BUYING A BUSINESS JET (1)

The China Daily Asia Weekly for January 21–27, 2011, contained a story by Steve Varsano that there are approximately 19,500 business jets in the world and that approximately 11,000 of them are in the U.S. With the economic downturn, now is an excellent time to buy a business jet from the U.S. market.
There are 93 business jets on the Chinese Mainland and 51 in Hong Kong - and the demand for business jets in China is growing. Steve Varsano asks the question “Will there be 5,000 business jets and turboprops sold in China in the next ten years?”

Whatever the answer, the fact is that demand is growing because more and more Chinese business leaders have recognized that the business jet is a valuable business tool, and a time machine that allows them to pursue aggressively their business goals and arrive anywhere in the world ahead of their competition.

For many Chinese visionaries the dream of owning a business jet and looking down from 45,000 feet at the factories and agricultural land of China is something that they may never have believed possible in their lifetime.

For those entrepreneurs and business leaders who have achieved the level of success that allows them to pursue this dream, the fact is that over one-half of the world aviation market for business jets is in the U.S. - and with the U.S. economic downturn, there has never been a better time to purchase a business jet from the U.S. market.

The purchase of an aircraft in the U.S., while complex, proceeds through a number of predictable steps. In the following article, we have outlined for you important considerations for before you initiate the negotiation process.

Preliminary Considerations Operational: The purchaser’s answers to the following questions will influence the type of aircraft to be chosen:

• How will the aircraft be used?
• Will it operate predominantly in international flights, or flights within a single country?
• Will the flights be long-distance, (for example, trans-oceanic) or will they tend to be medium- or short-range distances?
• What number of passengers will typically be on board?
• What budget constraints apply to the expected operating costs?
• Will your aircraft be new or pre-owned?

Whether the aircraft will fly a significant number of international flights may also affect the decision about the country of registration for the aircraft, which in turn affects the most desirable brand or model of aircraft.

Other operational considerations include the location and availability of manufacturer service centers and other maintenance providers. The location of pilot training facilities should also be considered when choosing the aircraft make and model, as well as the country of registration.

Regulatory: A purchaser’s freedom of usage of its business aircraft may be limited by regulatory issues. Within the U.S. there are few restrictions as to where an aircraft may operate, whether the aircraft is registered in the U.S. or overseas.

More stringent restrictions are in place in other countries. For example, in China the regulatory environment may make Chinese registration advantageous for an aircraft to facilitate operations within the country.

Equally important, before a particular make and model of aircraft can be operated, the purchaser may have to obtain governmental approval, known as type certification, by the local country’s regulating authority. If the purchaser selects a type aircraft not yet approved for operation in that country, the initial type certification can be very expensive and time-consuming.

Financing: If the purchase will require financing, it is very important to investigate the requirements of the potential lenders. Many lenders require the aircraft to maintain a particular country’s registration.

There may also be lender restrictions on the use of the aircraft such as geographical areas, or use for charter operations. A lender’s requirement to register the aircraft in a particular country may also result in additional use-restrictions on that aircraft, since some registries only allow operations in the private category, or may not provide type certification for all makes of aircraft.

For U.S. lenders, aircraft based outside the U.S. may be subject to additional undertakings from the borrower, including covenants, security filings, legal opinions, personal guarantees and more. Lenders may also impose restrictions such as minimum maintenance requirements and limited rights of the owner to lease, or sub-lease the aircraft. If the aircraft is leased there may be additional requirements for return of the aircraft at the end of the lease.

The purchaser must rely upon experienced financial advisors and aviation counsel to review loan or financing lease documents and to identify these issues in advance of any negotiations.

Registration Options and Owner Trusts: The country of registration for the aircraft needs serious consideration. There may be several countries which seem suitable for registration. Most national registries impose citizenship requirements upon aircraft owners, but in some countries the regulatory authority may have some discretion in granting registrations for owners who do not otherwise meet the citizenship requirements.

Citizenship requirements for registration of aircraft are very stringent in the U.S., to the point that some companies based there do not themselves qualify as U.S. citizens. The FAA has provided a registration vehicle for owners who do not otherwise qualify for U.S. citizenship. This is known as an owner trust.

An owner trust is created with a bank in the U.S. that qualifies as a U.S. citizen. That bank is known as the owner-trustee, and the aircraft is registered in the name of the owner-trustee. The overseas purchaser retains its rights in the aircraft as a “beneficial owner” through the trust. The bank owes its fiduciary duty to the purchaser in accordance with the trust document. In addition, the purchaser executes an Operating Lease Agreement with the bank (owner-trustee), which permits the purchaser to use the aircraft.

