Since January 2019
Aircraft Operator Certificates
Since 3rd July 2019
Words by Scott D. McCreary
Tell us a bit about the registry?
The United States Federal Aviation Administration (FAA) Aircraft Registry, commonly referred to as the N-Register, is one of the most frequently chosen aircraft registries. A majority of the aircraft in the world are registered with the FAA. The FAA is the primary US regulatory agency that governs registration, maintenance and operation of aircraft and focuses on operator safety. In addition, the United States Department of Transportation (DoT) provides economic authority for certain aircraft operations and regulates unfair and deceptive trade practices involving the sale of air transportation.
The FAA Aircraft Registry, located in Oklahoma City, Oklahoma, provides a system for registering aircraft as well as filing, indexing, and recording of conveyances affecting aircraft. US law also requires persons who operate, repair, or maintain aircraft in the United States to obtain and maintain a valid airmen’s certification. The FAA’s Flight Standards Service manages the Registry, and the Registry issues Certificates of Aircraft Registration (both for commercial and general-aviation aircraft) as well as airmen certificates. Contact information for the FAA Aircraft Registry can be located at www.faa.gov
There are several advantages for those owners and operators registering an aircraft in the US. The FAA is widely respected for its efficient, secure and inexpensive processes for registering aircraft and for perfecting interests in aircraft (including airframes, certain aircraft engines, propellers and spare parts as discussed below). There is a great deal of legal and transactional precedent involving US-registered aircraft which provides certainty and comfort as to the process for registering and/or cancelling aircraft from the FAA, as well as determining the validity, priority and enforceability of security in aircraft. The US was one of the first countries to adopt the Cape Town Treaty, thus providing the additional comfort and assurance that interests properly established and registered under the Cape Town Treaty will be recognised in other contracting states. Many parties also take comfort in the fact that the FAA, which is part of the US government, has the resources and wherewithal to properly oversee and enforce its rules and obligations as an aircraft registry. Finally, there is ample evidence that registration with the FAA may help preserve the value of a business aircraft, both because the FAA’s standards for aircraft operations and maintenance are among the highest in the world and because the US is a very active market for aircraft sales.
How can I use my aircraft?
Commercial air transport/aircraft charter:
Unmanned aerial vehicles:
What sort of aircraft do you consider:
Are there weight restrictions:
Which aircraft type certificates are accepted:
FAA/US type registered.
Are there age restrictions:
Are aircraft registered in the name of aircraft operator or the aircraft owner?
The FAA requires an aircraft be registered in the name of its legal owner and not in the name of a nominee or agent. In certain instances the owner may not be the holder of legal title of the aircraft. For instance a vendee under a contact of conditional sale or the lessee under a finance lease may be considered the owner for purposes of registration with the FAA. It should be noted that the FAA will record bills of sale and title documents for airframes, but does not record bills of sale or title documents for engines or propellers. The FAA will record consensual liens and encumbrances against engines and propellers of sufficient size.
Are there nationality requirements and if so what are they? Yes. The following entities qualify to register aircraft with the FAA:
A) Resident aliens. A resident alien is an individual citizen of a foreign country lawfully admitted for permanent residence in the US as an immigrant in conformity with the regulations of the Immigration and Naturalization Service of the Department of Justice
B) US government
C) State, the District of Columbia or territory or possession of the US, or a political subdivision of a state, territory or possession
D) A “citizen of the United States,” which is defined to include the following:
1. Individual citizens of the US
2. Partnerships made up of individual citizens of the US
3. Corporations and associations that meet the following criteria:
i) Organised under the laws of the US or of a state, the District of Columbia, or a territory or possession of the US
ii) President is an individual citizen of the US
iii) At least two thirds of the board of directors are (individual) citizens of the US
iv) At least two thirds of the other managing officers are (individual) citizens of the US
v) Is under the actual control of citizens of the US
vi) At least 75% of the voting interest is owned or controlled by citizens of the US. 49 U.S.C. §40102(a)(15)(C).
