Aircraft Sales Aviation Articles

Popular Topics on the Multi Engine Oral Exam

Whether you're going for a multi add-on to a previous certificate or doing a "fresh" multi certificate so to speak, you'll need to know these popular topics that almost every examiner will ask. They're the most important factors about multi flying and knowing them also keeps you safe.

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a. What's the difference between a single engine and multi engine plane? Well the most obvious answer here is one has one engine and the other has 2 or more. Tell that to your DPE and see if you can get a laugh out of them (and then follow with this elaboration). On a single engine plane when you lose an engine, you can no longer climb. You pitch for airspeed, find a spot to land, run through your checklist to diagnose the problem and then try to restart the engine. The danger here is stalling if you lose too much airspeed. In multi engine planes, the danger is the yaw that becomes uncontrollable until it rolls the plane over. You very quickly have to bring pitch to Vyse, manage your power settings, clean up any drag (like landing gear and flaps) and then the famous identify, verify and feather. These are life saving procedures that prevent you from becoming an accident statistic. You're preventing the yaw and stopping the plane from going below Vmc.

b. Describe Vmc. The definition for Vmc is that it is "the minimum control speed with the critical engine inoperative" and is marked by a red line on most airspeed indicators. You can find this on page 12-2 of the Airplane Flying Handbook along with all other V speed definitions. This goes back to what I previously wrote, that if you get below this speed you likely won't be able to recover from the aircraft yaw in the event of an engine loss. This also relates to Vsse, the safe intentional OEI speed. This is on the same page as Vmc in the AFH where it states it's the "minimum speed to intentionally render the critical engine inoperative." So when an MEI is demonstrating engine loss during flight, they don't go below this speed. It gives the pilot a safe margin to keep away from going below Vmc during the demonstration. 

c. How is Vmc determined? This is something that's set by the manufacturer. To memorize how, use the COMBATS acronym.

Critical engine inoperative

Operating engine full power

Max takeoff weight

Bank into the operating engine no more than 5 degrees

Aft CG

Takeoff configuration (gear and flaps down)

Standard day: standard temp and standard pressure

To add onto this, WHY does the manufacturer do this? All of these conditions are set for the worst scenario. The critical engine is obviously the worst to lose because of airplane controllability, and with full power on the good engine the airplane is now hardest to control. Max takeoff weight and an aft CG can make the airplane unstable and hardest to recover from. As for the takeoff configuration, with gear and flaps down this exhibits the most drag. 

d. Know your plane. By this I mean know what type engines you have (horsepower, which one is a critical engine if there is one and why), propellers, max takeoff and landing weights, service/absolute ceilings etc. When you go through these items in the operating handbook, pretend you're teaching it to someone else. This will help you understand it better and point out weak spots that you wouldn't be able to explain to a DPE. For example, the multi plane I fly has constant speed, hydraulically actuated, full feathering props. When an engine is lost, I'm still able to feather the plane without oil pressure (which keeps the prop at a low pitch) from the propellor governor. Without oil pressure the propellers go back to feathered position, and once oil pressure is lost this is where dry nitrogen kicks into place. Here's the best photo I could find to help illustrate the propeller system: 

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If you're like me and taking a multi check ride soon, then study study study ALL of this and be ready to explain it to a DPE! Stay calm, ask questions to clarify anything you don't understand, and most of all believe in yourself.

After your check ride if you're in the market to buy a multi engine, then you know where to go! Head over to our main page on Globalair.com and click the "aircraft for sale" drop down arrow and start searching. 

Any other tips you'd like to add on from your check ride experience? Comment below!

 

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

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

Retail Owners: BUY, SELL or HOLD?

As an inventorying-dealer, we are often asked by aircraft owners “Does it pay to make a move now?

The truth is, whenever you buy or sell an asset, there are unavoidable costs associated. Selling a home can be one of the best examples of an expensive transaction with often little monetary value gain. Moving costs, furniture damage, endless time spent cleaning/showing the home, agent commissions often eat up your anticipated fortune. 


An aircraft transaction however, has an overwhelming amount of justified reasons to invest. Whether for business or for personal use, aircraft as we all know are time machines which can also bring value to an owner’s employees, their families, the employee morale at a distant store or a face-to-face meeting with a vendor about an issue.  I would even argue the efficiencies a properly advised owner can create during a transaction can make for large gains in monetary value at times. No, I’m not suggesting you go buy a Falcon 10 and wait for the market to rise, however there ARE opportunities in this current active market, to make smart financial gains in your aviation transaction both for the short-term & long.


Whether it means you are a new private pilot moving up from your first 172 to a faster Cirrus, or whether you are a large corporation looking to sell your Citation XL and get into a large-cabin Falcon, I believe this is a good time to move! With pre-owned aircraft inventories shrinking daily & firming prices, we are already at pre-2008 inventory levels again and first-time buyers are entering the market which we haven’t seen in a decade. Only a couple years ago, we would commonly advise clients the selling would be the tough part, but the buying is easy. Now that is almost opposite in some late-model jet markets where buyers are waiting patiently for months at asking price while the seller tries to locate their new aircraft.