Advantages of this structure to an overseas purchaser of a U.S. aircraft include ease of international operation, a wider availability of financing options, anonymity of the purchaser through “beneficial ownership,” and avoiding any need to obtain a non-U.S. Certificate of Airworthiness for the aircraft.

At the same time, U.S. registration of the aircraft may present some disadvantages to the purchaser. There may be greater restrictions on operations in the purchaser’s home country and there may be some difficulty in obtaining manufacturer-approved maintenance or trained pilots overseas. In addition, a U.S. registration for an overseas-based aircraft may trigger additional tax issues.

With all of the above considered, once the purchaser has identified the type of aircraft that fits its needs, and has located a particular aircraft it wants to acquire from a particular seller, the negotiations begin. This forms the content of the article: ‘Step 2: Advanced thoughts for the Chinese business leader’ over the following pages.

BUYING A BUSINESS JET (2)

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With preliminary considerations for buying a business jet for sale on the U.S. market given due care and attention - and answered satisfactorily - it is time for the negotiations to begin. Following are some key steps in the process, along with further considerations that should be taken into account at each stage of the process.
Letter of Intent and Pre-Purchase Inspection 

A Letter of Intent (LOI) is the preferred method to negotiate the basics of the purchase such as price, deposit, basic delivery terms and conditions, removal of the aircraft from the market and protection of a purchaser’s deposit.

The LOI is not a binding contract. It documents the primary points of the negotiation until a detailed purchase agreement can be negotiated, often between legal counsel.

Usually the purchaser will want the LOI to provide that the deposit be refundable until a technical pre-purchase inspection of the aircraft is completed and accepted. The purchaser will also want the assistance of a technical representative for this inspection.

This step provides the purchaser with a better understanding of the condition of the aircraft. Also, if the aircraft is to be registered in another country, the purchaser can determine what may be needed to qualify for an Export Certificate of Airworthiness to that country, or meet the requirements of that registration.

Before the pre-purchase inspection of the aircraft itself, the purchaser’s technical representative may conduct a preliminary “visual” inspection of the aircraft, as well as a review of the maintenance records and logbooks.

In the case of a new aircraft to be built to the purchaser’s specifications, the LOI may set forth the purchaser’s right to have a technical representative observe and inspect the aircraft during the manufacturing process.

The purchaser’s LOI may require a test flight before the pre-purchase inspection, and it should also specify a deadline for completion of the definitive purchase agreement. Once the LOI is signed and the deposit made, the parties will negotiate the purchase agreement that becomes the binding contract of purchase.

Purchase Agreement/Purchaser’s ProtectionsThe primary points in the LOI will be incorporated into the Purchase Agreement along with many other terms and provisions.

The purchase agreement terms should protect the refundability of the deposit until the conclusion and acceptance of the pre-purchase inspection. The pre-purchase inspection will be conducted, typically, by an independent inspection facility that reports directly to the purchaser, or to both parties.

The purchaser will also require, in addition to its own due diligence in reviewing the aircraft records, certain assurances from the seller concerning the conditions of delivery. For used aircraft the seller should disclose any history of damage or corrosion on the aircraft, no matter how it may have been repaired, up to the time of closing. For U.S. aircraft, the FAA maintains a number of records to be reviewed by the purchaser’s technical representative.

The seller may have the aircraft enrolled in various warranty and maintenance programs, and the purchaser should be sure these are transferable by the seller, and paid for up to the date of closing.

The purchaser may want to have the right to assign the purchase agreement to an affiliated company for various purposes, and the purchase agreement should permit this. For example, the purchaser may want to establish an owner-trust for registration purposes, or use another entity to take delivery for tax purposes, such as with a “1031 exchange” under U.S. tax laws. The purchaser may want to place ownership of the aircraft with a lender for financing purposes.

With new aircraft, the purchaser typically must make progress payments to the manufacturer in addition to the first deposit, as the aircraft is built. With some newer designs of aircraft, the projected delivery date may be years in the future. During that time, the market may change dramatically, or the purchaser may encounter a change in its financial circumstances.

The manufacturer will insist upon a “liquidated damages” clause in the event the purchaser ultimately does not take delivery of the aircraft. This clause establishes a certain amount to be paid to the seller by the purchaser. The purchaser may be able to negotiate the conditions for payment or refund depending upon the timing and nature of any failure to take delivery. This clause may be coupled with “sole recourse” language stating that the purchaser shall have no other liability.

In case of delivery delays on the part of the manufacturer the purchase agreement may provide for liquidated damages in favor of the purchaser, return of funds, or other penalties. This is usually only an issue for new aircraft being purchased from a manufacturer. The purchase agreement will also specify deadlines for the manufacturer to make delivery, acquire type certification, conduct test flights and otherwise meet certain milestones in development or manufacture of the aircraft.

