Aircraft management agreements: what you are really signing

Aircraft management is a mature industry, and most management companies are competent and honest. But the agreements they offer are written by the manager, for the manager, and they vary enormously in how clearly they allocate responsibility and cost. An owner who signs the standard form without review often discovers its meaning only when something goes wrong: an incident, an insurance claim, a dispute over invoices, a decision to sell or change manager, or an inspector’s question about who was actually operating the aircraft.

This article walks through what a management agreement does, the provisions that matter most, and how they connect to the regulatory, VAT and customs positions covered elsewhere in our insights. It is not a template; it is the set of questions an owner should be able to answer about their own agreement before they sign it, and periodically afterwards.

What a manager does

A management company typically takes over the day-to-day running of the aircraft: recruiting, employing or contracting and training the crew; arranging maintenance and continuing airworthiness; handling flight planning, permits, slots and handling; procuring fuel, catering and insurance; managing hangarage; keeping the technical and operational records; and invoicing the owner for all of it. Where the owner wants charter, the manager may also place the aircraft on an air operator certificate and sell its spare hours.

The scope can be narrower — a “technical management only” arrangement in which the owner’s own team operates the aircraft and the manager handles airworthiness — or wider. Whatever the scope, the agreement should list it precisely, because every function that is not clearly assigned to the manager remains, by default, the owner’s.

Who is the operator?

The single most important question in any management agreement is who is the operator of the aircraft. European rules attach responsibility — for safety, for operational control, and for a range of compliance obligations — to the operator, and the answer also drives the VAT analysis and many customs questions.

For a business jet used privately, the operation is non-commercial and is conducted under Part-NCC of Regulation (EU) No 965/2012, which applies to complex motor-powered aircraft. The operator of such an aircraft must declare its capability and the means it has to discharge its responsibilities to the competent authority. Either the owner (through its owning company) is the operator and makes that declaration, with the manager acting as its contractor; or the manager is the operator under its own declaration, with the owner as the person whose aircraft it operates. Both models exist; what matters is that the agreement and the declaration say the same thing, and that the party named really exercises operational control.

Where the aircraft is used for charter, it is operated under the manager’s air operator certificate, and the AOC holder is the operator for those flights. An aircraft that alternates between private use and charter may therefore have different operators for different flights, and the agreement should define how each flight is classified and who is responsible for it. As our article on co-ownership explains, the line between commercial and non-commercial depends on remuneration and on whether the person paying controls the operator.

Fees and the money

Management economics usually combine three elements: a fixed monthly fee for the manager’s services; variable costs charged per flight hour or per flight; and pass-through costs — fuel, maintenance, parts, handling, navigation charges, insurance, hangarage, crew — recharged to the owner. The difference between a fair agreement and an expensive one is rarely in the fixed fee. It is in how pass-through costs are charged.

The questions to ask are simple. Are costs passed through at cost, supported by third-party invoices the owner can see? Or does the manager add a mark-up, take a volume rebate from suppliers that is not shared, or route purchases through affiliates? None of these is necessarily wrong, but each should be disclosed and agreed. An owner should be able to reconcile every invoice line to a source document, and the agreement should give them the right to do so — an audit right over the manager’s records relating to the aircraft.

The agreement should also deal with the owner’s account: whether the manager holds an advance or deposit, how it is held and returned, payment terms, and what happens to unspent maintenance reserves. Money held by a manager on the owner’s behalf should be identifiable as the owner’s, not mixed with the manager’s own funds.

Airworthiness and CAMO

Continuing airworthiness — keeping the aircraft’s maintenance programme, records and airworthiness status in order — is managed for complex aircraft by a continuing airworthiness management organisation (CAMO) approved under Regulation (EU) No 1321/2014. Many managers hold a CAMO approval or contract with one; the agreement should say which organisation is responsible, under what contract, and with what access for the owner.

This matters for more than safety. The aircraft’s technical records are a large part of its value: an aircraft with incomplete or inaccessible records is worth materially less on sale, and can be grounded until they are reconstructed. The agreement should make clear that the records belong to the aircraft and the owner, are kept to the required standard, and are handed over complete on termination.

Insurance and liability

Insurance is where management agreements most often leave gaps. The hull and liability policies should name the right insureds: the owner and the owning company, the operator if different, and the manager, with appropriate waivers of subrogation so that insurers who pay a claim do not then pursue one of the parties the policy was meant to protect. Where a financier is involved, its interests must be noted too.

The agreement’s liability and indemnity provisions should then fit the insurance, not contradict it. Managers commonly limit their liability to the fees they receive, except for gross negligence or wilful misconduct, and seek indemnities from the owner for losses covered by insurance. That can be reasonable — the aircraft’s risks are mostly insured risks — but only if the insurance actually responds, the limits are adequate, and the owner understands what is left uninsured. Review the agreement and the policies together, with the broker, rather than separately.