If the applicant for registration is a limited liability company, then a Statement in Support of Registration must be submitted with the Application for Registration.
Under certain circumstances, a corporation that is not a citizen of the US may register an aircraft when the corporation is organised and doing business in the US and the aircraft is also ‘based and primarily used’ in the US. ‘Based and primarily used’ registration is limited to corporations, and cannot be used by individuals or LLCs. Under ‘based and primarily used’ registration:
a) At least 60% of the total flight hours of the aircraft must be accumulated within the US for the period consisting of the remainder of the registration month and the succeeding six calendar months and each six-calendar-month period thereafter (the Six-Month Period)
b) Only non-stop (except for stops in emergencies and refuelling) flights between two points in the US (even if the aircraft is outside the US during part of the flight) are considered within the US.
The corporation must maintain and make available for inspection by the FAA records containing the total flight hours in the US for the aircraft for three calendar years after the year in which the flight hours were accumulated.
What are the typical structures used?
If the aircraft owner does not meet the US-citizenship test and does not qualify for ‘based and primarily used’ registration, the most common solution is to utilise a non-citizen trust (NCT) structure. Under an NCT, the non-citizen party and a US trustee enter into an NCT to qualify for registration. The form of trust utilised is based on a form previously approved by the FAA and contains various restrictions on the non-citizen owner’s control over the trustee. Title to the aircraft is held by the owner trustee, and there is normally an aircraft operating lease agreement from the owner trustee to the trustor/non-citizen entity or a third party operating the aircraft.
Is there a requirement to have local directors of shareholders?
The directors or shareholders don’t have to be physically located in the US. Nevertheless, the aforementioned citizenship test is applicable.
Do you need to have a local office or physical presence to register an aircraft?
The Application for Registration requires a physical address, but the FAA does not currently require an address in the US.
What continuing requirements are there to keep an aircraft registered?
A registered owner must file an 8050-1B Aircraft Registration Renewal Application once every three years. Re-registration is $5. In addition, there are a number of circumstances that may invalidate the current registration, such as the registered owner losing his/her citizenship, the ownership of the aircraft changes, the aircraft is registered on a foreign registry, the parties fail to comply with the 60% rule under ‘based and primarily used’, etc.
Inspections and CoAs
What are the requirements for a Certificate of Airworthiness?
In order to obtain a standard airworthiness certificate (FAA form 8100-2), the aircraft must be validly registered with the FAA. In addition, the aircraft must be in a condition that meets its approved type design, in a condition for safe operation and maintenance, and with all preventative maintenance and alterations performed in accordance with applicable FARs.
What is the inspection interval for a Certificate of Airworthiness/how often does the registry inspect aircraft?
Inspection intervals for aircraft registered with the FAA Aircraft Registry vary depending on how they are operated and manufacturer requirements. Generally, some aircraft are subject to inspections at least once each 12 calendar months, while other aircraft are inspected after each 100 hours of flight. In addition, the pilot in command is responsible for determining that an aircraft is airworthy and in a safe condition before each flight. Parties should coordinate closely with their technical advisors to make certain they comply with any required inspection intervals.
What operational requirements are there?
General operating and flight rules for all aircraft are codified under Part 91 of the Federal Aviation Regulations (Code of Federal Regulations, Title 14). However, aircraft may be subject to further operating requirements depending on size and use. The most common requirements beyond Part 91 are as follows:
- FAR Part 121 for scheduled air carriers
- FAR Part 125 for large aircraft
- FAR Part 135 for commuter and on-demand operations
- FAR Part 375
- FAR Chapter I and Chapter II generally.
How many airworthiness inspectors does the registry have?
The FAA maintains over 100 US Designated Airworthiness Representatives according to the published DAR-T Directory maintained by the FAA.
Where are the inspectors based?