Because aircraft are so mobile, the purchaser will want to be certain that the seller who will receive the money is able to transfer good title to the aircraft. The purchase agreement should always provide that the purchaser will receive a Warranty Bill of Sale along with the seller’s warranties of good and marketable title.

The purchaser will want an independent assurance of title from a title company or counsel’s opinion, when available. Title insurance may also be available, and the parties can negotiate whether title insurance is obtained and who is to pay for it.

The pre-purchase inspection was mentioned above. In a transaction with a U.S. seller, an overseas purchaser should consider this to be critical. The purchaser will want the right to reject the aircraft, and get a refund of the deposit, if the aircraft is unacceptable for any valid reason.

The seller should be required to correct, at a minimum, any problems that make the aircraft unsafe or illegal to fly. These are called airworthiness discrepancies, and the purchaser’s technical representative or inspection facility should find them.

If the purchaser intends to move the aircraft to another country after acquisition, the purchase agreement should require the seller to place the aircraft in proper condition for issuance of an Export Certificate of Airworthiness.

For new aircraft, the desired country of registration is usually communicated to the manufacturer early enough that the aircraft, when finally delivered, will comply with all requirements for the Export Certificate of Airworthiness to that country.

Tax and Insurance ConsiderationsA closing date for completion of the acquisition will be established after the purchaser has finished the pre-purchase inspection and all discrepancies are corrected by the seller.

In the United States, the purchaser must consider the State into which the aircraft will be delivered, because each State has its own law relating to sales tax, or a related tax known as ‘use tax’. Some States are considered tax-free and tax-friendly for aircraft closings, but the choice of location is not simple.

The timing of the delivery may also be important with respect to income tax laws - for example, in the case of a ‘1031 exchange’ or other acquisition that may be related to the sale of another aircraft.

The purchaser will want to make advance arrangements for aircraft insurance, both for the aircraft itself (known as ‘hull insurance’) and for liability insurance coverage. This insurance should be in place before the purchaser accepts delivery.

If financing is involved, this aspect of insurance will be coordinated with the lender, who will also impose certain insurance requirements through the loan or lease documents. The purchaser should have in hand a satisfactory certificate of insurance guaranteeing coverage prior to the closing.

Closing (Completion of the Purchase)The Closing is the event at which the final portion of the purchase price is paid by the purchaser, and the aircraft is delivered by the seller. Normally in the U.S., such a closing will be coordinated with a title company in Oklahoma City, Oklahoma, because that is the location of the FAA Records Center where recordation of the acquisition documents takes place simultaneously with the Closing.

The title company (as escrow agent) collects all the signed documents and funds and conducts the FAA filings. Thereafter, the title company distributes the final documentation among the parties.

For a U.S.-registered aircraft that will maintain its U.S. registration after purchase (perhaps through an owner trust), the FAA will require a series of documents. These include:

• The trust agreement;
• An acknowledgement of U.S. citizenship by the owner-trustee;
• The FAA or Warranty Bill of Sale;
• The Aircraft Registration Application in the name of the owner-trustee;
• The FAA Form 8050-135 for registration of the interest on the International Registry;
• Any mortgage or security agreement of the Lender; and
• Any lien releases from the seller to provide clear title to the aircraft.

Export and DeregistrationFor a U.S. aircraft that will be changing to a registration in another country, an additional series of documents will be required. In addition to those mentioned above, this includes lien releases from the seller providing clear title to aircraft.

Further, the purchase must have evidence satisfactory to the FAA that: Each holder of a recorded right has been satisfied, or has consented to the transfer; A written request for cancellation of Certificate of Aircraft Registration has been submitted; Written certification is available that all registered interests with priority have been discharged, or have consented to cancellation of the Certificate of Aircraft Registration, and; An approved form of notification to the country of export by the FAA is filed.

If the aircraft is delivered in the U.S. and is to be flown out of the U.S. immediately afterward, the purchaser must arrange in advance for the needs of that particular flight and each intermediate point of landing.

U.S. customs regulations require that a U.S. aircraft sold in the U.S. for registration or basing overseas must be formally exported from the U.S. when it leaves the country. The seller and purchaser will need to cooperate to affect the customs export, which requires a Shipper’s Export Declaration to be filed with Customs and Border Protection (most often performed by an established customs broker).

International RegistryAny aircraft transaction involving an aircraft registered in the U.S. will require FAA registration. In addition, the transaction should be registered with the Cape Town International Registry. At present there are 28 countries, including China and the United States, that are signatories to the Cape Town Convention on International Interests in a Mobile Equipment and the Protocol on Aircraft Objects.

