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Off-Shore Aircraft Registration

In the maritime world, a ship is said to be "flying a flag of convenience" if it is registered in a foreign country "for purposes of reducing operating costs or avoiding government regulations." The country of registration determines the laws under which the ship is required to operate under and also that which are to be applied in any relevant maritime legal cases that might come about.

In aviation there are a multitude of reasons why you might choose to register your aircraft off-shore under the flag of a foreign country. Some of these include:

Complete Anonymity, i.e. if you suffer from celebrity notoriety; or you are a powerful corporate leader who relies on discreet and untracked movement within the territory of your competitors; or simply for personal reasons requiring anonymity. When your aircraft has been registered off-shore your privacy protection begins. If a journalist, corporate competitor or other interested party seeks the registered owner of your aircraft; their search will end with the contact details of your registered agent or trustee, and not with you.

Sales Tax or other Tax Avoidance, i.e. generally speaking, it is fairly simple for you to avoid a multitude of forms of taxation that are normally associated with the ownership and operation of a private or business aircraft, by registering it off-shore. Neutral Nationality Registration, i.e. this issue has become very prominent since we have moved into the new age of terrorism and unrest. By registering off-shore, you can fly internationally without instant recognition as being from the U.S.A.

Most foreign registries require that the registrant be a citizen of that country. The United States is the same: A U.S. citizen by definition of 14 Code of Federal Regulations (CFR) section 47.2 can be an individual, or partnership where each individual is a U.S. citizen, or a corporation organized under the laws of the United States, state, territory, or possession of the United States of which the president and at least two-thirds of the board of directors are U.S. citizens and 75 percent of the voting interest is owned or controlled by U.S. citizens. A resident alien is considered to be a corporation other than classified as a U.S. citizen, lawfully organized and doing business under the laws of the United States or of any state thereof, if the aircraft is based and used primarily in the United States; or a government entity (federal, state, or local). How then do these off-shore registries allow a foreigner to register with them? This is allowed by the employment of a native 'Trustee' or 'Agent' who acts on-behalf for the foreign ownership entity, under the auspices of a formal 'Trust Agreement.' In all cases there are annual fees that are payable to the agent. The U.S.A. aircraft registration branch is the only authority that I know of, that does not charge any annual registration fees.

Internationally, the most popular off-shore countries of registration are Bermuda, the United States of America, and now the relatively new player: the Isle of Mann. The "M" Registration was first introduced in 2007 by the government of this small island tax-haven which is located in the North Sea between England and Northern Ireland; it is probably better known for its T.T. motorcycle racing history rather than for its aviation industry.

Even though the aircraft eligible for entry onto the "M" or "Manx" registration must all be Type Certificated by the European Aviation Safety Agency (EASA), the Isle of Mann has chosen to more closely mimic the Federal Aviation Regulations of the United States rather than the bureaucratic tangles and inconsistencies that are normally found within the rules established by the European Aviation Authorities. Interestingly though, no non-resident islander can register any aircraft that is non-turbine powered and below 12,500 lbs MGTOW, or in the case of Helicopters, a non-twin-turbine powered machine.

Since a convenient loophole in the Value Added Tax (VAT) Regulations was recently exorcised by the European Union from the Danish Ministry of Taxations' rolls, whereby a 'flat-tax' was charged for an aircraft run through their tax-registration system, instead of the normal 25% or so, being charged like everyone else. The Isle of Man registry has quickly taken the lead largely because of its zero tax ratings for both corporations and inheritances, and depending on an aircraft owner's tax domicile, the Manx government provides a pathway for owners to either significantly reduce or even eliminate the VAT charge on their aircraft purchase.

By the beginning of November, 2009 almost 180 business jets and turbo-props had already been enrolled onto the Manx aircraft register. I am certain that this number shall continue climbing at a high rate. How do you or your company handle the Registration of you aircraft? Please click on the link below which states "Reply to this Article", your thoughts and comments would be very much appreciated. Be funny, be inspired, but most importantly of all, please be nice.

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Three Tips for an Effective Aircraft Evaluation

Buying on impulse often leaves you disappointed. What looked or sounded great in the moment can turn out not to be what you thought you were getting. This applies to love and fast machines. With aircraft, it then applies double!

The first tip when looking at what aircraft to acquire is to be objective. Objective means choosing criteria that can be measured. In this way you avoid the subjective trap: what was great last night can be less than desirable come morning. With objective criteria, you can compare more than two aircraft and rank order them. Be as specific as possible. Non-stop to West Palm Beach is good. Non-stop to West Palm Beach with four passengers is better. Non-stop to West Palm Beach with four passengers, IFR fuel reserves against a 25 knot headwind is best. If what you are measuring isn't in units of some kind, it's doubtful that it is objective. The joy of an aircraft used for transportation is in proportion to its utility.

Objective criteria should also be specific to the mission assigned to the aircraft. That way you can avoid over-buying - getting far too much aircraft than you really need. If you are clear about what you need, it is easier to set up your criteria. "Go anywhere, anytime" might set you up for a supersonic tilt-rotor amphibian, but can you afford that?

