The FAA recently issued a legal interpretation in response to a request regarding whether the use of a management company might affect the assignment of operational control under certain aircraft dry-lease arrangements. Unfortunately, the legal interpretation didn’t really answer the question.
In the August 26, 2011 Legal Interpretation, the presented fact pattern involved an aircraft owner who wanted to contract with an aircraft manager to manage its aircraft. The aircraft manager would be responsible for maintenance of the aircraft, procuring pilots, providing pilot training, providing all consumables such as fuel and oil, providing scheduling services, and providing catering. The aircraft owner also wanted to dry lease some of its aircraft to other individuals. Although the aircraft owner had a “strong preference” for its lessees to use the the aircraft manager’s services and “would encourage them to do so”, the aircraft owner still intended for the aircraft lessee(s) to retain operational control of the aircraft operating under the dry lease arrangement.
The Interpretation initially references FAR 1.1 which defines operational control, with respect to a flight, as “the exercise of authority over initiating, conducting or terminating a flight” and then observes that “exercise of authority” means “the person having operational control must be responsible for and, in fact, exercise the operational expertise required to operate an aircraft.” The FAA determines who has operational control based upon the specific facts and circumstances of each case. According to the FAA,
“[w]henever the aircraft and flight crew are furnished by separate and unrelated persons, it is … the policy of the FAA to consider the lessee of the aircraft as the operator so long as he retains control, direction, and responsibility of the aircraft …. [However], [w]henever the instrumentalities of transportation, i.e., the aircraft and crew, are furnished by separate persons acting in concert, the situation is not the same. In such cases, the question to be considered is whether the net effect of the actual operational arrangements of the parties places responsibility for the operation of the aircraft in the lessor of the aircraft, the person furnishing the flight crew, or both.”
With respect to lease arrangements, operational control is determined “based on the terms of each lease as well as how the arrangement actually operates.” The FAA then concludes that the aircraft owner’s interest in contracting with the aircraft manager to maintain the owner’s aircraft and to schedule the aircraft owner’s operations, in combination with the aircraft owner’s desire to encourage lessees to procure pilots and crew from the aircraft manager, “may affect the FAA’s operational control determination.” As a result, the Interpretation states that the FAA would need to further review the situation to determine whether the arrangements were truly dry-leases.
Other than explaining generally how the FAA views operational control, the Interpretation isn’t particularly helpful. However, what is clear from the Interpretation, and important for aircraft owners and dry-lessees to keep in mind, is that the FAA will look beyond the terms of a dry-lease agreement to determine who has operational control. Thus, parties engaged in a dry-lease arrangement will need to not only have a properly drafted dry-lease, presumably with the help of an aviation attorney, but they will also need to act and operate the aircraft consistent with a dry-lease arrangement. A dry-lease agreement’s words alone will not save an aircraft owner or lessee from an enforcement action if the FAA finds that the wrong party is exercising operational control.