To fully perfect title in signatory countries, a qualifying aircraft (as to weight, engine thrust, etc.) must have its contract of sale registered. To register the interest, both the purchaser and seller must apply to become Transactional User Entities and appoint a Professional User Entity (usually an escrow agent) to register the interest.

Lenders in countries that are signatories will also want to register their international interest on the registry and will require the contract of sale to be registered.

ConclusionThe acquisition of a business jet may seem complex to the Chinese business leader, but with careful planning the process is manageable, and the satisfaction of owning and operating a business jet worldwide is readily achievable.

Whether the business jet is purchased from a U.S. seller or otherwise, the Chinese business leader would be best served by the assistance of an experienced aviation broker, and aviation legal counsel who specialize in international aviation transactions.

James E. Cooling is a partner, and Kathleen H. Breckenridge is a senior attorney with the law firm Cooling & Herbers, P.C., based in Kansas City, Missouri, U.S.A. and specializing in international transactions. The firm represents aircraft owners and operators in aircraft transactions and tax and regulatory compliance. The authors can be contacted via Telephone: +1 816.474.0777; Fax: +1 816.472.0790; or Website: www.coolinglaw.com

SIDE BAR

Back-to-Back TransactionsFor various reasons, aircraft are occasionally sold in back-to-back transactions. These transactions are commonly used when a trade-in aircraft is involved that would not allow a direct purchase, or for tax or other considerations. The transaction is often structured as a sale by a seller to a broker, and then the aircraft is immediately sold by the broker in a simultaneous transaction to a third-party purchaser.

The Purchase and Sale Agreements are negotiated simultaneously and are “mirror images” of each other so that the broker can require everything that it needs to provide to its ultimate buyer in the way of representations and warranties, warranty of title, scope of inspection, delivery conditions, and the like. The pre-purchase inspections and closings are virtually simultaneous.

Closing is done with all required documents in escrow with no funds released until the escrow agent has authority to release, transfer and file the bills of sale and the aircraft is in the condition ready for immediate issuance of a certificate of airworthiness for the country of registry. The first sale in a back-to-back transaction is typically not recorded although the country of registry requires all the necessary paperwork to validate the passage of title.

Another advantage to a seller is that the seller limits its liability risk by not being in the chain of title to the subsequent buyer. The seller also avoids dealing with an unknown party. A back-to-back transaction should be acceptable to a buyer so long as any deposit is properly protected and they are able to acquire the aircraft in good condition, with good title, at the agreed purchase price.

A320 Airbus

The COPA Guide To Buying an Aircraft (1)

The COPA Guide

To Buying an Aircraft

37th Edition – August 2011

Copyright Canadian Owners and Pilots Association 2011

PLEASE TAKE A LOOK THIS FULL VERSION OF THE GUIDE

The Canadian Owners & Pilots Association

71 Bank Street – 7th Floor, Ottawa, Ontario K1P 5N2 Canada

Tel: 613-236-4901  ·  Fax: 613-236-8646  ·  Email: copa@copanational.org

Website: www.copanational.org

Contents

Part I

An Airplane of Your Own? Scope of this Guide

Used Certified Aircraft New Certified Aircraft Owner Maintenance Aircraft

Ex-Military Types & The Limited Category

US Light Sport Aircraft Amateur builts Ultralights

Aircraft Kits & Plans Foreign Aircraft Pressurized Turbine?

Which Type is Right for You?

Who Can Own a Canadian Aircraft? Finding an Aircraft

Contacting a Seller

Out of Ten?

Inspecting the Aircraft Fly Before You Buy How much is it worth? Flying Junk

How much will it cost to own? Aircraft partnerships

Making an offer to purchase Giving the Seller a Deposit Title search and liens

Some Details about Foreign Aircraft Keeping It Foreign Registered? Taking Delivery

Escrow

Completing the Sale

Taxes

Aircraft type training

Insurance

Aircraft Financing

Aircraft Brokers & Dealers

Useful Resources

Aircraft Type Clubs

Aircraft Purchase Checklist

Part II

Articles on Buying an Aircraft:

Buying Your First Aircraft? Be Patient! By Darin and Lisa Graham The First Year of Aircraft Ownership by Darin and Lisa Graham Affordable Flying - Partnerships and Engine Overhauls

Affordable Flying –  Partnerships

Affordable Flying - Getting Along in Partnerships Affordable Flying –  Appreciating Depreciation Affordable Flying –  When Buying a Used Aircraft

Aircraft Prices in 2007 –  Where Are They Going? By Adam Hunt (written in June 2007) Understanding Aviation Insurance by Herb Cunningham

What You Need to Know About Aircraft Brokers and Dealers by Garth Wallace

Part III

Forms:

Partnership Agreement Sample #1

Partnership Agreement Sample #2

Offer to Purchase

Aircraft Bill of Sale

Receipt for Aircraft Purchase

The COPA Guide to Buying an Aircraft

Part I

An Airplane of Your Own?