US Designated Airworthiness Representatives are based around the world. The FAA maintains the FAA DAR-T Directory which can be used to locate the nearest DAR.
Registration costs and service
What is the initial cost to register an aircraft?
What are the annual costs for aircraft registration?
$5 every three years.
What is the average time needed to register an aircraft?
The time required to mechanically register an aircraft with the FAA varies from a few days to a few weeks. More often than not, the timing is controlled and affected not by the FAA but rather by the deal structure and the parties’ understanding of the requirements for registering the aircraft on the FAA and obtaining a Certificate of Airworthiness. For instance, the FAA has various forms that must be used and procedures that must be followed. Thus, timing can be greatly reduced by engaging legal and technical advisors that are experienced with registering aircraft with the FAA.
If the aircraft is operated internationally, the parties may submit a Declaration of International Operations asking the FAA to expedite the change of ownership and subsequent US registration of the aircraft. In addition, the FAA automatically expedites registration for aircraft that are imported onto the US registry after cancellation from a foreign registry. If expedited, the FAA often processes the documentation and issues a temporary certificate of registration (commonly referred to as a Fly Wire) within one to three working days. If the aircraft is operated domestically and is not an import, it may take the FAA several weeks to process the documents and register the aircraft. Nevertheless, the FAA allows for the operation of the aircraft within the US for a period of 90 days from the date of the application so long as an appropriate current airworthiness certificate or a special flight permit and a duplicate copy of the application is on board the aircraft.
In addition to registering the aircraft, the parties must obtain a US Certificate of Airworthiness or ferry permit upon registration in order to operate the aircraft. The Certificate of Airworthiness is not issued by the FAA Aircraft Registry and thus requires coordination with a US Designated Airworthiness Representative or other authorised party.
How much does it cost to register a mortgage?
$5 per airframe, engine and/or propeller per conveyance.
Does the registry/aviation authority require a notarised/authenticated document to register an aircraft?
In many instances, the FAA requires that parties file original ink-signed documents or documents with appropriate digital signatures. The FAA policy is to accept only digital signatures, rather than the broader classification of electronic signatures, so care should be taken to ensure documents with digital signatures are filed. The distinctions between digital signatures and electronic signatures are technical in nature and often difficult if not impossible to visually confirm based off a copy of the document filed. The FAA has specific requirements as to which titles it will accept from a signatory without further documentation to support the authority of the person executing for the company. Normally, the FAA Aircraft Registry will accept documents signed by a person with a managerial title such as officer, manager or director, but it will not accept documents signed by an attorney in fact or authorised signatory without supporting documentation.
Financing and de-registration
Is there a requirement for a governing law of mortgage?
The FAA will record documents governed by non-US law. Nevertheless, under US law certain aspects of the mortgage may be governed by the jurisdiction where the mortgage is delivered. Parties should engage legal advice regarding choice of law for the mortgage.
What is most common choice of law for financings?
Choice of law can vary, but New York law is common.
Can financiers file a priority notice of their interests?
Financiers establish their interests by recording the security documents with the FAA and registering interest on the International Registry, as well as making local Uniform Commercial Code registrations against the appropriate debtor entities, Advice should be taken as to what filings or registrations are required and the resulting perfection.
Can financiers file a Deregistration Power of Attorney/Irrevocable Deregistration Power of Attorney (IDERA)?
Is there a public mortgage registry?
Yes, parties can file liens and encumbrances with the FAA and when applicable should also register interests on the International Registry. There are also instances where a lender may require filing a UCC Financing Statement against the grantor, debtor or lessee. Liens and encumbrances can be filed and recorded against the aircraft, and should be recorded separately against (i) specifically identified aircraft engines of 550 or more rated take-off horsepower, or the equivalent of that horsepower, (ii) specifically identified aircraft propellers able to absorb 750 or more rated take-off shaft horsepower and (iii) any aircraft engine, propeller, or appliance maintained by or for an air carrier certificated under 49 U.S.C. 44705, for installation or use in an aircraft, aircraft engine, or propeller, or any spare part, maintained at a designated location or locations by or for such an air carrier.
