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Volume 7 - Fall 2006

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We publish this Newsletter periodically, on a time-permitting basis, and subject to our professional commitments to appraise clients and colleagues of recent developments in areas in which we are primarily engaged-- ‑‑FAA/NTSB/DOT, certification and enforcement, aircraft and equipment acquisition, sales and leasing, and airports matters. We provide this information, which has been derived from reliable sources and which we believe to be current at the time, but without liability therefor. We hope that you find AVIALEX ® interesting and informative. We would appreciate receiving your feedback with any suggestions or comments. If you know of anyone who might be interested in receiving copies, please FAX or Email their names and addresses to us. You may reproduce this Newsletter or use any information from it so long as you give us credit for same. (please see our copyright notice below).

WHERE WE'VE BEEN AND WHAT WE'VE BEEN DOING...

As the preface says..."periodically...time permitting...and subject to our professional commitments...".

Our last Newsletter was published about two years ago. So I guess that's good news.

In 2008 alone, Mike Dworkin has spoken at the International Air Transport Association (IATA) Legal Conference in Buenos Aires (Response to Aircraft Mishaps), National Transportation Safety Board Bar Association in Alexandria, Virginia (Air Carrier Operational Control Issues-(see below), National Business Aviation Association (NBAA) Annual Convention in Orlando, Florida (Defense of FAA Enforcement Actions) and The African Network Conference in Palo Alto, California (Need for African Aviation Infrastructure Improvements). He has also been serving as Director of Communications for the NTSB Bar Association.

In late 2007, John Van Geffen addressed Northern California pilots at Aircraft Owners and Pilot Association's (AOPA) pilot safety seminars with his presentation "Defending Against FAA Enforcement Actions" and in 2008 became very active in "shepherding" the National Transportation Safety Board's Law Student Division in the preparation of a white paper on data sharing. This white paper will be presented later this year at the NTSB Bar's annual meeting.

WHAT'S INSIDE

We have been involved in the representation of two start-up enterprises in Africa-the first, a new low-cost carrier, and the second a consortium seeking to establish an air carrier maintenance, repair and overhaul facility (MRO). Africa is the world's second largest continent in terms of geographic size and population, but only represents about 4.5% of the world's air traffic (and at the same time accounting for 25% of the world's aviation accidents). Both of these new enterprises seek to achieve and operate under 21st Century US and EU-established standards.

There is an old adage: "Wherever there is an aircraft, there is a tax man not far behind." While California law and regulations exempt air carriers from sales and use tax (let's see, 7.25 percent of the purchase price is...[a lot of money]), the California State Board of Equalization (the agency that collects these taxes) has recently "reinterpreted" the law, regulations and its own long standing policies. The result is that EMS operators are about to be deprived of this exemption.

On another front in California, the City of San Jose has recently enacted a living wage ordinance imposing upon all SJC Airport businesses the requirement to pay their employees minimum wages in excess of the Federal minimum wage requirements. This is an expensive area in which to live and that workers should be entitled to sufficient compensation make ends meet. However, the ordinance has exempted scheduled airlines. Consequently, one of our non-air carrier airport business clients finds itself in a situation in which airlines, availing themselves of this exemption and gaining a substantial cost advantage, are actively attempting to compete with our client..

What, if anything, should aviation do about global warming and climate change? In this area, it appears that the EU may be far ahead of the US.

One of the things that got in the way of our publishing our Newsletter in 2007 was a December 2006 development-the FAA's promulgation of new operational control guidelines for air carriers. These guidelines went into effect in December 2006. While the FAA took the position that it was simply clarifying policies and guidelines that had been in effect for decades, many within the industry, including us, respectfully disagree. Operational control issues (and the related issue of foreign ownership and control) were the pervading areas of our practice during all of 2007 and much of 2008. Mike and a number of his colleagues presented a program to the NTSB Bar Association on these issues. We have included excerpts from this presentation.

