Air Charter Escrow

An Air Charter Escrow account holds the money a charter client pays for a flight. The funds sit in a segregated account in from the point of booking, and are released to the operator when the release condition the parties have agreed is met (see more on this below). The broker's commission is released from the same account at the same time, or on a separate agreed trigger.

The funds being held are the full charter price. In the heavy jet world, a single flight can often exceed $80,000, and operators commonly require the whole amount weeks before departure. That money currently moves through the broker to the operator long before any aircraft has flown.

The distinctive feature of this arrangement is what happens when a flight does not operate. Because the money has not left the account, it can be released to a replacement operator instead of the original one. The broker is not waiting for a refund from the first operator while funding a second aircraft for the same client. There is one payment throughout, and it follows the flight that actually happens.

Brokers are the principal users. A broker sits between a client who expects a confirmed flight and an operator who holds the money, and carries the exposure created by that position without controlling either end of it.

Operators use it where they want certainty that the money for a booked rotation exists and is committed, without relying on the broker's own balance sheet or on the client paying on time.

Charter clients, family offices and corporates use it where the sums involved make paying a broker's operating account weeks in advance uncomfortable, particularly on a first booking or with an unfamiliar operator counterparty.

Aviation lawyers and advisers use it when structuring charter terms, block hour arrangements or programme flying, and when a client asks where the money will actually sit between contract and departure.

The trigger is confirmation of the booking, which is the point at which payment is demanded and the exposure begins.

High value one-way and positioning flights. The economic responsibility for the rotation lies with the operator, but a one-way booking paid weeks ahead concentrates the risk of a late change on the broker.

First bookings between unfamiliar parties. A new client and a new operator, or a broker working with an operator outside its usual panel, where neither side has a payment history with the other.

Multi-sector trips and programme flying. Where several flights are booked and paid together, and a disruption to one sector should not put the funds for the others in question.

Bookings where the client's own governance requires it. Corporate treasury, family office or fiduciary structures that will not release a six figure sum to an intermediary's trading account.

Escrow involves holding real money, independently and in advance, so that payment does not depend on a future claim being accepted.

Bonds and insurance rely on a third party promising to pay later, subject to conditions, exclusions and their own financial capacity at the time of claim.

The industry standard is 100% payment in advance, often weeks before departure, on flights that regularly exceed $80,000. The broker takes on the operational responsibility to the client and the full financial exposure at the same time.

If a flight is cancelled at short notice, sometimes inside 24 hours, the client expects a replacement aircraft immediately. The refund from the original operator arrives later, delayed by operational or administrative process, or in the worst case not at all if the operator fails. In the interval the broker is funding two flights for one booking out of its own working capital.

Holding the money at either end creates a different problem. Money paid to the operator early is exposed to that operator's solvency and to its willingness to refund quickly. Money held by the broker is exposed to the broker's solvency and to the general claims of its creditors, and many brokers would prefer not to be handling large client balances at all.

Escrow addresses the gap. The money leaves the client, which gives the operator the certainty it wants. It does not reach the operator until the agreed condition is met, which keeps it available to fund a replacement if the flight does not happen. The broker is not holding it and is not bridging it.

Neutrality, in that the funds are held by a party with no commercial interest in whether a particular aircraft flies.

Protection, in that the money is segregated and is not available to meet the general liabilities of the broker or the operator.

Certainty, in that the release trigger and the evidence supporting it are agreed before the money is deposited rather than argued about after a cancellation.

Continuity, in that funds already in the account can be applied to a replacement flight without a refund cycle first.

Confidentiality, in that each party sees only the part of the arrangement it is party to.

The practical outcome is that a confirmed and paid flight becomes reliable in a financial sense as well as an operational one, and the cost of a disruption falls where the parties have agreed it should rather than defaulting to the broker.

For the client

The client pays once, and pays into a segregated account rather than into an intermediary's operating account. The money is identifiable to the booking.

Payment in advance no longer means parting with the money in advance. The client meets the operator's requirement that the funds be committed, without those funds being spent before the aircraft is available.