Most pilots learn to fly on rented aircraft. After earning their pilot’s licence they continue to rent airplanes, often from the same school at which they learned to fly. For many pilots the shortcomings of renting quickly become apparent – you can’t take the plane away without paying a minimum charge per day, even if it is just parked at destination. Other shortcomings of renting include a very limited number of types available to rent, that the plane may not be available when you want and even that some rental aircraft may be a bit worn out and not very lovingly cared for.

At some point most pilots start dreaming of the advantages of owning their own aircraft. Just think, a myriad of different types that you could possibly own, fly whenever you want – the aircraft will be always available. Owning can be a lot cheaper than

renting, especially if you fly a lot, also the more flying time you acquire the safer pilot you will be. And you can maintain it and equip it the way that you want to. It would be yours!

Of course there are disadvantages, too – when it breaks you would have to fix it or pay to have it fixed. Owning may be more expensive than renting, especially if you don’t fly very much. You have to consider things that the renter-pilot doesn’t, like where to store the plane, who to get to maintain it and so on.

For most pilots the choice is easy – owning beats renting for them. It is true that

most pilots who once own an airplane don’t happily go back to renting again!

This COPA Guide is designed to help you understand what is involved in buying your own airplane – to take the mystery out of the process. Any pilot can own an airplane

– the greatest barrier should be the cost, not learning how to buy an airplane!

Scope of this Guide

This guide is the newest version of a long-standing and very popular COPA Guide. The original book was entitled The COPA Guide to Buying a Used Aircraft in Canada and dealt exclusively with buying used, certified aircraft in Canada.

This version has been expanded and discusses buying new and used aircraft, certified, amateur-built, owner-maintenance category, ultralights, warbirds, kits and foreign aircraft. There are lots of categories to choose from!

Suggestions for improvements to this COPA Guide are welcome! COPA updates and rewrites its COPA Guides on a regular basis to keep them up to date and relevant. Send your suggestions for improvements to  benefits@copanational.org.

NOTE

This guide contains information of a general nature only. It should not be considered a definitive document. Use of this guide does not make COPA responsible for legal action taken against you. Individual circumstances involving aircraft, and aircraft sales and the law vary greatly. Ensure that you read and understand the current CARs before buying and flying! For information that applies to your individual circumstances consult an aviation lawyer.

Note on Links: Blue links in this COPA Guide will lead you to external webpages and places within the Guide itself.  Green links will take to you pages in the “Members Only” section of the COPA website. Your membership number and last name “all in capital letters” are required for access to these pages.

Used Certified Aircraft

Certified aircraft have a standard Certificate of Airworthiness (C of A) and therefore meet all the applicable certification requirements.

Most pilots learn to fly on certified aircraft, so those are most familiar to them... Importing and exporting certified aircraft is a fairly simple venture in Canada. Certified aircraft include popular light airplanes such as the Cessna 150, 152, 172, Piper Cub and Cherokee, Beechcraft Bonanza, Mooneys, Maules and other well known brands. This category also includes certified gliders, helicopters, balloons, airships and even some certified gyroplanes. These are factory-produced aircraft and they must have their maintenance release signed by an AME after maintenance work is completed.

Certified airplanes have very predictable handling characteristics – they are stable and generally non-demanding to fly compared to some ultralights and home builts.

New Certified Aircraft

If you have decided to buy a factory new certified aircraft congratulations! This is definitely an easy way to go! You won’t have to worry about liens and title searches, pre- purchase inspections and other factors that are important when buying a used aircraft. Your new aircraft will come with a warrantee that will cover any defects for the first year or more. Also, new airplanes are not usually “high-maintenance”, unlike some older aircraft.

Your new aircraft will likely be well equipped with state-of-the-art avionics and the latest in safety and comfort features. What more could you ask for?

The downside in buying a new aircraft is that they are expensive! Not only is the purchase price higher than a used aircraft, but the insurance premiums will be proportionally high as well. This can make operating a new aircraft a lot more expensive than operating an older model of the same type.

The other factor that you will have to consider is depreciation. New aircraft lose their value, just like new cars do. For example, a 1999 Cessna 172R lost 28% of its value since new, between 1999 and 2004 or an average of almost 6% per year.  Diamond Katanas lost 56% of their value between 1995 and 2004 or about 6% per year! For more information on depreciation see the article at the end of this book entitled  Appreciating Depreciation.

