It’s a beautiful sunny day in Southern California and Joe, a private pilot, decides it would be a great day to go flying. Joe remembers that his buddy, Steve, needed to travel to Las Vegas for a meeting with a client. So Joe calls Steve and offers to fly him to Las Vegas and back to San Diego if Steve will split the flight costs with him, specifically, fuel, oil, airport expenditures, and aircraft rental fees. Sounds pretty innocuous…doesn’t it? Unfortunately, this fact pattern may constitute impermissible compensation to Joe according to the Federal Aviation Administration (“FAA”) and may have rather undesirable consequences.
The FAA regularly has consistently defined compensation as receiving anything of value. This includes, in addition to the payment of a flight charge or reimbursement of some of all of the flight costs, intangibles such as goodwill, bartering, services, building flight time, etc. In fact, the FAA has made it clear in a string of legal interpretations that compensation does not require a profit, a profit motive or even the actual payment of funds.
Joe, as a private pilot, is subject to the Federal Aviation Regulations (“FARs”) governing private pilot privileges and limitations. Specifically, FAR Section 61.113(a) provides that a private pilot is not permitted to either act as a pilot in command on an aircraft that is carrying passengers or property for compensation or hire or to get compensated for being a pilot in command of any aircraft. This prohibition would seem to spell the doom for any arrangements to share expenses with (or, in FAA speak, to receive compensation from) passengers. But all is not lost as the FARs contain some permissible exceptions to the general prohibition.
FAR Section 61.113(c) sets forth an exception to the general prohibition described above that permits a private pilot to share operating expenses of a flight with his passengers. To qualify for this exception, the private pilot must pay his pro rata share of fuel, oil, airport expenditures, and aircraft rental fees for the particular flight. Joe only suggested that he and Steve split fuel, oil, airport expenditures, and aircraft rental fees, so it sounds like this could work? Where’s the impermissible compensation? Well, the twist comes from the continued application of the general prohibition against “compensation” – which, coupled with the sharing of flight expenses basically means that a private pilot cannot get any additional “compensation” other than his passengers’ pro rata share of fuel, oil, airport expenditures, and aircraft rental fees for the particular flight. If there is additional “compensation” (which can be anything of value) then this exception would not apply and the pilot would no longer just be sharing permissible expenses but would be deemed to be flying for compensation.
So where’s the problem with Joe’s proposed Vegas jaunt? Well, arguably, Joe had not real purpose to fly to Las Vegas and accordingly, the FAA could find that Joe offered to fly Steve and split costs as a way for Joe to build some extra flight time, reduce his costs of flying and also possibly as a way to engender goodwill with Steve. These intangibles, to be received by Joe, constitute compensation according to FAA legal interpretations. The FAA has stated in several interpretations that in order for a private pilot to share in flight expenses, there needs to be a finding of a joint venture for a common purpose. In other words, Joe and his passenger, Steve, would need to share a common purpose for the flight – they would need to be going to Las Vegas for a bona fide common reason. As a further example, a permissible situation could be where Joe and Steve are both attending a show in Las Vegas and Joe decides to fly himself to Las Vegas and offers to take Steve along if Steve will share one-half of the fuel, oil, airport expenditures, and aircraft rental fees for the flight. Contrast that with our fact pattern above where there likely is no common purpose for flying to Las Vegas.
Going back to the original fact pattern above, let’s change things up a bit. Let’s now say that Joe wants to go flying on a beautiful day and offers to fly Steve to Las Vegas but does not want to have Steve reimburse anything for the flight. Would that be an issue? Clearly, Joe is not getting paid anything to fly Steve? Well, again, looking at the very broad definition of “compensation” employed by FAA, the FAA could argue that Joe nonetheless receives compensation by the goodwill he receives by providing the transportation to Steve. This would especially be true where Joe and Steve have an existing or potential business relationship and Joe would gain goodwill by providing the transportation.
This example illustrates the complexity of the analysis that needs to be conducted when reviewing and interpreting any FARs. While a question may appear to have an easy answer, a pilot needs to carefully review and consider FAA legal interpretations and case law that provide further definitions and clarity on the FAA’s reading of the particular FAR. And after all, since the FAA is the one that enforces violations, their interpretation of and position on the meaning of a particular FAR will be the one that serves as the nexus for an enforcement action.
Eli Mansour is a partner at Luce, Forward, Hamilton & Scripps LLP. He has substantial experience in aviation regulatory issues including the drafting and negotiating of aircraft purchase and sale agreements, management agreements, dry leases, time sharing agreements, joint ownership agreements and other transactional documents. For more information on Mansour’s practice visit www.luce.com/elimansour.
*The views and opinions expressed in the guest columns and monthly specials are those of the author and do not necessarily reflect the views of, nor should they be attributable to, SpeedNews or Penton Media.