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The Regulated Airport

As most of my readers will know, regulatory compliance is a HUGE deal in the aviation industry. This becomes apparent as soon as flight training begins. Someone outside of aviation may imagine that learning to fly is just learning which buttons to push and levers to pull to operate an aircraft, but the reality is that a large chunk of pilot training involves learning regulations and how to comply with them. The same goes for airports. A phrase that is thrown around a lot in Airport Operations curriculum is “The Regulated Airport.” Truly, an airport is under constant scrutiny and oversight by several different regulatory agencies.

When faced with a problem in aviation you must always ask yourself, “is there a regulation that applies to this?” Next, you think “where can I find this regulation?” Finally, “Does this comply with the regulation? If not, how can I fix it?” Since moving from the flight side to the airport side, it has always been surprising to me the variety of regulatory agencies that could be involved at any one time for any one problem.

Today I would like to provide an overview of some of the major regulations that airports must comply with, as both an exercise for myself and hopefully an interesting read for those outside of the aviation industry. This is by no means an exhaustive list, but will look at some of the regulations that come up most frequently.

Regulated Airport

Part 139
For the day to day operations of an airport with commercial service, the Federal Aviation Administration’s 14 CFR Part 139 is the governing regulation. This includes instruction on employee training, record keeping, wildlife management, airfield inspections, Airport Emergency Plans, and hundreds of other topics relating to airport operations. The most interesting thing about Part 139 is that an airport looking to earn certification writes their own Airport Certification Manual (ACM) outlining how they will comply with the different sections of Part 139, and it is signed and approved by an FAA inspector. The airport's ACM then becomes the regulatory document. 

Part 1542
The Department of Homeland Security has issued Transport Security Regulations (TSRs) that require airports to maintain certain security measures. This includes background checks on individuals that have access to secure areas, badging and access control, and a variety of other regulations regarding the security of airport property. One of the major security regulations that airports with commercial service must comply with is Title 49 CFR Part 1542. Similar to Part 139 and the ACM, airports write their own Airport Security Plan (ASP) which is then approved and becomes their unique regulating document. 

Grant Assurances
Any airport that accepts federal funding for a project is subject to the Grant Assurances for up to 20 years, depending on the lifetime of the project. These sets of regulations can also apply to a General Aviation airport that does not have to comply with Part 139, if they accept money from the Federal Government. Grant Assurances are obligations for the airport to keep itself in the best possible condition and properly operated. There are a total of 39 Grant Assurances, and they cover topics such as Economic Nondiscrimination, Compatible Land Use, and Planning Projects. 

Environmental Regulations
There are several environmental regulations that airports must comply with, both with the FAA and the EPA. The environmental issues that the FAA governs mostly relate to Airport Noise. For example, 14 CFR Part 150 “Airport Noise Compatibility Planning” and 14 CFR Part 161 “Airport Noise and Access Restrictions.” Airplane Noise has been a hot topic since well before the Jet Age, and the FAA has precise rules for how airports plan for and handle it. 

Airports also handle a variety of hazardous and toxic materials, so it is vital that proper quarantine and drainage protocols are in place to protect the local water supply. Many airports work closely with the Environmental Protection Agency to identify and avoid possible water pollution. 

Financial Regulations
Airports are subject to a variety of financial regulations, determining what they charge and how they use their funds. This is especially important when they accept Federal funding, and should be taken very seriously. 

Self-Implemented Regulations
In addition to all of the external regulations that airports must comply with, airports make their own internal rules as well. These rules are called Minimum Standards, and are required under Grant Assurance 19, Operations and Maintenance. Minimum Standards are used so that the relationship and expectations between the airport operator and airport users are clear and understood. 

This concludes my overview of some of the regulations that commercial airports must be aware of and comply with in their daily operations. Hopefully you learned something or had a nice refresher. Let me know in the comments below if you've had experience with any of these! 

Looking for Airport and FBO information?  Try Globalair.com's Airport Resource Center (ARC).  Packed with all the United States Airports Aeronautical information from the FAA and updated ever 56 days and over 3,200 FBO's and fuel prices.

