When Weather Diverts You. . .

It's part of flying, and there's nothing you can do about it. . . perhaps.

You're trying to get to your destination, or maybe you're trying to get home. You look at the weather and no matter how you plot out your time, direction of flight, and other options, you're staying put!

Blessing or curse?

I guess it depends what you'd like to make of it.

Flying home from OshKosh I met up with a couple stranded at the Mason County Airport (LDM) in Ludington,Michigan. If I were to be stranded anywhere, Ludington would be my dream! Beautiful sandy beaches on Lake Michigan have made this town one of the busiest resort towns in Michigan.

Again, blessing or curse?

This couple called over 40 hotels, motels and bed and breakfasts only to find all of them sold out! Once again they reviewed their options. Fly to Ann Arbor for a better position in the morning, sleep in the plane, make use of the comfortable lounge furniture in the terminal lobby?

The adventure continued. . .

A call from a local Bed and Breakfast revealed that there was one room they hadn't discovered. They'd have to share a bathroom, and there was no air conditioning, but there was a "bed" and a "breakfast!"

It turns out that this couple had also spent the night in Ludington on the way over to OshKosh when weather prevented them from flying across the lake.

Of course, I haven't heard the ending to this story yet, but If I wrote my own ending it would go something like this:

"After checking into the Bed and Breakfast, we walked down to the beach where we watched the boats and fishermen enjoy the evening as if nothing else in the world mattered. We realized we were getting hungry after the events of the day and found a cozy little seafood restaurant with a stunning view of the lake.

Before it was too late, I made a phone call to work letting them know I wouldn't be back on Monday or maybe even Tuesday! I was told to take my time and advised not push it if weather was an issue. How good can this get?

The room was just fine, and the breeze blowing through the open window was far more comfortable than a noisy room air conditioner.

After some interesting conversation and a tasty breakfast, we headed back home and didn't worry too much about weather.

Understanding Aircraft Insurance Policies

Many states require that owners and/or operators of aircraft have insurance covering their aircraft and operations. At a minimum, states usually require third-party
liability coverage. This applies to injuries to third-persons that result from operation of your aircraft. Additionally, if your aircraft is pledged as collateral for
financing, the lender will require that you have hull coverage and/or replacement value insurance to insure the value of the aircraft collateral.



Obtaining the Policy



So, how do you obtain aircraft insurance? Typically, you apply for aircraft insurance through an insurance agent or broker who represents an insurance company or
companies that provide aircraft insurance policies. The insurance company then reviews the application and does any additional investigation necessary for it to
assess its risk in providing you with insurance for your aircraft or operations. Its risk is the likelihood that it may have to pay out on a claim against your
policy.



In exchange for its acceptance of risk, the insurance company charges you a premium. The amount of that premium is a direct product of the amount of risk that the
insurance company is assuming by extending coverage to your aircraft or operation. The greater the risk, the more expensive the insurance coverage will be. In
some cases, the insurance company may not be willing to accept a particular risk for any price.



Factors that affect the underwriting decision include type of aircraft, pilot qualifications (e.g. total time, time in type, pilot certificates/ratings), nature of the operation
(e.g. pleasure, business, Part 91 or Part 135) and base of operations. General aviation policies can include non-commercial pleasure and business use under FAR
Part 91 or commercial use under FAR Part 135.



Reading the Policy



When an aviation insurance policy is issued, it represents a contract between you and your insurance company. As long as you comply with all of the terms and
requirements of the policy, your insurance company will provide you with coverage. If you fail to comply and a claim arises, you may find yourself without
coverage.



But, what does the aircraft insurance policy actually say? Well, as a practical matter, it is quite common that pilots and operators do not read their policies. Sure,
they may review the declaration page to confirm that the correct parties are named and that the appropriate coverage limits are in place, but often times that is as far
as it goes. Sometimes an owner or operator may even ask his or her agent to explain some of the policy’s terms.



Unfortunately, the policy contains quite a bit more information of which the pilot or operator needs to be aware of to ensure that he or she complies with the terms of
the policy. A thorough review of the policy is both prudent and recommended.



This review should begin with the Data Page or Declaration Page. First, confirm that the aircraft is correctly identified and that the appropriate owner and any
additional insured parties are included. Also read the coverage limits to make sure that you have the limits for which you are paying.