Charter revenue

Where the aircraft is placed on the manager’s AOC for charter, the agreement needs a further layer. Who sets charter prices and approves bookings? How is revenue shared, and after which costs? Does the owner have priority over charter customers, and on what notice? How are wear-and-tear, maintenance reserves and repositioning costs allocated to charter flights? How is charter use recorded and reported to the owner?

These are commercial points, but they are also the evidence on which any VAT position that depends on commercial use will be tested. If the owner hopes to rely on a genuine charter programme — for example for the Article 148 exemption, or for VAT deduction in an owning company — the agreement, the bookings and the revenue flows must show a real, arm’s-length operation, as we describe in our article on EU operation and AOC. A charter clause that exists only on paper is worse than none.

VAT on the management fee

Management services are supplies of services for VAT, and where they are taxed depends on the customer. Under the VAT Directive, services supplied to a business customer are generally taxed where the customer is established (Article 44), often through the reverse-charge mechanism; services supplied to a non-business customer — such as a private individual — are generally taxed where the supplier is established (Article 45). Specific rules can apply to particular elements, such as services connected with goods or transport.

Two consequences follow. First, the identity and status of the contracting owner — a company carrying on an economic activity, a passive holding vehicle, or an individual — changes how the management fee is taxed and whether the VAT on it can be recovered. Second, the exemptions for services to aircraft used by airlines under Article 148 do not generally apply to a privately used aircraft. The agreement should be with the right entity, invoices should be addressed to it, and the VAT treatment should be confirmed before the first invoice rather than discovered in the first audit.

Records and exit

Every management relationship ends — on sale of the aircraft, on a change of manager, or on a dispute. The agreement should make that transition orderly. It should set a reasonable notice period and allow termination for cause without one. It should require the manager to hand over, promptly and in full, the aircraft’s technical records, operational records, flight logs, passenger records and correspondence with authorities; to cooperate in transferring the CAMO, insurance and any operator declaration; and to return the owner’s deposits and reserves.

It should also address crew: whether crew employed by the manager can transfer to a new manager or the owner, and on what terms. And it should say what happens if the manager cannot perform — for example on insolvency — so that the owner is not left with an aircraft whose records, crew and funds are tied up in someone else’s administration.

The review checklist

Before signing, and at least on each renewal, an owner should be able to answer these questions from the agreement itself. Who is the operator for private flights, and for any charter flights, and do the declaration and certificate match? Which organisation is responsible for continuing airworthiness? Are pass-through costs charged at cost, with invoices and an audit right, and are any mark-ups disclosed? Who is insured, with what waivers, and does the liability clause fit the cover? How is charter revenue shared, and how is charter use recorded? Which entity is the contracting owner, and what VAT treatment applies to the fee? What happens on termination, to the records, the crew and the money?

If any answer is “I would have to ask the manager”, the agreement needs work. The point is not to distrust the manager; it is that the owner remains responsible for the aircraft and for its tax and customs position, and an agreement that cannot answer these questions leaves that responsibility undefined.

Mistakes we see

The management-agreement mistakes are rarely dramatic; they are omissions that only matter later. The first is the undefined operator: an agreement that never says who operates the aircraft on private flights, so that the declaration, the insurance and the VAT analysis each assume something different. The second is opaque pass-through pricing: an owner who cannot reconcile invoices to supplier documents and has no audit right to find out. The third is the insurance mismatch, where the liability clause assumes cover the policy does not provide, or a party who should be named and protected is not.

The fourth is charter on paper: an AOC placement and a revenue-share clause that exist mainly to support a VAT position, with little genuine charter behind them. And the fifth is the locked exit: no clear handover of records, crew, CAMO and funds, so that changing manager or selling the aircraft becomes a negotiation with the outgoing manager rather than a process the agreement already defines. Each is avoided by reading the agreement as a regulatory, financial and tax document, not just an operational one — and by reviewing it whenever the aircraft’s use, ownership or operator changes.

A good test is to imagine the three moments when the agreement will be read most closely: by an inspector asking who operated the aircraft and how it was used; by an insurer after an incident; and by a buyer’s advisers during a sale. If the agreement gives each of them a clear, consistent answer, it is doing its job. If any of them would have to reconstruct the position from emails and invoices, it is not — and the cost of fixing that is far lower before the question is asked than after.

Key terms

Frequently asked

Last reviewed 19 October 2026. This article is general information, not legal, aviation or tax advice; every agreement turns on its own terms.