 

 

Tips For Renting Your Aircraft

If you own an aircraft and are not utilizing it as much as you would like or if you would like to try and recover some of the cost of owning the aircraft, you may have thought about renting your aircraft to other pilots. As a practical matter, that makes some sense. But before you actually rent your aircraft to another pilot, here are a few things you should consider.

Aircraft Owners May Rent Their Aircraft To Third Parties

Tips for Renting your aircraftIt is important to understand that the FAA does not prohibit aircraft owners from renting their aircraft. In fact, the regulations specifically contemplate rental arrangements. So, renting your aircraft is permitted, provided that you comply with applicable regulations. The FAA provides guidance on what is and isn't a permissible rental arrangement in Advisory Circular 91-37B Truth in Leasing (although truth in leasing requirements only apply to large civil aircraft, the general lease concepts discussed in the AC apply to leasing arrangements for all aircraft).

Make Sure Your Insurance Permits Aircraft Rental

Most aircraft insurance policies will extend coverage to other pilots who fly your aircraft provided that the pilots are either expressly identified in your policy or if they have the necessary experience/qualifications to meet the "open pilot" clause of the policy. However, if you are going to charge the pilot for use of your aircraft, you need to confirm that your policy allows you to rent or lease your aircraft to a third-party. Most aircraft policies issued to owners for personal/business flying do allow aircraft leasing, but it is important to confirm this with your insurance underwriter.

Also, rather than paying to obtain their own insurance policy or renter's insurance to cover their use of your aircraft, most renter pilots will want to be named as an additional insured under your policy as this can oftentimes be done at no cost to you or the renter pilot. In that case, renters will typically ask for a certificate of insurance that reflects not only that they are added to your policy, but that they are covered for their operation and use of their aircraft. This is important because it doesn't do the renter pilot any good if he or she is added to the owner's policy but only covered for the owner's operation of the aircraft, rather than his or her own use.

Renting Your Aircraft Can Trigger Tax Consequences

In most states, when an aircraft owner rents an aircraft to a third-party the owner is required to collect and remit sales tax on the rent paid by the third-party for the aircraft. If you are in one of those states, in order to rent your aircraft you will need to obtain a sales tax number so you can collect and remit sales tax to the taxing authority. This is the aircraft owner's obligation and the taxing authority will hold the aircraft owner responsible for any sales tax the taxing authority believes the aircraft owner should have collected and remitted, regardless of whether the renter pilot actually paid the sales tax to the aircraft owner.

Also, when you rent your aircraft many taxing authorities view that activity as commercial activity which then means your aircraft could be subject to assessment of personal property tax on the value of the aircraft, or some portion of the value based upon the pro-rata rental versus personal use of the aircraft. Although not all states assess personal property tax on aircraft, if you are in a state that does you will want to determine your potential property tax exposure before you decide to rent your aircraft.

Conclusion

Although you will also have other things to consider as you decide whether to rent your aircraft to other pilots, these three issues should be near the top of your list. And if you understand and address these issues up front that will help ensure a successful aircraft rental experience for both you, the aircraft owner, and your renter pilot.

Greg can be reached at:

Greg Reigel
Shackelford, Bowen, McKinley & Norton, LLP
9201 N. Central Expressway, 4th Floor, Dallas, Texas 75231
Direct: (214) 780-1482 - Fax: (214) 780-1401
E-mail:  greigel@shackelford.law
Website:  www.shackelford.law

5 Surprising New Uses for Drones

Unmanned Arial Systems, or "drones," have been steadily increasing in popularity for years now. As engineers are able to design smaller drones with better cameras, sensors, and features at lower prices, it is only natural that new applications for drones are being thought of every day. As we begin the New Year I would like to take a look at some of the upcoming applications for drones that may surprise you in their genius or weirdness. 2019 might be the Year of the Drone! 

This article was inspired in part by research I did last summer over the current usage of drones in state Departments of Transportation. There are dozens of state DOTs that use drones for bridge inspections, traffic monitoring, and construction progress documentation. Over the course of this research, I also discovered this incredible website that hosts a database of U.S. public safety agencies that own and use drones. current as of May 2018, this database estimates that at least 910 state and local police, sheriff, fire, and emergency services agencies in the U.S. have acquired drones. They also estimate an 82% increase in the number of public safety agencies that own drones from the previous year. 

