Leasing deals and small fractional ownership/share arrangements may place passengers at risk.
If you fly privately, there are plenty of players in the industry to choose from. The ones that we may be familiar with normally fall into these three categories: charter operator, charter broker and 91k fractional ownership/share provider. And given that all brokers must service their requests through a certified charter operator, the options are reduced to two: charter or 91k fractional.
Choosing charter or fractional companies to create business aircraft travel solutions mean the customer is buying a service that is heavily regulated by the FAA. The oversight by the FAA helps to ensure the safety of passengers by regulating all aspects of an operation. The large fractional companies must be approved to operate under the provisions of 14 CFR 91 subpart K and the charter operators operate under the rules found in 14 CFR 135. Ultimately, these rules end up being very similar in terms of flight crew training regulations, aircraft check rides and requirements to have certain manuals produced and approved/accepted by the FAA.
Why so much regulation? The underlying principle is that the FAA is interested in protecting the safety of flying public. And if a company wishes to “hold out” to provide flying services, the FAA will want to have a say in how the operations are being conducted.
Not every private jet transaction, however, is required to be scrutinized like the 135 and 91k operators. There are ways to gain access to an aircraft for personal use without paying for a charter or joining a 91k fractional program. The FAA allows various agreements to be initiated for the purpose of having access to an aircraft. These methods include dry leases, time share agreements and fractional ownership/shares when 91k rules don’t apply.
The parts that remain unclear are the most concerning…
The problem with these other methods of air travel can be two fold. First of all, the requirements placed on the heavily regulated portion of the industry mean that the customer will always have a well-trained, highly qualified crew to service their trip. But this may not be the case for these alternate methods of securing aircraft. The fact is that the requirements to be qualified as a pilot in an aircraft for general operations pale in comparison to the pilot requirements when dictated by the FAA for charter operators/91k fractionals. Secondly, when signing agreements to get into these alternate methods, it can be very confusing about what is actually taking place. At the end of the day, the following questions must be answered: Who is the operator of the aircraft? Who hires the crew? Did the aircraft and crew come from the same place? Were the aircraft and crew paid for together or separately? Does the lease agreement include a requirement to use a particular crew? Do I need MEL/RVSM manuals to use on my flight? Who is responsible for mechanical problems on the aircraft? Who is responsible to buy the gas? Who is handling compliance with truth-in-leasing requirements? Who handles the insurance? Who are the liable parties during the aircraft operations? Who can the FAA investigate if rules are broken? How is the crew trained?
If these questions seem overwhelming, it’s because they are! But when you sign on the dotted line for these alternate methods of securing an aircraft, all of the questions must be considered. Let’s analyze the questions as they relate to a dry lease agreement.
A dry lease is a lease agreement where possession of an aircraft is transferred to the lessee. This type of lease does not include a transfer of a flight crew, so you will need to get your own pilots. Let’s take a look at the questions above in relation to this type of agreement:
Who is the operator of the aircraft?
The lessee is considered operator of the aircraft. Lessee chooses when to fly and has control over how flights are initiated, conducted and terminated. It’s no different than owning your own plane.
Who hires the crew?
The operator is responsible for securing and paying for their own crew. Some companies may suggest that they will provide a crew and do it all for you—but be careful. A provided crew in this type of arrangement could lead to FAA scrutiny.
Did the aircraft and crew come from the same place?
If so, this could be a big problem in the legality of a dry lease. When crew and aircraft come from the same place, it is considered a “wet lease.” Furthermore, if a wet lease were to occur, it could also be investigated by the FAA as an illegal charter.
Were the aircraft and crew paid for together or separately?
While similar to the question above, this helps to determine where the crew came from. If the lessor is the same entity that you are writing the check to for the flight crew, this would be a problem.
Does the lease agreement include a requirement to use a particular crew?
Since the lessee is the operator, they should be free to choose any pilots who are properly qualified to operate the aircraft. The only caveat to this would be insurance requirements that may specify certain experience or training requirements to operate that particular aircraft. If any agreement has been made, either expressed or implied, to utilize only certain pilots for the aircraft, that should be a red flag.
Do I need MEL/RVSM manuals to use on my flight?
MEL stands for Minimum Equipment List and refers to the ability to continue flying the aircraft when certain equipment isn’t working correctly. So if a landing light is found to be burned out one morning, the MEL allows most aircraft to fly during the day without the light working. If you didn’t have the MEL, you legally couldn’t even start the trip when the light issue was discovered.
