The FAA prohibits owning a corporate jet and employing the crew in a sole purpose entity so that the sole purpose entity operates the jet to provide flights to other entities. You risk FAA civil penalties, IRS taxes, penalties and interest and the possible denial of coverage by your insurer in the event of a claim after an accident.
Many aircraft owners lease their aircraft to a charter company to have the aircraft chartered by third parties to help cover the costs of operations. State tax issues, federal tax issues, fireblocking of the interior, crew training, maintenance issues and sometimes financing issues are just a few of the factors in this decision.
As part of the company’s risk management program, you may consider formalizing your aircraft use policies for both company owned aircraft and any employee owned aircraft used for the business. This will help the company be aware of the risk management issues. Violation of the FAA reimbursement/consideration requirements can carry risk exposure for both the employee and the company.
Under the non-commercial flights rules which are in FAR Part 91, there are limited opportunities to be reimbursed for flights to others. Dry Leasing is an option. Timesharing is another option, but an owner can only charge a limited amount for a timeshare flight. Another alternative is to lease the corporate jet to a company which has a charter certificate and to allow them to charter the corporate jet to others.
We can assist you with negotiating changes to the standard program documents provided by fractional companies.
Joint ownership requires that each party own an interest in the aircraft per FAR 91.501. If you form a company to own the aircraft, that company generally will not be able to operate the aircraft per the FAA regulations. That company must dry lease the aircraft to the operators.
Consider an interchange if you want to use another aircraft and crew in exchange for your aircraft and crew. An interchange is limited to an exchange for equal time and no charge, assessment, or fee is made, except that a charge may be made not to exceed the difference between the cost of owning, operating, and maintaining the two airplanes.
We can help identify issues needing further help:
- importing and exporting aircraft
- cabotage concerns when flying internationally
- European Union’s NCC requirements
Your management company handles the day to day details for your aircraft and you want to negotiate a good and thorough initial agreement to avoid future disputes.
A dry lease is the lease of an aircraft without any crew. Under a dry lease, the lessee generally has “operational control” and the responsibility and liability that accompanies operational control.
Timeshare is defined in FAR 91.501(c) as “an arrangement whereby a person leases his airplane with flight crew to another person, and no charge is made for the flights conducted under that arrangement other than those specified in paragraph (d) of this section”. This option is generally available only to large aircraft, however, the “NBAA exemption” to FAR 91.501 may apply. An owner can only charge an amount limited by regulation for a timeshare flight. Other issues can trip-up an unsuspecting aircraft owner, so careful planning is essential.