Uncategorized

Under Part 91 of the Federal Aviation Regulations (“FARs”), an aircraft owner generally cannot receive payment when someone uses their aircraft. The regulations state there can be no compensation for hire. That does not just mean cash, but it also includes non-monetary considerations such as tickets to a game, a nice bottle of wine, trades, or any other form of consideration.

When an aircraft is operated under Part 91 rather than a Part 135 charter certificate, the FARs intentionally limit how the aircraft can be used and what compensation can be obtained. As a reminder, the operating rules for Part 91 are much different than Part 135. Part 91 was created for when an owner was flying for their own purpose and not for use by someone else for payment. As a result, Part 91 has fewer safety restrictions. For example, under Part 91 there are no (i) flight time limits or specific rest rules; (ii) mandatory percentage safety buffers for runway calculations and (iii) onsite weather reporting requirements at the destination airport.

Part 135 of the FARs apply to flights when there is compensation for hire. A Part 135 certificate holder can hold itself out to the general public for commercial purposes. As a result, Part 135 requires the operator to meet significantly more stringent safety and operational standards.

A dry lease is one of the ways an aircraft owner can obtain compensation from someone who would like to use the aircraft. The biggest myth of a dry lease is that “dry” means without fuel; rather, it means the aircraft is provided without flight crew. Under Part 91, an aircraft owner can lease an aircraft without any crew members to a person or entity. Compensation is structured as a rental payment from the user (lessee) to the aircraft owner (lessor) usually as an hourly or monthly rate. For the dry lease to be “dry,” the user (lessee) must hire its own crew and pay the crew directly.

By contrast, if an owner provides the aircraft and the crew, the arrangement is considered a “wet lease.” This is generally not allowed unless there is a written time share agreement in place between the parties. Importantly, the amount of compensation under a time share is limited to essentially two times the fuel (See FAR 91.501(d) for full list of items which can be charged under a time share agreement). Because of these financial restrictions, aircraft owners more commonly utilize dry leases.

In addition to sourcing and compensating the flight crew, the user (lessee) has operational control of the aircraft under the dry lease agreement. According to the FARs, operational control means exercising the authority over initiating, conducting, or terminating a flight. This has been interpreted through FAA advisory circulars and interpretation letters that it needs to be clear that the user (lessee) is responsible for crew selection and compensation, insurance, fuel, flight following, and scheduling under the dry lease. These responsibilities can be delegated to another individual or company (like a management company). However, even when responsibilities are delegated, the party in operational control remains the user (lessee) under the dry lease.

For an aircraft that has a maximum take-off weight over 12,500 lbs. and also has a dry lease in place, the dry lease must (i) be in writing, (ii) have a truth-in-leasing section, (iii) be carried on board the aircraft, and (iv) require that the user (lessee) provide notice to the responsible flight safety district office at least 48 hours prior to the first flight.

If structured correctly, the user (lessee) will either pay an hourly or monthly rate to the owner (lessor). There are no restrictions on the amounts that can be charged under the FARs. The parties simply need to agree on the business considerations. The user (lessee) will be directly responsible for the crew, maintenance, insurance, and flight variable costs under the dry lease.

A dry lease can be structured as either non-exclusive or exclusive. An exclusive dry lease means that there is one user (lessee) who is the only party that has possession of and operates the aircraft during the term of the dry lease agreement. A non-exclusive dry lease would be used when (i) there are multiple dry leases (ii) when the owner also uses the aircraft or (iii) when the aircraft is also leased to a Part 135 company for charter use.

When setting up a non-exclusive dry lease it is very important that it is clear the user (lessee) hires and pays for the crew, has operational control and that there is a process used to deliver and re-deliver the aircraft between the parties. Non-exclusive dry leases should not be used to circumvent having an aircraft on a Part 135 certificate.

While there is no established number for how many dry leases you can have, if there are numerous unrelated third-party dry leases, it is possible, based on the facts and circumstances, that an illegal charter may be taking place instead of a dry lease. Factors such as (i) operational control, (ii) the number of users, and (iii) the relationship of the parties will be considered to determine if an illegal charter is happening, and not a true dry lease of the aircraft.