RVSM is the Reduced Vertical Separation Minimum airspace and refers to the authorization to operate between 28,000 and 41,000 feet. If you are leasing a turbo-prop/jet aircraft that is capable of flying higher than 28,000 feet, the current regulations require each “operator” to be approved to fly in that airspace.
The RVSM and MEL approval can be secured, but typically costs anywhere from $500 – $2000 to have a manual produced. Then it must be approved by the FAA. It should be noted that neither one of these authorizations must be received to simply operate the aircraft. However, if anything on the aircraft fails and you want to possibly continue the trip, you must have an MEL. And if you wish to operate the aircraft at the fuel efficient altitudes it was designed for, you must have RVSM authorization.
Who is responsible for mechanical problems on the aircraft?
Technically, the operator is responsible for any maintenance required. This should be thoroughly discussed and documented in the lease agreement so everyone is on the same page.
Who is responsible to buy the gas?
Depending on the way things have been set up, the price of fuel could be included in the lease rate or not. Be sure this is understood per the lease agreement before signing up.
Who is handling compliance with truth-in-leasing requirements?
If the aircraft in question weighs more than 12,500 pounds, or is turbine powered, then the truth-in-leasing requirements apply. This regulation, 14 CFR 91.23, includes provisions that must be in the aircraft lease as well as requirements after the lease has been executed. One requirement is to place a copy of the lease on file with the FAA in Oklahoma City, OK. Another includes notification to the local FAA Flight Standards District Office to give them 48 hours prior notice before the first flight on the lease. Lastly, a copy of the lease must always be carried on the aircraft while operating under the lease. The operator is normally responsible for compliance with the requirements of the regulation.
Who handles the aircraft insurance?
This is a point that must be discussed and explicitly denoted in the lease agreement with the lessor. Typically, the operator will need insurance unless they can be listed as a named insured on the insurance policy from the lessor.
Who are the liable parties during the aircraft operation?
From a liability standpoint, being the operator of the aircraft opens the door to many issues. If an accident or incident should occur, the operator is certainly liable for any missteps along the way. This is simply a natural by-product of being the operator of an aircraft. Pilots also share liability and must be sure the aircraft is airworthy and that all applicable Federal Aviation Regulations are followed for the given operations.
Who can the FAA investigate if rules are broken?
The FAA can issue letter of investigation to anyone involved with the operation of the aircraft. When signing into a dry lease as the lessee, you become operator and will certainly be part of an investigation if the FAA thinks a regulation has been violated.
How is the crew trained and qualified?
14 CFR 61 requirements must be followed in terms of having a qualified crew for the aircraft being leased. The training requirements are specific to the aircraft in question and should be addressed with a training provider. The only qualification required to legally hire a pilot is a Commercial pilot’s license. Furthermore, if the aircraft is multi-engine, the pilot must have that rating as well. Finally, it is prudent to secure a pilot with an instrument rating to be able to handle most weather conditions through your travels. Many larger aircraft also require a co-pilot, so that pilot will need to be trained and qualified.
Did you get all of that? It’s an overwhelming process for people that aren’t in the industry. Furthermore, if these things were truly conveyed to the lessee before they entered into the agreement, there may be some pause before continuing the process. And that ends up being the FAA’s biggest concern with these deals. If an individual is told how easy it is to get into a lease and how much money they may save instead of contracting with a charter operator or buying into the 91k fractionals, they are likely to go forward with this type of deal. And by signing on that dotted line, they are unknowingly responsible for things that the average person knows nothing about.
There are also safety implications of using the alternate methods of securing an aircraft. Since the crew isn’t trained and qualified in a standardized manner, the quality and performance of the crew is hard to predict. Conversely, a charter or 91k fractional crew has been trained in a standardized manner, received a check flight from an examiner, passed an oral examination on company operations and general aviation subjects, and more. More on charter crew qualification will be addressed in the next section, but needless to say, it’s an extremely involved process.
This isn’t just rhetoric to convince passengers to flock to an air carrier or 91k fractional. The statistics back it up! A recent Bloomberg article identified the fatalities from charter aircraft accidents and those that occurred in corporate/private-owned accidents. In the period from 2007 – 2014, there were 28 fatalities from charter flights compared to 78 in the corporate/private arena. In fairness, the numbers were a little closer looking further back in time. But we are concerned with the current trend! Charter operations have gotten safer while corporate and private operations have been stagnant in their ability to increase the level of safety.
