as much pertinent information as possible regarding such detailed topics, the CALS East Legal Roundtable attendees fielded questions, which were then answered by Scott McCreary, the session’s moderator and aviation law specialist.</p>
<h2>The impact of Truth in Leasing in today’s business aviation landscape.</h2>
<h3>What is Truth in Leasing?</h3>
<p>It’s not uncommon for there to be confusion between an aircraft lessee and a lessor about who has “operational control” of an aircraft. The Truth in Leasing set out in FAR 91.23 helps parties clearly define who is responsible for taking control of the aircraft’s maintenance, insurance, pilot requirements, and the like.</p>
<p>FAA Advisory Circular 91-37B provides more color to the FAR requirements, provides a framework for understanding aircraft operational control responsibilities, and specifies what information should be contained in the aircraft leasing agreement today.</p>
<h3>What should a lessor or lessee address in an aircraft lease as it relates to operational control?</h3>
<p>All of the regular items that fall under an aircraft’s “operational control,” including:</p>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Aircraft and crew scheduling, crew conduct, and flight termination</p>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Whom does the crew work for as direct employees or agents</p>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Where is the aircraft maintained, and who pays for that maintenance</p>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Who determines weather/fuel requirements and who pays for the fuel</p>
<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Who directly pays for all airport/handling, catering, and other operating costs</p>
<h3>What are common mistakes parties make when complying with Truth in Leasing?</h3>
<p>It is not taking time to understand what the Regulation requires, like having a written lease with the required clause in all CAPS above the signature pages.</p>
<p>Other common errors are failing to carry a copy of the signed lease on the aircraft at all times, not providing the appropriate FSDO with a copy of the signed lease at least 48 hours before the first flight, or not mailing a copy of the executed lease to the appropriate FSDO within 24 hours of the lease signing. (This is not the same thing as perfection filing).</p>
<h3>Is Truth in Leasing documentation required for all leased aircraft?</h3>
<p>The documentation is only “required” for aircraft weighing over 12,500 pounds, but the FAA confirms in the AC that the concepts of clearly defined operational responsibilities are to be applied broadly to all aircraft to ensure any person who is seeking to lease an aircraft clearly understands the meaning of “operational control.”</p>
<h2>Don’t get snared by aircraft “sharing.”</h2>
<h3>We’ve heard that aircraft sharing can be a good option. Is it?</h3>
<p>When they’re not using their aircraft as often as anticipated, owners may want to consider sharing its use to defer costs. It can be done more easily if the aircraft is operated under Part 135. However, if it is operated under Part 91, there are many more restrictions and requirements.</p>
<p>Remember, though, that the FAA does not allow a Part 91 operator to share the use of its aircraft and receive any sort of compensation for that use except in limited circumstances. FAR 91.501 sets out a limited number of scenarios where parties can share the use of an aircraft and receive limited reimbursement for that use.</p>
<h3>How is “compensation” determined?</h3>
<p>Compensation is considered any charge, assessment, fee, or quid pro quo and does not require a profit. Compensation can only be the reimbursement of direct operating costs. Capital contributions can also be a form of compensation.</p>
<h3>We are considering “dry leasing” our aircraft to another company. Is that a good option?</h3>
<p>Parties can share the use of an aircraft through a dry lease arrangement where the lessee is truly in operational control and operating the aircraft. The lessee would need to engage its own pilots and crew and understand it is responsible and has liability, both from a regulatory and third-party tort perspective, for operating the aircraft.</p>
<h3>What are your thoughts on “joint ownership?”</h3>
<p>Traditional joint ownership agreements (JOAs) require the aircraft owners to each be registered owners of the aircraft of record with the FAA and designate one of the “joint owners” to manage and operate the aircraft for the other(s).</p>
<p>JOAs are an excellent option for some parties. The only problem with JOAs is that they may limit further cost-sharing that may otherwise be available under sections of FAR Part 91.501. Parties may also want to consider a co-ownership option where each “co-owner” is in operational control while using the aircraft.</p>
<h2>Keeping your private flights private.</h2>
<h3>Our leadership team is concerned about people tracking our flights. What can we do?</h3>
<p>First, you need to understand that the FAA and other government authorities need to know who owns and operates a specific aircraft, but that information does not need to be broadcast to the general public.</p>
<p>Required information for the FAA includes the aircraft’s registration, ownership/bill of sale/lease documents, flight logs and records, certain letters of authorization, and similar documents.</p>
<p>Further to a General Accounting Office (GAO) report issued a few years ago, the FAA is requiring more information from each aircraft owner, including detailed data about any person or entity that is a “beneficial owner.”</p>
<h3>What can we do to protect our aircraft’s identity?</h3>
<p>Carefully consider what information will be in the public record and plan accordingly to mitigate that information’s exposure. Clients often don’t understand that the details of a limited liability company (LLC) or loan document filed with the FAA are public records.</p>
<p>Clients can use privacy structures to provide all the necessary and required information by the FAA, but not broadcast that information to the general public.</p>
<p>Another proactive step you can take is to make sure your aircraft is submitted on the PIA and BARR programs.</p>
<h3>What are the PIA and BARR programs, and how do they work?</h3>
<p>The FAA’s Privacy ICAO Address (PIA) program enables aircraft owners to receive temporary, non-persistent ICAO addresses, which prevents unauthorized tracking of the aircraft’s movements. Because of the time it takes to obtain a PIA from the FAA and activate it on the aircraft, operators should plan to make the request 60 days before the planned flight.</p>
<p>The Block Aircraft Registration Request (BARR) program is managed by the NBAA in cooperation with the FAA and allows owners to request that their aircraft’s flight information be blocked from being accessed by the general public or third-party services that monitor aircraft movements.</p>
<p>There are different levels of BARR services available, ranging from total information blocking to where only “authorized users” can see the aircraft’s data. The more extensive blocking can sometimes create unintended operational issues for the parties.</p>


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AIN 2024 Corporate Aviation Leadership Summit, East – Legal, Moderated by Scott McCreary, Attorney, McAfee & Taft

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