Aviation - Sample Transactions
I. Aircraft Sales, Fractional Purchases, Charters, and Other Transactions Sample Agreements
A. Transactions Involving the Transfer of Title
1. Pre-Owned Aircraft
a. Aircraft Sale-Purchase Agreement: This is the standard short-form for "as is" purchases of most pre-owned aircraft. It is the National Aviation Industry Association form, which was originally drafted by our law firm. It is not typically used for turbojet aircraft. The agreement contains an additional "Aircraft Acceptance Form" which is signed following a demonstration flight and the pre-buy inspection.
b. Helicopter Sale -Purchase Agreement: This is the standard short-form for most "as is" purchases of pre-owned rotorcraft. It is the National Aviation Industry Association form, adapted for rotorcraft. The agreement contains an additional "Aircraft Acceptance Form" which is signed following a demonstration flight and the pre-buy inspection.
c. Aircraft Sale-Purchase Agreement (Turbojet): For pre-owned turbojet or turboprop aircraft... The form is longer than the NAIA short form, and contains greater detail and focus on the due-diligence. The agreement contains an additional "Aircraft Acceptance Form" which is signed following a demonstration flight and the pre-buy inspection.
d. Aircraft Sale-Purchase Agreement (Air Cargo/Freighters): For pre-owned turbojet freighters. The agreement contains an additional "Aircraft Acceptance Form" which is signed following a demonstration flight and the pre-buy inspection.
2. New Aircraft and Helicopters
a. Outfitted Turbojet Sales Agreement: This agreement is for use in transactions involving new turbojet aircraft, usually when the manufacturer is selling the aircraft for the first time. It is, however, also applicable in transactions between buyers and seller, where the seller is conducting significant upgrades, retrofitting, or making alterations to an aircraft.
b. New Aircraft Sale -Purchase Agreement: This agreement is for use in transactions involving new single-engine land and multi-engine land aircraft where the manufacturer is selling the aircraft to its first owner. It contains appropriate discussions of warranties and other issues, which are not present in a typical pre-owned "as is" transaction.
c. New Rotorcraft Sale -Purchase Agreement: This agreement is for use in transactions involving new rotorcraft sales where the manufacturer is selling the aircraft to its first owner. It contains appropriate discussions of warranties and other issues, which are not present in a typical pre-owned "as is" transaction.
d. Aircraft Sale-Purchase Agreement (Air Cargo/Freighters): For new turbojet freighters when the manufacturer is selling the aircraft for the first time. It is, however, also applicable in transactions between buyers and seller, where the seller is conducting significant upgrades, retrofitting, or making alterations to an aircraft.
B. Transactions That Do Not Involve the Transfer of Title
1. Fractional Ownership Transactional Documents
a. Fractional Purchase Agreement: This agreement sets forth the terms and conditions of the sale of an undivided ownership interest in an aircraft. Terms include the purchase price of the fractional shares, the closing date, delivery conditions, what percentage the purchaser is obtaining, what warranties are being conveyed, and an explanation that the fractional owner is taking interest as a tenant-in-common with all other persons possessing ownership interests in the aircraft.
b. Fractional Management Agreement: This is a standard turn-key management agreement setting forth the terms and conditions of the management of the fractional owner's aircraft as well as charges payable by the fractional owners for flight services. The manager contemplated in the agreement is usually the company handling the sale of the fractional aircraft, but it may also be a third party or even one of the fractional owners (although this practice is discouraged).
c. Fractional Owners Agreement (also referred to by some as the "Interest Holders Agreement" and in the case of an LLC, this can be the Operating Agreement): This document lays out the rights and responsibilities of fractional owners to each other and as to the entity they have created to hold title to the aircraft. This agreement usually specifies the nature of the relationship among the owners, which typically is that of tenants-in-common, and that fractional owners will be severally, but not jointly, responsible for its pro rata share of the costs of operating the aircraft (so that a responsible party does not bear the burden for a delinquent one). It also addresses tax depreciation benefits, dispute resolutions, liability, insurance to be maintained, and other issues.
d. Interchange Agreement (also known as a "Master Cross-Leasing Agreement"): This agreement is also entered into among all of the fractional owners. The agreement contains the "rules of the road" to make the sharing of the aircraft as hassle-free as possible. Structurally, the agreement is in nature a lease by which each fractional owner agrees to lease its interest in the aircraft, from time to time and on an as-needed basis, to the other fractional owners. Many (but not all) fractional Interchange Agreements are structured as "dry" leases. That means the aircraft comes without fuel, flight crew, catering, etc. These are supplied by the fractional owners in a dry arrangement. They will be supplied by the management company pursuant to the management agreement in a "wet" transaction.
e. Fractional Program Deposit Agreement: Although last on the list, this is usually the first document signed. The Deposit Agreement will precede execution of all of the other Fractional Ownership Governing Documents. It details the amount of the deposit, when it is due, the nature of the deposit and any conditions for refund.
