While there are private aircraft buyers that are pilots, as well as companies with existing in-house flight departments, aircraft management companies are increasingly relied upon to ensure the most cost-effective way to manage aircraft assets
Aircraft management agreements are essential for ensuring the smooth and efficient operation of your aircraft, whether for private or commercial use. These agreements cover a wide range of services, including aircraft maintenance, crew management, and operational oversight. YYZlaw specializes in negotiating these agreements and can act as a liaison between the aircraft owner and the management company, ensuring that the owner fully understands their rights, fees and obligations under the agreement and that management companies operate within agreed parameters.While some companies have, and wish to use, an established in-house legal team, advice from third-party aviation lawyers, such as YYZlaw, can increase the efficiency of a transaction.
The first step in negotiating an aircraft management agreement is identifying the specific needs of the aircraft owner. Special consideration must be given to items such as aircraft storage obligations, aircrew employment and associated training and liability, aircraft maintenance, and charter usage s if the aircraft is used for commercial purposes. The management company is responsible for ensuring that the aircraft is always ready for use, which includes hiring and managing the crew, scheduling maintenance, and ensuring compliance with all regulatory requirements.
A critical aspect of these agreements is the allocation of responsibilities between the aircraft owner and the management company. For example, the agreement must clearly outline who is responsible for the costs associated with maintenance, repairs, and crew salaries. These costs can be substantial, so it is important that they are clearly defined and agreed upon to prevent disputes down the line. Additionally, the agreement should specify the standards for aircraft maintenance and operation, including how often the aircraft will be inspected and who will perform these inspections.
Another important element of aircraft management agreements is insurance. The agreement must specify the type and amount of insurance coverage that the management company will maintain on the aircraft. This typically includes liability insurance to cover any damages that may occur during the operation of the aircraft, as well as hull insurance to cover any damage to the aircraft itself. The agreement should also specify how any insurance claims will be handled and who will be responsible for paying any deductibles.
In addition to maintenance and insurance, aircraft management agreements often include provisions for the use of the aircraft. If the aircraft is used for charter services, the agreement must specify how revenue from these services will be shared between the aircraft owner and the management company. It should also outline any restrictions on the use of the aircraft, such as how many hours it can be flown each year or where it can be operated. These provisions help ensure that the aircraft is used in a way that maximizes its value while minimizing wear and tear.
YYZlaw’s role in negotiating these agreements is to ensure that all of these issues are addressed in a way that protects the interests of the aircraft owner. We work closely with our clients to draft agreements that are clear, comprehensive, and enforceable. This includes reviewing any standard contracts provided by the management company and negotiating any changes that may be necessary to protect our client’s interests.
One of the key challenges in negotiating aircraft management agreements is balancing the needs of the aircraft owner with the requirements of the management company. The owner may want to retain as much control as possible over the operation of the aircraft, while the management company may need certain freedoms to effectively manage the aircraft. YYZlaw helps navigate these negotiations to achieve a mutually beneficial agreement.
Another critical aspect is understanding the legal implications of these agreements. Aircraft management agreements often involve complex legal issues, such as compliance with aviation regulations and tax laws. YYZlaw provides the legal expertise needed to navigate these issues, ensuring that the agreement complies with all relevant laws and regulations.
YYZlaw also assists with the implementation of the agreement once it is signed. This can include helping to set up the necessary structures for managing the aircraft, such as establishing a separate legal entity to own the aircraft or setting up an escrow account to handle payments. We also provide ongoing legal support to address any issues that may arise during the term of the agreement.
To assist those in search of an aircraft management company to meet their needs, YYZlaw has prepared a listing of the largest aircraft management companies in Canada. This listing is provided without representation, preference, or endorsement as to the specific terms used by each aircraft management company. As is our general practice in advising our clients in these aircraft management transactions, our role is to ensure the terms are fair and properly documented. We do not opine on specific management fees and rates an aircraft management company may charge, as they are often associated with the levels of service being sought.
Negotiating an aircraft management agreement is a complex process that requires careful consideration of a wide range of issues. YYZlaw provides the expertise needed to navigate this process, ensuring that the agreement protects the interests of the aircraft owner while allowing the management company to effectively manage the aircraft. With our help, aircraft owners can have peace of mind knowing that their aircraft is in good hands and that their investment is protected.
