Shared Aircraft Ownership: The Legal Essentials

What are the key legal points the co-owners of a shared aircraft ownership arrangement need to discuss as they proceed to establish, or revise an existing agreement? René Armas Maes explores…

René Armas Maes  |  23rd May 2023
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    René Armas Maes
    René Armas Maes

    René Armas Maes, Vice President, Commercial, Jet Link International LLC, is an international...

    Shared aircraft ownership - the legal essentials

    Having considered the practicalities of shared aircraft ownership arrangements and how to identify an aircraft that serves the mission requirements of each owner equally well, there are various legal essentials that must be ironed out before a shared ownership agreement can be finalized.

    Based on the case study we presented in ‘Shared Aircraft Ownership: One Aircraft, Two Missions’ we will now explore some of the necessities for Owner A and Owner B to discuss ahead of extending their agreement. Owner A and B have been co-owners of a single pilot twin-engine turboprop aircraft, and have slightly different mission profiles and operational requirements for the Light Jet they plan to own together.

    Owner A has an average stage length of 1,200nm while Owner B averages 1,700nm. In two years’ time Owner B expects 30% of their annual flying (four trips) will be 2,400nm in length, after which their average stage length will return to 1,700nm. Moreover, Owner B needs to operate the aircraft in-and-out of a short, unpaved runway four times per year.

    Drilling into Specific Liabilities

    While both owners have enjoyed a mutually beneficial co-ownership experience to date, there are still several key questions that need answering to ensure both are adequately protected within a renewed agreement.

    Focusing on one specific question, let’s assume Owner A has concerns about the extra wear and tear to the tires and nosewheel steering of the aircraft due to unpaved runway operations. While Owner B assures Owner A that the runway will be coated with a binding agent to reduce aircraft wear and tear, Owner A still needs Owner B to demonstrate that the rough field has the same stability and strength as an asphalt surface.

    While ‘Shared Aircraft Ownership: The Liabilities & Risks’ highlights a variety of generic areas co-owners should discuss before buying an aircraft together, very often generic questions lead to more specific ones.

    The initial concern of Owner A about the unpaved runway highlights this point. Owner A needs to consider that there are specific training requirements for pilots to be able to operate Light Jets into and out of an unimproved runway, and this expense is something that Owner B should pay since it is of no direct benefit to Owner A.

    Therefore, wording should be added to the contract for clarity. Moreover, since the surface characteristics and strength of unpaved runways can reduce aircraft braking action/friction and performance, it’s important for the method and conditions that will be used to measure the surface strength to be identified, agreed between Owner A and B, and added to the contract.

    The requirement to inspect the runway at a frequency appropriate for local conditions, ensuring it remains in a satisfactory condition, should also be added to the new contract and Aircraft Flight Manual (AFM). And take-off, landing and accelerate-stop aircraft performance needs to be determined for the new Light Jet’s unpaved runway operation, based on the type of runway surface.

    The impact of the surface on aircraft speed and handling procedures must then be included in the new agreement and the AFM. If special equipment (e.g., shields and deflectors) or special procedures are required for operations on the unpaved runway, the impact on the aircraft’s performance including climb, descent, flat setting and speeds) should be determined and documented in the AFM and the revised agreement.

    Next, Owner B should demonstrate that any systems which may be impacted by operations from an unpaved surface (e.g., nosewheel steering) continue to perform their intended function under all conditions. And Owner B should demonstrate that the aircraft can be operated on the unpaved runway without any increased hazard, such as engine ingestion of gravel.

    Additional use of nosewheel steering may be necessary for improved handling which ultimately create extra wear and tear. Again, Owner B should be responsible (per the signed agreement) for any maintenance procedures that are incurred, including increased frequency of inspections, cleaning procedures, or increased frequency of parts replacement.

    All limitations, procedures and performance established for the unpaved runway will need to be defined and added to the AFM as a revision and/or supplement. Likewise, the Minimum Equipment List (MEL) must be updated, and operations that are not permitted should be determined and added.

    Finally, while Owners A and B have operated a single pilot aircraft before, neither have operated in-and-out of unpaved runways. Owner A may justifiably anticipate an insurance hike for this type of operation, and as a result the revised agreement needs to stipulate that the additional insurance expense should be covered by Owner B.

    In Summary…

    Over the preceding series, we’ve covered aspects of shared aircraft ownership from building the business case, to limiting liabilities and risks, to narrowing the aircraft search where two mission requirements need to be satisfied.

    It will be crucial to involve an aviation lawyer(s) to help navigate the process, identify the risks (adapting the wording of an agreement accordingly), and help ensure the shared ownership experience is beneficial to all parties.

    Their involvement will help avoid misunderstandings and gray areas from emerging in the future that could lead to avoidable disputes.

    Did you miss the previous articles in this series? Catch up on them here:

    Part 1: Making the Business Case for Shared Ownership

    Part 2: Understanding the Risks and Liabilities of Shared Ownership

    Part 3: Shared Ownership: Two Missions, One Aircraft

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    René Armas Maes

    René Armas Maes

    Editor, Buyer Strategy & Finance

    René Armas Maes, Vice President, Commercial, Jet Link International LLC, is an international aviation consultant and experienced C-Level professional. He has built a successful track record for developing and delivering Business Aviation strategies for Fortune 500 companies, Venture Capital firms, and HNWIs.

    René is a regular columnist for Bloomberg (financial), America Economia (business) and a speaker at aviation conferences worldwide.



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