What must an aircraft owner be cautious about when agreeing to a leaseback arrangement?

In a leaseback arrangement, an aircraft owner effectively sells their aircraft to a buyer and subsequently leases it back for continued use. A critical consideration for the owner in this scenario is the potential conflict of interest regarding the aircraft's usage. This stems from the fact that while the owner is leasing back the aircraft for personal or business use, they no longer hold ownership in the same sense, which might influence how they can utilize it.

Conflicts of interest may arise when the leasing terms may not align with the owner's customary application or needs for the aircraft. For example, if the leaseback terms impose restrictions on how the aircraft can be operated or require certain servicing procedures that the owner might not agree with, this can create complications. Understanding these dynamics is crucial to avoid disputes and ensure that the owner's interests are adequately protected in the arrangement.

This highlights the importance of thoroughly analyzing how the ownership change might affect operational flexibility and the responsibilities tied to ownership versus leasing. It focuses the owner's attention on ensuring that the leaseback terms are genuinely favorable and do not inhibit their intended use of the aircraft as they originally planned.