Charter operators and 91k fractional groups tend to have very similar requirements from the FAA. They are equally regulated and are essentially the same from an operations standpoint. The crucial difference is that charter customers simply pay for their services without any further requirements. The 91k fractionals require some percentage of aircraft purchase to become an “owner” in their system. Then the 91k side of the house kicks in with a management company that runs the entire show. Since these two programs are so similar in terms of FAA oversight, only one will be discussed moving forward.
Aircraft Charter refers to an FAA regulated operation that must comply with specific rules and regulations tailored to the type of services provided. In many cases, the general public considers a charter to be jet or turbo-prop aircraft used to transport passengers. But many aircraft, including single engine planes, helicopters, sea planes or jumbo jets could be used for charter operations which include both passenger and/or cargo flights. Since everything has been previously approved by the FAA, the process for a passenger to arrange and secure a charter flight is very easy. It’s as simple as contacting an operator, paying a fee and taking the trip.
The ease of being able to legally secure a charter flight is a byproduct of the many hundreds of hours of work that has been put in by the operator to develop a system for how they will conduct their business. The FAA reviews everything from General Operations Manuals and Training Manuals to Cabin Briefing Cards and Emergency Procedures. These items are all part of an operators manual system and must be approved by the FAA. It isn’t easy to be awarded an Air Carrier Certificate! And this might be why others in the general aviation industry do their best to avoid the process and utilize alternate ways to continue to conduct flights with passengers.
Charter pilots must receive initial ground training on the approved operator system including company standard operating procedures (SOPs). Portions of the ground training include segments on crew resource management, general emergencies, hazardous materials and other specific areas of training that are required for the specific authorizations of that operator. Additionally, formalized aircraft ground and flight training are also conducted as part of the process to qualify a pilot for charter services. Once all the training has been conducted, pilots must receive an oral examination and aircraft flight check to be sure the pilot is ready for service. This process can take three – six weeks to complete depending on the aircraft training requirements. Pilots must also abide by strict government regulations that dictate the amount of time they can work in a day, the amount of flying they can conduct in that work day and the amount of off time that is required between trips.
Once a pilot begins flying, the training and checking aren’t over. Pilots that serve as captains generally can expect another oral and flight check at the end of six months. And when the year is up, most subjects are trained again along with more checking. It truly is a never ending process to ensure everyone is doing their job as safely as possible.
The aircraft charter industry is very competitive. And the most important aspect of a good operation is their commitment to safety. Many industry groups have programs whereby an operator receives a rating and then is able to utilize that rating to validate their services to potential customers. The three main companies that rate charter operators are ARG/US, Wyvern and the Air Charter Safety Foundation (ACSF). Each of these companies investigate an operator to be sure each requirement is satisfied prior to issuing a rating. For the highest rating possible, an operator will have an on-site audit that will last for several days to be sure all required facets of the organization are in place and being utilized correctly. These ratings are not easy to come by and are a matter of prestige within the industry.
Aircraft charter operators are required to carry a certain level of liability insurance for their operation. Typically, an operator will have between $50 and $100 million in liability coverage. Another factor in reducing client liability is that the 135 charter operator always maintains operational control. Any issues that may arise and involve further communication with the FAA will be handled by the charter operator.
What will you do?
There are many competent organizations and pilots within the industry that provide nothing but first class service to end users when utilizing these “alternate” methods of securing aircraft as detailed above. And many of these companies work with aviation lawyers to be sure their method of getting consumers into aircraft is legal per the FAA. The fact remains, though, that no oversight is required of these services that pair aircraft with passenger through leasing, timeshare or ownership/shares arrangements (non 91k). The consumer may receive a wide array of experiences when utilizing these types of agreements and it’s hard to know what level of service will be received when signing up.
There are hundreds of charter operators in the U.S. that play by the rules and openly accept the extra FAA scrutiny in favor of being able to hold out to the general public in the manner intended by the Department of Transportation. Most operators have fantastic relationships with their FAA counterparts because our common goal is always the same. We all strive to provide safe, efficient aircraft transportation to the general public.
When it’s time to secure that next trip for business or personal needs, consider the list of items discussed with a dry lease earlier in this article. Is this really worth the headache? Do you really need to be involved with those areas of aviation? In most cases, the answer is no. Simply contact your local aircraft charter provider to conduct this trip for you and enjoy the peace of mind knowing that the trip is being conducted legally with well-trained flight crew members.
When it’s all said and done, aren’t safety and peace of mind the most important things…