Owner Maintenance Aircraft

O-M aircraft is a new category in Canada and it is unique in the world right now. No other country allows O-M aircraft! The O-M category is for older certified aircraft including many “orphaned aircraft” that are no longer supported by their manufacturers.

This category allows an owner, who is a pilot, to sign the maintenance release and to use non-certified parts on the aircraft. The main aim is to keep older planes flying and some wonderful things are being done in this category.

O-M aircraft operate with a Special Certificate of Airworthiness – Owner

Maintenance as their flight authority.

Currently O-M aircraft are not permitted in US airspace and cannot be returned to its previous category – a definite consideration if you are thinking of buying an aircraft in this category. This situation does not look like it will change in the near future.

If this category interests you please refer to  The COPA Guide to the Owner Maintenance Category, a book that offers complete information on putting aircraft in this category, maintaining them and flying them. The balance of this guide will just provide information about buying O-M aircraft.

Ex-Military Types & The Limited Category

Who hasn’t thought about streaking across the countryside in their own T-33 or splashing down in a lake somewhere in a float-equipped UTVA-66? Military aircraft have a romance all their own that lures many aviators.

Under the new CAR rules introduced by exemption in March 2002 many ex- military aircraft can now be owned and flown for recreational purposes. The rules are pretty straightforward and basically if you can show Transport Canada that you can maintain it then you can own it and fly it. These aircraft operate under a Special Certificate of Airworthiness – Limited.

Currently the rules are contained in an exemption to  CAR STD 507 Appendix F. COPA has a new book that is a useful introduction to these aircraft called the  COPA Guide to the Limited Class thatexplains the category and how it works.

Under these rules, all ex-military and other non-type certified aircraft in this category are divided into different groups with regard to their maintenance requirements:

Group 1 consists of gliders, balloons, piston-powered rotorcraft, basic training and communication aeroplanes, light transports, and equivalent aircraft types (total horsepower below 1000 BHP). Aircraft in this category are maintained by an appropriately qualified AME.

Group 2 consists of turbine-powered rotorcraft; World War II era aircraft, including fighters, medium bombers and transports; basic jet trainers; advanced piston- powered trainers; Korean War era aircraft, including first generation jet fighters; and equivalent aircraft types. Aircraft in this category are maintained by an AME with an appropriate Restricted Certifying Authority (RCA) or by an appropriately qualified Approved Maintenance Organization (AMO).

Group 3 consists of all aircraft not included in Groups 1 or 2. This includes jet fighters and other similar types. Aircraft in this category are maintained by an appropriately qualified Approved Maintenance Organization (AMO).

It is worth noting that many “ex-military aircraft” don’t come under the rules for the Special Certificate of Airworthiness – Limited. Aircraft such as the Harvard, Tiger Moth and Chipmunk all have Type Certificates and are eligible for standard Certificates of Airworthiness because they are certified aircraft. Check out the paperwork requirements carefully while you are researching the aircraft you are interested in.

Amateur Builts

Buying a used amateur built aircraft is often a good way to get a lot of performance for a reasonable price. It is also a great way to find an affordable helicopter or gyroplane. Many people buy used amateur-built aircraft because they want an interesting aircraft that they can maintain themselves, but who don’t have the time available to build one of their own from plans or from a kit.

Amateur built aircraft are subject to pre-cover and pre-first flight inspections from an MD-RA Inspector before they get their flight authority for the first time, so there is quality control in their construction. They fly under a Special Certificate of Airworthiness

– Amateur Built. Even if you buy a used amateur built aircraft the owner is permitted to do all the work on the aircraft and also sign the maintenance release for the work completed.

There is a huge variety of aircraft that fit into this category – airplanes, helicopters, gliders, balloons, airships and gyroplanes to name some possibilities.

Non-certified amateur built fixed-wing and rotary-wing aircraft will no longer be limited by weight or by passenger occupancy. Read article April 2009  Weight off shoulders of Amateur Builders.

Specific reference to aircraft weight or occupancy limits and in the case of lighter than air aircraft, buoyancy or cubic capacity limits were simply removed from the existing exemption Section 549.01 of the CARs and Chapter 549 of the Airworthiness Manual. Although this new amendment is not available on TC’s website as of the writing of this article. The referenced document can be found at: http://www.tc.gc.ca/civilaviation/regserv/affairs/exemptions/docs/en/1298.htm

Complete rules for this category can be found in an exemption to  CAR STD 507

Appendix C that came into effect in 2002.

Once completed and flying, amateur built aircraft comply with the same flying rules that govern certified aircraft.

COPA has a guide that gives lots of information on amateur-built aircraft  The COPA Guide to Amateur Builts. Reading this book is a must if you are considering buying an amateur-built.

