An Air Carrier certificate acquisition can seem simple and straightforward until you examine both the business and regulatory details which necessarily apply. For a prospective buyer, the concern is preserving its operational value at reasonable cost without inheriting undesirable limitations or liabilities.
If you are considering becoming an FAR Part 135 Air Carrier by acquiring another operator’s certificate, the Federal Aviation Administration (FAA) input on the subject will likely affect your proposed investment. A clear understanding of the FAA’s position on your plans will help clarify what you can accomplish and how long it will take to complete.
The certificate stays with the entity it was issued to
You cannot purchase an FAR Part 135 Air Carrier Certificate as a separate asset. However, you can acquire the entity to which the FAA issued it to. That type of transaction involves a stock or membership interest purchase of the entity holding the certificate.
This type of transaction retains the FAR Part 135 Air Carrier Certificate in the hands of the legal entity to which it was issued. That company therefore remains the certificate holder. Yet ownership alone does not resolve every regulatory issue. The FAA will review the change of ownership in light of the change in key personnel and organizational capabilities as they relate to the operations specifications, and manuals for operations, training and safety.
Ownership changes require a coordinated transition
The terms and conditions of the agreement for the acquisition normally cover all aspects of the transfer of ownership of the certificate-holding entity. But the FAA will examine whether the new owner can meet operational parameters described in the operations specifications for that certificate. Early contact with the responsible Flight Standards District Office (FSDO) is an essential step in that process.
- Change of Entity Ownership: You generally buy the certificate-holding entity’s stock or membership interests. The entity remains the certificate holder, but the ownership of that entity has changed. An advantage of this approach avoids the need for applying for a new certificate, which is a process which can take up to a year to complete, and can cost many thousands of dollars to add aircraft types and operational capabilities. A downside to this approach is that any liabilities of the certificate-holding entity come along with the certificate. As a result, liability limitation strategies need to be put into place to protect the buyer to the extent possible.
- New Control Means New People: The new owners will either have to fulfill the key roles of an FAR Part 135 Air Carrier themselves, or they will have to bring them to the new company. That includes the Director of Operations, Director of Maintenance and Chief Pilot. These key people will have to satisfy the FSDO’s scrutiny, and demonstrate that they have the depth of education, training and experience to fulfill those roles in light of the operations specifications of the certificate.
- New Plans Bring New Reviews: If the new owner plans a new base, or new aircraft types, or expanded geographic or over-water operations, these changes will increase the scope of FAA scrutiny. Any changes sought in the operations specifications will require an amendment to the company ops specs by the supervising FSDO, and these changes may affect your planned closing date and the start of new flight operations.
How careful preparation can preserve deal value
The acquisition of an existing FAR Part 135 Air Carrier Certificate generally combines the customary due diligence associated with any capital transaction along with FAR Part 135 compliance and FAA oversight. Your deal terms and operational plans must therefore take into account the time and requirements which will likely be imposed by the supervising FSDO.
An experienced aviation attorney can help you navigate this process to disclose all likely contractual and regulatory requirements and to maximize the value of your deal. Having informed, realistic expectations early in the process helps to develop mutually favorable closing terms.