UPDATES

In our last Newsletter (Volume 7), we wrote about Operation Safe Pilot. Two of our clients ("Edward" and "William" in that article) have since been medically recertificated by the FAA without restrictions. This came a no surprise to us, considering what we perceived to be the lack of merit of the FAA's stated medical basis for revoking their certificates. "William" took it one step further. He sued the United States Government for violating his rights under the Privacy Act of 1974 (5 U.S.C. Sec. 552). The United States District Court for the Northern District of California found that the Government had, in fact, violated his rights. The issue of damages remains pending.

ARTICLES

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MRO's For Africa

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Africa is the second largest continent on this planet, both geographically and in terms of human population. Despite its size, Africa currently has only 4.5% of the world's air traffic yet accounts for 25% of the total accidents. According to various aviation groups, an air passenger is 30 times more likely to die in a crash in Africa than in the US, the world's safest country for aviation.

Africa has the highest potential for air traffic growth in the world and there is a vital need for the establishment of effective safety standards and companies willing to meet them. This presents a unique opportunity for US and African companies interested in joint ventures to assist Africa in developing a viable aviation industry with effective safety standards that will facilitate and promote aviation industry expansion and national air transport.

Ensuring new aviation businesses have measurable safety standards is essential to attracting customers and operating outside of the continent. The U.S. bars all countries that fail to comply with the ICAO standards from providing air services to the U.S. Only a few years ago Europe had banned all African airlines from conducting services in and to the EU. While some 17 carriers have started services in the EU, the majority (74) have not.

In the past, Africa conducted most of its external trade with Europe, but trade with the U.S. and Asia is becoming increasingly significant. Trade and investment ties with Africa have grown rapidly in recent years. Greater transparency and accountability in government as well as strengthened local watchdog institutions fighting corruption have contributed to making African nations more attractive markets to U.S. investors.

Aside from safety concerns, African nations have yet to adopt or implement a "common civil aviation policy". For instance, travel between some African countries requires an intercontinental flight out of Africa before traveling to the final destination within Africa. In an attempt to create a unified system several African nations, including South Africa, Nigeria, Libya, Ethiopia, Cameroon and Namibia, recently initiated the African Civil Aviation Authority or AFRO-CAA.

In addition, the International Civil Aviation Organization (ICAO), a United Nations agency which promotes aviation safety by requiring its member states to adhere to the universal safety oversight audit, the International Air Transport Association (IATA) and even the U.S. FAA have undertaken efforts to foster safety initiatives within Africa.

Ultimately, as trade and commercial impediments lessen and safety standards improve, traffic levels between and within countries will naturally increase creating a demand and market for new aviation businesses seeking to comply with industry-accepted international safety standards. A case in point is the emergence of Maintenance, Repair and Overhaul (MRO) facilities.

In the past, airlines performed an estimated 80 percent of all maintenance services on aircraft, engines and components. Now however, airlines are changing their business prospects by framing success in terms of profit and no longer solely on capacity or market share. Outsourcing non-core operations will likely continue to grow, allowing airlines to reduce fixed costs. Even airframe and engine manufacturers are becoming service integrators, either engaging in maintenance services themselves or entering partnerships with airlines and independent MROs.

As airlines and manufacturers continue to expand their reach and outsource to cut costs, African nations have a chance to seize a piece of the expanding $50 billion dollar outsourcing market. For example, Pratt & Whitney's joint ventures with airlines account for half of its worldwide locations, such as its engine overhaul shops in Singapore, with Singapore Airlines, in New Zealand with Air New Zealand, and Shanghai with China Eastern Airlines. At present there are no MRO programs within Africa creating a void which only a niche market can fill.

The aviation maintenance industry can be not only profitable, but highly visible in terms of international attention. The opportunity to establish an MRO exists as several factors are increasing in importance throughout Africa: growth in passengers; increased reliance upon air travel and air cargo; continual operation of older aircraft beyond their economic design life; emergence and growth of low cost carriers and increased pressure upon airlines to reduce costs by outsourcing services.