Ultralights

Until 2005 ultralights had been the fastest growing segment of aviation in Canada, since 2005 certified aircraft held that honour. New ultralights added to the Canadian Civil fleet still account for a large proportion of the aircraft registered each year.

For some people, ultralights are the only affordable form of flying available. Other pilots could afford a bigger and more expensive aircraft but enjoy the simplicity of open cockpit “low-and-slow flight” that is the hallmark of ultralight flying. That said there are some very fast and cross-country capable ultralights being flown in Canada.

There is no doubt that ultralights are great fun to fly and are relatively inexpensive to own and maintain.

CAR 602.29 and the Transport Canada Ultralight Transition Strategy currently govern ultralights. Once incorporated, these rules will all become part of the CARs and will be found in the CAR 603 and 605 series. The only permitted uses for ultralights are private recreational flying and commercial flight instruction, rental and towing hang gliders. Other commercial uses such as crop spraying, aerial photography, towing gliders, carrying freight or passengers for hire are not permitted.

The Canadian ultralight category is quite different from that found in the USA, although the US is finally catching up to Canada with its  Light Sport Aircraft Category. It is also quite different from the European FAI “Microlight” category.

Canadian ultralights come in two flavours – Basic Ultralights (BULA) and

Advanced Ultralights (AULA).

Basic Ultralights are the original ultralights. They were first developed in the mid-

1970s, not by shrinking conventional airplanes, but by putting a motor on an Easy Riser biplane hang glider. Today in Canada, the rules have evolved over time and basic ultralights may currently have one or two seats, weigh up to 1200 lbs take-off weight and have a stall speed of 39 knots (45 mph) or less. Basic ultralights are not permitted to carry passengers, although they may be flown with two pilots on board or with a student and instructor. Helmets are required when flying basic ultralights. There are no specific maintenance requirements for basic ultralights, but protecting your investment and yourself means taking good care of your basic ultralight. Basic ultralights are all

registered in the series starting with C-I.

Advanced ultralight airplanes (AULAs) started as a new category here in Canada in 1991. They are single or two seat airplanes that comply with the Light Aircraft Manufacturer’s Association of Canada (LAMAC) publication called Design Standards for Advanced Ultralight Aeroplanes DS10141. Note at the time of publishing LAMAC President retired, the Association is in restructuring and LAMAC website is unavailable until further notice.

AULAs must be purchased as a kit or complete aircraft. For quality control reasons they cannot be built from plans. Changes were made to the category in June 2001 and, as a result, AULAs can now weigh up to 770 lbs for single seaters and 1232 lbs for two seaters. Under the revisions to the category, powered parachutes and hang glider- based trike ultralight designs may now qualify as AULAs.

AULA aircraft types are added to the TC  Listing of Models Eligible to be Registered as Advanced Ultra-Light Aeroplanes (AULA) when the manufacturer signs a Declaration of Compliance (D of C) for the type, a copy of the Manufacturer Specified Maintenance Program and TC will review and may accept it for the list. The manufacturer of an advanced ultra-light aeroplane is also responsible for the "after market" support for the continuing "fit for flight" condition of their aeroplanes.

Individual AULAs get their status from a Statement of Conformity (S of C) that the manufacturer issues when the plane is built. This S of C indicates that the plane conforms to the standard for the type. The S of C allows the AULA to be registered with Transport Canada as an advanced ultralight. AULAs cannot be modified without the written authority of the manufacturer and they must be maintained in accordance with the manufacturer’s instructions. If an AULA is modified without permission from the manufacturer or not maintained as required then its Certificate of Registration will be cancelled. These aircraft may be re-registered in the basic ultralight category, if they qualify to do so, and will lose their passenger carrying status. Note that an AULA that has a gross take-off weight between 1200 and 1232 lbs cannot revert to the BULA category currently and will be grounded if it fails to continue to meet the AULA requirements, unless it can fit into the  Limited Class. Maintenance records are required are for all AULAs.

Used AULAs must have a Fit for Flight Form (FFFF) completed by the previous owner or else they cannot be re-registered in the name of the new owner as an AULA. See the Ultra-light Transition Strategy for more details on this requirement.

AULAs can carry a passenger, if the pilot is qualified to carry a passenger. This currently requires at least a Pilot Permit - Ultralight Aeroplanes with the Passenger Carrying Rating. Helmets are not required to be worn in AULAs, but may be a good idea depending on the design.

Starting at their inception in 1991, AULAs were registered in the C-F or C-G series, but since January 1997 they have been registered in the C-I series, like all other ultralights. There are still quite a number around that have C-F or C-G registrations.

COPA has a guide to ultralights that provides lots more information on this category or aircraft. Have a look at the  COPA Guide to Ultralights for the complete story.

