FAA Proposes New Policy Governing Owner Trusts with US-Registered Aircraft

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On February 9, 2012, the United States Federal Aviation Administration (FAA) published a proposed policy that, if adopted, would affect the rights and responsibilities of owner trustees of FAA-registered aircraft and their related trustors, owner participants and trust beneficiaries.

In order for an aircraft to qualify for registration with the FAA, the owner of the aircraft must satisfy certain citizenship requirements. Where those requirements cannot be satisfied, aircraft owners often establish owner trusts that meet the FAA’s citizenship requirements, whereby the owner trustee becomes the legal owner of the aircraft and the non-citizen retains the beneficial interest in the trust estate. The FAA’s proposed policy would clarify that the owner trustees of such trusts are obligated to comply with all FAA regulations imposed on owners of FAA-registered aircraft and would require an owner trustee to provide the FAA with certain information about its registered aircraft, such as the identity and contact details of the operator, the habitual location of the aircraft and the location of the aircraft’s records within two business days, and more detailed information regarding the aircraft’s flight schedule, airworthiness status and maintenance within five business days. It is not clear from the proposed policy whether the FAA intends to impose these obligations on the owner trustee in its individual capacity or solely in its capacity as owner trustee (i.e., whether the institution or person acting as owner trustee will be personally liable for noncompliance). There is nothing in the text of the proposed policy, however, that indicates any intention to hold the institutions or persons acting as owner trustees personally liable to the FAA.

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