Aircraft Damage Coverage




The typical aircraft insurance policy will include both aircraft damage coverage, as well as aircraft liability coverage. The aircraft damage coverage applies when
your aircraft sustains damage (e.g. bent metal, broken windows etc.). This coverage comes in two flavors: In-flight/In-motion and
Not-in-flight/Not-in-motion.



As you may have guessed, in the first instance your aircraft will be insured for damages it sustains while it is in use: moving under the power of its own engine,
whether taxiing or flying. In the latter instance, you aircraft will only be insured while it is parked on the ramp or in the hangar. This coverage is less expensive
because it presents far less exposure to the insurance company. It will only have to pay a claim if something happens to your aircraft while it is standing still and not
in use. An aircraft owner may want this limited coverage when the aircraft is going to be stored and unused for a period of time.



It is also possible to purchase “all risk ground and flight” coverage. This coverage protects you whether the aircraft is moving or not. However, a policy with this
coverage will likely be more expensive than a policy that is either In-flight/In-motion or Not-in-flight/Not-in-motion.



The aircraft damage coverage provides for transportation of the aircraft to and from the location at which the repairs are made, any related storage charges and the
actual repair of the aircraft. However, most policies will also exclude coverage for damage sustained by your aircraft as a result of governmental seizure, resulting
from repossession or enforcement of a lien against your aircraft or damage that is due to ordinary wear and tear, deterioration or age.



Assuming the damage to your aircraft is covered, you should read your policy language to determine whether it contains any specific restrictions or requirements
relating to processing of your claim, who performs the repairs, where they are performed and even how they are to be performed. Simply because you have
insurance coverage, this does not mean that you have carte blanche for having your aircraft repaired.



Aircraft Liability Coverage




Aircraft liability coverage protects you from liability or responsibility to third-persons for damages they may suffer resulting from the operation of your aircraft. The
coverage requires that the insurance company both indemnify and defend you against such claims. Indemnification means that if you are responsible for the damage
to a third-person, the insurance company will pay the third-person directly, up to the policy limits, the amount for which you are responsible.



The duty to defend means that the insurance company will pay for your defense costs if you are sued by a third-person alleging that your operation of your aircraft
caused damage. The insurance company will hire an attorney, usually experience in aviation law, to represent you and defend against the claims. Given the
complexity and cost of aviation litigation, this benefit alone can be worth a substantial amount of money and may even exceed the amount of money actually paid by
the insurance company to indemnify you.



Your policy will always have a maximum limit for liability coverage that can be either “sub-limit” or “smooth” coverage. An example of sub-limit coverage is a policy
that provides for $1,000,000 per occurrence and $200,000 per passenger. This does not mean that you have $1,000,000 to pay all claims.



Rather, the insurance company will pay a maximum of $1,000,000 per occurrence, but will only pay each passenger up to a maximum of $200,000. Thus, for an
accident in which only one passenger is injured, the insurance company’s maximum exposure is $200,000, exclusive of any amounts it spends on your
defense.



On the other hand, smooth limit coverage of $1,000,000 per occurrence will provide up to $1,000,000 of coverage regardless of the number of passengers. This
coverage presents a greater risk to the insurance company since it could have to pay the full policy limits even if only one person is injured. As a result, greater risk
means that the premium for this coverage is going to be more expensive than the premium for a policy containing sub-limits.



Policy Definitions



When you read an aircraft insurance policy, you need to pay special attention to the definitions section. Many of the terms used in the policy have specific definitions
that are different from a dictionary definition or common usage for that word.



Examples include the definition of “accident” which is often defined as a “sudden and unexpected event resulting in bodily injury, death or property damage”. This is
different than the definition of accident contained in NTSB Rule 830 and is also more specific than a dictionary or common usage definition of the word.



Another example is the definition of “commercial operations” or “commercial purpose.” An insurance policy’s definition of this term is usually different from, and in
some cases may be broader than, the FAA’s or IRS’s definition or a dictionary definition.



These are just two examples. However, remember that the aircraft insurance policy is a contract between you and the insurance company. Both you and the
insurance company agreed to the policy definitions when you paid the premium and the insurance company issued the policy. As a result, both you and the insurance
company will be bound by those definitions.



