Chapter 1 - General Information

1.1  Purpose

The purpose of this manual is to provide administrative procedures to staff who are involved in the process of issuing leasing authorizations and who track or review leasing advisories. Aircraft leasing operations, depending on the application, may involve any combination of the functions of General Aviation, Aircraft Maintenance and Manufacturing, Commercial and Business Aviation, Airline Inspection, and Aircraft Certification.

1.2  Scope

This manual covers all aspects Subpart 203 of the Canadian Aviation Regulations - Operation of Leased Aircraft by a Non-Registered Owner and the accompanying Standard 223 - Standards Respecting the Operation of a Leased Aircraft by a Non-Registered Owner. Subpart 203 leasing operations include air operators operating under Part IV (flight training unit operators), Part VI (private air operators), and Part VII (commercial air operators).

1.3  Format

Each chapter covers a specific leasing situation set out in Subpart 203 as follows:

  • Chapter 2:  A Canadian Air Operator that Leases a Canadian Aircraft from Another Canadian Air Operator - No Authorization Required - Advisory
  • Chapter 3:  A Canadian Air Operator that Leases a Canadian Aircraft from Another Canadian Air Operator - Authorization Required
  • Chapter 4:  A Foreign Operator that Leases a Canadian Aircraft from a Canadian Air Operator that is Operating under Part IV, VI or VII
  • Chapter 5:  A Canadian Air Operator that is Operating under Part IV, VI or VII and that Leases an Aircraft Registered in a Foreign State
  • Chapter 6:  A Foreign Operator that Leases a Canadian Aircraft from a Canadian Aircraft Manufacturer

A record of amendments page is provided to enable the holder to maintain a record of all future amendments.

Checklists are provided in the Appendices to assist both Transport Canada staff and our clients meet the regulatory requirements.

1.4  Quality Assurance Reviews (QAR)/Functional Reviews

Following the procedures set out in this manual should ensure a consistent approach, nationally, to administering aircraft leasing transactions. Discrepancies with these procedures and best practices that can form the basis for improving these procedures will be discussed during headquarters (HQ) visits to regional offices and Transport Canada Centres (TCCs) as part of the QAR and/or functional review process.

1.5  Functional Guidance

Aircraft leasing activities are administered primarily from regional offices and TCCs. If problems arise, or if there are questions about how to interpret the regulations or standards or any sections of this manual, HQ functional specialists are available to provide guidance and seek legal opinions. TCC staff are welcome to contact HQ directly but may wish to first consult with their respective regional offices. The HQ Aircraft Registration and Leasing division’s leasing specialist can be reached at (613) 998-3600. This number can also be used if referral to another Transport Canada Civil Aviation (TCCA) branch is required for questions requiring the assistance of a subject matter expert.

1.6  Delegation of Authority to Issue a Leasing Authorization

Delegation with respect to the issuance of leasing authorizations is set out in the Delegation of Authority document #150346 (June 4, 2000) under Schedule C-9 - Civil Aviation Licensing Officers. Approval and sign-off of the leasing application forms by representatives from the various regional Civil Aviation divisions is required prior to the issuance of a leasing authorization. Regional Aircraft Registration and Leasing staff with delegated authority will authorize and issue the leasing authorization to the appropriate applicant after review and approval of the leasing forms are completed.

1.7  Role of the Regional Aircraft Registration and Leasing Division

The regional Aircraft Registration and Leasing division is responsible for managing the processing of all leasing applications and leasing advisories. The duties are as follows:

  1. receiving incoming communications, e.g. leasing applications and advisory forms, telephone calls, e-mails, facsimile transmissions;
  2. liaising with regional records to set up a leasing file;
  3. forwarding applications and advisories, leasing files, documents, etc., to the appropriate Civil Aviation divisions for their action;
  4. coordinating with other divisions as necessary for confirmation that the applicant has met all regulatory requirements;
  5. managing the routing and tracking the status of the leasing application or advisory through the administrative process from the beginning to the end;
  6. producing the leasing authorization (LF-6) in final format through the Canadian Civil Aircraft Register Computer System - Evolution (CCARCS-E); and
  7. providing HQ Aircraft Registration and Leasing division with copies of the applicable documents (see section 1.14 of this manual).

Note: At times there will be delays in the issuance of a leasing authorization for technical or other reasons. When this occurs and an applicant is enquiring into the delay, the applicant should be referred to the division or section where the delay has occurred. Applicants and TCCA subject matter experts should discuss technical issues directly.

1.8  Leasing Authorization Term

The leasing authorization will expire (or be cancelled) on the earliest of:

  1. the date on which the lease is terminated;
  2. the date specified by the Minister in the authorization;
  3. the date on which the certificate of registration of the aircraft is cancelled;
  4. the date on which the air operator certificate is suspended or cancelled; or
  5. the date on which there is a change in any of the information that was submitted in support of the application and on which the issuance of the authorization was based.

CARs reference: 203.03(3)

Note: In most cases, the term of the leasing authorization will correspond with the termination date specified in the lease.

