Transferring a fractional jet share: what the agreement and the FAA require

A fractional program is not a set of separate ownerships that happen to share a manager. Under 14 CFR 91.1001(b)(5) it is a system with six required elements. Three of them matter here: management services by a single program manager on behalf of the owners, a dry-lease aircraft exchange arrangement among all of the owners, and multi-year agreements covering the ownership, the management and the exchange. The exchange is the arrangement, documented in those agreements, under which the program aircraft are available to each owner without crew when their own aircraft is elsewhere.

That structure is what makes consent structural. Every owner has agreed to lease their aircraft to every other owner, and every owner has agreed to the same manager. A new party entering that web is a counterparty to everyone already in it. That is why program agreements commonly require the program's consent, apply the program's qualification standards to the incoming owner, and make that owner's signature on the management and exchange agreements a condition of the transfer. The regulation then adds its own condition: 14 CFR 91.1013 requires the program manager to brief a new fractional owner on their operational control responsibilities on signing an initial management contract, and requires that owner's written acknowledgment.

The consequence for anyone planning a transfer is that the buyer, the entity or the heir is not the only party whose agreement is needed. The program's consent has to be obtained in the form the agreement requires, on the conditions it sets, and the plan has to be built around that rather than presented to the program afterwards.

The interest itself is conveyed by a bill of sale, and the conveyance is recorded with the FAA under the system that 49 U.S.C. 44107(a) establishes for conveyances that affect an interest in a civil aircraft. Under 14 CFR 47.5(b) an aircraft may be registered only by and in the legal name of its owner. The FAA's registration application carries a co-owner category, requires each co-owner to sign, and requires each to certify eligibility. A transfer therefore ends with a registration filing in the incoming owner's name, prepared by counsel, and not merely with a letter from the program.

Eligibility is the test the incoming owner must pass. Under 14 CFR 47.3 an aircraft may be registered only if its owner is a citizen of the United States or a foreign citizen lawfully admitted for permanent residence. A non-citizen corporation organized and doing business under United States or state law also qualifies, provided the aircraft is based and primarily used in the United States. For a company or trust, 49 U.S.C. 40102(a)(15) supplies the citizenship definition: a president and at least two thirds of the directors and managing officers who are U.S. citizens, actual control by U.S. citizens, and at least 75 percent of the voting interest owned or controlled by U.S. citizens.

This is a point at which a transfer to your own entity can stall. An operating company with foreign investors, a trust with a non-citizen trustee, or a partnership with one foreign partner may fail the test even though the individual behind it would pass. Where that is so, the interest can often be restructured as a lease, which 14 CFR 91.1001(b)(4) counts as a fractional ownership interest, or held through an owner trust. Which applies is a determination for counsel, and it is settled before the consent request goes to the program, because the program will ask.

A transfer to your own entity is a structuring decision, and it is usually cheaper to make before the purchase than after it. Buyers deciding how to hold an interest should settle the entity, its eligibility and its tax treatment while the proposal is still open; the checks are set out in buying a fractional jet share. A transfer after signature is the same decision with a consent, a fee and a registry filing attached.

A transfer to an unrelated buyer is a sale, and it competes with the repurchase clause. Whether it returns more depends on the buyer's price, the transfer fee, the right of first refusal, and the months of management fee the sale takes to close. That arithmetic is worked through on selling a fractional jet share. Owners who are transferring because their flying has fallen rather than stopped should price a resize within the program alongside both routes. Owners approaching the end of the term should read the renewal options first, because the notice window for renewal and the timing of a transfer are decided together.

A succession transfer is neither a sale nor a structuring choice. It is an estate matter in which the interest, the fee obligation and the program's consent all continue while the estate's counsel decides between an heir entering the program and an exit through the repurchase clause. The one thing that helps is a file: the agreements, the registration, the hours position and the contacts at the program, kept where the executor can find them.