Coverage Exclusions



Your aircraft policy will also contain exclusions. Exclusions define circumstances in which the insurance company will not provide you with coverage for operation of
your aircraft. An aircraft insurance policy usually includes both specific and general exclusions.



Specific exclusions arise when you assume additional liability (e.g. you sign a contract that indemnifies or holds someone else harmless for damage they cause),
damage occurs to your own property or injury occurs to members of your family. The policy may also specifically exclude coverage for your own medical expenses
or for your operation of an aircraft that you do not own.



Depending upon the state in which the aircraft is based, general exclusions can result in denial of coverage regardless of whether they directly caused a particular
claim. These exclusions will preclude coverage for operation of your aircraft in commercial operations (as defined by the policy, not necessarily the FAA or IRS),
using your aircraft to commit unlawful acts, damage caused by war or terrorism or if your aircraft is operated by a pilot that is not named as an insured on the policy
and does not meet the open pilot qualifications.



Who Is Covered



Assuming no exclusions are applicable, the policy will provide coverage to each person named as an insured under the policy and to pilots who meet the “open pilot”
requirements. As a threshold matter, each pilot operating the aircraft, whether named insured or qualifying under the open pilot provision, will need to possess the
appropriate pilot and medical certificates and meet all currency requirements for operation of your aircraft.



The open pilot provision extends the coverage of your aircraft insurance policy to a pilot operating your aircraft who is not a named insured on your policy. The
provision sets out total time, time in type and training requirements that the unnamed pilot must meet in order for the pilot to be covered under the policy. Generally,
if those requirements are met and the pilot is operating your aircraft with your consent, your insurance coverage should extend to that pilot.



What You Can Do



The complexities of aircraft insurance can seem daunting. But, what can you do to protect yourself? The first, and one of the most important things you can do, is to
read your insurance policy. If you have questions regarding terms or coverage talk to your insurance agent or contact an aviation attorney who is familiar with
aviation insurance matters.



Once you understand the policy, make sure you abide by the policy and comply with its terms and requirements. It makes little sense to spend substantial amounts
of money on insurance premiums and then place your coverage in jeopardy by doing or allowing something your policy prohibits.



Next, document your operations. What do I mean by that? Simple: Keep good records. Make sure your pilot logbook is up-to-date and current. If you take
your pilot logbook with you when you fly, make copies of the pages containing your satisfaction of the FAR currency requirements and keep the copies in a safe
place.



This way, if something happens to your pilot logbook and your insurance company or the FAA later question your currency, you will have back-up proof that you
were current for your flight. Although not as critical, you may also want to keep a photocopy of your pilot certificate(s) along with your logbook records.



Finally, you should use this same procedure for your aircraft and engine logbooks. If you must take them with you in the airplane, make copies and keep them in a
safe place. In this instance, you may want to make a full set of copies of the logbook entries, rather than just the pages showing the aircraft’s current airworthiness.
An aircraft that contains logbook entries for all of the work ever performed on the aircraft is worth more to a potential purchaser than if those records are incomplete
or missing.



These simple steps can prevent potentially costly disputes down the road. It’s been said that the best insurance is the insurance you never have to use. That may be,
but if you take these steps, you should have greater peace of mind that your insurance will be there if you need it.

AIRCRAFT OWNERSHIP: IS THE TIME RIGHT?

In the hours and days immediately following the tragic attacks on America of 9/11, there was much speculation about the effects on the general aviation industry. While the events of September 11, 2001 have had a significant impact on the economy as a whole, sales of personal aircraft in Michigan have experienced a surprising boost. Certainly, the convenience of personal transportation has played a major role in this increase as airport lines and security have become more time consuming. The reduction of flights resulting from the airline cost-cutting have limited flexibility for the business person and affected the productivity of companies relying on commercial transportation.
These factors alone can’t explain surge of people joining the flying community for more than just pleasure. Rebates, low and 0% interest rates, training allowances, and yes, even the IRS played a role in creating an environment that has introduced more people to the benefits of aircraft ownership and had an effect similar to that seen after the passage of the General Aviation Revitalization Act of 1995.

