What Is Breach of Warranty in Aviation Insurance—and Why It Matters
Insurance expert Tom Hauge breaks down the concept of Breach of Warranty–and why it matters, especially to lenders. Learn why this little-known endorsement can make or break a high-stakes aircraft transaction.
What is Breach of Warranty? In aviation insurance, it’s a policy endorsement designed to protect lenders (lienholders) who have a financial interest in the aircraft.
Insurance underwriting carriers often include a "Breach of Warranty" (BOW) endorsement in the policy when there’s a lender involved. That’s because it essentially creates a separate agreement between the insurer and the lienholder, and outlines the rights of both parties.
Because financial institutions often hold a lien on the aircraft, they need protection in the event the aircraft owner suffers a loss. This is where BOW plays a critical role. It ensures the lender can still recover their investment, even if the policyholder breaches the terms of the insurance policy.
Common Breach of Warranty Scenarios
Common areas for claims denial or a breach of policy language could be:
- An unapproved pilot operates the aircraft.
- A pilot fails to complete training requirements required by the policy
- The aircraft is operating in a territory not covered by the policy.
Why Lenders Rely on BOW Coverage
Lenders often have a significant financial stake in the aircraft, sometimes as much as 90 percent of the purchase price.
As such, if a loss occurs and the insurer denies coverage to the policyholder, the Breach of Warranty clause allows the lender to still recover their losses.
Typically, lenders want to cover the full value of their outstanding note. In some cases, they request 110-125 percent or more of their loan amount to account for any fluctuations in the cost of capital and additional recovery costs.
BOW for Non-Lending Entities
On rare occasions, a Breach of Warranty may be requested by a non-lender. Such instances could may be when an aircraft is insured under a charter operator or an aircraft management firm’s fleet policy.
The aircraft owner may want protection in case the charter or management company breaches a policy condition and the insurer denies the claim. Without BOW coverage, the aircraft owner could be left responsible for the damages, even if they weren’t at fault.
Bottom Line
Breach of Warranty is typically offered to lenders but may also be available to other parties, depending on the insurer and circumstances.
While it’s not always required, it’s often a smart move, especially when high-value assets are involved and third parties are managing operational risks.
Halfway Done and Halfway to Go: A 2025 Aircraft Finance Recap
In this midyear finance update, Mike Smith shares insights from his lending team on what’s driving demand—and where uncertainty still looms. From bonus depreciation to tariff policy, there’s a lot in play for aircraft buyers.
My electric bill reminds me that it’s peak summer here in Ohio, which means we’re at the halfway point of the year…and what a crazy year it’s been!
While the final tariff policies remain unresolved, the passage of the “Big Beautiful Bill” now provides clarity regarding tax laws for purchase planning in 2025.
I’ve mentioned before that clarity in rules and process is often the deciding factor between delaying and proceeding with a purchase. The more certainty buyers have, the more confident they feel—driving stronger transaction activity.
That’s why we’re watching closely for updates on tariff and trade policy, hoping for clearer direction by the end of summer.
Midyear Market Pulse: What Lenders Are Seeing Now
As we enter the second half of the year, I asked our lending team to weigh in on what stood out in the first half—and what might lie ahead.
Overall, they were a little surprised by how resilient demand remained through the first half. Yet, uncertainty remains both domestically and internationally. Exactly what sort of impact that has, only time will tell.
What’s exciting the team? Two things stand out:
The return of bonus depreciation—and with it, more clarity around tax planning for buyers.
Also, EAA AirVenture and a busy fall calendar of aviation events, offering opportunities to connect and reconnect with industry friends and partners.
So, what does all of this mean for you if you’re considering financing the second half of this year?
Our team encourages you to start early.
There’s no harm in obtaining a pre-approval while you shop the market. In fact, we've seen a handful of prospects wait until the end of the purchase process to engage us, which creates the opportunity for undue time pressure on all parties.
On behalf of the entire team at Scope, I wish you a prosperous and joyful second half of 2025. As we say in our office, “Here we go!”
Importing Aircraft, Part 5: Logistics - Where to Inspect the Plane and Complete Closing?
In Part 5 of his importing aircraft series, attorney John Farrish explores how to coordinate inspections and closings across borders. From ferry flights to fresh eyes, he outlines what buyers need to know before the paperwork’s signed.
Coordinating the purchase of a foreign aircraft is like conducting a symphony. Every element must work in concert to avoid chaos.
From customs and deregistration to airworthiness and taxes, each component we've covered plays a vital role.
Now it’s time to bring them together and focus on the final piece: how to align all the logistics for a successful inspection and closing.
Where to Inspect the Aircraft?
For a foreign-based plane, there’s always a bit of a tug-of-war when it comes to inspection location. Should it happen overseas, or in the U.S.? For a U.S.-based inspection, you’ll need to account for the cost of the ferry flight. Doubly so in the event that the aircraft is rejected by a purchaser.
Foreign sellers prefer inspections close to home, so that if the transaction falls apart, they don’t have to retrieve the plane from another continent. A purchaser can assuage the seller’s concerns by promising a nonrefundable deposit (so long as the plane meets the required condition). This lowers the risk that the plane would ever need to return to its former home base.
The chosen inspection facility must be licensed to perform the repairs under the authorization of the plane’s current registration. This can limit the ability of some U.S.-based facilities to perform an inspection.
As I’ve previously recommended, it's best for the buyer to choose an inspection facility that hasn’t routinely serviced the aircraft. Having fresh eyes helps ensure an unbiased evaluation.
Where to Complete the Closing?
