Split Airplane Ownership and Flying for Hire

[RingLaserGyroSandwich]

I've done some searching around but haven't stumbled upon the answer to this question. First, a review of my understanding of some of the basics of flying for hire (assume I'm a commercial pilot):

• You can hire me to fly you in your airplane to a destination of your choosing. You will cover airplane expenses plus whatever compensation I am offered. As a commercial pilot, I need to be careful to ensure I'm not generally holding myself out to the public.
  
• You cannot hire me to fly you in my airplane to a destination of your choosing. If we have a common purpose, we can split the cost of the flight (fuel, oil, airport fees) at best, or I have to pay everything at worst.

I'm less comfortable for how this works when an airplane is owned by more than one person. The simplest example would be that you and your friend each own an airplane 50%. If you want to hire me to fly you in your plane, I assume you can, provided you are using the airplane in accordance with whatever rules you and your friend previously agreed to.

Now for the weird example which got me reading up on this. You and I each own the same airplane with 50% shares. You can't (or won't, for whatever reason) fly yourself anymore so you want to hire someone to fly you in the plane. As in the previous example, you can hire some other pilot to fly you provided it doesn't interfere with whatever arrangements you and I have as co-owners. However, can you hire me to fly you? In this example, you would cover the cost of the flight, including any maintenance reserve contributions, and potentially pay me an hourly rate as well. If you can hire someone else to fly you, I don't see why you can't hire me.

Assuming my logic above is correct (and if it isn't I'm sure I'll find out real fast), what's to stop a pilot from having their non-pilot friend buy in a percentage of airplane ownership so that the friend can hire you to fly them around? Would there be a minimum percentage of the airplane that the friend would need to own to make this legal? This arrangement seems like a way that a non-pilot could "own their own plane" and let the pilot, also a major owner, treat the airplane like their own plane whenever the non-pilot didn't need to be chauffeured. In the extreme case, the non-pilot would only own like 1% of the airplane. There must be something we can point to which says this arrangement is not allowed by the FAA, or alternately I'm just missing some sobering factor...

 

[MauleSkinner]

or alternately I'm just missing some sobering factor...

More than likely, flying your 50% co-owner for hire is 100% legal.

Flying one of your forty-nine 1% co-owners for hire would most likely be considered a Part 135 violation.

somewhere in between is the “case by case basis”, “we’ll know it when we see it” cutoff point.

And before the FAA looks at it, someone has to complain about it.

 

[SkyDog58]

 

[dell30rb]

More than likely, flying your 50% co-owner for hire is 100% legal.

Flying one of your forty-nine 1% co-owners for hire would most likely be considered a Part 135 violation.

somewhere in between is the “case by case basis”, “we’ll know it when we see it” cutoff point.

And before the FAA looks at it, someone has to complain about it.

Good answer.

 

[RingLaserGyroSandwich]

The FAA is watching! Overnight I got this e-mail from FAASafety:

FAA Safety Team | Safer Skies Through Education

Misuse of Expense Sharing and Understanding Pilot Privileges
Notice Number: NOTC2238

Unauthorized 135 operations continue to be a problem nationwide, putting the flying public in danger, diluting safety in the national airspace system, and undercutting the business of legitimate operators. This letter is a follow-on to the May 2020 Informational Pilot Letter and a continuing effort to remind all pilots to be on the lookout for possible illegal operations. This letter will focus on two ongoing issues; first, the misuse and/or misunderstanding of expense sharing between pilots and passengers. Second, the apparent lack of understanding of pilot privileges and limitations versus operating rules.

Expense Sharing Reminders: (See AC- 61-142)

When compensation is exchanged for transportation, the public expects, and the regulations demand, a higher level of safety. As a general rule, private pilots may neither act as PIC of an aircraft for compensation or hire nor act as PIC of an aircraft carrying persons or property for compensation or hire. Refer to 14 C.F.R. § 61.113(a). Section 61.113(b) through (h) contains seven exceptions to this general prohibition against private pilots acting as PIC for compensation or hire. One commonly misapplied provision is the expense sharing exception contained in § 61.113(c), which permits a pilot to share the operating expenses of a flight with passengers provided the pilot pays at least (may not pay less) his/her pro rata share of the operating expenses of that flight. Those expenses are strictly limited to fuel, oil, airport expenditures, or rental fees. In addition, only reimbursement from the passengers is allowed.

(NOTE: The § 61.113 exceptions also apply to ATP and commercial certificate holders who are exercising private pilot privileges and also broadly applies under § 61.101 and § 61.315.)

Pilots must also remember, if they want to share expenses under § 61.113(c), they must not “hold out” to the public or a segment of the public to expense share because that would put them into the realm of common carriage—i.e., (1) the holding out of a willingness to (2) transport persons or property (3) from place to place (4) for compensation or hire. As discussed more below, common carriage changes the operating rules under which the flight must be conducted and, necessarily, triggers the higher certification and qualification requirements for pilots required by those operating rules. (See AC 120-12A).

A major point of emphasis to keep in mind regarding expense sharing flights is the “common purpose test”. This means, that the pilot must have his or her own reason for traveling to the destination, not simply for the transportation of the passengers.

• For example: A private pilot is flying to Stillwater, Oklahoma, to visit her mother in the hospital over the weekend. Five of her friends would be coming with her to attend a football game that same weekend. She CAN legally share expenses because she has a reason to fly to Stillwater (visit her mother) not simply to transport her friends. Expanding the same scenario; if she has too many friends going to the football game that she has to make a second trip to pick up the rest, she CANNOT legally share expenses on the second trip because her purpose for flying to Stillwater was complete when she arrived the first time. The second flight was solely for the transportation of passengers.

