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Aircraft Management Services Agreement

Although from a practical point of view it may seem that there is not much difference between the two structures (after all, the same person or company flies on the plane and pays the cost of flights), the use of the wrong structure can lead to serious negative consequences. These consequences may include violations of insurance policies (and possible denial of coverage by the insurance company in the event of an accident), breaches of credit agreements, CIVIL fines from the FAA against the SPE, penalties for pilots of the aircraft (for example. B, fines and licence suspension) and federal excise duties. In addition, liability protection planning can potentially be compromised due to the penetration of the corporate veil argument (since the MAIN activity of the SPE is to conduct illegal flight operations). This structure is also more likely to undermine typical government revenue and tax planning. Essentially, the flight department company`s trap is a situation in which spe illegally operates its aircraft because stricter FAR applies to SPE`s flight operations, but these stricter rules are not followed because the SPE operates flights exclusively under Far Part 91. The main activity of an SPE would be air transport, since there is no other main commercial activity carried out by the SPE (which leads to the description “Flight Department Company”). Therefore, the SPE cannot meet the requirements of FAR 91.501(b)(5). In addition, Part 91 of the FAR does not allow the aircraft operator to receive compensation of any kind, except under certain limited exceptions. Capital contributions by a person or his or her operating company to the SPE (which would generally be the only means of financing the operation of the aircraft, since the only asset of the SPE is the aircraft) are considered compensation. Most aircraft owners who own an aircraft choose to hire a management company to manage the day-to-day operations and maintenance of their aircraft. This allows the aircraft owner to focus on what they are doing well and hire someone else to handle something complex and highly regulated. Aircraft owners expect the management company to know how to maintain an aircraft so that the reliability of marine transportation is good, safety is not compromised, and the cost is reasonable.

Some general information will be useful. It is common for a special purpose vehicle (“SPE”), which is usually wholly owned by an individual or his or her operating company, to take possession of the aircraft. The aircraft management company usually prepares its management contract, which the SPE can sign. This happens frequently because the management company rarely has information on ownership structuring issues. The best advice I can give is that if the MA you receive is terribly one-sided, has outrageous conditions, or doesn`t match the proposal you received, switch to another management company. There are excellent management companies, and if the MA sent to you is not a fair agreement documenting the terms already agreed, it should immediately be a red flag on how the management company operates. Given the structure in which the SPE enters into the management contract, the Federal Aviation Administration (“FAA”) would likely consider the SPE to be a supplier of air transport services in exchange for compensation to the owner of the SPE. The fact that the SPE may be wholly owned by the recipient of such transport services or cannot be taken into account for federal income tax purposes is irrelevant. Once the management company has been selected, it will make available its standard management contract (“MA”). In general, the MA will specify how the aircraft and records are to be kept, when the owner must approve maintenance, fees for services, insurance requirements, and whether the owner chooses to allow the management company to charter the aircraft. I am fortunate to have the opportunity to work with a number of large asset management companies that have invested time and money in creating good MAs.

However, from time to time, I am asked to check out a master`s degree for a company I have never worked with before, and I am sometimes shocked by what I find. The following is a list of some of the key points to focus on when reviewing maid the MA: Aircraft owners often arrange for aircraft management companies to provide comprehensive aircraft management services for aircraft operations under Part 91 of the Federal Aviation Regulations (“FAR”). However, if the aircraft management company enters into a contract with the owner of the aircraft, there is what is called the “flight department company trap”, which can have serious negative consequences. FAR 91.501(b)(5) permits the conduct of flight operations in accordance with Part 91 of the FAR if the carriage of officers, employees, guests and property of a Corporation on board an aircraft operated by that Corporation is within and incidental to the Corporation`s business (other than air transportation) and no fees, assessments or charges are charged for the transportation, which goes beyond the cost of ownership. Aircraft operation and maintenance. This usually means that flights must be made to promote a main business activity of the company. For example, flying executives of a company that sells widgets to a manufacturing plant where widgets are manufactured to monitor production would be part of the company`s core business and would be secondary. Fortunately, aircraft owners can still hire aircraft management companies to help them operate FAR Part 91 flights if properly structured. Generally, the structure would mean that the SPE would lease the aircraft “dry” (i.e., lease the aircraft without a crew) to a person or its operating business, and that the person or company would enter into the aircraft management agreement.

That person or company would then pay the aircraft management company, and the person or company would be considered by the FAA to be the operator of those flights. Ideally, SPE would not participate in cash flow relative to the aircraft`s operating budget and would instead only have cash flow revenues from the dry lease. The Aircraft Management Agreement (the “Agreement”) entered into on October 1, 2002 by and between FL Aviation Corp. (FL), a company incorporated under the laws of the State of Delaware and headquartered at 9 Airport Road, Morristown Municipal Airport, Morristown, New Jersey 07960 and Citadel Broadcasting Corporation (Citadel) headquartered at 7201 West Lake Mead Boulevard, Suite 400, Las Vegas, NV 89128 Home > Publications > Articles > Aircraft Management Arrangements and Flight Department Trap Company. This Aircraft Management Agreement (this “Agreement”) is effective on May 22, 2003 between 7700 PROPERTIES, L.L.C., an Oklahoma limited liability company (“Owner”), and UNITED STATES AVIATION CO., an Oklahoma corporation (“Manager”). THIS AIRCRAFT MANAGEMENT AGREEMENT, AS AMENDED AND AMENDED (the “Agreement”) will be signed on September 30, 2008 by and between DUNCAN AVIATION, INC. (“Duncan”), National Education Loan Network, Inc. as successor in title to Nelnet Corporate Services, Inc.

(“Nelnet”) and Union Financial Services, Inc. (“UFS”) (Nelnet and UFS are sometimes referred to individually herein as “co-owners” and collectively as “co-owners”) and is made by reference to: Learn more about FindLaw`s newsletters, including our Terms of Use and Privacy Policy. This website is protected by reCAPTCHA and Google`s privacy policy and terms of use apply. . THIS AMENDED AND AMENDED AIRCRAFT MANAGEMENT AGREEMENT (the “Agreement”) will be effective on December 16, 2005 (the “Effective Date”) by and between KRAFT FOODS GLOBAL, INC., a Delaware corporation headquartered at Three Lakes Drive, Northfield, IL 60093 (“Kraft”), and ALTRIA CORPORATE SERVICES, INC., a New York corporation headquartered at 120 Park Avenue. New York, NY 10017 (“Manager”). For more information on this topic or other requirements related to business aviation, please contact Ryan Swirsky (rswirsky@gkglaw.com or 202.342.5282). This Aircraft Management Agreement (this “Administrative Agreement”) is dated October 16, 2009 between LW Air I LLC, a Delaware limited liability company that is the trustee under this special trust agreement dated October 19, 2009 between the Owner and Wells Fargo Bank Northwest, National Association (“Owner”) and Avantair, Inc., a Delaware Corporation (“Manager”). The e-mail address cannot be subscribed. Please try again.

Aircraft ownership and operation is a complex issue that requires the consideration of multiple, often competing, factors. GKG Law`s business aviation lawyers have in-depth knowledge of aviation, taxation and regulation, and we are one of the country`s leading firms primarily dedicated to business aviation law. .

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