C. Leases, Rentals, Charters, Co-Ownership
1. Long Terms Agreements
a. Aircraft Lease Agreement: The traditional lease may be superior to fractional ownership for companies who expect to put their aircraft into service for a significant period of time each year. A third-party leasing company or entity created by the buyer takes title to the aircraft and leases it to the corporation.
b. Aircraft Priority Charter Agreement: This agreement between a charter company and a corporation is preferred when the company's needs are predictable and intermittent. The charter company's obligation is to provide access upon reasonable notice at a flat fee. The aircraft is generally operated "wet," and recent trends include fuel surcharges and discounts depending upon the volatility of the fuel market.
c. Aircraft Co-Ownership Agreement: This is a traditional arrangement wherein two or more people purchase a general aviation aircraft together. The purchase can be made through a new entity, individually, or through a "club." The document sets for the rights and responsibilities of co-owners, the amounts of their payments for the purchase and then recurring use of the aircraft and other issues.
d. Aircraft Time Sharing Agreement: Pursuant to Section 91.501(c)(1) of Federal Aviation Regulations (the "FAR").
2. Short-Terms Agreements
a. Aircraft Hourly Rental Agreement: This agreement is between an aircraft owner or authorized manager and a renter for general aviation aircraft. It is not, however, the preferred form for FBOs and clubs (below) as it contemplates a high-performance aircraft and a "dry" transaction.
b. Aircraft Charter Agreement: This is a standard form charter agreement. It contemplates a "wet" or "dry" transaction.
c. Airplane Use Agreement: This agreement is between a corporation or other aircraft owner and an entity or person who is granted short-term use of the aircraft for business or special purposes at an assigned rate. The form addresses various regulatory matters during periods of use.
D. Miscellaneous Sample Agreements Related to All Sales
1. Banks and Finance Companies
a. Aircraft Finance Agreement (new purchase): This is the lender's master finance agreement and promissory note for an aircraft or rotorcraft.
b. Aircraft Finance Agreement (refinance): This is the lender's master finance agreement and promissory note for an aircraft or rotorcraft where a loan is being refinanced.
c. Aircraft Security Agreement: The lender's aircraft security agreement turns his interest into a secured transaction that cannot likely be discharged in bankruptcy court.
II. Fixed Based Operators Contracts and Other Legal Documents
a. Fixed Based Operator Policies and Procedures Manual and Employee Handbook: This mission-critical document is provided to every FBO employee. It contains the rules of the road and requires them to sign and return a signature page for the FBO's records. The 100-page document contains items relating to safety, the law, the airport environment, dealing with customers, and much more.
b. Aircraft Hourly Rental Agreement (Wet or Dry): This agreement is between an FBO and a renter for general aviation aircraft. It contemplates a "wet" or "dry" transaction.
c. Standard Services Agreement for Customers: This document sets for the standard legal terms customers will agree to which will protect the FBO from liability, minimizing the company's bad debt, shift certain risks away from the company, permit recurring billing to credit cards if customers do not pay timely by check, and other issues.
d. Hangar Rental Agreement: This agreement is between an FBO or other lessor (landlord) of a hangar. It attempts to shield the FBO from liability incidental to the storage of a customer's aircraft. The agreement requires the customer to have insurance, to make fixed monthly payments (plus tax), and to keep a credit card on file for payment in the event of a default. It also speaks to security deposits, the risks associated with the hangar (which are appropriately shifted to the customer), and other issues.
e. Avgas or Jet-A Requirements Contract: For large consumers of fuel, this is a must. It is also important whenever parties have agreed to a fixed price for fuel for a particular duration. There are various financial arrangements.
f. Risk and Indemnity Agreement: This is part of the "welcome package" for any new FBO customer, and speaks to the risks inherent in aviation and appropriately shifts them when permitted to the customer.
III. Corporate Aviation Department Legal Documents and Agreements
a. Corporate Aviation Department Policies and Procedures Manual and Employee Handbook: This mission-critical document is provided to every corporate aviation department employee. It contains the rules of the road and requires them to sign and return a signature page for the company's records. The 100-page document contains items relating to safety, the law, the airport environment, dealing with the company's employee-passengers, and much more.
b. Employment Agreement between a Corporation and a Director of Corporate Aviation
c. Employment Agreement between a Corporation and a Chief Pilot
d. Employment Agreement between a Corporation and an Aviation Maintenance Manager
e. Employment Agreement between a Corporation and a Pilot
f. Independent Contractor Agreement between a Corporation and a Pilot
g. Management Agreement between a Corporation and an Independent Aircraft Management Company
h. Agreement between a Corporation and an Independent Licensed Aviation Maintenance Company
i. Sample contract sections relating to the provision and use of a company aircraft to a corporate executive
j. Aircraft Reimbursement Agreement between Corporation and Executive
IV. Insurance Agreement and Legal Documents
a. General Aviation Aircraft Insurance Agreement
b. General Aviation Aircraft Excess Insurance Agreement
c. Commercial Aviation Insurance Agreement - Single Aircraft
d. Commercial Aviation Insurance Agreement - Fleet Policy
e. Commercial Aviation Excess Insurance Agreement - Single Aircraft
f. Commercial Aviation Excess Insurance Agreement - Fleet Policy
g. Aircraft Renters Insurance Agreement
h. Additional Insured Sample Provisions
V. Other Documents
a. Aircraft Manufacturer Policies and Procedures Manual and Employee Handbook
b. Aircraft Maintenance Facility Policies and Procedures Manual and Employee Handbook
c. Air Charter Company Policies and Procedures Manual and Employee Handbook
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