The IRS is here to help you? Well, believe it or not, a new tax law passed earlier this year represents a renewed attempt by our nation’s leaders to jumpstart the economic recovery. The bill applies to new airplanes acquired after September 10, 2001, and before September 11, 2004, and provides tax savings from economic stimulus provisions included in the Internal Revenue Code designed to encourage investment in capital assets. Visit your local airport and you’re sure to see plenty of forty and fifty year old aircraft operating for both business and pleasure. Even prior to the new tax law, Congress recognized that capital investment is an important part of our economy, and therefore allowed a five year depreciation of these assets. To further encourage investments, they do not require the depreciation to be spread evenly over the five years, but through a concept know as “double declining balance,” greatly accelerate depreciation during the first two years of ownership. Now with the additional incentives of 30% bonus depreciation on new airplanes, tax deferral opportunities are greatly expanded.

So how might a business person benefit from these new changes? First of all, the impact of these depreciation changes greatly reduce net cash investment for the purchase of a new airplane. Specifically, an operator in the 40% tax bracket who can successfully write off his aircraft ownership expense may have no cash investment in the airplane during the first four years. Additionally, when properly structured, many taxpayers have an opportunity to convert personal use into business use. The Internal revenue code provides an optional method of taxing an individual for personal use of an aircraft which many times amounts to less than 10% of the actual deductions flowing from the investment. Consult your tax professional prior to purchasing your new airplane or ask your Aircraft Dealer for the name of an Aviation Tax Specialist to set up your purchasing entity.

And you say you’re not a pilot? Local aircraft dealers like Suburban Aviation, Inc. in Lambertville, Michigan will actually teach you to fly your new airplane and even reimburse your expenses when you purchase a new Cessna airplane from them. Most of today’s pilots learned to fly in a Cessna airplane and the majority of these pilots continue to experience the freedom and flexibility that flight offers in one of Cessna’s many single engine models. For 75 years, Cessna has been the leader in general aviation aircraft providing a safe and reliable alternative to commercial airlines and the automobile.

So if your business can benefit from improved efficiency and tax savings, why not consider a company airplane? There are few tax saving opportunities as effective as fully depreciating an aircraft on a five year accelerated basis, and with today’s interest rate environment, a well-structured transaction often results in little or no after tax cash flow holding costs during the early years of ownership. Of course, arriving at your meeting on time and with all your luggage can also be pretty convincing!

Why Use An Aircraft Purchase Agreement?

It always surprises me when a potential aircraft buyer is unsure of whether he or she should use a purchase agreement when buying an aircraft. Most of these individuals have purchased homes and no doubt used a purchase agreement in such transactions. Yet, many of these same individuals would spend the same amount of money to purchase an aircraft, and often times a great deal more money, without the protection of a written aircraft purchase agreement.



Aircraft purchase agreements should be used in almost every aircraft sale transaction. First, the law in most states requires that a contract for an amount greater than $500.00 be in writing in order for it to be enforceable. This is called the statute of frauds. Although exceptions to this legal doctrine exist, complying with the law is usually safer than hoping you will be able to take advantage of an exception.



Further, using an aircraft purchase agreement can also help avoid confusion and misunderstandings. If the agreement clearly explains how the transaction will happen, when it will happen and what is included in the deal, the greater the likelihood that the buyer and seller will each know the other party’s expectations and the less chance for surprises or misunderstandings.



What Terms Should Be Included?



The number and complexity of the terms that should be included in an aircraft purchase agreement will often times be dictated by the type and value of the aircraft being purchased/sold. Although by no means inclusive, the following terms provide a good place to start.



Identify the Parties. The agreement should identify who is selling the aircraft and who is buying the aircraft. Although this sounds simple to do, it isn’t always clear who is the seller and who is the buyer. It is very common for aircraft to be registered in the name of a corporation or limited liability company. In that case, the individual with whom you are negotiating is not the owner of the aircraft and should not be listed as the seller. The registered owner of the aircraft should be identified as the seller.



The buyer on the other hand, can be an individual or a corporation or limited liability company. If an individual is the buyer, that person will be listed and upon registration will be the record owner of the aircraft. To fully take advantage of release and indemnity language discussed in greater detail below, the seller may also want to consider having an individual buyer’s spouse execute the purchase agreement.