Distinction Between Pilot Privileges and Operational Rules:

It has come to the attention of the FAA that, in general, pilots do not know or completely understand that the privileges and limitations of their certificates are separate and distinct from the operational rules required to conduct a flight, or to put it simply, pilot certification rules vs. operational rules. A person who holds an ATP Certificate or a commercial pilot certificate may act as PIC of an aircraft operated for compensation or hire and may carry persons or property for compensation or hire. However, simply holding a commercial pilot or ATP certificate does not end the inquiry. A commercial pilot or ATP must meet the qualification requirements not only of part 61 but also the part under which the operation is conducted and the operator must hold the proper operating authority. Most operations involving the carriage of persons for compensation require the operator to hold a certificate under part 119 authorizing such operations to be conducted under part 135 or 121. (See 14 C.F.R. §§ 119.1 et seq., 135.1, and 121.1, and definitions codified at § 110.2) A pilot, for a flight operated under part 135 or 121,must meet additional qualification requirements like training, checking, and experience requirements. Therefore, in addition to ensuring compliance with the applicable pilot privileges and limitations in part 61, prior to conducting any operation a pilot must also determine what operational rules the flight is conducted under, whether the operator has the appropriate operational certification (a part 119 certificate), and whether the pilot has the requisite qualifications. Unless a valid exception from operational certification rules applies pursuant to § 119.1(e), operators (could be the pilot under certain circumstances) cannot engage in common carriage, e.g., holding out, unless they are operating in accordance with an air carrier certificate or commercial operating certificate. (See AC 120-12A).

• An example of pilot confusion over these distinctions is as follows: During a conversation between an experienced part 135 pilot and an Aviation Safety Inspector (ASI), the pilot said “Doesn’t part 61 (61.133) say that a commercial pilot can transport persons or property for hire?” The ASI answered “Yes...but what does the rest of the sentence say?” …provided the person is qualified in accordance with the applicable parts of this chapter that apply to the operation…” The ASI then asked “Do you fly under part 61 or under an operating rule such as part 91 or part 135?” The pilot suddenly replied “Ohhhh! I see” he said, “part 61 is privileges and limitations, but we also have to comply with the operating rules. Got it!”

Commercial and ATP pilots should also remember that although these certificates allow them to receive compensation and operate aircraft carrying people for compensation or hire, they themselves cannot hold out the public unless they have been issued a part 119 certificate. (See Legal Interpretation from Mark Bury to Rebecca B. MacPherson (August 13, 2014)).

If you have questions regarding sharing of operating expenses, holding out, or pilot certification rules versus operating rules, please review the FARs, Advisory Circulars, and Legal Interpretations referenced herein and below. Additionally, you may contact your local Flight Standards District Office for assistance or seek the advice of a qualified aviation attorney.

FAA Legal Interpretations

FAA Safe Air Charter Operations

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Unfortunately, it doesn't actually answer my question from this thread.

More than likely, flying your 50% co-owner for hire is 100% legal.

Flying one of your forty-nine 1% co-owners for hire would most likely be considered a Part 135 violation.

somewhere in between is the “case by case basis”, “we’ll know it when we see it” cutoff point.

And before the FAA looks at it, someone has to complain about it.

Makes sense for the two more extreme cases of 50/50 or 51/1/1/1/1/etc. The in between case I'm actually most interested in is two owners with an 80(me)/20(you) or something like that. How much out of 100% would my single "friend" have to buy in in order to not be considered a violation of air taxi rules? Perhaps a fair way to do it would be for the FAA (if investigating for some reason) to look at the cost sharing agreement and how much each person operates the airplane. If I have an 80/20 split with you, I pay 80% of fixed fees (storage, insurance, etc), and you use the plane 20% of the time (hiring pilots such as me, or only me, to fly you), then we might be "legal." If you own 1% of the plane but hire me to fly you 50% of the plane's operating time, that seems much more suspect. This is all speculation on my part.

 

[Paul V]

The FAA is watching! Overnight I got this e-mail from FAASafety:

FAA Safety Team | Safer Skies Through Education

Misuse of Expense Sharing and Understanding Pilot Privileges
Notice Number: NOTC2238

Unauthorized 135 operations continue to be a problem nationwide, ​

The FAA is watching. I got that email from FAASafety less than 1 hr after reading this thread.​

 

[TCABM]

Both our partnership docs and insurance policy prohibit commercial use of our aircraft without regard to what the FARs say. They also effectively prohibits primary instruction being received in the aircraft.

 

[WDD]

You got an unsolicited e mail from the FAA because you made this thread?

 

[MauleSkinner]

Makes sense for the two more extreme cases of 50/50 or 51/1/1/1/1/etc. The in between case I'm actually most interested in is two owners with an 80(me)/20(you) or something like that. How much out of 100% would my single "friend" have to buy in in order to not be considered a violation of air taxi rules? Perhaps a fair way to do it would be for the FAA (if investigating for some reason) to look at the cost sharing agreement and how much each person operates the airplane. If I have an 80/20 split with you, I pay 80% of fixed fees (storage, insurance, etc), and you use the plane 20% of the time (hiring pilots such as me, or only me, to fly you), then we might be "legal." If you own 1% of the plane but hire me to fly you 50% of the plane's operating time, that seems much more suspect. This is all speculation on my part.

I suspect that if you sold a percentage of your airplane to someone who can’t fly it, and you flew it for them most of the time, that would fall under Private Carriage 135 rules. If they hired other pilots most of the time, and you occasionally flew it when they couldn’t get someone else, it might be ok.

It’s probably less about the percentages than how much operational control the FAA thinks the other owner(s) have and/or exercise.