FAA Halts Non-U.S. Citizen Owner Trust Registrations

By: Stewart Lapayowker

May 7, 2010

Yesterday, the FAA Aeronautical Counsel Center’s office halted approval of non-citizen owner trusts and directed the FAA examiners office to cease processing registration of aircraft by those trusts.   Industry participants are attempting to enter into a meaningful dialogue on the matter.   There has not as yet been any clarification as to whether the FAA’s position will be applied retroactively.

Owner trusts are commonly used by non-U.S. citizens to register aircraft with the FAA.  Basically, a non-U.S. company enters into a trust agreement with a financial institution that is a U.S. citizen. The trustee (referred to as an “owner trustee”) then acquires and registers the aircraft in its name as owner trustee.  It then typically will provide the aircraft to the beneficial owner through a lease or operating agreement.  The FAA has approved thousands of these types of trusts over the years.

The FAA’s action has the potential to impact pending transactions, sales by manufacturers of new aircraft, sales of pre-owned aircraft to foreign buyers, among others.

We will continue to monitor the situation.

Regards. SHL.