Owners of business aircraft frequently face the question of whether their aircraft should be operated under 14 C.F.R. Part 91 (“Part 91”) or Part 135 (“Part 135”). And it isn’t uncommon for owners to simplistically choose Part 91 because they have been led to believe that Part 135 is far too expensive and restrictive. Unfortunately, that answer isn’t necessarily the correct answer for all circumstances. The question is more complicated and requires a thorough analysis of the facts.
Generally speaking, it is true that aircraft may be operated under Part 91 with fewer restrictions and regulatory requirements than when operating under Part 135. However, from a risk management perspective, Part 135 exposes the charter customer to the least amount of regulatory and legal liability risk. As a result, it is necessary to understand the key distinctions between operations under Parts 91 and 135 in order to determine how they apply to a particular situation.
Let’s look at some of the differences between Part 91 and 135:
The operator of an aircraft has primary legal liability for injury to persons or property arising from an aircraft accident or incident regardless of whether the operation is conducted under Part 91 or Part 135. The operator is the party who exercises authority over initiating, conducting or terminating a flight (“Operational Control”). The operator of the flight has legal liability whether the operator is the actual owner of the aircraft or merely a lessee.
An entity that owns an aircraft may operate that aircraft under Part 91 as long as (1) that operation is incidental to its business, and (2) the operator is paying for those operations out of its normal revenue without receiving compensation or reimbursement from some other person or entity. That is, the entity must derive at least 51% of its revenue from business that is unrelated to its use of the aircraft, and then use and pay for that use incidental to that primary business activity. In such a situation the entity is exercising Operational Control of the aircraft and as the operator it has liability for its operation of the aircraft.
Expanding on this concept, an entity whose sole purpose is to own the aircraft (an “SPE”) may not operate the aircraft without certification from the FAA to act as an air carrier, i.e., it must have a “Part 135 certificate.” However, it is common under the FAA’s rules for an SPE to own the aircraft solely for the purpose of leasing it to other parties. For example, an aircraft may be owned by an SPE and then leased to an individual or business lessee who will then operate the aircraft under Part 91 pursuant to a “dry-lease,” with, as noted above, such lessee’s use being incidental to the lessee’s primary non-aviation-related business. A dry-lease is a lease for the aircraft alone, without crew, and may be with or without fuel, with the lessee then being responsible for providing its own flight crew either directly (e.g. lessee’s employee(s)), or hired as independent contractors from an outside source (e.g. a pilot services or aircraft management company). In this situation, the lessee is exercising Operational Control, and as the operator of the aircraft it has assumed all regulatory and civil liability for each of its operations of the aircraft under the lease (regardless of how it obtained its pilots, who performs the maintenance, and so forth).
Conversely, where the Part 135 certificate holder exercises Operational Control over the aircraft and all flights, that Part 135 certificate holder has assumed regulatory and civil legal liability for injury to persons or property arising from an aircraft accident or incident. Passengers on the aircraft do not have legal liability.
An aircraft owner, whether SPE or otherwise, may lease an aircraft to a Part 135 certificate holder under a dry-lease. The Part 135 operator then provides the crew (either using the Part 135 operator’s employees or independent contractors who are then agents of the Part 135 operator) and conducts operations pursuant to its Part 135 certificate. In most cases the entity that owns the aircraft will not have any legal liability for the Part 135 certificate holder’s operation of the aircraft.
In addition to risk management, various differences between operational conditions and limitations under Parts 91 and Part 135 must also be considered. These include:
As you can see, operations under Parts 91 or 135 have both advantages and disadvantages. Owners and operators of business aircraft need to carefully consider each in the context of their own circumstances. An in-depth discussion with a knowledgeable aviation attorney is also recommended to make sure their decision is the right one for their situation.
The information contained in this web-site is intended for the education and benefit of those visiting the Aero Legal Services site. The information should not be relied upon as advice to help you with your specific issue. Each case is unique and must be analyzed by an attorney licensed to practice in your area with respect to the particular facts and applicable current law before any advice can be given. Sending an e-mail to Aero Legal Services or Gregory J. Reigel does not create an attorney-client relationship. Advice will not be given by e-mail until an attorney-client relationship has been established.