The Rules of the Game
With the possible exception of nuclear-power plants, aviation is the most highly regulated industry I can think of. Laws and rules apply to every aspect of business flights, from where and when you can land to whether and how much you can pay for a flight. As a result, most everyone who works in business aviation exhibits an impressive awareness of legal requirements.
Unfortunately, non-aviation professionals don’t necessarily share that awareness. To explain the rules to audiences ranging from tax accountants to flight dispatchers, a cottage industry of seminars and conferences has mushroomed over the years.
Topping the list of legal topics at such events are the Federal Aviation Regulations, the so-called “FARs.” The FARs are issued by the Federal Aviation Administration, a branch of the U.S. Department of Transportation. The DOT has many jobs, but the FAA has only one: to ensure that civil aviation in America is as safe as possible.
With the exception of military aircraft, FARs regulate almost everything flying in U.S. airspace, from Boeing Dreamliners to balloons. You’ll find the basic operating rules in Part 91, which applies to civil aircraft of all sizes.
Other parts of the FARs impose additional requirements on various operations.
Airlines, which operate scheduled flights, must also comply with Part 121, which runs to over 250 pages of small, eye-stressing print and contains rules that vary from the essential to the mundane. Section 577, for instance, covers stowing of tray tables and Section 571 requires that passengers must be briefed that “Federal law prohibits tampering with, disabling, or destroying any smoke detector in an airplane lavatory.”
In addition to Part 91, two other sections of the FARs basically govern the operation of business jets: Part 135 for charter and air-taxi commercial operations, and Part 125 for larger airplanes. (A special subsection of Part 91 allows fractional programs like NetJets to avoid Part 135.) Which of these Parts governs your operations depends on the size of your airplane and whether any of your flights are “commercial.”
Two factors basically render a flight commercial: carriage of passengers (or cargo) and compensation. The first requirement is fairly straightforward. Airplanes provide transportation, so if you don’t fly someone or something someplace, it’s hard to argue that a flight is commercial. It’s also hard to argue that it’s commercial if you don’t get paid for it. If you do receive payment, on the other hand, that instantly makes a flight commercial unless an FAA-approved exception applies, and in the FAA’s view, any kind of compensation counts, including the conferral of a benefit or the reimbursement of flight expenses.
Unless you’re flying on a Part 125-size business jet, if your operations are non-commercial, they are simply governed by Part 91 of the FARs. On the other hand—and assuming again that your jet isn’t too big or that no exception applies—if you are receiving compensation for a flight, you must conduct it under Part 135.
At first glance, it may seem odd that the FAA has different rules for operating identical flights on the same aircraft, depending on whether paying passengers are aboard. Suppose, for example, you fly your mother on your Citation Excel from Teterboro, New Jersey, to West Palm Beach, Florida. Assuming you don’t charge Mom for the flight, you can operate it under Part 91. But if Mom insists on paying for jet fuel, you would now be receiving “compensation.” That would make the flight commercial, so the FAA would expect it to be operated under Part 135, even though, apart from the exchange of funds, the two flights may be identical.
This raises a question: What’s the safety rationale for imposing different operating rules? Essentially, while it’s reasonable to assume you’ll be careful flying yourself around, the FAA considers Part 135 rules necessary to ensure that people in the business of providing air transportation will exercise special care to ensure passenger safety. These rules hold pilots, aircraft, and operations to a higher standard than would apply to someone providing transportation only to himself and his guests.
Why not then just operate all flights under Part 135? First, though you can (and some people do) follow Part 135 rules even when officially operating under Part 91, actual Part 135 operations require that you have a commercial certificate (often called a “charter certificate,” though the technical name is “air carrier certificate”) issued by the FAA as well as an approval from the DOT. Obtaining a charter certificate is complicated, expensive, and time-consuming, so don’t count on flying Mom to Florida under Part 135 for at least a year after you apply. Consequently, most aircraft owners who want to fly under Part 135 sign up with an existing charter company.
But even if they have easy access to a charter certificate, most aircraft owners are happy to fly Part 91. The reason is that the FAA’s way of making sure that Part 135 flights are arguably safer is to impose operating restrictions that most jet owners would just as soon have at least the option to avoid.
First, under Part 135, you can’t use just any airport that would be available under Part 91. Aircraft flying under commercial rules can’t land at airports without on-site weather reporting, and the runway length must have a 40 percent cushion over what the aircraft’s performance limitations require. Second, Part 135 imposes greater restrictions on when you can take off. (If visibility is zero, forget it.) Third, Part 135 requires your aircraft to be equipped with gizmos and upgrades that are optional under Part 91, and the aircraft must be maintained to the higher standards of Part 135 even though you operate many or even most of your flights under Part 91.
For pilots, Part 135 has specific duty-time and rest requirements, so when the stipulated workday ends, it doesn’t start again until the FAA’s rest requirement is satisfied. Pilot qualifications and test requirements are also more stringent under Part 135. In short, to fly under Part 135, you sacrifice a great deal of operational flexibility.
On the other hand, Part 135 lets you charge Mom or anyone else whatever you want for a flight. Once the aircraft is on a charter certificate, you can also make it available for revenue charter to help offset the fixed costs of ownership. You can even charter your own airplane yourself, which can be advantageous in minimizing federal and state taxes. Finally, the FAA imposes operational responsibility for flights operated under Part 135 on the holder of the charter certificate, not the aircraft owner or Part 91 operator, which greatly reduces their liability exposure for accidents or incidents. Some well-heeled owners choose to operate their own flights under Part 135 for that reason alone.
As noted earlier, the other section of the FARs that business jet owners operate under is Part 125. Part 125 applies to aircraft with at least 20 seats or a maximum payload of at least 6,000 pounds—Boeing Business Jets, Airbus Corporate Jets, and the like. As with Part 135, you can receive compensation for flights and (unless the FAA lets you out of this requirement) you need a commercial operating certificate, But unlike Part 135, Part 125 doesn’t allow you to hold yourself out to the public as willing to provide air transportation for hire (so-called common carriage). Instead, you have to make private arrangements with potential customers, which is why many owners of Part 125-size aircraft seek ways to operateunder Part 135.
Why comply with FARs? Depending on the violation, civil and criminal penalties start at more than $1,000 and go up from there. That’s per violation—and every day and/or every flight in which a breach of the rules continues can often be treated as a separate violation with a separate fine, which means that, even at the lowest levels, fines can add up quickly. Jail time is also a possibility. And of course, as a result of violations, your aircraft could be grounded and your pilots could have their licenses suspended or revoked. Accordingly, it’s essential to ensure that members of your aviation team understand and comply with the FARs.
Jeff Wieand (firstname.lastname@example.org) is a senior vice president at Boston JetSearch and a member of the National Business Aviation Association’s Tax Committee.