If a corporation or limited liability company will be registering the aircraft, the purchase agreement should identify that entity as the buyer. Alternatively, an individual can sign an agreement as the buyer and, as long as the agreement allows the buyer to assign his or her rights under the agreement, that individual may still assign the agreement to a corporation or limited liability company prior to closing. The corporation or limited liability company then becomes the buyer and can close on the transaction without the individual ever entering the chain of title. From a liability perspective, this can be important.



Identify the Aircraft. The aircraft purchase agreement should identify the aircraft with as much detail as possible. At a minimum, it should include the make, model, N-number and serial number for the aircraft. Ideally, a list of all avionics, logbooks, handbooks, additional equipment and any accessories should be included. Also, if the seller intends to retain certain items, those items should be specifically identified and excluded from the transaction. By taking the time to detail exactly what is and isn’t being sold, you will prevent misunderstandings at delivery.



Purchase/Sale Price. The agreement should specify how much is being paid for the aircraft. If the buyer will be giving the seller a deposit or earnest money, that fact should be included. Also, what happens to the deposit when it is given to the seller? Will the money be placed in escrow or simply held by the seller? If an escrow agent is not involved, the buyer will need to obtain some assurance that his or her deposit will not simply disappear into the seller’s pocket making the buyer’s recovery from the seller difficult or impossible if the transaction does not close. The agreement should also state under what conditions the seller must refund the deposit to the buyer.



The buyer’s method of payment should also be stated. Is it a cash transaction or will financing be involved? If financing is involved, the buyer may want to include language that makes the transaction contingent upon the buyer obtaining financing on terms acceptable to the buyer. That way, if the buyer isn’t able to obtain satisfactory financing, the buyer will not be forced to complete the purchase on financially unacceptable terms.



Will other consideration be given to the seller, such as a trade? If so, to the extent that it is possible, the item(s) to be traded to the seller should be identified with the same amount of detail used to describe the aircraft being purchased. This will help avoid later confusion.



Documents. The agreement should include a statement about which documents the seller will sign and deliver to the buyer at closing. Usually this includes a Bill of Sale (FAA Form 8050-2) and a signed current Registration Form (FAA Form 8050-3).



Pre-purchase inspection. In most transactions, the buyer will want to have a pre-purchase inspection performed on the aircraft. The purchase agreement can specify who will perform the inspection, what qualifications that individual must possess and where the inspection will take place. Also, the buyer should make the agreement contingent upon the buyer’s satisfaction with results of the inspection. Although the buyer is usually responsible for the expenses associated with a pre-purchase inspection, the agreement should address which party is responsible for what expenses related to the inspection.



Warranties. It is possible to include a variety of warranties in the purchase agreement representing certain conditions of the aircraft (e.g. warranties of airworthiness, merchantability, fitness for a particular purpose etc.). However, due to space limitations most of these warranties will not be discussed here.



From a buyer’s perspective, the warranty of title is probably most important. This warranty ensures that the buyer receives title to the aircraft free and clear of any liens or mortgages. Although the buyer will still want to obtain a title search of the FAA Registry’s records for the airplane, having the warranty of title included in the purchase agreement will help to minimize the risk of any unrecorded liens or interests in the aircraft.



Most sellers will want to include a disclaimer in the purchase agreement stating that the buyer is purchasing the aircraft "As-is". This language is intended to limit the seller’s responsibility for any defects or unknown conditions in the aircraft. If the buyer is having a thorough pre-purchase inspection performed by a qualified mechanic familiar with the specific aircraft, inclusion of this disclaimer in the purchase agreement is probably not a great concern for the buyer.



Choice of Law/Venue. If the transaction involves a buyer and seller from different states, it may be prudent to include language in the purchase agreement that governs what law applies to the transaction and where any disputes would have to be resolved.



Waiver and Release of Liability. The seller will want waiver and release of liability language in the purchase agreement to limit potential liability for injury or damage sustained by the buyer arising out of the buyer’s use of the aircraft. The language should be in bold, all caps letters to make sure it is obvious and not buried in the fine print of the purchase agreement.



