Company offers "lease agreements" for charter customers

[pilothouston123]

I am working for a small charter company that wants to get more airplanes on its certificate. In the meantime, they are offering lease agreements for charter customers/ Lease the airplane not on certificate and the pilots from the company.

This seems ilegal. Or at least fishy. Any ideas folks/

 

[O-Line]

It's very illegal unless they let the FSDO know about it (FAR 91.23). Unfortunately it's been done a lot in the past, and the company is very unlikely to get caught unless there is some kind of incident.

 

[414Flyer]

I know of a pilot in an north texas city, who has some kind of racket and has been doing 134.5 for years and years. I dont know what kind of arrangement he has, but has been doing it a long time, and even one of his friends is an FAA inspector.

But he does it in his own planes, has no 135 cert, and keeps it pretty low key. But there is no way for any 135 startup to survive in this city, because their potential customers already fly with this guy.

 

[A Squared]

Without knowing more facts, one cannot say for sure. But it seems probable that the leases are merely a device to get around the 119 and 135 regulations. If that is the case, the "leases" are illegal.

O-line mentions 91.23, but it should be pointed out that this applcable to Large aircraft. Are large aircraft involved?


That apart, the FAA knows the difference between a legitimate lease and one who's sole purpose is to circumvent charter regulations. They look at several criteria: Does the plan and pilot come from the same source? Can the lessee use any pilot of thier chosing, or are they required to use a pilot from the lessor. WHo has actual operational control of the aircraft? It is not enough that the lease states the lessee has operation control of the aircraft. If the aircraft remains in the lessors hangar, and is dispatched on flights at the lessors discretion, the lessee does not have operational control of the aircraft, regardless of what the lease says. There's no one single determining factor, but the facts of the situation as a whole are examined.

If the Lessee does not have exclusive use of the aircraft (no other "lesees")
and the lessee is required to use pilots from the owner's company, and if where the airplane flies and when is primarily dictated bu the owner, it is almost certinly not a legitamate lease, and the owner could be in deep doo-doo.


Here's a link to an NTSB decision involving a "lease" arrangement. It disusses some of hte things which are examined in determining if a lease is an actual lease or a sham lease.

http://www.ntsb.gov/alj/O_n_O/docs/aviation/4825.PDF

 

[KeroseneSnorter]

Basically it comes down to what the feds like. There are lease agreements that make the feds happy, and others that do not.

I ran across something like this in the past, I just went to the FSDO and got the info from the horses mouth. If you have a contact, and are the type that tries to stay out of trouble, most of the time they will be helpful(not always).

Bottom line, as long as the Feds give you the magic rubber stamp of approval you are golden. I was surprised at what they were happy with, on the surface to me, it looked like a gray area at best, and plain illegal at worst. But it went through channels and they were happy with it. I think for the most part it has a lot to do with how you go about it. If you are honest with them and tell them up front what you are looking for and ask for an official FAA opinion of legality, and how you need to go about it to make sure you are operating legally, you will be surprised at what they will do to help you out.

Of course there are always "those" FSDO's that wouldn't help you out of oncomming traffic!!!

 

[proav]

I was involved in a similiar situation. I do contract work for a guy who owns a CE501. He wanted to lease the plane to another guy. This was a legitimate deal. I didn't think we could legally do it so I wrote a letter to our FSDO. I explained that company "A" who owned the plane did not pay me a salary, only a daily rate when I flew. This company also uses another pilot on occassion under the same conditions. Company "A" wanted to lease the plane to company "B" who would also use us contract pilots. The FSDO said that so long as company "A" leased the plane with out pilots and company "B" paid the pilots directly for their fee they would not see a problem with that. I think they would also look at how many "leases" company "A" had at any one time to make sure they were not "holding out" to the general public.

Hope this makes sense.

 

[A Squared]

I was involved in a similiar situation. I do contract work for a guy who owns a CE501. He wanted to lease the plane to another guy. This was a legitimate deal. I didn't think we could legally do it so I wrote a letter to our FSDO. I explained that company "A" who owned the plane did not pay me a salary, only a daily rate when I flew. This company also uses another pilot on occassion under the same conditions. Company "A" wanted to lease the plane to company "B" who would also use us contract pilots. The FSDO said that so long as company "A" leased the plane with out pilots and company "B" paid the pilots directly for their fee they would not see a problem with that. I think they would also look at how many "leases" company "A" had at any one time to make sure they were not "holding out" to the general public.

Hope this makes sense.

Yeah, that would be a lease which genuinely is a lease. Compare that to the one in the link provided, which was a charter company without a certificate. The various aspects they examine is how they differetiate between the two. You're right the number of leases in a certain time period is another thing thye look at.

 

[pilothouston123]

Thanks you all,
Esp A squared for the link. I am outta here. I am looking for another JOB. It appears the the feds are going to start proceedings against my former Company. I value my ATP way too much.

If you never fly the "a" model of anything, and when flying, fly the airplane until the last part stops moving. Then one day you will be sitting around and realize; you are the old guy.