Interesting drone facts aside, let's get on to the list of my top 5 surprising new uses for drones! 

1. Car Accident/Crime Scene Documentation

An interesting application that the North Carolina Department of Transportation has for their drones is documenting car crashes and crime scenes. It is particularly useful for car accidents, as it severely cuts down on the time required to record pictures and evidence so that the Highway Patrol can clear the accident and reopen roads quicker. Authorities in Asheville simulated a head-on collision and then used their drone with a laser scanner to take pictures of the scene and create a 3D model. 

Work that usually takes state troopers about two hours to complete took only 25 minutes with a drone. They are then able to take the data and recreate the accident to better understand what happened. Now that's innovation! 

2. Food Delivery 

This application still has a lot of logistical kinks to work out, but I would not be surprised if food delivery via drones becomes a popular venture in the next few years. The novelty of the experience of having a drone delivery your meal will attract countless customers. Transportation giant Uber is already jumping on this idea, sharing their vision to have a fleet of food delivery drones by the year 2021. This one makes me stop and think, is life getting too fast-paced? Can we not wait the typical 30 minutes for food delivery via automobile? We will have to see how this one plays out! 

3. Fishing Aid

In what is perhaps one of the most creative fishing technologies I've ever seen, the company AguaDrone has created a drone that can not only detect fish with their wireless sonar pod, but also carry bait to the fish to catch it. The waterproof design can land and take off from fresh or saltwater and features a detachable camera to record all of your fishing adventures. I imagine this would be particularly useful for fishing in crowded areas, where you could reach further than any other lines. 

The drone and accessories currently only say "coming soon" on the websites's shopping page, but hopefully this genius invention will be manufactured and sold soon to fishers everywhere. 

4. For Hospice Patients

This one tugged at my heartstrings when I heard about it. A small company in Ohio is using their drones to bring happiness and comfort to those in their final days of life. The Flight To Remember Foundation flies drones to capture videos of meaningful places so that hospice patients can see them for one last time. These can be shared via live stream or video complication for repeated viewing. I can only imagine how special this would be for a loved one. According to their website they are currently looking for more volunteer drone pilots, so that is a cause worth checking out! 

5. Help with Cooking 

This one is more satirical in nature than the others, but check out that video! Someone found a great way to use their drone for several common cooking tasks. The blades peed the potatoes with such ease, and you won't even have to leave your kitchen to safely fry your turkey! 

All jokes aside, I hope this article has helped you to see the possibilities of drones in a new way. What is your favorite drone application? Have you thought of one that doesn't exist yet? Let me know in the comments below! 

Closing Aircraft Purchase/Sale Transactions

 

Aircraft Purchase/Sale Transactions

As we get to the end of the year, many aircraft purchasers and sellers are trying to get their deals closed. Whether for tax or other reasons, year end is a busy time for aircraft transactions. Many transactions are closed using escrow agents located in Oklahoma City, Oklahoma (home of the FAA Aircraft Registry). If you have never been involved in an aircraft transaction, you may wonder what happens at an aircraft closing.

In a typical (if such a thing exists) aircraft closing, here are the steps an escrow agent takes to help aircraft sellers and purchasers close a transaction once all of the necessary funds and documents are in escrow:

  • The escrow agent will pay off any liens, mortgages, security interests or other interests held by third parties against the aircraft ("Liens");

  • The escrow agent will disburse to the seller the purchase price, plus any unpaid amounts due from purchaser to seller for flight costs associated with moving the aircraft to the inspection facility or the delivery location, and less one-half of the escrow agent's fee;

  • Once the seller confirms receipt of the funds, the escrow agent (a) dates and files with the FAA releases of any Liens the FAA Aircraft Bill of Sale (FAA Form 8050-2), the Aircraft Registration Application (FAA Form 8050-1) and statement in support (for example, if the purchaser is a limited liability company); and (b) dates and releases the Warranty Bill of Sale and Assignment of Warranties and Other Rights (if applicable) out of escrow to purchaser;

  • Purchaser executes and delivers the delivery receipt to the seller which confirms the aircraft is in the delivery condition and is accepted by the purchaser;

  • If the aircraft is subject to the Capetown Convention, the escrow agent, as purchaser’s professional user entity, registers the sale of the aircraft to the purchaser with the International Registry; and

  • The escrow agent, as the seller’s professional user entity, discharges any registration by seller with the International Registry of any international interest or prospective international interest registered with respect to the aircraft, and consents to the registration of the sale of the aircraft to the purchaser.

