Aircraft Timesharing between a Company and its Dealers

The FAA spends many regulatory pages (and significant enforcement activity) differentiating between private, noncommercial operations under 14 C.F.R. Part 91 and commercial operations under Part 119 (operating certificates generally) and related regulations, including Parts 135 (charter and air taxi) and 121 (airlines). Part 91, Subpart F sets out special rules for the private, noncommercial operation of large and turbine multi-engine aircraft, and those in fractional programs. Subpart F permits these aircraft some of the operating privileges the FAA otherwise considers commercial. For example, Subpart F operators may carry business guests, for, among other things, the purpose of  selling them property, franchises and distributorships,  so long as the guests are not charged for the flight. 14 C.F.R. §501(b)(9).

Section 501(b)(6) also permits no-charge business-related transportations on airplanes operated under a time sharing, interchange, or joint ownership agreement.”  “Time sharing” under Subpart F is an arrangement in which an airplane is leased with a flight crew. This is an arrangement generally considered a “wet lease” prohibited to Part 91 operations; it usually requires a Part 135 commercial operating certificate. The authorization comes with limitations. The only charges permitted under the arrangement are a group of ten listed in §501(d). The list is fairly broad, with the limitations apparently designed to avoid  profiting from the arrangement. In addition to the charge limitations, the operation may not involve common carriage. “Common carriage” is a term at least as old as the stagecoach. It is differentiated from “private carriage” by a willingness to furnish transportation services to the public or a segment of the public, often referred to a “holding out” the availability of transportation services.

On July 3, 2017, the FAA Chief Counsel’s office responded to an attorney’s request on behalf of a client company to review the elements of a proposed timesharing arrangement between the company and its dealer network. The company planned to enter into timesharing agreements with “perhaps 3 – 5” of its dealers. The company would provide an aircraft and flight crew for dealer use in customer site visits. The only charges to the dealers would be those permitted by §91.501(d).

Lorelei Peter, writing for the FAA Chief Counsel’s office, agreed the arrangement, as stated, complied with Subpart F with respect to both the charges made to the dealers and the requirement that the operation be limited to private carriage. On the latter point, the interpretation cautions strongly against crossing the line from private to common carriage:

Please note, however, that the use of time sharing agreements with potential customers must be limited in scope so that the agreements do not effectively defeat the purpose of § 91.50l(b)(9). We consider your client’s proposed arrangement with three to five of the dealers to be sufficiently limited in number. The FAA cannot accept as appropriate the distinct scenario where a private operator enters into time sharing agreements with all or a substantial number of its potential customers as a means of circumventing the restriction on accepting payments from customers.

The July 2017 Hills Interpretation may be viewed at http://bit.ly/2tdorA3.

A few observations.

First, it should go without saying, these are a body of complex regulations. These types of arrangements must be both well documented and carried out in a way that makes clear it is “private carriage” and otherwise complies with the limitations for these types of operations. Professional advice is a must.

Second, while Subpart F applies to large airplanes (over 12,500 pounds maximum takeoff weight), multiengine turbojet airplanes, and fractional ownership program aircraft, the National Business Aircraft Association (NBAA) has obtained a exemption permitting its members Subpart F privileges (and limitations) in piston airplanes, small airplanes, helicopters. A discussion of the NBAA Small Aircraft Exemption and NBAA membership may be found on the NBAA website here. The most recent renewal of the NBAA exemption in March 2017, may be viewed here.

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