1.9  The Lease

A lease means an agreement in respect of the operation of an aircraft that:

  1. specifies a commencement and termination date;
  2. gives the lessee legal custody and control, and the right to exclusive possession and use of the aircraft during its term; and
  3. may include provisions respecting the operation of the aircraft for hire or reward.

CARs reference: 203.01

Therefore, at the minimum, a lease would contain:

  1. the lessor’s and lessee’s legal name and address;
  2. a description of the aircraft (mark, manufacturer, model, and serial number);
  3. a commencement and termination date of the lease; and
  4. a statement that the aircraft will be in the legal custody and control of the lessee for the duration of the lease.

This definition does not place any restrictions on the type of legal instrument document used to transfer legal custody and control of the aircraft.

A Canadian air operator that has been issued a leasing authorization must submit to the Minister a signed copy of the lease within 7 days of the authorization being issued.

CARs reference: 203.09

1.10  Certificate of Registration of Leased Aircraft/Lease Interchange

The certificate of registration of a leased aircraft operated under a leasing authorization will remain valid despite any change of legal custody and control of the aircraft both:

  1. at the beginning and end of the lease; and
  2. at any other time during the term of the lease that is specified in the leasing authorization for that aircraft.

CARs reference: 203.05

This means that the custody and control of an aircraft can change during the term of the lease and the certificate of registration of the aircraft will remain valid. Therefore, if an applicant submits a lease that details use of the aircraft by both the lessor and lessee (interchanged), there is nothing in the regulations that prohibit a change of custody and control during the term of a lease; however, the interchange would need to be approved through a leasing authorization, after careful consideration of the details of the interchange by TCCA subject matter experts.

In a lease interchange complete custody and control must pass back and forth between the lessor and the lessee while the aircraft is being interchanged.

The times of the interchange should be noted in the “conditions of issue” section on the leasing authorization. Where the times cannot be pre-defined, it is acceptable for the lease and the leasing authorization to use words similar to, “on an as-required basis”. When this occurs, an additional condition of issue should set out a requirement for the lessor/lessee to track, during the validity period of the leasing authorization, who was operating the aircraft at any given time. This information is to be recorded in the aircraft journey log.

1.11  Complex Leasing Transactions

Some leasing operations may have very complex business transactions supporting them. A copy of these transactions must be submitted in order to verify legal custody and control of the aircraft before a leasing authorization is issued.

1.12  Access to Information

Access to, and release of information contained on aircraft files and the Canadian Civil Aircraft Register is subject to the Access to Information and Privacy (ATIP) Acts. Not all information may be made public. For example, this could include “third party” information or the name of a lessor or the status of an aircraft. All requests for such information should be directed to your regional ATIP Coordinator to ensure that the provisions of the above-mentioned acts are respected.

1.13  ICAO Contracting States

Standard 223 requires that a foreign aircraft leased to a Canadian air operator be registered in a contracting state and an entity leasing a Canadian aircraft be incorporated or formed by or under the laws of a contracting state. An up-to-date list of contracting states is available through a link on the ICAO web site at: http://www.icao.org/.

1.14  File Keeping

Editorial Note: Profiling to RDIMS will eventually be a requirement. This manual will be amended as soon as RDIMS business rules are developed nationally.

1.14.1  File Keeping - Region

A leasing file will be opened for any leasing operations in the name of each Canadian applicant. All leases for this company are held in this file in order to determine compliance with the maximum number of leased aircraft allowed and time limitations. Any documentation related to Canadian aircraft should also be placed on the aircraft’s file as well.

1.14.2  File Keeping - Headquarters

Headquarters will retain copies of all documents, including leasing application forms, leasing advisory forms, leasing authorization forms, and leases or other documentation related to legal custody and control of the aircraft. These will be placed on file by date and type of leasing form.

1.14.3  File Content - More than one Region

If a leasing operation spans more than one region, ensure that all relevant parties are forwarded copies of the applicable documents to put on their own regional files.

1.14.4  Forwarding Documents to Headquarters

Regions shall forward to HQ copies of all applicable forms: leasing application, leasing advisory, leasing authorization, as well as leases or other documentation related to legal custody and control of the aircraft. The relevant regions shall also forward copies of all international communications sent or received by another region.

1.15  Leasing Forms

There are six leasing forms pertinent to administering Subpart 203. They are commonly referred to as the:

  • LF-1 - Application to authorize a leasing operation involving a Canadian air operator lessee and a Canadian air operator lessor;
  • LF-2 - Application to authorize a leasing operation involving a foreign air operator lessee and a Canadian air operator lessor;
  • LF-3 - Application to authorize a leasing operation involving a Canadian air operator lessee operating a foreign registered aircraft;
  • LF-4 - Application to authorize a leasing operation involving a foreign operator lessee and a Canadian aircraft manufacturer;
  • LF-5 - Advisory - Aircraft Leasing Operation; and
  • LF-6 - Authorization to conduct a leasing operation.