A dry lease is commonly used and required if a sole purpose LLC is formed to own an aircraft. A sole purpose LLC formed to own an aircraft cannot legally operate under Part 91 as flight operations would not be incidental to a separate primary business. For that sole purpose LLC, air transportation would be its business and would require a Part 135 certificate. As a result, if the owner of an aircraft is the sole purpose LLC to hold the aircraft, then a dry lease is a required to transfer possession of the aircraft to an entity or person that is legally permitted to operate the aircraft under Part 91.

Dry leases are also used when company aircraft are made available for executive personal use. If a company does not wish to treat personal flights as taxable employee fringe benefits paid by the company, a dry lease allows the employee to lease and operate the aircraft as an individual for personal flights.

Dry leases are also used by aircraft owners who have complex organizations where related companies want to pay for and account directly for certain trips. While there is an exception under Part 91.501(b)(5) for subsidiaries, this exemption only works when the entities are in a parent-child relationship and when the entities are corporations. If both of those factors do not exist, then a dry lease may be a good option depending on how the crew is sourced.

Finally, many states require payment of use tax on either (i) the purchase price of an aircraft or (ii) the lease revenue stream. In this case, a dry lease is required if a sole purpose LLC is formed to own the aircraft for both tax planning purposes and tax strategy.

Although dry leases have recently been a hot topic in the private aviation sector, sometimes with a negative undertone, there are circumstances when, if structured and executed correctly, dry leases are a valid vehicle through which an aircraft can be leased and operated.

When an aircraft owner decides to sell their aircraft, timing and precision are critical. Failing to execute key preparatory steps at the appropriate stage of the transaction can lead to significant financial costs, delays, or legal defaults. This article outlines ten essential actions required to ensure a smooth and successful aircraft sale.

1. Aircraft Specification Sheet (Marketing Materials) When marketing the aircraft for sale, the specification sheet must be 100% accurate. Advertising an aircraft with certain options or equipment only to discover a misrepresentation during the sale process can lead to serious legal and financial implications, including seller default.

2. Loose Equipment List  Establishing a definitive loose equipment list early in the process is vital. This equipment has value, and inventorying it in advance reduces the time required to finalize the sale agreement. Often, the loose equipment list is an exhibit to the sale agreement and failure to prepare it in advance can cause significant signing delays.

3. Aircraft Registration Number  Many aircraft owners have aircraft registration numbers that are important and personal to them and want the registration number excluded from the aircraft sale. The best way to make sure a seller does not lose control of their registration number is to change it prior to closing. A seller can submit the request to change the registration number with the FAA, although it is important to keep in mind that it is currently taking over three months for the FAA registry to issue 8050-64 forms. Once the 8050-64 form is issued, the owner of the aircraft has up to 12 months to make the registration number change. The 8050-64 form can be obtained in advance of listing the aircraft for sale and the aircraft registration number can be changed during the inspection of the aircraft and/or during the repair of discrepancies. This allows sellers to maintain control of the registration number that is important to them. Failure to follow this process means that a seller must negotiate with the buyer to get the registration number back after the aircraft is sold, which sometimes can result in delays or even the loss of the registration number.

4. Service Contracts and Subscriptions  All associated service contracts and subscriptions must be identified for transfer or termination. Sellers should pay close attention to prepaid annual subscriptions; knowing these dates allows for prepayments to be factored into the purchase price or reimbursed at closing. Additionally, if there are any early termination fees it may be best for a seller to only sell the aircraft to someone willing to continue on the service contracts or require the buyer under the sale agreement to pay any associated fees.

5. Title Search  Prior to listing the aircraft for sale, the owner can obtain a title search on the airframe and engines for approximately $300. This identifies unexpected liens – such as tax, mechanics, or erroneous filings – that may have occurred during ownership. Any title work can be done while the aircraft is being marketed for sale so that when it is time to close on the transaction, the title is already clear or will be cleared. Failure to clear unexpected liens in advance of closing can delay closing or result in a default by seller if clear title cannot be conveyed.