Aircraft Kits & Plans

There are currently over 700 different types of aircraft that can be built from kits or plans! That means that there is probably something there that will suit just about any potential airplane owner.

In Canada, kit or plans built aircraft have to meet the requirements for either the amateur built or ultralight categories. Have a look at the preceding paragraphs for information on the limits of those categories.

The main advantage of buying a kit or plans and building your own aircraft is that you will get exactly what you want and you will know everything about how it is constructed. After all, you will have pulled all the rivets, laid up all the fibreglass or clamped all the glue-joints yourself! Building your own aircraft can also save you a lot of money – you get a lot more performance at a lower cost by providing your own labour.

There are disadvantages to building your own airplane. It takes time to build an airplane – usually more than you expect. Most manufacturers publish a “number of hours to build”. Some of these numbers are quite fanciful, while others are based on actual times that it has taken real builders to complete the aircraft. Most manufacturers use the time that it takes an experienced builder, with all the proper tools working full time to complete the kit. No matter how simple the kit, most first-time builders find that they

need to double or even triple the estimated time to build. Consider realistically how much time that you will be able to spend on building per week. How long will it take to complete your dream plane?

Aircraft kits vary greatly in how long the manufacturer says it will take to complete them. Some simple ultralights can be built in 50-100 hours, while more complex projects can take 5000 hours or more.

A builder who can work on the project fulltime could realistically put in 2000 hours in a year. If you are working at a job fulltime and building your plane on the weekends you may find that 500 hours per year is as much as you can find to build. Under those conditions that kit that the manufacturer says will take 2500 hours to build (and will actually take you 5000 hours) will take ten years to complete! Can you hang in there that long?

Other factors to consider are tools and space. Do you have heated space big enough to build in? If it isn’t heated then you won’t be doing much building in the Canadian winter and that is when most airplane building happens! Do you have the tools you need or can you get them? Did you factor tools into the cost that you were expecting?

Perhaps the most important factor in building an aircraft is “spouse support”. If your partner and other family members aren’t 100% supportive of your airplane building then you will probably have a serious problem in finding the time and money to keep building. All factors to consider!

There are many factors to think about when assessing if you have the ability to build an aircraft. Aside from time, space, tools and spouse support there are skills, ability and training. Assessing your capabilities is a large topic. There are many good books that describe the challenges of building your own aircraft and how to deal with them. It is recommended that if you are considering building your own aircraft that you read one of those texts. One source of this information is  Choosing Your Homebuilt – T he One Y ou’ll   Finish and Fly by former COPA Director Ken Armstrong.

There is no doubt that one of the most memorable moments in any pilot’s flying career is the first flight in an aircraft that they built themselves. Almost all aircraft builders say, after that first flight, that it was all worth it.  The COPA Guide to Amateur- Builts has lots more information on the considerations for building an aircraft in this category

Foreign Aircraft

What if the perfect aircraft for you isn’t in Canada? In many cases it is possible to import an aircraft.

The first step is to ensure that it will qualify for a flight authority in Canada. Certified aircraft are usually not a problem, especially if they are certified in the USA. Make sure that aircraft is eligible for a Canadian type certificate. Other aircraft need to fit into the ultralight, amateur built or limited categories.

Any aircraft that fits the Basic Ultralight definition of two seats or less, 45 mph or less stall speed, 1200 lbs or less gross weight and the  minimum useful load calculation can be brought into Canada and registered as a BULA.

US Light Sport Aircraft

If they meet the definition of an amateur-built (51% rule) E-LSA (Experimental LSA), they can be brought in as an amateur-built; this class is not weight limited but data must be available to prove that the aircraft can be operated at the chosen weight. They

can be brought in as an AULA, including restrictions to 1232 pounds and no additional allowance for floats. They can also be brought in as a  Limited Class, with no weight restriction (other than that specified by the manufacturer – LSA are limited to 1320 pounds or 1430 on floats) but with a significant requirement to be maintained by an AME. In the Limited Class, LSA fall under Group A for determining operational and Group 1 for maintenance conditions.

AULA are more difficult, since this category does not exist outside Canada. If the aircraft is a listed AULA and manufacturer is willing to issue you a Statement of Conformity for the aircraft then you can register it as an AULA without too much difficulty. Without a S of C issued by the manufacturer you cannot register it as an AULA.

Importing amateur built aircraft used to be impossible in Canada. Due to COPA initiatives through CARAC, this is now possible! Foreign amateur built aircraft that meet the Canadian definition and have flown 100 hours airframe time are eligible, subject to an inspection when they enter Canada. The complete rules for importing an amateur built aircraft are located in CAR STD 507 Appendix C and there is lots more information in The COPA Guide to Amateur-Builts