Aircraft Dry Leasing
Leasing an aircraft can be an alternative to outright purchase for a variety of reasons ranging from practicality to cash flow. There are a wide variety of leasing options available, each with specific advantages and disadvantages. In general terms, a lease is a transfer of an aircraft without transfer of title. The owner of the aircraft, or lessor, retains legal title to the aircraft.
Aircraft leasing can be an alternative to outright purchase for a variety of reasons ranging from practicality to cash flow. There are a wide variety of leasing options available, each with specific advantages and disadvantages. In general terms, a lease is a transfer of an aircraft without transfer of title. The owner of the aircraft, or lessor, retains legal title to the aircraft, but transfers possession of the aircraft to the lessee. It is important to note that due to the broad range of options available, not all aircraft leases will meet the above definition.
Aircraft leasing is also regulated by the FAA in the Federal Aviation Regulations (FARs). The FAA classifies aircraft leases as either “dry leases” or “wet leases.” Under a dry lease, the aircraft owner provides only the aircraft and no crew. If at least one crew member is provided in the lease arrangement, this becomes a wet lease as defined in the FARs. A wet lease is an exception to the simple definition of a lease because it does not involve transferring possession of the aircraft. The lessor maintains operational control of the aircraft under a wet lease. Without a specific exemption, such as a time sharing agreement, or other options found under FAR 91.501, a wet lease requires an FAA commercial operating certificate.
“True” Dry Lease – As was stated before, a dry lease is an aircraft lease without a crew. Typically in a dry lease, the lessee is responsible for hiring the flight crew and has operational control of the aircraft. In these cases the lease is considered to be non-commercial and the lessee and the lessor are not required to hold an FAA-issued operator’s certificate as long as the lessee is not carrying persons or property for compensation or hire. The IRS agrees with the FAA on dry leases and the commercial FET is not due on the lease payments between the lessee and lessor.
“Sham” Dry Lease – This would be an example of someone trying to confuse the issue as to who has control of the aircraft. The typical case is where the lessor is providing the aircraft under a dry lease and is also providing the crew under a separate agreement. Another example would be where the lessor is leasing you the aircraft, but you have to get your crew from the lessor or a specified source. In both cases the plane and the crew are too closely connected. In the case of a “sham” dry lease or “damp” lease the FAA may take the position that the lessor should hold a commercial operating certificate. The IRS would more than likely consider the lessor to have possession, command, and control, and the commercial FET would be due on the lease and pilot service payments.
Full and Co-Ownership
As implied, an individual or business owns 100% percent of an aircraft. Full ownership allows the greatest level of flexibility and control over all factors relating to transportation. The aircraft owner is responsible for the level of safety, security, comfort, and cost of business travel. Aircraft operations can be managed by an in-house flight department or outsourced to an aircraft management company such as FlyMax Aircraft, LLC.
Full Ownership
As implied, an individual or business owns 100% percent of an aircraft. Full ownership allows the greatest level of flexibility and control over all factors relating to transportation. The aircraft owner is responsible for the level of safety, security, comfort, and cost of business travel. Aircraft operations can be managed by an in-house flight department or outsourced to an aircraft management company such as FlyMax Aircraft, LLC. To be cost effective, full ownership generally requires a minimum level of utilization. In general, if the company plans to utilize the aircraft for at least 200 flight hours per year, full ownership is a good option. Although for some companies, the benefits of business aviation are such that they purchase and operate a whole aircraft even at less than 200 hours of utilization per year.
Co-Ownership
Through a co-ownership structure, multiple companies are able to share in ownership of an aircraft. When operating the aircraft, each co-owner is responsible for providing the flight crew. The crew can be provided by the co-owner independently or through the management company. It is important to note that aircraft co-owners are not able to charge each other for operating the aircraft. This structure should be distinguished from a joint ownership agreement which allows registered joint owners to charge each other for certain operating costs.
At FlyMax Aircraft, LLC we are there to help you evaluate and take the stress out of managing your Aircraft ownership options.
Joint Aircraft Ownership
Joint ownership is defined in 14 CFR §91.501(c)(1) of the Federal Aviation Regulations (FARs) as an “arrangement whereby one of the registered joint owners of an airplane employs and furnishes the flight crew for that airplane and each of the registered joint owners pays a share of the charge specified in the agreement.