6. Aircraft Document Inventory  While a full aircraft records review may not always occur before marketing, records should be inventoried and organized. Making sure the records are complete and organized before a buyer commences its visual inspection allows buyers to feel confident that the aircraft was well maintained. It also allows the owner to find any missing records before the buyer discovers them during the pre-purchase inspection.

7. Know Your Aircraft  When offers start rolling in for the aircraft, most offers will have a list of delivery conditions the aircraft must meet at closing. It is important to know the condition and history of the aircraft, including if there has been any damage history, if any systems are not working or no longer supported, or if there are any technical variations on the aircraft or engines. If any anomalies exist, they need to be carved out from the delivery conditions. Failure to do this means that the delivery conditions cannot be satisfied and could result in a seller default or rejection of the aircraft by the buyer and termination of the sale agreement. It is always best to know your aircraft and disclose any items necessary before signing the letter of intent to sell.

8. Logo Removal  All logos from both the exterior and interior (including Airshow) should be removed. The seller should think about the best time to have this work done and make sure it is completed prior to closing. Failure to do this could mean the aircraft does not meet the delivery condition or worse, a logo is left on the aircraft, and the new buyer is involved in an accident or incident. This could have a negative impact to the seller’s image, which could have been avoidable.

9. Company Status  If a sole purpose entity was created to hold title to the aircraft, a business search should be done on the secretary of state website where the selling entity is registered. The selling entity needs to be active and in good standing. If it is not, the selling entity will need to take steps to bring the entity back to an active and good standing status with the state of registration. A sale agreement should not be signed unless the entity is in good standing.

10. Loaner Equipment  If there is any loaner equipment on the aircraft it should be disclosed as part of the sale process. For example, if an engine overhaul is taking place and a loaner engine is currently on the aircraft, arrangements need to be made with the service provider to transfer all agreements to the new owner as part of the sale process. This includes the maintenance contract and the bailment agreement for the loaner equipment. Failure to do this in advance of closing would result in a breach of the service contract and the loaner agreement. It could also mean that the loaner equipment is not properly insured, if the seller previously insured it.

Preparing to sell an aircraft should be done systematically and thoughtfully to make sure the aircraft is sold and there are no unintentional results from failure to properly plan.

Usually, during the summer months aircraft transaction volume slows down, causing pre-owned aircraft inventory to increase. Normally, this summer slowdown is helpful during the 4th quarter when transaction volume peaks. However, 2026 inventory levels remain extremely low, particularly for the desirable aircraft models with low aircraft times and cycles. At a recent industry event I attended, many aircraft brokers mentioned how numerous clients looking for good, quality aircraft to purchase  have been unsuccessful in finding anything that matches their search criteria. This aircraft shortage will impact the remainder of 2026 in three important ways.

First, as inventory levels decrease, sellers respond by requiring more seller-friendly terms in transactions such as larger non-refundable deposits, aggressive closing timelines and limiting the scope of pre-purchase inspections. These seller-friendly terms inevitability leave the buyers accepting more risk in the transactions. A strong seller market can turn off aircraft buyers and result in those buyers not moving forward with a transaction or moving into fractional ownership. Fractional programs can offer interim lease solutions which allow for immediate aircraft access while the new aircraft that the buyer purchased a fractional share in is being built.

The second impact of low inventory levels is that it will be extremely difficult to source a pre-owned aircraft during the 4th quarter. Historically, the 4th quarter is the busiest quarter for aircraft transactions during which many aircraft brokers close more than half of their yearly transaction volume. If there is limited inventory going into the 4th quarter buyers will either forgo the opportunity to purchase in 2026 or alter their search criteria and purchase a different aircraft (whether it be year, make, model, condition, configuration, or total time) than originally planned.

