Aircraft Partnership Agreements

[AOA]

Hi Everyone,

Just looking to see if you have a copy of a template agreement you'd be willing to share? (P.M if required) With that in mind any thoughts or best practices for a 1/4 aircraft partnership?

Appreciate any insight,

Thanks
AOA

[iflyforpie]

The best practice is to find three other partners who always pay their bills but never fly.

[niss]

That's exactly what I did. I'll try to find a copy for you tomorrow.

[burhead1]

The best practice is to find three other partners who always pay their bills but never fly.

That's exactly what I did. I'll try to find a copy for you tomorrow.

Where can i get one of them? LOL

[niss]

I wrote this guide before, it has the link to the contract I used at the bottom:



viewtopic.php?t=28813

Purchasing an Aircraft.

To begin it I must start by saying that ownership is not for everyone. There is an incredible amount of variables and hurdles to owning an aircraft. Aircraft parts can be quite expensive, fuel is expensive and they are full of ‘surprise’ costs just to keep running. This isn’t to say that it is a rich mans game but that there is considerably more money being played with than when owning a car or a boat.

Your Needs!

Firstly decide what kind of aircraft you are looking for. What do you need? Do you need an aircraft to train on? What kind of training are you doing? Are you doing your Private Pilots License? Your Commercial Pilots License? Your Multi rating? Your float rating? Do you just want something to use to commute or do you just want another toy to help relax with? All these will affect your decision as to what kind of aircraft you want. There are plenty of fantastic and reasonably priced trainers on the market. The aircraft I co-own is a Piper Cherokee 140, an aircraft that can be found at almost any general aviation airport one goes to. Other popular training aircraft include but are not limited to: Cessna 150/152, Cessna 172, Piper Tomahawk, etc. As the Cessna 172 is the most popular and widely available aircraft, odds are that if you are looking for a trainer there will be plenty of these available.

Renting Or Owning?

Since my experience in aircraft purchasing is very limited (I have only ever owned one & it is meant for PPL & CPL training) I will only talk about what I know. When searching for an aircraft to train on think long and hard about whether you want to own or rent. Both have their benefits. Ironically the benefit they both share is freedom, but in different forms. When renting you have freedom from responsibility. You are not faced with huge costs for foreseen and unforeseen maintenance (ie. Annual or Hangar rash, etc.). That said however, you are at the mercy of the FBO for aircraft availability and the hourly running rate is higher than if you owned the aircraft yourself (most local FTUs at the time this is written in my area charge $115/hr for a 172, whereas my Cherokee 140 costs me ~$75/hr). Ownership requires a greater start up cost and responsibility. However, you are free to take the aircraft wherever you want, when ever you want, however long you want, and at the end of your training you are not left with nothing.


Cha-Ching!

The initial costs for an aircraft can vary from case to case. For the purpose of this article we will use the numbers from my aircraft (my actual costs in the end were different due to certain circumstances). My PA28-140 was for sale for $32,000.00. Lets assume that you have that money available. In the province of Ontario the PST (Provincial Sales Tax) is 8%. That means that the 140 is $32K + $2560.00. When purchasing an a/c in Canada it must be registered in your name with the Civil Aviation governing authority Transport Canada (Federal Aviation Administration in the United States). The fee for registration as of 2006 is $110.00 CDN. While this is negligible considering the value of the aircraft it is an example of the many small fees a/c owners have to pay. In order to fly an aircraft in Canada it must be insured. There are many insurance companies available, each with its own pros and cons. My insurance company is one of the few who has an Open Pilot Clause. This means that for the purpose of ferrying (10hrs or less a year if I recall correctly) any person holding a Private Pilots License or higher can fly my aircraft without needing to be added to the insurance. This is a very nice clause to have as it allows for greater flexibility and convenience, however does cost more than some other policies. When I first bought my insurance I was quite surprised as to how little it costs and how much it covers. The insurance for me and my partner costs $2000.00 CDN a year. It covers $32,000.00 if the a/c is written off, $1 Million liability, and $100,000.00 per person in the a/c (4 seats). The $100.00 deductible was very surprising to me as it is much lower than its automotive or house insurance counterparts. Perhaps the most nerve wrecking of costs is the certainly-uncertain Annual inspection. All private aircraft in Canada must undergo an Annual inspection once every year. Assuming proper maintenance and no surprises usually this inspection will cost $1500 - $2000. During this inspection they remove the interior (seats, upholstery, etc.) and inspect all controls, linkages, electronics, etc. They also go open up inspection plates and remove the cowls on the fuselage to inspect the control surfaces, engine, etc. They give the aircraft a very thorough inspection to ensure that it is still safe to operate. Sometimes there are a few surprises. You may find that the hoses on your engine are gone, the oleo is leaking or damaged, you may find a bend, etc. All these are what ensure that airplane owners nails are bitten down to the tips during annual time. Assuming no hard landings and some diligence and TLC on your part will ensure that your annual will be as painless as possible but be prepared. If you decide to purchase an aircraft keep putting money away the whole year for that annual. Every year NavCanada (a corporation responsible for providing ATC, radio navigation aids, weather, publications, etc.) sends aircraft owners a bill. Usually if you are just a private operator it is a small amount ($75 in my case) but it is still something to keep in mind. Also unless you have your own airfield you are going to need a home for your aircraft. Most airports charge around $50 a month for tie-downs on the grass and hangars start at around $300 a month for T-Hangars. Tie-downs are nice and cheap but they leave your aircraft exposed to the elements and potential vandals, but a hangar costs much more.