Joint aircraft ownership is defined in 91.501(c)(1) of the Federal Aviation Regulations (FARs) as an “arrangement whereby one of the registered joint owners of an airplane employs and furnishes the flight crew for that airplane and each of the registered joint owners pays a share of the charge specified in the agreement.”
Under this agreement, one registered owner may provide the flight crew and the other registered joint owner(s) may pay a share of the fixed ownership costs as specified in the agreement. Each joint owner is responsible for individually covering their own direct operating costs. All joint owners must be named on the registration certificate of the aircraft.
Only U.S. registered aircraft that are eligible to operate under Part 91 Subpart F may utilize a joint aircraft ownership agreement. To be eligible, the aircraft must fall into one of the following groups:
- The aircraft has a maximum takeoff weight of over 12,500 pounds, or
- The aircraft is a multiengine turbojet aircraft (regardless of size), or;
- The aircraft is a fractional program aircraft (regardless of size).
FlyMax Aircraft, LLC stands ready to assist you in structuring and managing this excellent aviation opportunity for your group.
Fractional Aircraft Ownership
Fractional ownership operations began in 1986 with the creation of a program that offered aircraft owners increased flexibility in the ownership and operation of aircraft. This program used current aircraft acquisition concepts, including shared or joint aircraft ownership, and provided for the management of the aircraft by an aircraft management company.
Fractional aircraft ownership operations began in 1986 with the creation of a program that offered aircraft owners increased flexibility in the ownership and operation of aircraft. This program used current aircraft acquisition concepts, including shared or joint aircraft ownership, and provided for the management of the aircraft by an aircraft management company.
The aircraft owners participating in the program agreed not only to share their own aircraft with others having a shared interest in that aircraft, but also to lease their aircraft to other owners in the program (dry lease exchange program). The aircraft owners used the common management company to provide aviation management services including maintenance of the aircraft, pilot training and assignment, and administration of the leasing of the aircraft among the owners.
During the 1990′s, the growth of fractional aircraft ownership programs was substantial and this growth is expected to continue. As these programs grew in size, complexity, and number, there was considerable controversy within the aviation community as to their appropriate regulatory structure. Additionally, the FAA had evolving concerns regarding issues of accountability and responsibility for compliance (operational control).
The FAA created the Fractional Ownership Aviation Rulemaking Committee through an order dated October 6, 1999. The objective of the FOARC was to “propose such revisions to the Federal Aviation Regulations and associated guidance material as may be appropriate with respect to fractional aircraft ownership programs.” The final result was Subpart K of Part 91 that specifically addresses fractional ownerships. It adds some significant compliance requirements and therefore cost to the organization.
A fractional aircraft ownership program can be an advantage for certain clients. At FlyMax Aircraft LLC we are happy to help you decide if this is the right path for you.
Aircraft Charter (Part 135)
Safety, security convenience and productivity are key reasons why individuals and companies choose on-demand air travel for personal and business travel. Air charter flights operate on the passenger’s schedule, allowing considerable flexibility. With the ability to fly in and out of more than 5,000 public use airports in the United States.
Safety, security convenience and productivity are key reasons why individuals and companies choose on-demand air travel for personal and business travel. Aircraft part 135 charter flights operate on the passenger’s schedule, allowing considerable flexibility. With the ability to fly in and out of more than 5,000 public use airports in the United States – more than 100 times that of the airlines – aircraft charter provides convenient access to your destination. And aircraft part 135 charter is a safe mode of transportation.
Are you interested in becoming an aircraft charter part 135 on-demand service? Becoming a part 135 charter operator is a complex process and requires a significant effort working with the FAA to obtain an operating certificate. At FlyMax Aircraft, we can help you decide if this arrangement is right for you and then assist you through the process of successfully obtaining your operator certificate.
Do you have an aircraft you are considering leasing back to an existing part 135 charter operator? At FlyMax Aircraft, we can look at your existing aircraft/operation and provide the information you need to decide if this is the best course for you.
At FlyMax Aircraft, LLC we are all about the client and pilot centered experience. We don’t just want your business today, we want to be your go-to service for the long haul. Whether you wish to leaseback your aircraft or have your own charter operation, you can always expect us to make recommendations that best serve your needs, not ours.