Buying or selling an aviation business can be fundamentally different from most commercial transactions. Whether you are acquiring a flight school, selling an MRO, purchasing aircraft or aviation assets, or investing in an aircraft parts manufacturer, aviation M&A demands deep industry knowledge, regulatory awareness, and careful legal planning.

From letters of intent to Federal Aviation Administration (FAA) compliance and deal structure decisions, aviation transactions present unique challenges. Working with legal counsel experienced in aviation law and business transactions is often the difference between a smooth closing and costly delays.

Start with a Clear Flight Plan: Letters of Intent and Deal Structure in the Aviation Industry

Every successful aviation M&A transaction begins with alignment. The parties need to define the intended transaction and set a course for the deal they are starting. A well-drafted letter of intent (LOI) establishes the material terms of the deal, including purchase price, structure, timelines, and exclusivity. While portions of an LOI may be nonbinding, it sets expectations and guides due diligence and negotiations.

One of the most critical LOI-stage issues in aviation M&A is deal structure, particularly whether the transaction will be structured as an asset purchase or an equity (stock or membership interest) purchase.

Asset Purchases in Aviation

An asset purchase involves acquiring specific assets of a business, such as:

• Aircraft and equipment
• Inventory and tooling
• Intellectual property and contracts

Asset purchases allow buyers to selectively assume liabilities. They also can provide tax advantages, including depreciation of acquired assets. In many other industries, asset purchases are often preferred for these reasons.

Equity Purchases and FAA Considerations

An equity purchase involves acquiring ownership of the entire company, including:

• All assets and liabilities
• Existing contracts and goodwill
• FAA licenses, certificates, and approvals

In aviation transactions, equity purchases are often necessary or strategically advantageous. Some FAA certifications are not transferable as assets, so the business as a whole needs to be acquired. An equity structure allows the buyer to “step into the shoes” of the existing entity, reducing regulatory disruption and avoiding the need to reapply for FAA approvals from scratch.

FAA Regulations and Aviation-Specific Risks

The FAA introduces a level of regulatory complexity that does not exist in most M&A transactions. Buyers and sellers must evaluate FAA compliance issues early because missteps can lead to enforcement actions, grounding of operations, or significant delays.

These issues come up frequently in aviation-related transactions, including purchases or sales:

• Aircraft management or charter operations (see also Part 61, Part 141, and Part 145)
• Flight schools and pilot training organizations
• Flight simulators and training devices
• Maintenance, repair, and overhaul (MRO) businesses

These entities often hold highly specific FAA certifications. Structuring these transactions correctly, frequently as equity purchases, can preserve licensure and reduce regulatory risk.

Ownership Transitions and Growth Opportunities in the Aviation Industry

In many aviation transactions, it is advisable (and sometimes required) by the FAA to keep expertise and institutional knowledge with the business/asset through the transition. It is important to preserve licenses and certifications, retain personnel, and continue operations as seamlessly as possible when ownership changes hands.

From a regulatory and operational standpoint, acquiring an existing aviation business is often more efficient than starting a new one. Established aviation companies typically already possess:

• FAA certificates and operating authority
• Local and state permits
• Proven operational systems
• Existing contracts

As a result, aviation acquisitions can often close within six months. By contrast, the timeline to launch a new aviation enterprise usually one or two years.

Aircraft Use, Tax Exposure, and Charter Issues

In any M&A transaction that includes aircraft, it is very important to understand that aircraft ownership and usage will also present hidden risks. Ultimately, the way a corporate aircraft is owned and used can trigger FAA and tax consequences, including:

• Imputed income for personal use
• Unintentional illegal charter operations
• FAA enforcement investigations
• Tax structuring for the acquisition

Any time two or more entities or persons share aircraft usage and money changes hands, you need to be sure such usage does not violate regulations or trigger IRS or SEC issues. If an acquisition involves any of these issues it is important to involve aviation counsel early to avoid unforeseen consequences.

Entry-Level Ownership Opportunities

The rise of entrepreneurship through acquisition (ETA) transactions and favorable small business financing has further accelerated aviation M&A activity. Buyers with aviation backgrounds are increasingly using acquisitions as a strategic entry point into the industry. In many cases, acquisitions of smaller aviation businesses, such as maintenance providers, FBOs, flight schools, charter operators, and aviation services companies, may qualify for financing through loan programs offered by the U.S. Small Business Administration, including the widely used SBA 7(a) Loan Program. These programs can allow qualified buyers to finance a substantial portion of the purchase price with longer repayment terms and lower equity contributions than traditional commercial loans, making ownership more accessible to first-time operators and ETA sponsors. ETA is not specific to aviation, but it can be a useful approach. Click here to learn more about our ETA practice group and the work we do in that space.

Aviation M&A Experience Matters

Buying or selling an aviation business or aircraft assets is not a standard transaction. It is a coordinated process involving regulatory compliance, sophisticated negotiation, and industry-specific insight. FMJ’s Aviation & Transportation Team brings both aviation law experience and comprehensive business and M&A counsel to every transaction. FMJ has advised clients across the aviation sector, including:

• First-time buyers acquiring flight schools
• Owners selling MROs and aviation service businesses
• Domestic and international investors purchasing aviation assets and parts distributors
• Owners selling flight simulation schools
• Acquisition and sale of airlines and assets

Talk to an Aviation M&A Attorney Early

There are many pitfalls for the unwary in aviation transactions. Engaging experienced counsel early in the process can help protect your investment, preserve regulatory approvals, and keep your deal on course.

Click here to read the original blogpost from Kristina Keppeler, Rob Tunheim, and Kevin Johnson of Ally Law member firm Fafinski, Mark & Johnson.