Solo or Dual?

So you are decide that yes owning is for you, yes you have been approved for that loan, or you just have the money laying around, etc. You are committed to purchasing an aircraft now all you have to do is find one. There are two major routs you can go. You can go for sole ownership, or you can go for co-ownership (like I did). With sole ownership you have to bear all the costs yourself, but you do not have to worry about whether or not the aircraft will be at the airport, you do not have to worry about your partners bending the airplane etc. You have to ask yourself, how much is having the aircraft to myself worth to me? If a lot, sole ownership is for you. Since I could not afford to purchase an aircraft outright by myself this made the decision very easy for me. I was going to have to find a partner.


Finding your baby

Now comes time to find the aircraft of your dreams, where do you look? There are tons of aircraft brokers online, a quick Google search will reveal a wide variety of aircraft and a wide variety of prices. Ebay even has airplanes on it but I would stay away from those. COPA (Canadian Owners and Pilots Association (http://www.copanational.org)) is also a great place to start. What aircraft you choose depends on your needs. For a training aircraft you probably do not want to go out and get the newest and prettiest and fastest airplane out there. Nor do you need the newest and best avionics available. All you want is something that is structurally sound, and with a relatively fresh engine. Research the hell out of that particular aircraft! Find out everything you can, some aircraft have their own little quirks. Know everything you can about the aircraft you plan on buying before you buy. It may save you lots of money and heartache down the road. I would recommend finding an unbiased AME to do a pre-purchase inspection to help you decide. I am not entirely sure as to how much a Pre-purchase costs as I did not get one done (I lucked out and got a good a/c but it could have easily ended up the other way) but it is still a good idea. Make sure that there is no wing spar damage, no corrosion, no bends, cracks, etc. Go through all the logs (Maintenance Logs, Journey Logs) and get a feel for the airplanes history. Damage history isn’t necessarily a deal breaker depending on the damage and if it has been properly repaired, but it is definitely something you would want to know. Make sure that the engine is in good shape. An overhaul on a Lycoming O-320 can cost anywhere between $16,000 - $25,000 so watch out! The Time Before Overhaul (TBO) on the O-320 is 2000 hours, but it is not a requirement if owned privately. It says TBO but usually they go well beyond that. That said try to find an engine with a fresh overhaul, or at the very least a fresh Top Overhaul. Make sure that the compression is up to snuff. Nothing on an engine is cheap, new cylinders can cost $1500 a piece so it’s better to have the previous owner to pay for that instead of you. Fresh paint is not essential for a training aircraft. It doesn’t have to look nice, it just has to fly right, and most importantly be safe! I will not really touch on avionics as that really depends on what you need your aircraft for. However you will probably want at the very least a working VHF radio, a VOR and NAV receiver and an Intercom. GPS are nice to have but do not use one for training, learn the old way first, as GPS can make things too easy.


Married to your plane, and your partner

If you decide to go for co-ownership make sure you and your partner are compatible! Nothing can ruin ownership worse than a partner you hate. I am very lucky to have an amazing partner. There have never been any issues, and the aircraft is always there when we need it. You may decide to find a friend or two and split the aircraft. One word of advice on partnerships: No gentlemen’s agreement! Make sure that you draft a contract that clearly outlines all the terms and conditions of your partnership. Things to include in your contract:

- Maintenance
- Storage
- Usage (schedule)
- Operating costs
- Dissolving of partnership
- Sale of aircraft

At the end of this guide is a link to a sample contract that I actually used (after modifying it to suit my needs). Make sure all your bases are covered, do not leave anything open, and make sure that all parties are 100% satisfied with it. The contract does not necessarily have to be strictly adhered to but it does have to be respected. For example, let’s say that you outline a schedule in the contract. As long as it is agreed on by your partners you can deviate from the schedule, but if there is an issue then the contract is the final word. Make sure that all parties have a signed and dated copy of the contract to keep for their records. In a partnership, personality is everything! The smoother your partnership is the more enjoyable your aircraft ownership will be. Maintenance can be a big deal when you have partners. Let’s say that you blow an engine, depending on the contract the three of you may be responsible to bear the costs of a new engine. What if one partner can not afford it? One solution may be for the others to pay for the third partner in exchange for some or all of his shares, or to dissolve the partnership entirely and sell the aircraft. All these scenarios must be taken into consideration when drafting your contract.

All this information has been based on my experiences with my aircraft ownership and partnership. That said, I have not been able to describe all that there is to owning an aircraft, but I hope that I was able to shed some insight into aircraft ownership. Whatever you do, be smart and safe, try to look at all angles and make the best and most knowledgeable decision you can. Talk to people who own the type of a/c you are eyeballing, talk to mechanics and ask them their opinions. ASK QUESTIONS!

http://www.1st-of-pryor.com/co-ownership%20contract.htm

[AOA]

Niss,

Thanks a bunch for tracking down your previous post! Some great info.. Appreciate the help

AOA