What should you do? Get the advice of a trusted and seasoned professional. If you aren’t already working with a broker or dealer, I recommend starting your search for one at National Aircraft Resale Association From there you’ll have the freedom to rely on your broker’s market intel, along with your good business sense which likely allowed for you to buy an aircraft in the first place. Good hunting and God Bless.


Chris is the Vice President of Meisner Aircraft who has served companies both small and large for over 30 years.  They have built their reputation of providing good sound business advice for clients around the world.  Whether it was a customer purchasing their first single engine aircraft or the larger flight department who needed a company with the experience and expertise to handle a complicated transaction process.  Family owned and operated they have successfully been involved in over $900 million in aircraft sales.  

Does The “As-Is” Language In An Aircraft Purchase Agreement Make A Difference?

It isn’t uncommon in aircraft purchase agreements to see language stating the parties are agreeing that the aircraft is being purchased “as-is” or “as-is, where-is.” Oftentimes the agreement will go on to also say that the seller is not making, nor is the buyer relying upon, any representations or warranties regarding the condition of the aircraft. And it may also specifically state that the buyer is only relying upon its own investigation and evaluation of the aircraft. But what does this really mean?

Well, from the seller’s perspective, the seller wants to sell the aircraft without having to worry that the buyer will claim at a later time that the aircraft has a problem for which the seller is responsible. So, the seller does not want to represent that the aircraft is in any particular condition (e.g. airworthy). When the deal closes, the aircraft is sold to the seller in its existing condition without any promises by the seller about that condition.

Here is an example of how this works: If the first annual inspection of the aircraft after the sale reveals that the aircraft is not in compliance with an airworthiness directive (“AD”) that was applicable to the aircraft at the time of the sale, the buyer could claim that the aircraft was not airworthy at the time of the sale and demand that the seller pay the cost of complying with the AD. But if the purchase agreement has “as is” language, then the chances of the buyer being able to actually force the seller to pay are low.

Not only does this “as-is” language protect the seller, but it also protects other parties involved in the sale transaction such as seller’s aircraft broker. A recent case provides a nice explanation of the legal basis for this result.

Red River Aircraft Leasing, LLC v. Jetbrokers, Inc. involved the sale of a Socata TBM 700 where the aircraft owner/seller was represented by an aircraft broker. The buyer and seller entered into an aircraft purchase agreement that included not only “as-is, where-is” language, but it also provided that the buyer was accepting the aircraft solely based upon buyer’s own investigation of the aircraft.

During the buyer’s pre-purchase inspection of the aircraft, the buyer discovered certain damage to the aircraft. However, the buyer accepted delivery of the aircraft in spite of the damage based upon alleged representations by the broker that the damage was repairable. After closing the buyer learned that certain parts were not repairable. Rather than sue the aircraft seller, presumably because the buyer recognized the legal impact of the “as-is” language in the purchase agreement with the seller, the buyer instead sued the aircraft broker alleging that the broker negligently misrepresented the aircraft.

In order to succeed on a claim of negligent misrepresentation under Texas law (the law applicable to the transaction), the buyer was required to show (1) a representation made by the broker; (2) the representation conveyed false information to buyer; (3) the broker did not exercise reasonable care or competence in obtaining or communicating the information; and (4) the buyer suffers pecuniary loss by justifiably relying on the representation.

In response to the buyer’s claim, the broker argued that the “as-is” language in the purchase agreement waived the buyer’s right to be able to prove that it justifiably relied upon any alleged representations by the broker. The buyer primarily argued that the purchase agreement language did not apply because the broker was not a party to the agreement. But the Court disagreed with the buyer.

The Court found that

the purchase agreement contains clear language evincing Red River's intent to be bound by a pledge to rely solely on its own investigation. And, because it appears that the parties transacted at arm's length and were of relatively equal bargaining power and sophistication, the court concludes that the language in the purchase agreement conclusively negates the reliance element of Red River's negligent misrepresentation claim.

So, even though the broker was not a party to the purchase agreement, the Court still held that the buyer was bound by the statements/obligations to which the buyer agreed in the purchase agreement, even with respect to third-parties. As a result, the Court granted the broker’s summary judgment motion and dismissed the buyer’s claims against it.

Conclusion

“As-is” language will continue to be common in aircraft purchase agreements. Aircraft sellers and those working with them will certainly want to include and enjoy the benefit from this language. Conversely, aircraft buyers need to be aware of the scope and impact of “as-is” disclaimer language in an aircraft purchase agreement. If a buyer is unhappy with the condition of the purchased aircraft, the presence of this language in the purchase agreement will significantly limit the buyer’s remedies and recourse.

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