If the flight does not operate and no replacement is arranged, the escrow agreement provides for return to the client, subject to any amounts properly due under the charter terms. The money to fund that return is already in the account.

If the flight does not operate and a replacement is arranged, the client's booking can be re-covered from the same funds without the client being asked for a second payment while waiting for the first to come back.

For the broker/operator

Operators give up early access to the cash, and the arrangement has to be worth that. The main benefit is that payment becomes certain and quick rather than contingent on the broker's own liquidity or on the client having paid the broker at all. The operator is looking at an identified fund committed to its flight.

Where positioning, fuel or crew costs are incurred before departure, the parties can agree a staged release, with an agreed proportion released at confirmation to cover out-of-pocket costs and the balance released on the agreed trigger. That preserves most of the operator's working capital position while keeping the balance protected.

The operator also gains at the other end of the transaction. It is not exposed to a broker collecting from a client that fails to pay, and it is not chasing a receivable after the aircraft has flown.

Escrow does not guarantee payment and does not remove commercial or operational risk. It narrows the risk to the operation of the agreed mechanism and the sufficiency of the funds deposited.

For advisors and lawyers

Solicitors and advisers structuring charter terms get a mechanism that matches the risk allocation in the contract. Where the contract says the operator carries the rotation risk, the payment structure can be made to reflect that rather than contradict it.

Brokers avoid holding client money. For a broker that does not wish to operate client accounts, or whose own terms of business restrict it, escrow removes the balance from the broker's books entirely while leaving the commercial relationship intact.

Corporate clients and family offices get an auditable position. Deposits, releases and instructions are recorded, and access can be extended to a treasury function or a fiduciary on a read-only basis where the parties agree.

Insurers, funders and auditors get a single identifiable item per booking rather than a movement through an intermediary's general account.

What types of Air Charter Escrow arrangement are available?

Single flight account. One booking, one deposit, one release. This is the standard arrangement and suits high value one-way and positioning flights.

Multi-sector or round trip account. One deposit covering several sectors, with releases sector by sector or on completion of the itinerary as agreed.

Programme or block hours account. A client funds an agreed number of hours or a season of flying, with releases drawn down against each confirmed flight and any unused balance returned at the end of the term.

Staged release account. An agreed proportion released to the operator at confirmation to cover positioning and other out-of-pocket costs, with the balance released on the later trigger.

Broker commission account. The commission element is identified separately within the same account and released to the broker on the agreed trigger, so the broker is paid from the transaction rather than out of the client's payment before the flight. Visibility of that element is restricted to the broker, so the operator does not see the margin and the client does not see the operator's net price.

Yes. The release trigger is the principal variable and is settled between the broker and the operator for each arrangement. The realistic options are:

• Aircraft assignment confirmed at an agreed point before departure, commonly T-24
• Departure of the outbound sector
• Completion of the flight or of the final sector
• A staged combination, with a deposit released at confirmation and the balance on departure or completion

Also tailorable are the evidence required for each release, the individuals authorised to instruct, the treatment of the commission element, the currency, and the notice periods applying to a return to the client.

Arrangements can be combined with a third party managed account where a broker administers wider client funds separately, and can sit alongside a charter agreement that already provides for a cancellation scale.

Where an operator will not agree to escrow, the arrangement cannot be imposed on it. Two structures remain available. The broker can hold the client's funds in escrow and pay the operator on the operator's own terms, which protects the client and the broker's position without changing the operator relationship. Alternatively the broker can propose a staged release, which is the version operators accept most readily because it preserves the cash they need before departure.

What cannot be tailored is the character of the role. dospay holds and releases funds against defined conditions and does not take on an operational, certification or dispute resolution function.

All escrow arrangements are administered through the dospay digital escrow portal.

The portal provides a single place where authorised parties can view account balances, payment history and escrow status. It also supports the submission and tracking of information required for payments or releases, in line with the escrow agreement.

Using a digital portal reduces reliance on email chains and manual reconciliation. It improves transparency and creates a clear audit trail for payments and releases. Advisors often find this helpful when reviewing payment history or responding to queries during the life of the project.