Mind you, entering a volatile international market is not for the weak of heart. Historically, U.S. companies have faced several challenges to African market entry, including: limited purchasing power; small market size; limited financing resources; unfamiliarity with U.S. products and traditional ties to European markets; high inflation rates; tribal conflicts; inefficient bureaucracy; open corruption and inadequate infrastructure. However, these traditional impediments have also created tremendous opportunities. Only time will tell whether the risks will reap sufficient rewards.

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CALIFORNIA SALES AND USE TAXES: What the Legislature Giveth, the Bureaucracy
Taketh Away
-or-
California's Efforts to Deny the Common Carrier Exemption to Air Ambulance Operators

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Yesterday's, today's and tomorrow's news: state, counties and cities are broke. California is looking at a budget deficit of $40 billion by June of 2010. Motor vehicle registration fees have gone up, government services have been reduced. Two day per month mandatory furloughs for State employees are in the works. The State needs to raise money, however and wherever it can.

The California State Board of Equalization ("BOE") is the state agency charged with collection of State Sales and Use Taxes. In doing this, BOE promulgates regulations which augment and interpret the Revenue and Taxation Code.

Aviation is not inexpensive (and never has been or will be). Aircraft are expensive and high profile and lurking behind every aircraft is a tax man considering, at the 7.25+% sales and use tax rate, for every million dollars spent in the acquisition of an aircraft (or engines, parts or accessories) a second check goes to the State for more than $72,500.

In an attempt to increase receipts, the BOE appears to be "reinterpreting" established law. For example, under State sales and use tax regulations, common carriers are exempt from the taxes usually imposed from the purchase, sale, storage, use, or other consumption of aircraft in this State. These regulations define a "common carrier" as any person who engages in the business of transporting persons or property for hire or compensation and who offers his or her services indiscriminately to the public or to some portion of the public.

An aircraft is deemed a common carrier aircraft if the carrier's principal use of the aircraft involves transporting persons or property for compensation or hire, for more than one-half of the operational use during the 12 month test period following the initial operational use of the aircraft. The BOE, in determining common carrier status, examines each flight segment taken over this 12 month period. Thus, the exemption applies if the aircraft is operated carrying persons or property for compensation or hire for more than 50% of its operation in the initial 12 months that the aircraft has been in use.

Until recently California air ambulance operators fell within this exception. However, the BOE recently changed its long-held interpretation, imposing draconian record-keeping requirements designed to ensure that air ambulance operators will no longer meet the exception.

Now according to BOE, only those legs upon which a patient, organ or speciality medical staff (not the operator's flight nurse) is on board will be treated as falling within the common carrier exemption. Most EMS flights usually consist of three legs: first, flying from base to the patient; second, flying the patient to the hospital; and then returning to base. Assuming these three legs were more or less equidistant, the exemption request would be denied. BOE now states: "...Where the flight does not itself transport the person or property to a location on the ground (or water), the flight does not qualify as a common carrier flight for the purposes of the exemption."

Under this new interpretation, the aircraft is used in common carriage only 33% of the time, falling short of the exemption's 50% threshold, in effect defeating the exemption. Is this completely unreasonable? Yes! No EMS carrier, unless based at the trauma unit of a hospital, could possibly obtain the 50% status.

Unfortunately, and whether we like it or not, government agencies, like the courts, may overrule prior decisions or practices and may initiate new policy through interpretation and adjudication-even if that interpretation appears to be contrary to a the previously stated intent or prior longstanding agency policy. There is no law prohibiting a state agency from reinterpreting a statute or regulation without first notifying those affected by it. The result is that the common carrier aircraft tax exemption is no longer automatic.

In order to avail itself of the exemption, the carrier is going to have to do a lot of "tax planning" in advance of aircraft and equipment acquisition.

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WAGE LAWS IN THE BAY AREA
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The Good News is You Will be Making More Money-
The Bad News is You are Being Laid Off

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January 1, 2009: a new year with new opportunities. And a new wage ordinance went into effect at San Jose International Airport (SJC).