The third impact may go unnoticed for some time. Specifically, that buyers (i) may not buy, (ii) may decide to purchase a fractional share and/or (ii) may purchase an aircraft without a proper inspection or outside of their original search criteria. All of the foregoing has a long term impact on the health of the whole aircraft market because some buyers will go to fractional program and never move into whole aircraft. Others may be dissatisfied with the aircraft they purchased, sell the aircraft in short order and not purchase another aircraft again.

While there is not necessarily a solution for low inventory levels, the negative impacts can be minimized by buyers with a good, experienced and creative acquisition team.

When a buyer elects to finance their aircraft, most lenders require an aircraft appraisal. Lenders will require one of two types of aircraft appraisals: 1) a desktop aircraft appraisal or 2) a physical appraisal of the aircraft.

A desktop, or remote, aircraft appraisal is based on certain aircraft information which is sent to the aircraft appraiser and the aircraft appraiser completes the appraisal based on the information received. The information usually needed to complete the desktop aircraft appraisal includes: a recent computerized aircraft maintenance report showing upcoming inspections and any past due items; aircraft make, model, and serial number; the aircraft configuration; and an aircraft specification, including current times on the airframe, engines and APU. The aircraft appraiser will also need to know if the aircraft is currently on any airframe, engine or other maintenance programs. Appraisers will also use market considerations and analyses in the appraisal.

A physical, or on-site, appraisal of the aircraft occurs when the aircraft appraiser travels to the aircraft and conducts a review of the aircraft and its records for the appraisal. In the case of a physical appraisal, the aircraft appraiser will still need all the information listed above but most of it will be with the aircraft or in the aircraft records that they review in person. It is important to make sure the aircraft and records are at the same location when the physical appraisal is conducted on the aircraft.

Typically, lenders will not order the required aircraft appraisal until the aircraft purchase agreement is signed. In some cases, lenders will wait until their underwriting group has approved the loan to order the aircraft appraisal.  However, the timing of the aircraft appraisal could delay the aircraft purchase process or, at the very least, cause some unexpected out of pocket expenses for the buyer.

A financing contingency is a provision in a purchase agreement that typically states a buyer has a certain amount of time after execution of the purchase agreement to obtain financing for the purchase – and if the buyer does not, then the purchase agreement can be terminated.  Financing contingencies are relatively uncommon in today’s market. But, if the buyer has already signed a purchase agreement that does not have a financing contingency, then the buyer has a risk that the appraised value will come back lower than expected and result in the lender financing a lesser  amount.  In some cases, if the appraised value comes back too low it could impact the loan approval and leave the buyer in a bind.

As a result of the possible impact appraisals may have on the purchase process and timeline, it is important to understand when the appraisal will occur. In some instances, especially where financing is needed for the buyer to close the transaction, the buyer should consider requesting the appraisal be ordered by the lender early in the process, even if it means additional costs to buyer if the closing does not occur. Alternatively, working with the seller and being transparent with the lender’s requirements may allow flexibility to be built into the purchase agreement timeline to limit the possible financial impacts to buyer with regard to the timing of the appraisal and/or the results of the appraisal.

I realize that each year it takes me longer to recover from the fourth quarter and to begin thinking about the year to come. Every December I think it cannot possibly get more complicated or busier, and yet it does. In 2025, transactions were generally more complicated as a result of (1) tariff uncertainty and complications (impacting aircraft for the first time in 50 years), (2) the uncertainty surrounding bonus depreciation, and (3) the implementation of the One Big Beautiful Bill Act of 2025.

After reflecting on my personal experience in 2025 and analyzing key data, there is a noticeable trend as we move into 2026. Specifically, fractional programs and co-ownership programs are a larger percentage of the total market than ever before. This segment’s growth is outpacing other segments in private aviation.

Those purchasing into fractional programs and co-ownership structures are not just new entrants to private aviation. Instead, an increasing percentage of the fractional and co-ownership program participants are owners who have owned whole aircraft and are selling their aircraft to transition into fractional or co-ownership. In some cases, owners are selling part of the aircraft they already own to create a co-ownership structure. Additionally, we are seeing long-standing flight departments increase their dependance on fractional ownership or, in some cases, entirely replace the in-house flight department with fractional ownership interests. I think there are several key factors influencing the decision to move towards fractional and co-ownership.

