Dry Lease and Contract Pilots

[dpilot_citation]

I have a question for all the guys & gals who have been around corporate aviation for a while. It has to do with Dry Leases and Contract Pilots. Here is the scenario:



Company A an LLC wants to Dry Lease an under utilized corporate aircraft to company B to augment a busy flight department. The pilots are paid a salary by separate corporation, which the president of the LLC also owns, which now leases the aircraft to the corporation, the pilots are paid a salary by. The LLC is a separate corporation although closely held.



Can the pilots Contract them self out to company B to fly the LLC company aircraft. When company B is using the aircraft, they would have operational control of aircraft at that time and would pay the pilots contract day rates.



This by no means an attempt to skirt 135 issues. There would only be one outside company leasing the aircraft from the LLC, not everybody who walked in off the street.. The pilots would have a Contract with company B for pilot service while they are still receiving a salary from company A. Although they would not be on every flight they would be on most of the flights in the leased aircraft.



Any and all thoughts would be appreciated!



Thank You

Dpilot

 

[Jack Schitt]

I'm confused. Are you asking whether it's legal to be paid a daily contract rate for company B while still getting a salary from company A? Or are you asking whether we think the owner should pay you a daily contract rate for company B in addition to your salary from company A?

 

[dpilot_citation]

Confused also

Company B would be paying a contract rate, for each day of flying to the pilots directly.

The only diffrence in the decison below is that the pilots would continue to work and recieve a salary from a closley held company of the leasing company.


I know it is as clear as mud....dpilot

Dry Lease
​

FEDERAL AVIATION DECISIONS

Interpretation 1989-20
​

FAD Digest of Interpretations:

FAR 135.1

The rental of an aircraft without a pilot is a “dry lease” and is not subject to Part 135 of the FAR.

Source of Interpretation: Letter to Mike Green from Kenneth E. Geier, Assistant Chief Counsel, signed by

Joseph T. Brennan, Deputy Assistant Chief Counsel, dated July 29, 1989.

Your letter of July 5, 1989, to the Wichita Flight Standards District Office has been referred to this office for

reply.

The situation you presented involved Company A, who owns a Cessna Conquest I which it uses for company transportation. Company A utilizes a pilot who is hired on a contract basis. Company B, from time to time, rents the aircraft from Company A for its use. Company B hires the same pilot on a contract basis. The pilot has no financial interest in the aircraft, and each company pays the pilot separately for his services. Your question is whether Company A’s lease of the aircraft to Company B would be considered an operation subject to the provisions of Part 135 of the Federal Aviation Regulations.

For the sake of this opinion, it is assumed that the pilot used is an independent contractor and has no financial or employment relationship with either company other than when he/she is hired to operate the aircraft. It is further assumed that, under the rental agreement/lease agreement, Company B is free to use any qualified pilot to operate the aircraft while it is in its custody and is not required to use the same pilot as Company A.

Assuming the situation to be as set forth above, it is our opinion the rental agreement/lease agreement between the companies would be considered to be a “dry lease”, and the operations would not be subject to Part 135 of the Federal Aviation Regulations.

If there are any questions, please advise us.
​

 

[HawkerF/O]

I have a question for all the guys & gals who have been around corporate aviation for a while. It has to do with Dry Leases and Contract Pilots. Here is the scenario:



Company A an LLC wants to Dry Lease an under utilized corporate aircraft to company B to augment a busy flight department. The pilots are paid a salary by separate corporation, which the president of the LLC also owns, which now leases the aircraft to the corporation, the pilots are paid a salary by. The LLC is a separate corporation although closely held.



Can the pilots Contract them self out to company B to fly the LLC company aircraft. When company B is using the aircraft, they would have operational control of aircraft at that time and would pay the pilots contract day rates.



This by no means an attempt to skirt 135 issues. There would only be one outside company leasing the aircraft from the LLC, not everybody who walked in off the street.. The pilots would have a Contract with company B for pilot service while they are still receiving a salary from company A. Although they would not be on every flight they would be on most of the flights in the leased aircraft.



Any and all thoughts would be appreciated!



Thank You

Dpilot

The Pilots would have to come off of the payroll at company A. It's Just that simple. Ownership is common, and that is what is going to get you. Pilot's have to come off of the payroll, and the Chief pilot, or whoever, is going to have to start his own company and employ the pilots, then bill companies A and B for the pilot services. At the end of the day, by not coming off company A's payroll, you are doing 135. THe common ownership is that is going to get you each time. I know this because I have been in this position in the past. Kent jackson wrote a great article on jus tthis subject. I forgot what periodical though.