In November 2008, with very little notice or fanfare, the San Jose City Counsel enacted Ordinance No. 28432 with imposes a minimum 'living wage' of $14.08 per hour for all SJC airport employees.

There is nothing wrong with imposing a 'living wage'. This is one of the most expensive areas of the country. The cost of living in the Bay Area has risen to such an extent that many Bay Area airport workers are faced with 2 hour commutes so they can live in more affordable areas. Ideally, higher wages attract better employees, result in less employee turnover and contribute to an overall safer aviation environment.

But here's the catch. The ordinance exempts passenger airlines from the living wage requirements. Normally such an exemption would be fine--the economy is hurting, airlines are suffering and airports must do what they can to keep present levels of service and attract new service.

Enter the ground service industry, providing ramp services, aircraft cleaning, cargo handling and passenger services to the majority of airlines at SJC. Airlines, in an effort to become more efficient and improve their bottom line, have turned to outsourcing non-core operations, including ground services.

There are a few carriers who still conduct ground services, utilizing their own personnel. As they are exempt under the City Ordinance they can pay their in-house ground handlers a lower rate. So long as the carrier is providing the service to itself and with its own employees, we have no problem-that's a matter between the airline management and its employees (or their collective bargaining unit).

But what about those carriers that elect to provide contract ground services to other carriers in competition with established independent ground service providers? With this exemptions, they are enjoying a large competitive advantage, benefitting from a 40% labor cost savings over existing independent ground service providers.

This could mark the beginning of the end for the independent ground service industry, or for that matter other airport businesses that provide services in competition with airlines. One of our clients had urged the City to limit the exemption to air carriers providing these services to themselves, utilizing their own employees and deny the exemption to air carriers providing these services to others in competition with existing independent businesses. Thus far, the City has declined to do this.

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AN INCONVENIENT FLIGHT
-or-
How the EU, the U.S. and Everyone Else Can't Agree on What to do About
Aviation and Global Warming

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In 2005, the FAA published Aviation & Emissions, a Primer which admitted that while representing a relatively small portion of global emissions, aviation emissions cannot be ignored.

According to the report, assuming a constant rate of emissions from aircraft, aircraft greenhouse gas emissions in the U.S. will increase between 60 and 144 percent over the next 20 years. This forecast is an estimate, it cannot account for improvements in aircraft energy efficiency over the next 20 years or other variables, such as to what extent emerging markets will increase the demand for aviation.

The International Air Transport Association (IATA) suggests a four pronged approach for tackling emissions: investing in technology, flying aircraft more efficiently, building efficient infrastructure and using positive economic measures.

How will the industry regulate itself? The current consensus seems to be market-based mechanisms for curbing emissions, including emissions-trading systems (as put forth in the Kyoto Protocol). An emissions‑trading system is one whereby the total amount of emissions is capped and allowances, in the form of permits to emit CO², can be bought and sold to meet emission reduction objectives.

The Kyoto Protocol, to which the US is not a member, urges countries be allotted a base emission amount, the allowed emissions are then divided into "assigned amount units" (AAU's), which can be sold to those who exceed their allotted amount. While aviation is not currently included in the Kyoto Protocol, the European Union is pushing to include air and sea travel in the agreement that is currently being negotiated to follow Kyoto in 2012.

The International Civil Aviation Organization (ICAO) has been charged with determining how to include aviation in an emissions trading system. To this end, ICAO recently released a Carbon Calculator which will estimate the carbon footprint of a flight. The calculator has been fully backed by IATA. However, in its infancy, it is uncertain how the Calculator will be used. The European Union (EU) has taken a lead-drafting legislation to account for all emissions on flights into or out of Europe. Under the EU's proposed legislation, the total amount of emission allowances granted to the aviation sector would be determined by reference to the average emissions from aviation in 2004-2006.