Forms LF-1 to LF-5 are accessible to Transport Canada staff on the Intranet and are also available for external users on the Internet. Both internal and external forms can be filled in on-line. Regional Aircraft Registration and Leasing staff with delegated authority generate the LF-6 through CCARCS-E.

1.16  Availability of the Manual

The Aircraft Leasing Procedures Manual is available on-line to Transport Canada users by accessing the Aircraft Registration and Leasing home page at:

http://www.tc.gc.ca/eng/civilaviation/standards/general-ccarcs-menu.htm.

It is also available to external users at the following Internet address:

http://www.tc.gc.ca/eng/civilaviation/standards/general-ccarcs-menu.htm.

1.17  Activity Reporting and Standards System (ARASS) Tasks

Administering Subpart 203 leasing transactions requires regional staff to produce scheduled ARASS reports. Contact your ARASS Coordinator for information on relevant task numbers and descriptions. The CCARCS-E system is able to produce ARASS statistical reports.

1.18  Fees

1.18.1  Fee Schedules

The fee schedules for aircraft leasing services are contained in CARs Subpart 104 - Schedule III. Schedule I contains the fee for replacement of a mutilated, lost or destroyed Canadian aviation document.

1.18.2  Fee Payment Procedures

The regulations require that the applicant pay a fee for a leasing authorization. The fee must be submitted at the outset of providing the service. It is not dependent upon whether an applicant is successful in being issued an authorization.

1.19  Cost Recovery Agreements

A cost recovery agreement signed by the applicant for TCCA services provided inside and/or outside of Canada may be necessary before the issuance of a leasing authorization. For example, an agreement could be required where an inspection of an air operator’s facility or aircraft is necessary prior to the issuance of an authorization and for subsequent inspections during the leasing operation. TCCA Directive No. 3 (CAD 3) refers to this issue.

1.20  Air Operator Certificate Validity

Certain leasing operations require that the lessor and/or lessee hold an air operator certificate (OC). A condition of holding an OC is to have legal custody and control of an aircraft. If an air operator leases their only aircraft, they would lose their OC, therefore, they could not enter into a Subpart 203 lease. Similarly, a lessee must have legal custody and control of at least one aircraft to be a valid OC holder. Operator certificate requirements are noted below:

  1. Canadian lessor/Canadian lessee (advisory and with authorization) - OC required for both parties;
  2. Canadian lessor/foreign lessee - OC required for both parties;
  3. Foreign lessor /Canadian lessee - Foreign lessor doesn’t require OC/Canadian lessee requires OC; and
  4. Canadian aircraft manufacturer lessor/foreign lessee - Aircraft manufacturer doesn’t require OC/foreign lessee requires OC.

1.21  Canada’s Legal International Responsibilities re: ICAO Article 83 bis

On October 6, 1980, the Aircraft Lease Protocol relating to an amendment to the Convention on International Civil Aviation was signed. The amendment, Article 83 bis, provides for the state of registry of an aircraft leased to an operator in another state, to transfer to the state of the operator (by agreement between the two states), all or part of its functions and duties in respect of that aircraft under Articles 12, 30, 31, and 32(a) of the Convention. The state of registry would then be relieved of responsibility for the functions and duties transferred, and all other states would recognize the transfer of responsibility.

A summary of the articles is as follows:

Article 12 - Rules of the Air

Article 12 states the responsibility for ensuring that every aircraft flying over or manoeuvring within its territory shall comply with the rules and regulations relating to the flight and manoeuvre of aircraft there in force; and ensuring that every aircraft carrying its nationality mark, wherever such aircraft may be, shall comply with the rules and regulations relating to the flight and manoeuvre of the aircraft there in force.

Article 30 - Aircraft Radio Equipment

Aircraft radios must be licensed by the state of registry if they are to be carried in or over the territory of other contracting states. The use of radio apparatus must be in accordance with the regulations of the states flown over. Radios can only be used by members of the flight crew licensed for that purpose by the state of registry.

Article 31 - Certificates of Airworthiness

Every aircraft engaged in international navigation must be provided with a certificate of airworthiness issued or rendered valid by the state of registry.

Article 32(a) - Licenses of Personnel

The pilot and crew of aircraft engaged in international navigation must be provided with certificates of competency issued or rendered valid by the state of registry.

1.22  Definitions - Types of Leases and Extended Charter

There are 2 lease types as described below:

1.  Dry Lease

“Dry Lease” means a lease where the lessor does not provide, either directly or indirectly, the crew member(s) to operate the aircraft.

2.  Wet Lease

“Wet Lease” means a lease where the lessor does provide, either directly or indirectly, the crew member(s) to operate the aircraft. All crew members are those of the lessor.

Extended Charter

An extended charter is utilized to provide a service that is commonly recognized as a wet lease. An extended charter is normally approved for a Canadian commercial operator to operate an aircraft on behalf of another air operator for a period of 21 days or more in order to supplement the fleet of the charterer. The registered owner of the aircraft retains legal custody and control of the aircraft, provides the crew members and is responsible for the maintenance of the aircraft.

CARs reference: 700.06 and 720.06

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