Right to Use: Streamlining Aircraft End of Lease Transfers

When a lessor or an airline operator decides they want to transfer an aircraft at the end of their lease, the new lessee or operator may find themselves in the position of having to ask a Supplemental Type Certificate (STC) owner for the right to continue to use the STC for any modification, inflight entertainment, for example. This frustrating situation leads to the aircraft’s owner/lessor and new lessee potentially being trapped—forced to pay thousands in fees for the rights to use the aircraft’s previously installed aircraft modifications. It has been going on for 40 or more years, and it is a serious problem for aircraft owners, lessors and airlines.

While it is not entirely clear how these circumstances arose, somewhere along the way, aviation authority rules were interpreted somewhat differently than intended. The result of which was that owners/lessors and new lessees started to be held hostage. Despite this state of affairs, there is a path forward to eliminate these situations. We at IAMA have developed a Rulebook with a section that addresses these unfortunate and frustrating predicaments. The rules, which provide guidance to IAMA approved members, aim to make an aircraft transfer smooth and successful, while addressing aircraft modifications completed through Supplemental Type Certificates.

Nailing a Flawless Aircraft End of Lease Transfer

It is no secret that transferring an aircraft to a new operator is a major undertaking. The volume of paper work associated with an aircraft transfer is astounding. Every aircraft modification and every aspect of the operation of the aircraft must be documented and provided to the new lessee. But the one of the major hurdles to overcome in these transactions is how to assure the new lessee that existing, already installed modifications can be further used and operated when the primary contracting partner was the former lessee.

The work related to such transactions can be tricky. An aircraft modification is usually sold to the operator who holds the contract, and the right to use the modification with its related data is held by the current operator. When, typically in a leasing situation, the aircraft is transferred to a new lessee, there are several pain points that make the transaction incredibly difficult. All of which are primarily related to ensuring ongoing airworthiness and support.

The key challenges include but are not limited to ensuring:

- The new lessee and other future operators have access to gather all the data needed to update their own manuals

- A clear contractual status between the future operator and the STC provider (the Design Organization) e.g. in case of in-service problems

- A clear contractual ownership of the STC, especially in the FAA-related context where the current operator might be the STC holder.

- All the above usage rights are also guaranteed to the aircraft owner, so transfer planning can be done in advance, without a future operator having yet been assigned.

The Right to Use Rules in the IAMA Rulebook

The corresponding rules in our Rulebook are applicable to the legal Intellectual Property (IP) aspects related to authorizing the commercial right to use data. IAMA member organizations commit to following the rules to help aircraft owners and operators avoid these situations. By regulation, the STC holder is required to provide all installation data and maintenance documents required to modify and maintain the aircraft. The rules are not intended to duplicate FAA 14 CFR Part 21.120 which requires an STC holder to provide written permission that authorizes use of an STC to alter an aircraft. Rather they are designed to ensure future legal operators and owners have the rights to use the data required to maintain, modify and operate their aircraft.