Is it easy for financiers to perfect a mortgage?
A lender would typically record the mortgage with the FAA, make the appropriate registrations on the International Registry and file a UCC Financing Statement against the grantor/debtor and other relevant party. The parties must file original ink-signed documents with the FAA or documents properly digitally executed in compliance with FAA procedures. As these filings require various legal and technical steps, the parties should engage appropriate legal counsel in this regard to make certain they are properly perfected.
How long is the period during which a moratorium could be imposed in the event of a lessee or borrower insolvency?
Should a lessee or borrower file for bankruptcy, under US law and in US courts, an ‘automatic stay’ may be imposed, preventing further action by the lessor or lender against the debtor/lessee or the aircraft. The rights of the parties and any dispute as to the aircraft would be addressed within the bankruptcy proceedings. In certain limited circumstances, Section 1110 of the US Bankruptcy Code may allow the lender or lessor to repossess the aircraft 60 days after the initial order for relief unless all defaults (other than defaults related to the financial condition of the debtor/lessee or the reorganisation or insolvency itself) have been cured and the debtor/lessee agrees to perform all future obligations.
In the case of bankruptcy or insolvency are aircraft typically deemed to be part of the lessee’s property?
Yes, it is possible. See above.
Does the registry/aviation authority require a notarised/authenticated document to de-register an aircraft?
There is no notary/authentication requirement for deregistration requests. However, the other signature requirements for deregistration of the aircraft remain the same, i.e. requirement for original or digital signature, title of the signatory, etc.
What are the requirements for deregistration of an aircraft?
The registered owner of the aircraft who wishes to cancel the Certificate of Aircraft Registration for the purpose of export must submit the following to the FAA Aircraft Registry:
1. A written request for cancellation describing the aircraft by make, model and serial number, and stating the US registration number and the country to which the aircraft will be exported
2. (i) For an aircraft not subject to the Cape Town Treaty, evidence satisfactory to the FAA that each holder of a recorded right has been satisfied or has consented to the transfer
(ii) For an aircraft subject to the Cape Town Treaty, evidence satisfactory to the FAA that each holder of a recorded right established prior to the date the Treaty entered into force with respect to the US has been satisfied or has consented to the transfer
3. A written certification that all registered interests ranking in priority to that of the requestor have been discharged or that the holders of such interests have consented to the cancellation for export purposes.
If the aircraft is subject to the Cape Town Treaty and an IDERA has been filed with and accepted by the FAA, the FAA will honour a request for cancellation only if the party authorised under the IDERA makes the request. As a practical matter, the registered owner or holder of the IDERA should obtain and file with the FAA either releases or consents to cancel US registration from the holders of competing interests.
What are the requirements for deregistration of mortgage?
In order to release a mortgage the parties should file an originally executed ink-signed or digitally executed release by the lienholder describing the collateral and the mortgage as required by the FARS.
Has the jurisdiction ratified the Cape Town Convention?
What date did it come into affect?
1 March 2006.
Which Cape Town declarations have been made?
The US lodged declarations under Sections 39(1)(a)-(b), 54(2) of the Convention and Sections XIX, XXX(1) (including Articles VIII, XII and XIII) of the Aircraft Protocol. The US established the FAA Aircraft Registry as an authorising entry point to the International Registry with respect to civil aircraft of the US or an aircraft for which a US identification number has been assigned. In order for a registration with International Registry to be valid as to such aircraft or helicopter, the parties must request and obtain a unique authorisation code from the FAA Aircraft Registry by filing: A completed AC Form 8050-135
Any documents representing the transaction that are recordable with the FAA (such as the mortgage, lease or bill of sale). The code is used when making registration with the International Registry. For prospective international interest, the documents must be filed with the FAA within 60 days of the date of the filing of the AC Form 8050-135.