The US last year stonewalled local efforts to create a national scheme confronting emissions. On June 2nd the Senate voted closure on the Warner-Lieberman bill which attempted to lower greenhouse gas emissions to 65% below 2005 levels, citing hardship on consumers due to higher fuel prices.

On the positive side, the pace of technological change across the industry is increasing. New engine designs are improving fuel efficiency while simultaneously reducing NOx emissions. New aircraft design will improve aerodynamics and reduce weight thereby improving fuel efficiency, reducing all pollutants at the same time. New air traffic control technologies, reduce emissions by reducing fuel consumption (the effect on individual pollutants depends on the phase of flight most effected). And new management strategies like load management planning and code sharing are being used to optimize the entire system's operation. One airline representative stated "With improved air traffic management, the aviation industry could reduce its emissions by 12%".

Is there an easy solution? No. But, at least global warming has finally been accepted as a real threat to the viability of our planet. While slow and labored, the aviation community must continue discussing how it will do its part. In fact, only last month, numerous aviation trade and industry groups (including, among them AOPA, NBAA, RAA, GAMA, NATA, ALPA and NATCA) committed to address aviation's effect on climate change and its role in reducing greenhouse gas emissions.

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OPERATIONAL CONTROL IN A NUTSHELL

As promised, here is a summary outline of the presentation that Mike and colleagues gave at the National Transportation Safety Board Bar Association's Annual Meeting:

Applicable Law:

Title 49, United States Code, Sections:

§ 41101‑Requirement for Air Carrier Certificate

§ 41110‑Effective periods, amendments, modifications, suspensions and revocations of certificate

§ 41712 ‑Unfair and deceptive practices and unfair methods of competition

§ 40102‑ "Citizen of the United States" means:

(A) an individual who is a citizen of the United States;

(B) a partnership each of whose partners is an individual who is a citizen of the United States; or

(C) a corporation or association organized under the laws of the United States or a State, the District of Columbia, or a territory or possession of the United States, of which the president and at least two‑thirds of the board of directors and other managing officers are citizens of the United States, which is under the actual control of citizens of the United States, and in which at least 75 percent of the voting interest is owned or controlled by persons that are citizens of the United States.

Applicable Federal Aviation Regulations:

1.1 Operational control with respect to a flight, means the exercise of authority over initiating, conducting or terminating a flight.

91, Subpart F‑Large and Turbine‑Powered Multiengine Airplanes and Fractional Ownership Program Aircraft

FAR 91, Subpart K‑Fractional Ownership Operations

119.9(b) Use of business names.

119.53(b) Wet leasing of aircraft and other arrangements for transportation by air.

135.23 Manual contents

135.77 Responsibility for operational control.

Each certificate holder is responsible for operational control and

shall list, in the Manual required by § 135.21, the name and title of

each person authorized by it to exercise operational control.

135.79 Flight locating requirements.

Other FAA Guidance:

Operations Specifications A002, A008, A039 and A040

FAA Notice N8000.347, effective December 28, 2006, cancelled December 28, 2007

FAA Order 8900.4, effective May 25, 2007 (cancellation date May 25, 2008)

A008 Revisions:

FAA's statement of intent per Notice N8000.347

Mutual understanding between the FAA and the FAR 135 operator concerning the system and procedures used by the operator for the exercise of authority over the initiation, conduct and termination of a flight.

 

Maintaining Operational Control requires that FAR 135 operator:

1. Ensure that it alone conducts operations;

2. Ensure that its crewmembers are trained and qualified in accordance with applicable FAR's and operator's training program;

3. Prior to flight initiation, operator must know the identity of each crewmembers and must affirmatively determine that each crewmember is qualified;

Maintaining Operational Control requires that FAR 135 operation:

1. Put procedures in place to ensure that when safety conditions specified for a flight cannot be met, flight is canceled, delayed, rerouted or diverted;
2. Ensure that aircraft is airworthy and in compliance with FAA‑approved inspection/maintenance program;
3. Have a system for locating each flight if a flight plan has not been filed.