The second tip is to separate your criteria into desired and required criteria. Required criteria are criteria that the aircraft must meet in order to do the mission (job) assigned to it. If the aircraft does not meet the required criteria, it should not be considered any further.

Desired criteria are those that enhance or expand the capability of the aircraft to perform its mission. Generally speaking desired criteria go beyond the minimum needed for the mission, or perhaps they make accomplishing the mission easier, or faster. Once you have your aircraft that meet the required criteria, you can use the desired criteria to differentiate between them. This is helpful in rank ordering the aircraft. Here is a basic example:

Mission Criteria
Required
Desired

Range with 4 passengers (NBAA IFR Reserves 200 NM)

1,800 NM
2,100 NM

Range with 6 passengers (NBAA IFR Reserves 200 NM)

1,500 NM
2,100 NM
Passenger Seats
6
8
Hot food galley?
Microwave
Convection Oven

If you understand your mission, then you can your criteria to reflect what you need to do, and also choose desirable criteria that are meaningful. In the above example, the aircraft buyer was OK stopping for fuel on the 2,100 NM trip, but not for 1,800 NM trip with 4 passengers, of which there were quite a few.

The third tip is to prioritize before you analyze. If you group your criteria into sub groups, then you can not only rank order within those sub groups, but also prioritize which sub groups are more important. Again, this is best shown in the below example. Do you value more range over a bigger cabin?

Mission Score:
Range 60%
Cabin 15%
Payload 15%
Speed 10%

In this case, once an aircraft meets the required cabin size, an aircraft with a larger cabin has value, but not a lot. But, once an aircraft meets the required range, additional range will be greatly valued. This can be done once again after looking at the costs and supportability:

Total Score:
Mission 50%
Life Cycle Cost 35%
Product Support 15%

Here, an aircraft that costs a little more but offers more capability may be the best ranked aircraft in the group.

A big caveat: set this up before evaluating your aircraft. If you really, really want that supersonic tilt-rotor amphibian, you may ignore the fact that you really don't need to land on the water! OK, a bit of a stretch there but the warning is to set the rules first and then perform the evaluation second. What is important to have in your aircraft?

All of this can help you identify the "Best Value Aircraft." We do a lot of our work on the cost side, but we always stress that a large gain in performance at a small increase in cost may be well worth the added expense. At the end of the analysis, it is the responsibility of the decision maker (the one who writes the check) to arrive at that best value. An objective analysis should be done first.


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Pros and Cons of Placing Your Aircraft On Someone Else's Charter Certificate

If you are like many business aircraft operators, your aircraft is not being used as much as in the past. Your costs are up and utilization is down, and you are under pressure to keep the budget under control. Your friendly local charter operator suggests having you place your aircraft on their Part 135 charter certificate to gain income from charter.

Why Would You Want To?

To off set your operating costs. A typical charter agreement has the owner paying for all the operating costs. The owner gets the revenue from the charter less a 15% commission to the certificate holder. This is the basic cost/revenue structure, but there are variations.

You will not make money doing this. If this were the case, wouldn't charter operators always own their aircraft? The charter revenues should exceed the variable expenses of operating the aircraft leaving the excess amounts to offset the fixed expenses, thus lowering the total cost to the aircraft owner.

Other benefits may include:

Reduced liability to the owner if all flights are flown under the charter operator's certificate. If your own flights are under Part 135 then the operational control for the flight rests with the charter operator, not the aircraft owner. Although if this is a big issue, don't even own an aircraft in the first place, just charter.

Access to lower costs. Bulk fuel, reduced hangar rates, possible fleet discounts on insurance, and lower personnel costs if you fly with the charter operator's crew.

Why Shouldn't You?

One is control. If you are a control freak, then you should own your aircraft and hire and manage the crew. Then you have 100% control over who flies, and when and where the aircraft is used.

Depending on the aircraft, conformity to Part 135 may increase your costs. Additional maintenance may be required, plus you will have more stringent crew rest regulations. Seating needing to meet current fire-blocking rules may be an issue as well. These costs are dependent on the aircraft type and configuration.

Increased utilization (especially by others) will increase the wear and tear on the aircraft. Plan on refurbishing the interior more often.

Decreased values. The more hours an aircraft flies the greater decrease in value at the time of sale (other factors being equal). A 10-year old airframe with 6,000 hours will have a reduced value and take longer to sell than one in the same overall condition, but with 4,000 hours.

Increased aircraft management and operational issues if operating both Part 91 and Part 135. The FAA adds restrictions on how the aircraft agreements (and contracts for crew) can be structured and can affect how easy it is for you to fly under both Part 91 and Part 135. Flying all Part 135 is easier, but you may want the flexibility that Part 91 offers. .

However, the biggest reason not to place your aircraft on someone's charter certificate is if you already use your aircraft a substantial amount, then there will be little opportunity for offsetting charter revenues.