The parties agree the escrow terms, including the release trigger, and dospay opens the account. The client transfers the charter price, and from receipt the funds are segregated and identified to that booking.

The funds remain held until the trigger occurs. Where a staged release has been agreed, the deposit element is released to the operator at confirmation and the balance continues to be held.

When the trigger occurs, the authorised party submits the instruction with the agreed evidence. dospay checks that the instruction comes from an authorised person and that the evidence is of the type and form specified, then releases the funds.

If the flight does not operate, the funds stay in the account and follow whichever route the parties instruct: release to a replacement operator, or return to the client subject to any amounts due under the charter terms.

The escrow arrangement does not replace the charter agreement between the client and the broker, or the agreement between the broker and the operator. Those documents establish the price, the aircraft, the schedule, the cancellation terms and who bears which risk.

The escrow agreement deals only with the money. It records the amount held, the currency, the release trigger the parties have selected, the evidence required to support a release, and where the funds go in each outcome.

dospay does not decide whether a flight operated, whether a cancellation was justified, whether a substitution was acceptable, or how a cancellation charge should be apportioned. Those are matters for the parties under the charter terms. dospay releases funds against the instruction and evidence the escrow agreement specifies, and holds the funds where it does not receive them.

Only parties authorised under the escrow agreement can give instructions to the escrow agent. This is agreed at the outset and documented clearly.

Instructions are usually tied to specific events, such as the issue of a certificate, confirmation of a milestone or the occurrence of a payment default. The escrow agent checks that the instruction matches the agreed conditions before acting.

This approach ensures that payments are controlled, predictable and not dependent on informal requests or unilateral decisions by one party.

The escrow agreement names the authorised instructing parties and the individuals who may act for each of them.

Release to the operator on a normal completion is usually structured as a unilateral instruction from the broker supported by the agreed evidence, or as a joint instruction from broker and operator.

Release to a replacement operator, and return of funds to the client, are usually structured as joint instructions, because they involve a change to the arrangement the parties originally agreed.

Informal instructions are not sufficient. A message on a trip thread, a call from an operations desk or a verbal confirmation at the aircraft will not move funds. The instruction must come from a named authorised individual in the form the escrow agreement requires.

Stage 1: Agreement. The parties settle the escrow agreement, identifying the booking, the charter price, the commission element, the authorised instructing parties and the release trigger.

Stage 2: Onboarding. dospay completes identity, ownership, sanctions and source of funds checks on the parties to the arrangement.

Stage 3: Account opening. The account is opened and designated to the booking. It exists before any money moves.

Stage 4: Funding. The client transfers the charter price. Funds are segregated on receipt.

Stage 5: Holding. The balance is held to the release trigger. Where a staged release applies, the deposit element is released at confirmation.

Stage 6: Release. On the agreed trigger, and against the agreed instruction and evidence, funds are released to the operator and the commission to the broker.

Stage 7: Disruption route. If the flight does not operate, funds are released to a replacement operator or returned to the client, on instruction.

The starting point is understanding the booking. dospay needs to know the parties, the charter price and currency, the commission element, the flight or itinerary, and the intended departure date.

The release mechanism is settled next. The broker and the operator agree which trigger applies and what evidence will be produced to support it, and the treatment of a cancellation is agreed at the same time rather than left open.

The escrow agreement is then executed and the account opened, with onboarding completed in parallel. Funding follows account opening. No funds are accepted before the agreement is in place and the account exists.

For a straightforward booking between corporate parties with complete onboarding information, an account can usually be opened within a small number of working days once the escrow terms are agreed.

Charter timescales are short, so the practical answer for a repeat broker or operator is to establish a master arrangement once and open accounts against it per booking. That reduces the per-flight step to funding and instruction.

There is no requirement for any party to hold an account with a particular bank. Onboarding is carried out by dospay, and a broker does not have to move its banking or obtain approval from a third party institution before it can use the service.

Timing depends on the complexity of the parties and on how quickly complete information is provided. Incomplete ownership information, missing identification for a beneficial owner and unevidenced source of funds are the common causes of delay.