Keeping in mind that the plane will be a “paperweight” once closing occurs and the plane is deregistered from its former country. Therefore, closing will have to occur at a facility capable of converting the plane for FAA airworthiness. The “n-number” will need to be applied to the aircraft, avionics reprogrammed, and oftentimes a service bulletin will need to be performed that covers such basics as converting things from kilograms to pounds.
For flexibility and to solve more complicated logistical issues, a mobile mechanic team can be dispatched to complete the conversion. Additionally,it may be possible to obtain a ferry permit for a flight from the closing location to another facility if needed.
Last but not least, choose a closing location where your accountant can effectively manage the tax implications. U.S. tax-friendly states typically involve less paperwork than foreign jurisdictions. Closing in a foreign jurisdiction will often require hiring local tax advisors. Just note: foreign sellers may be reluctant to risk issues arising from a transoceanic delivery flight they’d be responsible for fixing.
Next month, I’ll wrap up this six-part series with a look at the finer points that can make or break a deal in “Contractual Quirks of Foreign Transactions.”
Part 1: Navigating Aircraft Import & Tariff Customs
Part 2: Importing Aircraft: Aircraft Registration and Deregistration
Part 3: Airworthiness: How to Get Your Imported Aircraft Ready to Fly
Part 4: How to Balance Taxes Between Multiple Jurisdictions
Part 6: Contractual Quirks of Foreign Transactions
This article is not intended, nor should it be construed or relied upon, as legal advice. The comments, recommendations, and analysis expressed in this article are those of the individual author, John Farrish, are purely informational. This article does not create an attorney-client relationship between you and the author or his law firm. If specific legal information is needed, each person should retain and consult an attorney with knowledge of the subject matter.
The Flight Control System of Freedom and Business
What does the U.S. Constitution have in common with successful business aviation companies? Dustin Cordier reveals how real accountability—not blame—creates the freedom, focus and alignment every business needs to thrive.
In the weeks since Independence Day, I’ve been reflecting on the deeper design of our country. The United States wasn’t built just for freedom; it was built for responsibility and accountability.
That balance is what sustains us.
Thankfully, the U.S. Constitution didn’t trust power in one place. It’s built on three branches—executive, legislative and judicial—to keep each other honest.
No one gets to fly solo without oversight.
That same structure of accountability is what separates successful businesses from chaotic ones. Especially in business aviation, where low volume sales make every deal critical.
Accountability in Action
When I work with aircraft charter companies or brokerage firms using the EOS® framework, I see firsthand how powerful it is when a business adds its version of the “three branches.”
In EOS, our three branches are “Vision, Traction and Healthy.”
- Vision clarifies where we’re going.
- Traction ensures we’re executing.
- Healthy helps teams face conflict directly, encourage it when necessary and address it constructively.
At a recent session with an EOS client, one team member finally called out an issue that had been quietly limiting performance for months. It wasn’t comfortable, but that’s the point.
Like the Supreme Court issuing an unpopular ruling, proper accountability isn’t always convenient.
But it keeps us aligned, honest and focused.
Too often in aviation businesses—especially those led by founders—we confuse accountability with blame. However, in EOS, accountability is a gift: it provides clarity, ownership and a structure that prevents the business from drifting into autopilot mode.
Our Founding Fathers didn’t build a system that relied on perfect people. They built one that kept imperfect people aligned. Your business needs the same.
As we celebrate our independence, let’s not forget what sustains it: interdependence, built on shared responsibility.
Not All Aircraft Charters Are Created Equal: What the Market Isn’t Telling You
Midway through 2025, the aircraft charter market isn’t moving in lockstep. Andrew VanderPloeg explains what’s really happening behind the numbers, and what it means for owners and operators.
Midway through 2025, the aircraft charter market remains robust in the U.S., though Tuvoli data shows activity is down slightly compared to last year (-1.77%).
But as always, the charter market is not a monolith.
All aircraft are not created equal, and neither are their demand curves.
Take a closer look, and divergence emerges:
- Light Jet traffic is down -8.5% year-to-date through mid-June
- Turboprop volumes are off even more
- Midsize, Super-Mid and Heavy Jets have seen year-over-year increases
The takeaway?
The charter market, within those jet categories, isn’t necessarily on equal footing.
Each category moves on its logic of demand, pricing and buyer psychology.
From our vantage point in the charter trenches, here are three signals worth watching:
1. Increased Competition, Even in Strong Segments
- Aircraft charter operators are getting sharper on pricing, even in categories showing growth.
- Operators are asking for “last look” more frequently, even on larger aircraft.
- Charter clients are benefiting as carriers fight harder to retain share.
- Some aircraft owners are noticing that their contribution margins may be shrinking, even with more hours booked.
2. Owners Opting Out of the “Drama”
More aircraft owners are reevaluating their Part 135 participation. And some are walking away entirely.
Why?
- Charter revenue simply isn’t material enough to justify the complexity.
- Personal use is being compromised, with aircraft often unavailable when needed.
- Flexibility—the very reason many bought—starts to feel like fiction.
As one owner put it: “I didn’t buy a jet to be told when I can’t use it.”
3. Aircraft Downtime Disrupts Everyone
While downtime disruption isn’t a new trend, the issue isn't going away.
- Scheduled maintenance timelines are stretching.
- Unscheduled events are harder to resolve due to limited parts availability.
- Delays are compounding and hitting both charter availability and owner satisfaction.
Final Approach
If you’re an aircraft owner or operator reevaluating your charter model mid-year, you’re not alone. The market remains active, but it’s evolving unevenly.
The smart move isn’t just about tracking volume, it's also worth looking at value.
And that means understanding where your aircraft sits in the charter landscape.