1. Availability & Flexibility  Fractional ownership programs include interchange programs so that if the specific aircraft owned or leased by the fractional customer is not available, they can fly on other aircraft in the fractional ownership program. In fact, most of the time a fractional owner does not fly on the specific aircraft they own. As a result of the interchange program, the aircraft available to fractional owners can be quite numerous.

This does not mean that fractional owners do not encounter delays due to unexpected mechanical issues, weather, or crew issues, etc., but the recovery time and cost is different in the fractional model. In the event of an issue with the specific aircraft assigned to a flight, the fractional program will work on a recovery solution. With a large fleet, this often means several options. Additionally, unlike whole aircraft ownership, there is no additional cost associated with the recovery as it is included in the fractional program.

2. Fixed Costs  Fractional ownership offers fixed pricing for a five-year term, with annual increases. For co-ownership programs the same can be true if the program is run by a charter operator, or at the very least, the effect of the variability of costs is less impactful when shared with one or several co-owners. Conversely, the maintenance costs vary from month to month with whole aircraft ownership. While various maintenance programs (engines, parts, avionics) are available, these programs do not always cover all maintenance and often times overpromise and underdeliver with regard to program coverage. Many of my clients have been affected by the supply chain issues with parts, particularly loaner engines, whether or not the aircraft is on a parts or engine program. It is important to note that not all maintenance programs are the same and some have an incredible repair and response rate.

3. Generational Wealth Transfer  The greatest generational wealth transfer is occurring right now. The transition is going to a younger generation and most often to more than one individual. As a result, having one aircraft available for multiple users may not be satisfactory. Instead, each recipient can purchase their own co-ownership or fractional interest and have more aircraft availability on a daily basis. The younger generation is more tied to school calendars and as a result has less flexibility when they can travel and that can make sharing an aircraft difficult.

4. Product Offerings  The program providers continue to grow with new co-ownership, and fractional programs being launched on a somewhat regular basis. For the more established fractional program providers, they have continued to evolve their program offerings, including larger primary service areas (where no ferry fee is charged) and luxury partnership opportunities.

5. Anonymity  In the United States, we have an owner-based registry system, which results in privacy issues for aircraft owners. There are solutions to help protect owner’s privacy but once an aircraft is associated with an individual, sometimes simply by having someone see an individual board a particular aircraft, the privacy protection may have been lost. With the fractional ownership program interchange structure, owners are not flying on the same aircraft each trip, and therefore allows fractional owners more anonymity. Some fractional providers have also started filing requests through CARES to remove all fractional ownership information from the FAA website.

6. Aircraft Management  Traditional turnkey, full-service management companies have disappointed a segment of whole aircraft owners. The disappointments stem from incorrect budgets, inability to control costs, less charter revenue than promised, and a lack of transparency. Unfortunately, there are management companies that produce proposals and budgets for aircraft that are significantly flawed.

Individuals who are new to private aviation, and who have not retained unbiased consultants or attorneys, sometimes assume the information received from so-called experts is correct. This leads to disappointment and the sale of the whole aircraft in exchange for a reliable alternative with fixed pricing. Additionally, whole aircraft owners who are transitioning to fractional ownership or charter have expressed that certain management companies have lost the ability to provide luxury, customized services for aircraft owners.

There are some great management companies, but when their proposals show actual numbers and another management company’s proposal show numbers that are too good to be true, the owners sometimes select the too good to be true management company and are left disappointed and dissatisfied with whole aircraft ownership as a result.

While this is not a complete list of the reasons we are seeing a shift in the market, it does capture the majority. When I started in the industry there was a rule that said anyone who flew more than 200 hours a year should consider whole aircraft ownership. While there is still a financial analysis that can predict when owning a whole aircraft would make financial sense, the analysis cannot necessarily compute all of the soft factor items, like privacy, scheduling, and luxury services, that most of my clients are considering.