Standard onboarding requires identity verification for beneficial owners, directors, persons with significant control and authorised signatories, together with corporate documents cross-checked against the relevant register.

Sanctions and adverse media screening is carried out on all parties. Private aviation carries a heightened profile here, and screening covers the client and the operator as well as the broker.

Source of funds evidence is required for the amount being deposited, particularly where the payer is an individual, a personal holding company or a party other than the named charterer.

Transaction information is required to establish the release mechanism, including the charter agreement or confirmation, the operator agreement, the aircraft and itinerary, and the agreed trigger and evidence.

• Parties to the escrow agreement and the individuals authorised to instruct
• Identity information for beneficial owners, directors, persons with significant control and authorised signatories
• Corporate documents and current group structure chart
• Source of funds evidence for the deposit, including where a third party is paying
• Charter agreement or booking confirmation, and the broker to operator agreement
• Aircraft type, registration where known, and the flight or itinerary
• Escrow amount and currency, and the commission element
• The agreed release trigger
• The evidence that will support release, and who produces it
• Cancellation terms and how funds are to be treated on cancellation
• Departure date and any staged release dates

The charter client pays the money into escrow. Where a third party is paying on the client's behalf, that party is identified at onboarding and the source of funds evidence covers it.

Funding is normally a single payment of the full charter price made after the account is opened and by the date the charter terms require. Where a booking is made against a programme or block hours arrangement, the account is funded once and drawn down per flight.

Funds are ring-fenced on receipt. From that point they are segregated, identified to the booking, and subject only to the release conditions in the escrow agreement.

Charter is priced in euros, sterling and dollars depending on the operator, and the parties frequently sit in different jurisdictions. The account is held in the currency of the charter price so that the amount released matches the amount owed, and any conversion is completed before funds reach the account.

Staged release at confirmation. Where the parties have agreed one, an identified proportion is released to the operator at confirmation to cover positioning and other out-of-pocket costs. The balance continues to be held.

Release to the operator on the agreed trigger. Against the evidence named in the escrow agreement, whether that is confirmation of aircraft assignment, departure of the outbound sector or completion of the flight, the balance is released to the operator.

Release of commission to the broker. The commission element is released on the same trigger, or on a separate trigger where the parties have agreed one. The amount is visible to the broker alone.

Release to a replacement operator. Where the original flight is cancelled and a replacement aircraft is arranged, the funds are released to the replacement operator on the agreed instruction. This is the route that removes the need for the broker to bridge two payments.

Return to the client. Where the flight does not operate and no replacement is arranged, funds are returned to the client, less any amounts due to the operator or the broker under the charter terms as the parties instruct.

Residual balance on a programme account. Where a programme or block hours account is not fully drawn, the unused balance is returned to the client at the end of the term.

In every case, if the instruction is not made by an authorised party or is not supported by the evidence the escrow agreement requires, the funds remain held.

If instructions are disputed or unclear, we will not release the funds.

Instead, the funds remain held safely in the escrow account while the parties follow the process set out in the escrow agreement. This may involve clarification, confirmation from an agreed third party, or the use of the dispute resolution process under the underlying contract.

This approach protects both parties. It ensures that money is not released prematurely and that funds remain available once the position is resolved.

If a party to the underyling contract becomes insolvent, we continue to operate under the escrow agreement.

Because the funds are held in escrow and not in the control of either party, they are protected from being used for other purposes. We will follow the agreed instructions and any applicable insolvency process, as set out in the escrow agreement.

In practice, this can provide greater certainty than relying on funds held directly by one of the parties, particularly where payment timing or entitlement is being considered as part of an insolvency situation.

‍

What happens if DOS & Co. becomes insolvent?

All escrow funds are segregated (kept separate from our own funds), safeguarded (protected by law from our own creditors) and kept liquid and unencumbered at the Bank of England. In the event of our insolvency, we have set aside regulatory capital that will be used by our administrators to 'unwind' our affairs - this will usually involve working with the parties to agree the identity of a new escrow agent who will 'step in' to carry out our obligations under the escrow agreement.