Facts Change
Risk can be introduced into a flight department by any change, whether it is new personnel, new aircraft, or a business change to the entities that own or operate the aircraft. Best practice is to perform risk management acts every year.
The Risk
A flight department, although tasked with the responsibility of the aircraft, is generally not informed of a decision to change the management or ownership of the entities that own or operate the aircraft.
A change made for business or tax reasons may inadvertently invalidate an aircraft’s registration or result in an operating structure that violates the federal statutes and FAA regulations, resulting in an invalid airworthiness certificate, invalidating the insurance coverage and violating loan covenants.
The Actions
Educate
Educate the legal and accounting departments on risks that may be inadvertently introduced if the FAA regulations are not considered when changing the entities that own or operate the aircraft. If they do not regularly deal with aviation issues, they do not realize that violation of the federal statutes and FAA regulations can result in FAA civil penalties, additional taxes, interest and penalties and the possible denial of coverage by the insurance if a claim is made.
Ask Questions
- Ask the legal department about any changes to ownership or management of entities in the chain of entities that own aircraft. Ask about any change in business operations in the entities that operate the aircraft.
- Ask the accounting department about the current payment flows for dry leases, timeshares and interchange agreements.
Contact Jetstream Aviation Law to help you identify and manage the implications of any prior or pending changes in the entities that own or operate the aircraft.
Michelle M. Wade is a partner with the law firm of Jetstream Aviation Law and counsels clients on the acquisition, financing and operation of corporate jets operated under Part 91 and Part 135 of the Federal Aviation Regulations. Jetstream Aviation Law can be found at www.JetstreamLaw.com.
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.