Other circumstances affecting operational control:

1. Actual or legal possession of aircraft;
2. Business relationship between certificate holder and crewmembers;
3. Leases and other agreements;
4. Insurance arrangements;
5. Fuel payments; and
6. Payment flows, i.e., "following the money"..

Required systems and procedures for FAR 135 operators:

1. Initiating, diverting, terminating flights;
2. Persons or duty positions authorized to and responsible for exercise of operational control;
3. Facilities and locations of facilities;
4. Communications systems;
5. Ensuring that all aircraft are airworthy;
6. Ensuring that all crewmembers are qualified;
7. Emergency notification;
8. Ensure PIC knows the certificate holder's responsibilities to exercise operational control;
9. Two‑tiered concept:

   First Tier: Certificate holder's assignment of crewmembers and aircraft for service. Individuals listed in OpSpecs or in GOM whom have been delegated authority to make decisions;

   Second Tier: Personnel in day‑to‑day conduct of operations (e.g. PIC).

    

Operations in the Real World:

FAR 91, Subpart F (Time Share, Interchange, etc.)

FAR 91, Subpart K (Fractional)

Aircraft Management Agreements

Tension between Tax Code and FAR's

Citizenship and foreign investment in US air carriers

And a few hypotheticals:

But first the disclaimer:

The following hypotheticals, scenarios and names of persons, firms, corporations, partnerships or other entities are purely fictitious. Any resemblance to actual persons firms, corporations, partnerships or other entities is purely coincidental, as the names were chosen completely at random.

Background:

Operator: A2ZAir, Inc.

FAA‑Certificated Air Carrier (On Demand) under FAR's 119 and 135

State of Incorporation: Delaware

Corporate Officers: President/CEO

Vice President/COO

Corporate Secretary

CFO

Board of Directors: All Corporate Officers

Retained outside counsel

First Tier Managers: Director of Operations

Director of Maintenance

Director of Safety

Chief Pilot

(All direct employees)

Fleet: Two 9‑seat corporate jet aircraft owned by and registered to the operator

Pilots: 8 (4 F/T direct employees; 4 P/T contract employees)

Mechanics: 2 (the majority of maintenance work is outsourced)

Flight Followers: 2 (1 full time, one part‑time contract employee)

Other Employees: Office and clerical Personnel

The company is privately held.

President, CFO and Corporate Secretary are US Citizens.

Vice President and COO is not a US Citizen.

With the exception of the Vice President/COO, all members of the Board of Directors are US Citizens.

The Vice President/COO is a resident alien who has lived in the US for over 5 years.

Scenario #1

A2ZAir is always interested in business expansion possibilities. However, it is not in an economic position to acquire additional aircraft or hire more employees. It is approached by Oliver Owner, a wealthy local businessman, who is in the market for a corporate jet, but who would like to defray many of the costs of ownership and possibly avoid states sales and use taxes that would otherwise be imposed on an aircraft purchase trans‑action but which may be avoided by placing and operating that aircraft on an FAA air carrier certificate.

Owner proposes to purchase an aircraft substantially identical to A2Z's existing fleet, provide a flight crew and enter into a management agreement with A2Z. Under the management agreement, A2Z's flights for Owner would be under FAR Part 91, while charter operations would be under Part 135. Owner pays for his full‑time flight crew. A2Z places aircraft on its fleet policy with pro‑rata charge back to Owner. Owner pays a management fee to A2Z. A2Z pays owner a percentage of charter revenue generated by its charter operation of Owner's aircraft.

Scenario #2

Owner wants to maximize A2Z's use of his aircraft and charter revenues payable to him under the management agreement. Owner starts to vigorously market his aircraft as being available for charter.

Scenarios #3(a) & 3(b)

(a) Following Owner's efforts in Scenario #2 above, Owner, in the interest of truly maximizing use of his aircraft, decides to enter into a time sharing agreement, and when the aircraft is not being used by A2Z in its charter business, making the aircraft available under lease to third persons.

