Structuring General Aviation Dry Leases: Avoiding Illegal Charter Operations

Description

Operating an aircraft pursuant to Part 91 is expensive, so it is no wonder that aircraft owners would like to recoup some of that cost if possible. Although dry leasing the aircraft to third parties might seem like a good idea, those arrangements can turn out to be illegal charters that lead to serious trouble with insurance coverage, the FAA, the IRS, and the TSA. Furthermore, insurance underwriters may refuse to write policies for aircraft with a suspicious number of dry leases and insurers may deny coverage for illegal charter operators.

Dry leases have their proper uses and can be either exclusive or non-exclusive. Structuring non-exclusive dry leases correctly is particularly challenging, and multiple dry leases will frequently draw the attention of the FAA.

The situation is further complicated when the aircraft is owned by a sole purpose limited liability company. Although that arrangement can have financial or tax benefits, the structure of the ownership and operation of the aircraft must comply with relevant FARs.

Listen as the panel of experts reviews and describes the proper uses of dry leases, why they are on the FAA’s radar, and how to avoid the perils and pitfalls.