The Critical Role of Aviation Law in Aircraft Ownership: Ensuring Compliance and Mitigating Risks

Owning a private jet is a symbol of success, but it comes with a set of legal responsibilities that many overlook. Stephen Hofer, President of Air Lex, underscores the importance of understanding the legal landscape of aircraft ownership, particularly when it comes to compliance with federal aviation regulations (FARs) and structuring ownership entities. This article delves into the legal considerations that can make or break your aviation experience.

Entity Structuring and Compliance

When purchasing an aircraft, many opt to create a single-purpose entity to own the plane. While this approach has its advantages, Hofer warns that it can lead to complications if not properly structured. For instance, if the entity is set up without consideration of the IRS's rules on tax depreciation or if it's not aligned with the operational needs of the aircraft, it could result in significant financial and legal risks. Hofer's advice is clear: work with an aviation attorney who understands both the tax implications and the operational requirements to ensure your ownership structure is legally sound and financially optimized.

Avoiding Illegal Flight Department Companies

One of the most common legal pitfalls in aircraft ownership is the creation of an illegal flight department company. Hofer explains that many owners unknowingly set up their flight departments in a manner that violates FARs, particularly when it comes to operational control. In a worst-case scenario, this can lead to the FAA deeming the operation illegal, with severe consequences for the owner, including potential loss of insurance coverage and loan acceleration.

Insurance and Risk Management

Properly managing risk is a cornerstone of aircraft ownership, and this extends to having the right insurance coverage. Hofer emphasizes that insurance policies often contain clauses requiring compliance with all applicable laws and regulations. Failure to meet these requirements can result in denied claims, leaving the owner financially exposed. Therefore, it's crucial to work with legal experts who can review and draft agreements that protect your interests and ensure compliance.

The legal complexities of aircraft ownership demand careful attention to detail and the involvement of specialized legal counsel. By structuring your ownership entity correctly and ensuring compliance with all regulations, you can mitigate risks and enjoy the benefits of private jet ownership without the headaches. Stephen Hofer's extensive experience in aviation law offers a roadmap for navigating these challenges effectively.

For those already owning or considering purchasing an aircraft, ensure your legal and operational frameworks are bulletproof. Consulting with an aviation law firm like Air Lex can provide the peace of mind that comes with knowing your assets and interests are well-protected.