(b) Owner's sister in law, Minnie La Moocher, owns a twin engine, piston aircraft, with a seating capacity of 6, including the pilot. Minnie suggests to Owner that they enter into an interchange agreement so that they can use each other's aircraft.

Scenario #4

For the most part, Owner's pilots fly Owner's aircraft, whether the aircraft is operated under Part 91 or 135. The aircraft is flown under FAR Part 135 so much that Owner's pilots want a pay increase for 135 flights.

Scenario #5

While maintenance is performed in accordance with A2Z's approved maintenance and inspection program, one outside facility is objectionable to Owner and Owner insists that A2Z bring the aircraft to another facility for maintenance.

Scenario #6

Business is booming. However, A2Z management concludes that while it is good at operating, maintaining and managing aircraft (the fun things), it does not have sufficient expertise to provide certain "non‑aviation" support services, such as HR/benefits administration, insurance/financial risk management, invoicing/billing, payroll, accounting, tax and other financial aspects of its operations, and elects to outsource these functions. The Vice President/COO's wife, who holds Juris Doctor and MBA Degrees from Ivy League schools, has her own company which provides these services on a contract basis, to other companies, including other aircraft charter companies. While she is a US resident, she is not a US citizen.

Scenario #7

The company is very successful. But it can do just so much with only 3 aircraft. A2Z learns that it may be able to become the launch customer for the new Belchfire Business Jet. While the MSRP of the aircraft is expected to be over $25 million, A2Z learns that as the launch customer, it will be able to purchase these aircraft for $22 million each and that it may sell its delivery slots to third parties (with A2Z and Belchfire splitting the difference between the eventual sale price and A2Z's launch price). Belchfire Aircraft is not a US citizen. In order to qualify as a launch customer, A2Z must commit to 20 aircraft. While Belchfire will provide some financial assistance, the quid pro quo is a seat on A2Z's Board of Directors.

Scenario #8

Even with Belchfire's financial assistance, A2Z does not have the resources to commit to this without obtaining additional financing. It eventually does this through a local venture capital firm, Talon Ventures, LP. As part of the financing, Talon acquires 30% of A2Z and two seats on A2Z's Board of Directors. One of the limited partners in Talon is a hedge fund based in the Cayman Islands.

Scenario #9

A2Z decides that it is going to market fractional interests in the Belchfire Business Jets. Fractional interests may either be outright purchases of not less than 1/16 share of an aircraft or a long‑term lease of at least 1/16 share of an aircraft. It is as yet undecided as to whether A2Z will operate these aircraft under FAR 91 or under FAR 135.

And a word of caution:

Many of these hypothetical scenarios are based upon actual case histories and many have "crossed the line" under the laws and regulations cited above, as well as OpSpec A008, subjecting operators to revocation of their operating certificates and owners and operators to substantial civil and, in some cases, criminal penalties.

This is an area of the law that can be a proverbial minefield and competent aviation legal counsel should be sought before the deal is done.

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AND FINALLY, IN THE "YOU'VE GOT TO BE KIDDING DEPARTMENT"

For all of you who are required to have/administer or submit to FAA-mandated drug and alcohol tests, effective November 1, 2008, observers must ask the employee being tested to "raise his or her shirt, blouse or dress/skirt, as appropriate, above the waist, and lower clothing and underpants to show you, by turning around, that they do not have a prosthetic device." We're not kidding. In fact, an employee's failure to cooperate constitutes a refusal to take the test.

OKAY, JUST ONE MORE...

One of our colleagues in Germany reports that in recent years various offices of airlines, forwarders and logistics companies have been "dawn raided" by EU or national competition authorities. These "dawn raids" are unannounced visits to businesses, and even private homes, between 7 AM and 9AM to catch staff by surprise and completely unprepared.

And we thought the FAA was difficult!

©Copyright 2009, Michael L. Dworkin. All Rights Reserved.

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