Waiver and release of liability language will not release a seller from responsibility for the seller’s intentional acts or gross negligence. Nor will it prevent possible claims from third-parties who are injured or damaged by buyer’s use of the aircraft or from the buyer’s minor children. However, it will prevent the buyer, and the buyer’s spouse if the spouse has signed the purchase agreement, from suing the seller if a defect in the aircraft causes an accident that results in injury or damages.



What Remedy Does An Aircraft Purchase Agreement Give You?



First, an aircraft purchase agreement is not a 100% guarantee that a buyer or seller will not be sued. In this litigious world, I don’t know that such a guarantee is possible. Further, the purchase agreement alone does not make anyone do anything. If a buyer or seller does not want to comply with his or her obligations, the purchase agreement will not change that. However, the purchase agreement will give you the ability to go to court and have a judge make the non-performing or “breaching” party comply with his or her obligations.



If the purchase agreement is drafted clearly and with sufficient detail, it may be possible to have the court specifically enforce the agreement (e.g. make the breaching party do what the purchase agreement says he or she is supposed to do). An example would be where a buyer refused to complete a transaction even though the seller and the aircraft complied with all of the terms of the purchase agreement. In this case, a court could force the buyer to purchase the aircraft.



Alternatively, the court may award money damages for losses incurred by the non-breaching party. An example of this is when a seller refuses to return a deposit even though the buyer has complied with all of the terms of the purchase agreement and has a right to return of the money. In this situation, a court could enter a judgment against the seller in the amount of the unreturned security deposit.



Conclusion



An aircraft purchase agreement is a valuable tool to ensure that each party to an aircraft purchase transaction receives what is expected. It prevents confusion and misunderstanding and provides security that a party will have recourse if the other party to the transaction fails to perform as required. With minimal up-front time and expense, both buyers and sellers can protect their interests and maximize the likelihood of an uneventful closing and purchase.

10 Best Ways to Justify Your Airplane Purchase

For those of us who've caught the "aviation bug" finding a way to justify the purchase of an airplane becomes an all consuming mental task. Make this task simple by choosing the appropriate reasons from the list below:

1. The airplane will make money for me.
This one actually works! Learn about leasebacks and/or using your airplane in your business by visiting: http://www.airplanenoise.com/answers_to_why.htm
2. My business will benefit from my increased productivity when I fly instead of drive.

Save time and money by flying yourself! You can avoid hours at the security gate and layover time by flying yourself. Most regional trips will be completed in a fraction of the time you'd spend driving or flying commercially. Learn more by clicking the link: http://www.airplanenoise.com/business_justification.htm

3. The airplane will keep my family together.
Many people find their children off to college and their parents staying in the south. A personal aircraft allows you to stay in contact and maintain the relationships that are so important to you. After all. . . is there anything more important than our relationships with our family and friends?

4. Learning to fly provides a new challenge.
Most of us have dreamed about flying since our childhood. What's preventing us from taking that step? Life's too short to procrastinate!

5. I can vacation every weekend!
No doubt, every weekend can be earmarked for a new destination. Start with you own state, and expand to other states. Visit museums, recreation areas, friends . . . the sky's the limit!

6. I can make an airplane payment instead of an IRS payment!
With minimal business use (30%), your airplane purchase may be a depreciable asset. New tax laws significantly increased the tax benefit to owners.

7. I can enhance my children's educational experience.
Children learn more from an experience rather than sitting in a classroom or reading a book. Trips to Washington D.C., Niagara Falls, Gettysburg, PA, Kitty Hawk are all great reasons to fly the family. Re-live your childhood at the same time.

8. Flying as therapy?
Well, believe it or not, some people fly for its therapeutic benefits. Life's problems seem to disintegrate as altitude increases. Try it next time you're feeling overwhelmed by life's challenges!

9. An airplane is a terrific status symbol.
If status is what you're looking for. . . you can't beat an airplane. Not only are pilots looked up to, but when it's your own airplane. . . "You've arrived!" No one even needs to know that the airplane is generating a positive cash flow.

10. I just WANT one!
Sometimes we just need to satisfy our desires!
"I'm worth it."
"I've worked hard and this is my reward."
"I only live once!"

I know you can add to this list!