Record delays – CJI One Minute Week 589

opinion

by Alasdair Whyte

January 3, 2023

Sadly, for many involved in aircraft transactions the term holiday season is ironic.

At the end of December, hundreds of owners were desperate to take ownership of their aircraft before accelerated depreciation became less generous. And the last thing anyone needed was a surprise change of policy from the FAA.

On December 12th, the FAA said it would immediately prohibit access to “ancillary documents” involved in aircraft registration. It said it was doing this for privacy reasons. These documents sound innocuous but unfortunately, they are key to closing deals. Without them lawyers cannot check title, legal owner, liens against the aircraft and much more.

“The biggest concern for us is the timing of this,” Jack Gilchrist, director and shareholder, Gilchrist Aviation Law, told Corporate Jet Investor (CJI) on December 23rd. “To do it in December, when we’re busy closing transactions. We’ve probably got 30 to 40 aircraft that we will be closing between now and the end of the year, so the timing of this thing is just really, poorly planned.”

The FAA is aiming to protect the personal data of people who have registered on the Civil Aircraft Registry Electronic System (CARES). Some of the information is personal and can include sensitive information such as birth dates or photographic ID. The Authority rightly wants to protect this.

On December 15th, the FAA stated that it would allow public access to a summary page of ancillary records from December 23rd. But this will only notify examiners of the existence of important records, rather than disclose their details.

Gilchrist said that it will still be possible under the new rules to gain access to the information needed in the now private documents.

But it will make transactions slower, and it will be more difficult to obtain older documents as people involved will have to submit written requests to the FAA and those mentioned within the documents. The FAA will then need to comb through documents to redact any potential sensitive information before sending it on.

“The FAA is already six months behind in processing documents,” Gilchrist said. “This will add to their delinquency in processing documents. It’s hard to say how long delays will be, but it can’t help when they’re already short staffed.”

One aircraft lawyer told CJI that the industry should sue the FAA because it’s a violation of the Administrative Procedure Act. But not everyone one wants to sue what is a key partner.

“Discussions among various industry representatives and with the FAA Registry officials are ongoing,” said Edward Gross, shareholder, Vedder Price. “The industry is hoping to better understand the disclosure concerns that were the basis for the restrictions and whether there might be a more practical approach to addressing those concerns. Hopefully, a collaborative approach will quickly address the respective concerns of the FAA and the aviation industry.”

The leading Oklahoma escrow agents and law firms (led by the Association of Aircraft Title Lawyers) have written to and are talking with the FAA. There is a good chance that things will change. Scott McCreary at McAfee & Taft has been very involved in this as well.

The NBAA is also concerned. “NBAA is working closely with the General Aviation Manufacturers Association and industry experts to find a pathway to access ancillary documents that meets industry’s time constraints while protecting personally identifiable information,” said a spokesman.

Gilchrist believes there is a solution. “We’ve asked them to identify us as ‘Public Documents Room Permittees’ as exemptions to this public rule and allow us to access these records, but not to divulge sensitive information to third parties. They’ve never allowed us to join them and the inside crowd. We’re hopeful, but we’ll see what happens with that.”

But it is unlikely to happen soon.