Which insolvency regime has been chosen?
As the US did not submit an insolvency declaration under Cape Town, the US Bankruptcy Code would be applicable.
Importing and exporting aircraft
Are there significant taxes or fees involved in importing an aircraft?
The FAA Aircraft Registry does not impose significant taxes or fees for importing an aircraft. The parties may be subject to various other sales, use or income taxes imposed by the US or other jurisdictions, and will need to comply with any US customs regulations.
Is an Export Certificate of Airworthiness, license of permit required to export an aircraft?
An Export Certificate of Airworthiness is not required to cancel the aircraft from the FAA Aircraft Registry, but is often required or utilised by the new aircraft register. As such, parties should take care to obtain the Export Certificate of Airworthiness or confirm with the relevant technical advisors that it is not needed before cancelling US registration of the aircraft.
How much does it cost to get an Export CoA and how long does it take to get one?
Costs, time and requirements vary as the requirements are determined by the Designated Airworthiness Representative and the aircraft involved, but the process can often be completed within a few weeks.
Are there significant taxes or fees involved in exporting aircraft?
The FAA Aircraft Registry does not impose significant taxes or fees for exporting an aircraft. The parties may be subject to various other sales, use or income taxes imposed by the US or other jurisdictions, and will need to comply with any US customs regulations. There may also be various fees and costs associated with moving the aircraft, any modifications to the aircraft required by the new registry, as well as the fees and cost to document the transaction and file/register with the FAA Aircraft Registry and International Registry.
Judgements and arbitration
Have there been any recent legislative changes or significant cases that owners or financiers should be aware of?
Will a court in the US recognise and enforce a judgement rendered by a New York State Court or a US federal judge?
Will a court in your jurisdiction recognise and enforce a judgement rendered by an English court?
Typically, a foreign judgement would need to be domesticated in the US in order to be recognised by the FAA.
Can the government of the country requisition or confiscate an aircraft without needing to pay compensation?
The US can confiscate an aircraft if the aircraft is used in furtherance of a crime (i.e. civil asset forfeiture).
Are there any recent cases where the aviation authority/aircraft registry has refused to honour a request by an owner or lessor to deregister an aircraft?
Not to our knowledge.
Are any legislation or regulatory changes planned?
The 2018 FAA Reauthorization Act requires the FAA modernise and upgrade current FAA Aircraft Registry systems by October 2021. The Act mandates the upgrades shall include: (i) the digitisation of non-digital Registry information; (ii) the digitalisation of Registry manual and paper-based processes, business operations, and functions; (iii) implementation of systems allowing public to submit information and conduct any transactions electronically; and (iv) allowing more efficient, broader, and remote access to the FAA Aircraft Registry. The DoT Inspector General released a report on May 9, 2019, detailing the FAA plan to modernise. At the conclusion of the audit, the Inspector General recommends that the FAA design and implement the Civil Aviation Registry Electronic Services (‘CARES’) programme. In response, the FAA released a plan to implement CARES by October 5, 2021. These upgrades shall further enhance and streamline access to the FAA Aircraft Registry and should benefit all parties involved with the ownership, operation and financing of aircraft on the N Registry.
Aircraft Operating Certificates
General comments: Are AOCs encouraged, how long does process take, etc?
An Aircraft Operating Certificate is not required to operate an Aircraft under FAR Part 91, which encompasses most aircraft operated for corporate/private use. To the extent business aircraft are required to be operated under FAR Parts 125, 135, 121 or 129 parties will often place the aircraft with a certificated entity rather than setting up their own AOC.
Obtaining an AOC for commercial use is an extensive process which can be time consuming and expensive.
What are the nationality requirements for an AOC?
The same citizenship test for registering an aircraft in the United States is used. However, please note the Department of Transportation and the FAA interpret this test slightly differently.