Operating Permit for EU Air Carriers

To carry passengers, mail or cargo in commercial air transport, air carriers based in the EU require an Operating License. While the Air Operator Certificate (AOC) certifies the air transport operator's professional suitability and organization to carry out commercial air transport, the Operating License is intended to ensure the company's economic performance and majority ownership by EU citizens or EU states.

Application for the Operating License

The most essential requirements for obtaining an Operating License:

• The air carrier's principal place of business is within the EU.
• The company is owned directly or through majority ownership by EU member states or EU nationals.
• Evidence from the applicant that the company will be able to meet its actual and potential obligations at any time during a period of 24 months after commencement of operations.
• Evidence from the applicant that the company can manage without operating income for the first three months after the start of flight operations.
• The applying company holds an Air Operator Certificate (AOC). Usually, the Operating License is applied for in parallel with the AOC.

Depending on the business model, aircraft and contractual situation, the requirements for the Operating License may result in significant capital requirements. For this reason, an exception has been created for small air operators. Under certain conditions, it is sufficient to provide ongoing proof of nominal economic equity of at least 100,000 Euros and information that the company can meet its actual and potential obligations in the following 12 months.

Maintaining the Operating License

Once granted, the Operating License is generally unlimited in time. However, the competent licensing authority may suspend or revoke it, for example in the event that the Air Operator Certificate has been suspended or revoked. Decisions to grant or revoke Operating Licenses are published in the Official Journal of the European Union.

Two years after the granting of the Operating License, an in-depth review is carried out by the respective competent licensing authority.

The holder of an Operating License is required to notify the appropriate licensing authority about certain intentions. The most common are:

• Plans to operate a new air service to a continent or area of the world not previously served
• Changes in the type or number of aircraft operated
• Leases (all lease-ins as well as dry-lease-out)
• Intended mergers and acquisitions
• Any change in ownership of individual investments representing 10% or more of the total investment capital
• Change in place of business

The review of economic performance based on the intended circumstances is generally based on the following documents, which must be submitted to the relevant licensing authority, and which may also be requested as part of a routine review:?

• Planned balance sheet with income statement
• Cash flow forecasts and liquidity plans
• Detailed information on past and planned expenses and income of significant cost items and influencing factors, such as exchange rate effects.
• As applicable, leasing or purchase contracts of aircraft.

Usually, the licensing authorities request the regular submission (monthly or quarterly) of financial statements and balance sheets as part of their routine supervision. Annual financial statements shall be prepared, audited, and sent to the licensing authority within the first six months after the end of the fiscal year.

Planning, maintaining and demonstrating the economic performance of the airline are elementary elements of airline management. We at G?tze Müller Partner have a great deal of experience in economic planning and optimization for air transport operators as well as in planning and applying for Operating Licenses.

Please feel free to?contact me?about this or other topics.

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