The Proposed Rule
Aircraft owners and operators should be aware that the Federal Aviation Administration (FAA) has proposed a new rule covering the “Re-registration and Renewal of Aircraft Registration.” If adopted as proposed, the new rule would eliminate perpetual registration for aircraft and require periodic renewal similar to that for boats or cars. This will be accomplished by the cancellation of all aircraft registrations in the FAA Civil Aviation Registry and the re-registration of such aircraft over the course of three years. It is estimated that this will require the re-registration of between 240,000 and 340,000 aircraft.

Implications
The proposed rule would significantly modify the current registration process that requires aircraft owners to register aircraft only at the time title to the aircraft is acquired by a new owner. Failure to properly re-register and renew an aircraft would cause the registration to lapse. Operation of aircraft that are not properly registered is illegal. Consequently, the proposed rule has the potential to ground aircraft. Aircraft owners or operators who operate improperly registered aircraft could face significant civil and criminal penalties under the proposed rules.

If the proposed rule is adopted in its current form, it would impact not only aircraft owners, but also aircraft lessees who finance aircraft through leasing relationships with finance companies such as GE Capital. Finance companies that own aircraft and lease aircraft to lessees will need to establish mechanisms to verify the accuracy of the information contained in the registration for each renewal. This includes coordinating with lessees the placement of new registration cards on aircraft and the proper return of old registration cards to the FAA.

Not only will the proposed rule impact aircraft owners, lessees and financing parties, there will be an impact on the Registry. The proposed rule would require the Registry to process records related to the large number of aircraft involved, including coordination with financers, operators, and legal counsel, etc. The size of such a task could result in delays and errors, potentially leading to grounded or unregistered aircraft and even uninsured aircraft. The general aviation arena in particular could be impacted because aircraft owners may not have resources available to adequately comply with the new measures.

Alternatives
According to the FAA, the goal of the proposed rule is to provide a means to improve the accuracy of information contained in the Registry and to respond to law enforcement concerns. Industry groups and GE Capital strongly support the proposed rule’s stated objectives, as an accurate Registry would indeed benefit everyone. However, industry groups point out that the proposed rule is too broad, posing serious problems for the industry. A simpler, more tailored solution could provide the same benefits without the adverse impact. One such solution proposed by industry groups would entail minor modifications to the Triennial Reporting System requiring aircraft owners to periodically verify the accuracy of the information maintained by the FAA Registry. Currently, the Triennial Reporting System requires a response only if the information is incorrect, rather than affirmative verification that the information is correct.

What’s Next
At this time, the rule is not yet final and it is unclear what actions will be required with respect to registering and renewing aircraft. The rule may be finalized as early as the first quarter of 2010. Click here for more information on the FAA Aircraft Re-registration Rule Proposal and industry group response. To speak with the GE Capital, Corporate Aircraft Finance representative for your area, please call 866-359-2677.

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