February government shutdown threat overhangs aircraft transactions, AIC Title offers insurance

Photo credit By Jnn13 (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons

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The partial US government shutdown that ended on January 23 will only have delayed a few aircraft transactions, but it is a warning of what could happen if Capitol Hill cannot agree on a long-term budget by February 8.

In the past the Federal Aviation Administration has not considered an essential service during a government shutdown. This prevents people from registering or de-registering aircraft during a shutdown.

Leaders from six general aviation authorities – Mark Baker, president and CEO, Aircraft Owners and Pilots Association; Ed Bolen, president and CEO, NBAA; Pete Bunce, president and CEO, General Aviation Manufacturers Association; Martin Hiller, president, National Air Transportation Association; Jack Pelton, chairman and CEO, Experimental Aircraft Association; and Matthew Zuccaro, president and CEO, Helicopter Association International – have argued that this is wrong.

In a letter to the Department of Transportation (DOT) Secretary, Elaine Chao, they said: “We respectfully submit that DOT has authority under the Anti-Deficiency Act to staff the US Registry as it is vital to protection of human life and property, and necessary for the US to fulfil its ongoing international legal obligations.”

However, there is no guarantee that it would be open in a future shutdown. In the 16-day government shutdown in October 2013 the FAA was closed. This created a backlog for aircraft registrations that lasted for several weeks.

“Time kills deals and we are here to keep transactions moving any way that we can.”

“It is very serious. It effectively puts transactions on hold,” says Bruce Marshall, general counsel at AIC Title Service. “There is no way to perfect rights in aircraft during the shutdown. People will only be able to fly their aircraft internationally under previously issued authorization from the FAA until those authorizations expire (so called fly wire permits which are valid for 30 days). People flying on temporary certificates of registration – which are valid for 90 days- will only be able to continue to do so until the certificate expires.”

One other risk is that prospective buyers are not able to search the registry to see if new liens have been added to aircraft during a shutdown. AIC Title Service has worked with insurer AvSure to create a policy to cover this risk. It is available to anyone who has undertaken a title search within 30 days of the start of a shutdown.

“It was business as usual for those who took advantage of special Aviation Title Insurance policy endorsements offered by AvSure during the 2013 shutdown, with AIC assisting in closing over $50 million dollars in aviation transactions during the last shutdown,” says Clay Healey, president and CEO of AIC Title Service. “Time kills deals and we are here to keep transactions moving any way that we can.”