You are the general manager of a full-service FBO. Your company sells a customer a new aircraft, with a bank financing the purchase via a written security agreement on the aircraft, filed with the FAA Aircraft Registry and the International Registry. Later, the customer has your shop install an expensive upgraded avionics suite including the latest "glass cockpit" multifunction displays (MFD) integrating flight, navigation, engine and sensor data.

Does your shop have the right to require the aircraft owner to pay the bill for this upgrade in full before you return the aircraft? Explain.

If, when your shop has completed the upgrade but before the customer has paid the bill and while the FBO still has possession of the aircraft, the aircraft owner files for bankruptcy, who will be paid first from the proceeds of the bankruptcy sale of the aircraft: the FBO or the bank? Explain.

Instead, in initial discussions over the price of the upgrade, the customer indicated that she wanted to buy the avionics package from the FBO and have your shop install it, but she wanted to pay the price of the equipment and installation in three equal monthly payments, instead of one lump sum. She has been a good customer, and the proposal is acceptable to you. How can you release the aircraft to her upon completion of the work while protecting the FBO’s security interest in the aircraft to assure payment?

After completing the transaction described in 3, above, your shop installs the avionics package and returns the aircraft to its owner. Before paying the bill, she files for bankruptcy. Now who will be paid first from the proceeds of the bankruptcy sale of the aircraft: the FBO or the bank? Explain.

1) Yes, as the initial consideration was only for the aircraft. Since this upgrade is additional work performed by the company, the client should be billed.

2) As the consideration for the aircraft is yet to be paid and FBO is still in possession of the aircraft, the ownership has not passed into the hands of the customer yet. Thus, even though he may file for bankruptcy, it doesn't impact anything.

3) A written agreement should be entered into with the customer and the bank which states that the disbursements from the bank should be made in 3 equal monthly instalments to the FBO, post release of the aircraft to the customer. Any delay in these will be construed as default by the bank with the necessary legal implications involved for claiming the requisite amount by the FBO from the bank.

4) In this case, the ownership of the aircraft has passed to the customer prior to it defaulting. Thus, the bank will be paid first from the proceeds of the bankruptcy sale of the aircraft.