 

[Throttlebender]

My understanding is that as long as company B is leasing the aircraft and paying the pilots completely separate of that(meaning pilot fees are not being wrapped up in the lease price)then you're fine. For instance, if company B leases the aircraft, then they need to hire pilots. These pilots could be from anywhere, yet company B is choosing to hire the pilots that are familiar with that particular aircraft. It's their choose. Company A gets into trouble if they are also providing pilots for the aircraft in the leasing agreement. It the becomes a "holding out" situation(ie. part 135).

 

[dpilot_citation]

Throttlebender….That’s the way I would like to interpret it but since there is money involved (for me), I don’t want to be responsible for the final interoperation. The paragraph below is what gives me heartburn.



“For the sake of this opinion, it is assumed that the pilot used is an independent contractor and has no financial or employment relationship with either company other than when he/she is hired to operate the aircraft. It is further assumed that, under the rental agreement/lease agreement, Company B is free to use any qualified pilot to operate the aircraft while it is in its custody and is not required to use the same pilot as Company A”.



I sort of agree with Hawker FO but still trying to get a feel for what is going on in the industry. Our aircraft is so underutilized we are afraid the bean counters will want it to go away. Our salaries are extremely good for the number of days we fly but lower than the average for this type of aircraft. Our Company has always allowed us to fly contract work for other companies and we are currently doing just that. The leasing of this aircraft would only serve to lower hourly operating cost, and improve our currency.

 

[Throttlebender]

I hear ya. Just ask your local FSDO. I've done it as have others I know in my area. Each FSDO tends to have their own "ideas" about things.

As for, “For the sake of this opinion, it is assumed that the pilot used is an independent contractor and has no financial or employment relationship with either company other than when he/she is hired to operate the aircraft. It is further assumed that, under the rental agreement/lease agreement, Company B is free to use any qualified pilot to operate the aircraft while it is in its custody and is not required to use the same pilot as Company A”. I would asuggest that in your case, sense company B does in fact have the option to hire any pilot they choose it shouldn't matter that you have a "finacial relationship" with company A. If the aircraft is leased to comapny B there is no guarantee that you would be hired to fly it. Therefor, it's not part 135. Run it by your FSDO using that reasoning and see what they say.

 

[FlyFlyFly]

I looked it up, and the source I found said: "though it is tempting to get a bunch of guys with dubious backgrounds to provide you with legal advice, it is always best to hire an experienced aviation attorney prior to making decisions that could cost you your ticket or land you in jail".

 

[HawkerF/O]

I hear ya. Just ask your local FSDO. I've done it as have others I know in my area. Each FSDO tends to have their own "ideas" about things.

As for, “For the sake of this opinion, it is assumed that the pilot used is an independent contractor and has no financial or employment relationship with either company other than when he/she is hired to operate the aircraft. It is further assumed that, under the rental agreement/lease agreement, Company B is free to use any qualified pilot to operate the aircraft while it is in its custody and is not required to use the same pilot as Company A”. I would asuggest that in your case, sense company B does in fact have the option to hire any pilot they choose it shouldn't matter that you have a "finacial relationship" with company A. If the aircraft is leased to comapny B there is no guarantee that you would be hired to fly it. Therefor, it's not part 135. Run it by your FSDO using that reasoning and see what they say.

You just said it: If Company B was to infact go hire their own crew totally seperate from Caomany A's operation, then they would be fine. SInce Company B does not in fact do that and they use Company A's pilot, then it's 135. Think about it. If this type of operation was OK, then why wouldn't every 91 operator do that when their A/C is not being used. Lets do a 1 day lease, 5 day lease, ect. Is it truly a dry lease? Is company B free to use any crew they want to?

 

[Throttlebender]

Well FlyFlyFly stated it perfectly.
I also just went back and re-read the original post. My mistake. It would be 135 in that scenario. I read the last line and assumed that company B had the option of using any pilots of their choice. I must have pasted right over the line prior, which stated that the pilots would be under contract with company B.

Sorry....no can do.

Unless...the contract for services between company B and the pilots was strictly between those two parties. If company A was involved only with the lease of the aircraft and in no way involved with the supplying of pilots, you might be OK.

Ah Hell....go talk to an attorney.

Cheers

 

[dpilot_citation]

Well FlyFlyFly stated it perfectly.
I also just went back and re-read the original post. My mistake. It would be 135 in that scenario. I read the last line and assumed that company B had the option of using any pilots of their choice. I must have pasted right over the line prior, which stated that the pilots would be under contract with company B.

Sorry....no can do.

Unless...the contract for services between company B and the pilots was strictly between those two parties. If company A was involved only with the lease of the aircraft and in no way involved with the supplying of pilots, you might be OK.

Ah Hell....go talk to an attorney.

Cheers

Actually, what I meant to say was there would be a "contract pilot" contract with the lessee not with the leasing company. They would have the right to use any qualified pilot, which meet the insurance company's open pilot minimums or who was named on the policy. It just so happens there is not that many available pilots current in type who they could use.



Dpilot