If you have infrequent use and a predictable schedule, then you might want to look into charter. If you have a constantly changing flight schedule, and take the aircraft on the road for long trips, the charter operator won't have access to your aircraft and you won't get much revenue.

There are also issues that involve legal, tax and FAA. Rental income is generally considered as a passive income. Passive income (and losses) may impact the ability to fully tax depreciate the aircraft. State and local taxes are often different for commercial operations. You need tax guidance from an aviation-tax specialist to full understand the ramifications.

If done under the correct circumstances, placing an aircraft on an operator's charter certificate can be a win-win situation. The owner gets revenues to offset costs, and the charter provider gets an aircraft to charter without having to fully support the costs of owning and operating the aircraft with charter revenues. However, don't go into it without carefully researching all the requirements and conditions, especially legal and tax.

Have you experience with placing an aircraft on someone else's charter certificate? Click reply and let me know your experiences.

None of Us Want to Be Dinosaurs

Let's not lose sight of where this wonderful industry is heading.

I am sorry to have to tell you this, but most of you reading this article are no longer the future of aviation. You may be fully entwined and engrossed as a current player within the aviation industry today, but all too soon some day off in the future, you will have to slow it down and enact your exit strategy with the hope that you will have suitably prepared yourself for a long, comfortable and happy retirement before you make your last flight.

No; the future of aviation lay's in the hands of today's youth, and unless you work at an aviation school, you have probably noticed that there are not too many young people hanging out at your airport, like they did when you were first bitten by the love of aviation bug. This is a gathering storm that will eventually turn into a cataclysm that will consume the industry that we all love, if none of us make the time to give a leg-up to youngsters that are our future.

Part of the problem is the fact that airports have now become impenetrable fortresses where it is impossible for any young person to have any kind of personal - hands on experience (touch/feel) with an aircraft up-close. Razor-wire topped fences, cameras, no-parking signs and airport security personnel has effectively killed any hope of parents packing a picnic lunch and loading it and their children up in the family car to go an watch aeroplanes at the local airport.

Years ago it was commonplace for pilots and their aviation friends to invite an excited boy or girl who had been eagerly watching aircraft movements' car-side, to hop over the fence and "come take a look at my aeroplane." Sometimes after obtaining mum or dad's approval, they might have even strapped the youngster in and taken them for a quick hop around the pattern. Regardless of what act of random kindness someone on the air-side of the fence decided to bestow upon an awestruck youngster, it was the spark that ignited a raging fire that burned in the belly of that youngster that caused he or she to pursue a career within the aviation industry.

If we didn't have the EAA's Young Eagle Program, the Scouts Aviation Badge System, and the Air Cadet Organization thankfully out there plugging away on our behalf trying to give young people their first taste of aviation, our industry would have already been long-ago relegated to near extinction. Obviously there will always be a need for air transportation; however the new-world order of anti-terrorism-security programs and other societal-saving mandates has slowed the air transportation system down to a crawl, and subsequently what little glamour or mysticism that our industry was barely clutching onto in its wizened hands, has now been lost. Why would a youngster aspire to join an industry that is inaccessible, officious and inconvenient?

There was a time when Glenn Curtiss was building airports all-across the United States to allow the dots of commerce to be rapidly connected. There was a time when aerospace was synonymous with everything that was new, slick and advanced in the world. Men and women like Charles Lindbergh and Amelia Earhart, through their record-breaking aviation exploits and feats of daring provided immense inspiration as positive role models to young people in the twentieth century. Where are the aviation role models in this second century of aviation?

Hopefully this is where you come in. Yes you; I'm not talking to anyone else so please don't ignore my message to you in this vital matter. Now is the time for you to start sharing your love of aviation with the younger generation. How can you do this? To start with, why don't you talk to your neighbours where you live and ask if any of the children in the neighbourhood would like to come to the airport with you to look around and get up-close to some aircraft? I promise you that the first time that you make a move in this effort; your heart shall be gripped with an overwhelming sense of good. If your own passion for aviation might have been flagging of late, the joy of aviation that the young people find thanks to this, your first effort shall, I am certain, encourage you to do more of this aviation experience sharing. If you fly, take the youngsters up. Maybe later you will become so enamoured by the way that this benevolent new side of you makes you feel, you might start speaking at local schools in your area?

It takes a massive amount of people to make our national aviation system work. The pilots often take most, if not all of the spotlight and glory; but think of the number of aviation maintenance technicians, line service personnel, engineers, designers, detailers, sales people, air traffic controllers, handlers, administrators, painters, upholsterers, inspectors, regulators, and entrepreneurs that are right behind the pilot, thus making his role possible within this marvellous system. If we can't inspire the next and future generations of people to elect to fill these roles, where will we all end-up? I don't plan on ever walking in the long-cold and dead footprints made by dinosaurs, and I pretty sure you don't either too.

Please become an inspiration to others by sharing your love of aviation, because you are mainly all that this industry has, and unless you have found a way to live forever, you will soon be retiring.

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