The seller and purchaser usually intend that each of these actions is interdependent with each of the others, but that upon completion they are considered to have occurred simultaneously. When all of these steps are completed, the seller delivers physical possession of the aircraft to the purchaser at the closing location.

This closing process may occur via a telephone call with all of the interested parties on the line, or simply after each of the interested parties has provided authorization (usually via e-mail) for the escrow agent to perform these steps and close the transaction. And, of course, depending upon the transaction, these steps may vary. But this is generally how the process occurs.

If you ever have questions or need assistance with an aircraft transaction or closing, I would be happy to help. And in the meantime, Happy New Year.

Greg can be reached at:

Greg Reigel
Shackelford, Bowen, McKinley & Norton, LLP
9201 N. Central Expressway, 4th Floor, Dallas, Texas 75231
Direct: (214) 780-1482 - Fax: (214) 780-1401
E-mail:  greigel@shackelford.law
Website:  www.shackelford.law

The IRS May Disregard Your LLC, But You Shouldn’t.

As you may know from my previous articles, an aircraft owner may use a limited liability company (“LLC”) to register and hold title to the owner’s aircraft. Aircraft OwnershipAn LLC is formed by filing articles of organization with Secretary of State (or equivalent) in the state in which the LLC is organized. The LLC has members who hold/own membership interests in the company that are represented by the members’ capital accounts. The LLC may be managed by managers or it may be managed by the LLC member(s).

An LLC is a type of business entity that has distinct legal personality from its owner(s)/member(s) and managers. An LLC is treated as a separate “person” in the eyes of the law with an independent existence from its members. Thus, if the owner/member of an LLC dies, the entity continues to exist (although an LLC needs to specifically elect to have this continuity of existence).

However, once set up, the laws governing LLCs require that certain formalities be observed (e.g. annual meetings, separate checking accounts, maintaining corporate/company books and records, filing annual renewals/registrations etc.). If the LLC does not comply with those formalities, it is possible that the law will not recognize the LLC as a separate “person” and will look to the LLC’s members or managers to personally honor the LLC’s obligations. This is called “piercing the corporate veil.” Not only is this a bad situation for the LLC members, this concept is frequently confused with the Internal Revenue Service’s treatment of an LLC as a “disregarded entity.”

Although an LLC is a “legal entity”, the Internal Revenue Service (“IRS”) does not treat an LLC as a “tax entity.” Rather, the IRS “disregards” LLCs for federal tax purposes as if the entity does not exist. Most LLCs with a single member are taxed as a sole proprietorship, while a multi-member LLC is usually taxed as a partnership. In some cases, the LLC can elect to be treated as an “S” corporation if the LLC satisfies certain criteria.

As a disregarded entity, a single-member LLC does not file an income tax return or report income, loss, deduction, or credit. Instead, the LLC member incorporates these tax items into the member’s tax return. Similarly, a multi-member LLC’s members and the members of an LLC that has elected “S” corporation tax status would report on their respective tax returns.

If you are using an LLC to own an aircraft, keep in mind that the IRS’s disregard of your LLC for tax purposes does not relieve you of your responsibility to comply with the formalities required by the laws applicable to LLCs. Failure to comply with the formalities can negate the personal liability protection otherwise afforded to an LLC’s members, and can also render the aircraft’s registration invalid. So, it is important to pay attention to both the tax and the legal aspects applicable to your LLC to take advantage of the benefits of owning an aircraft with an LLC.

Note from Publisher: If you are in need of professional aviation legal services please reach out to Greg.  With over 20 years of service in the corporate and general aviation services Greg can help to make sure you are protected in any applicable laws in the aviation industry.