Flying Under the Radar

Some business jet buyers like to show off their aircraft and are happy to let people know they’re the owners. As you might expect, this includes President Donald Trump; his name appears in huge letters on the side of his Boeing 757, and one of his Sikorsky S76Bs is registered in Great Britain as G-TRMP. Wynn Resorts’ aircraft, meanwhile, have “WR” tail numbers and the company logo emblazoned on the fuselage.

But many business jet owners prefer to remain anonymous, and some are downright secretive. Crusading politicians and journalists sometimes suggest that such individuals must be concealing something nefarious, but the reality is that famous and wealthy people have legitimate reasons for not advertising their ownership of a jet. Aircraft flights can signal a business deal in the works, and the deals themselves can take jets to airports around the world, not always in the most secure locations. Owners seeking to avoid the paparazzi and the prying eyes of fans, enemies, and curiosity seekers would just as soon have their airplanes appear to be operated by JetBlue.

Related Article

Fessing up to jet perquisites

Understating the value of personal usage of the company aircraft can lead to significant penalties.

The challenge in remaining anonymous is that a good deal of aircraft information is a matter of public record. Ownership, leasing, and financing data is filed on the FAA and international registries, and a simple tail-number search on the FAA registry will show you exactly who the registered owner is. You can find much of the public information on Amstat and similar services, which even provide copies of filed documents. Other filed documents can be obtained through Freedom of Information Act (FOIA) requests.

A key part of preserving privacy, therefore, is to make sure that the documents submitted to register the aircraft don’t betray crucial information. A standard option is to register the aircraft in a trust, which separates legal and beneficial ownership. Legal title to the jet is held by the trustee, usually a corporation affiliated with a bank or an aviation-services company like TVPX or Delaware Trust that has no connections with the real owner.

But what about beneficial ownership? The trust instrument, which is filed on the FAA registry, must name a beneficiary, so the trust provides little help in shielding the identity of the owner unless the beneficiary is also an unrelated party, which isn’t likely. The solution is a so-called double trust, where the beneficiary of the trust holding title is another trust. An affiliate of the owner can be the beneficiary of the second trust because the second trust isn’t filed on the FAA registry.

The trust companies may be happy to solve your ownership problem, but they aren’t going to operate your aircraft for you, so the next step is putting the aircraft someplace where the real owner can use it. Remember, it’s owned “legally” by the trustee of the registered owner trust. So that trustee leases the jet to the trustee of the second trust. This by itself doesn’t accomplish much, of course, and that lease must be filed on the registry anyway. But the second trustee then subleases the aircraft to an affiliate of the real owner. In most cases, FAA regulations also require that this sublease be filed with the FAA, but this time only for “truth in leasing” purposes. As such, it’s not on the registry itself, so copies aren’t available to the public, and it isn’t subject to FOIA requests.

Establishing this arrangement may sound expensive, but Jeff Towers, general counsel at TVPX, says it adds only modestly to the overall cost of buying a business jet. It may also sound like a lot of rigmarole to go through to protect the identity of the owner. That it is, so you’ll be glad to hear that there’s a simpler way: instead of using a second trust, you could use a corporation as the beneficiary. The FAA doesn’t require disclosure of the owners of a corporation, though some members of Congress are trying to change that. In fact, you could substitute a corporation for both trusts.

Unfortunately, corporations have their own problems. A C corporation is a separate taxable entity, and as such may rob the aircraft owner of the benefits of writing off expenses for tax purposes. You could use an LLC instead—a pass-through entity for tax purposes—but LLCs are required to file a “Statement in Support of Registration” that names all the members and managers. So the next option is an S corporation, also a pass-through entity, but one that is limited to 100 shareholders, none of which can be a corporation. Unlike corporations and LLCs, trusts don’t show up on a secretary of state’s website as incorporated or organized in the state. However, documents have to be signed by officers, who have to be individuals who can’t be traced to the real owner through the FAA, state filings, or other means; they may be well below the radar and relatively anonymous themselves, but in this era of internet searches, Facebook, and LinkedIn, it’s amazing what people can figure out.

The double trust may seem complex, but it’s not expensive and most everything needed can be taken off the shelf. It’s arguably the safest route to take. Does it make America less safe? Ironically, putting an aircraft in a double trust at a reputable provider can actually make data more easily available to the authorities if they need it. “The major trust providers do a lot of due diligence on clients and underlying owners,” says Jeff Towers at TVPX. “We have important obligations to provide information to the FAA and other governmental agencies for safety and law-enforcement purposes, but we otherwise treat client information as confidential.”

If you want to fly below the radar, having bulletproof anonymity in your registered ownership structure gets you a long way. But not all the way. There are lots of people at law firms, trust companies, banks, and management companies who need to know who the client is, and they all can be required to sign confidentiality agreements. Even some maintenance programs insist on knowing who the real beneficial owners are. I’ve heard of a jet owner being identified because the chief pilot reserved a tail number. And public information about owners and operators doesn’t stop with the FAA registry. Letters of authorization for things like operations in RVSM airspace must be in the name of the operator, not the trust that owns the aircraft, if it is to be operated under Part 91 regulations.

And then there are movements of the airplane itself. Owners can block their tail numbers from being identified and traced based on radar data, but with ADS-B Out, the aircraft blasts out a unique ICAO code tied to its tail number that can be tracked on publicly available devices. Fortunately, an industry group that includes the National Business Aviation Association is working with the FAA to find solutions to this problem.