How is Aircraft Ownership Impacted by Registry Choice?

Business jet ownership is international by nature, with the potential for operators to register their aircraft in many jurisdictions around the world. What factors should guide their decision, and how could their choice of registry impact on their ownership?

The decision will be dictated, in part, by the owner’s intended use and operation of the aircraft. However, “in essence, people tend to pick operators and registries local to them who are familiar with the operating environment and airspace regulation,” says Aoife O’Sullivan, Partner at The Air Law Firm, a specialist aviation law practice.

The precise choice can be driven by a variety of complex factors, O'Sullivan notes.

According to Alexandria Colindres, CEO of The Registry of Aruba, the first focus is usually determining an aircraft owner’s operational needs – notably whether it’s being operated privately for their own use or chartered out. The registry will also ask them where they intend to operate the aircraft.

Such operational needs “are going to tell us whether or not we’re the right fit for them.” If the aircraft is intended to be flown commercially for charter in Europe, it generally should be registered in the same country as that of the Air Operator Certificate (AOC), O’Sullivan suggests.

European charter owners, for instance, will typically pick an EASA registry and operator to allow for maximum cabotage freedoms. There are exceptions, though. Some non-EASA AOCs can operate commercially in Europe, such as the UK, Switzerland, San Marino, and Aruba, with the operator applying for third-country approval.

There are more freedoms in terms of registry choice if the aircraft will be flown privately, O’Sullivan says, since these “do not need to link to the operator’s aviation authority”.

Other Factors When Considering Registries 

However, there are still numerous other factors to consider, such as if the aircraft is financed. Financiers will tend to insist on a registry with a highly reputable aviation authority and a corresponding mortgage registry, along with access to the International Registry.

Pilot licensing could also have a bearing on a private owner’s choice of registry, O’Sullivan adds. For example, if the pilots are FAA-licensed only, they may look to registries accepting FAA licenses, rather than having to re-certify under EASA, for instance. 

O’Sullivan also points to the potential need for Export Certificates of Airworthiness, which can be a lengthy and costly process, depending on the state of registry.

“These documents are needed if moving from EASA to FAA or vice versa, but a more efficient Airworthiness Review Certificate process is available if moving between states under EASA.

“Post-Brexit in the UK, an Export Certificate of Airworthiness is now needed to move from the UK to EASA or from EASA to the UK, despite the continuing similarities in regime and oversight.”

Finally, the owner must consider factors around responsiveness and timing, O’Sullivan says. The responsiveness of the registry can make or break a deal, particularly in a purchase transaction. “The market has been very buoyant, and sellers are less interested in waiting around for buyers and their registry requirements.

The buyer, on the other hand, will try to ensure the aircraft registry is ready to accept the aircraft on the day of closing to avoid any potential grounding of the aircraft while it’s ‘stateless’.”

In such circumstances, buyers have chosen at times to stick with the existing registry and move the aircraft later, which can pose added cost implications. Additionally, there can be issues around the extent of a registry’s requirements for de-registration, she said.

Owners will also naturally consider any financial implications associated with their choice of registry. The registry effectively determines which aviation authority has safety oversight and responsibility for the aircraft, with fees being similar in most cases, meaning there should not be any significant financial implications of choosing one over another.

However, there can be maintenance and modification costs associated with changing registration, O’Sullivan warned, such as ensuring the interior of the aircraft has all the required type certifications.

“In addition, there can be exposure in terms of whether the aircraft is compliant with all Airworthiness Directives and Service Bulletins of the incoming regime,” she adds. “A good technical engineer or aircraft operator will give invaluable advice on this in the early stages of a purchase.”

Business Implications of Registry Choice

Charles Pace, Director General for Civil Aviation at the Transport Malta Civil Aviation Directorate, notes that each jurisdiction has its own schedule of fees imposed on the registrant of an aircraft, with fee schedules varying from one jurisdiction to another.

There could also be a range of taxation benefits to operating in certain environments, which often goes beyond registering alone. “Over the past 10 years, Malta has embarked on a rigorous effort to boost the country’s aviation industry.

“With this came a number of taxation benefits available for both individuals and companies, such as lower taxes imposed on aviation professionals, reduced corporate tax rates, fringe benefits and no withholding taxes imposed on dividends, among others.”

The business implications involved in choosing one registry over another are significant. “The registry of choice will have a great effect on the operations of the aircraft, and it is safe to say that having an efficient and flexible authority, together with a robust and effective set of laws in place, will greatly facilitate the operations of the aircraft.”

Pace points to a range of other factors for owners to keep in mind. The first consideration should be the international safety authority to which they will be subject (for example, Malta falls under EASA).

Other concerns might not be immediately obvious: for example, the official language of the country, and the need to submit documents to that country’s registry in an officially recognized language. “In Malta all laws are actually published in English, making it easy for many foreigners to understand,” Pace said.

Related concerns include the routes to be operated. “Should an operator not be licensed by an EU member state, then that operator is not able to operate cabotage flights (i.e. the performance of intra-EU flights) without obtaining special permits for each flight. This process becomes very cumbersome and restrictive for aircraft which predominantly operate in EU airspace.”

They should also consider the securities and protection given to owners and financiers, Pace continues, something Malta seeks to prioritize through its legal framework, among other assets.

It is also very important to consider the legal framework of the jurisdiction where aircraft owners are considering registering the aircraft, Colindres adds – “for example, there could be restrictions on foreign owners’ possession of an aircraft”.

Pace highlights the benefits of compliance with the Cape Town Convention, which helps to protect financiers when lending against an aircraft asset. Operators should think about the efficiency of the court systems in the country in question, as well as the existence of “efficient and flexible corporate structures available for the owner to structure the ownership of the aircraft,” which helps with operational efficiency.

Does Registry Choice Impact Resale Value?

According to Colindres, “The other thing to consider is the future resale value – especially if you're a new owner. “Obviously you're excited about the aircraft and keen to fly – you're not really thinking about the future of the aircraft. But there will come a time when...it's important to have preserved the resale value of that aircraft.”

If an owner pursues the appropriate structure, there is no tax implication to importing and operating an aircraft in the country, Colindres says. However, “people sometimes confuse tax efficiency with being a tax haven – that’s definitely not what Aruba is.”

As a privately managed aircraft registry, Colindres elaborates, “our business model allows our clients to deal with people versus bureaucracy”, which she says can be found in traditionally managed, state-run registries.

“A lot of what we offer is the ability to register your aircraft within a couple of days – so the time that your aircraft is on the ground is kept to a minimum, because at the end of the day, the decision of the client can come down to their time versus money,” Colindres highlights.

In Summary: Ask a Pro

It is vital to engage professional advice, summarizes Adam Meredith, President of AOPA Finance. This is particularly true in areas like taxes, which he labels “an ever-evolving and moving landscape”. In the US, for instance, this goes beyond national registry, even down to the state or county level.

“Make sure to engage with somebody who understands the landscape at any given moment and can help advise on that,” he concludes.