Interchange agreements

[English]

Okay, boring subject, but I need the expertise of some of our members here.

Example and question:

Let's say we have two airplanes that are managed by the same management company. Aircraft 1 is owned and flown solely by a private individual. Not on the charter certificate. Aircraft 2 is owned by several different partners in 1/8 fractions and is on a charter certificate.

An owner of aircraft 2 wants to go on a trip, but the plane is booked on a charter. Management books aircraft 1 for the trip for owner of aircraft 2and assigns company pilot to fly the trip on the non-owned aircraft. There is no written interchange agreement in place. When management is queried, the answer to the legaility questions range from, "aircraft 1's ops specs are supposed to show up any day now" to "there is a mangement agreement in place, an interchange agreement is not necessary, we have aircraft owner 1's verbal approval to use his plane".

Is this a legal trip?

 

[corpflunkie]

In a nutshell, if the person utilizing the aircraft has no share in the aircraft, it is an illegal charter... unless of course, one of the owners is footing the full expense him/her self.

 

[501261]

Interchange agreements are fine and dandy under 91.501c2. Pretty normal for a couple of companies to do that. They both can share an airplane if one goes down for MX or other reasons. Certainly can't run any 135 stuff using this kind of agreement.

Here's the big gotcha.....91.23 (truth in leasing) could be interpreted to mean that the FAA is required to have written notification of an interchange agreement for that interchange agreement to be effective.

Now to answer your question is the trip legal? Well this is complicated, it can be. Under 91.501b4 this trip can be flown, however your passenger can't be charged anything. If he's charged something then the trip could be construed as 135 thereby making it illegal. On the other hand if he is simply sharing the airplane and the affiliated costs with a fellow airplane owner then 91.501c and d would apply and the trip is perfectly legal, but again 91.23 might rear its ugly head and an overaggressive POI might say "well, if I don't have a copy of the interchange agreement its not an interchange, its illegal charter!"

In my opinion your big problem is that you've got op specs coming for this airplane, meaning your friendly POI is poking his nose around and might get interested in something that he'd usually steer away from.

I'm also interested in other responses to this issue regarding 91.501 interchange agreements, specifically if you've got subsidiary A owning airplane A and subsidiary B owning airplane B with the parent company paying charge backs (91.501d) to its subsidiaries for the use of its airplanes

Good luck and thanks in advance for your responses.

 

[English]

So if I understand this correctly, this trip will be legal if the owner of aircraft 1 eats the costs of the flight done for the owner of aircraft 2? What costs can the (fractional) owner of aircraft 2 pay and still have it be legal?

Does it make any difference that aircraft 1 was crewed with a pilot who works exclusively for aircraft 2?

For sake of example, let's say that the management company usually charges the fractional owners a flat hourly rate (less than the retail charter rate but more than the actual hourly cost) to fly their own airplanes. If the fractional owner is charged this same rate to fly the non-owned aircraft (aircraft 1), is this legal or pointing again to illegal charter?

 

[rice]

I'm not a Lawyer

And I don't play one on TV but....................

Verbal means nothing, repeat NOTHING!!!!!! Never, ever, ever!!!!
Not much you as a pilot can do about it though. How hard would it be for the company to get on the computer and print up a generic interchange agreement until the Op specs arrive? Something aint right here and it sounds like someone is blowing smoke at you, but if it was me doing the flying I'd at least have a witness who was present when the boss said he had the verbal okay to use the aircraft, CYA!!!!

 

[501261]

Re: I'm not a Lawyer

Something aint right here and it sounds like someone is blowing smoke at you, but if it was me doing the flying I'd at least have a witness who was present when the boss said he had the verbal okay to use the aircraft, CYA!!!!

Good point Rice,

Seems like the management company is doing what management companies do and wants you to fly a borderline trip. The management company should either broker out the charter on aircraft 2 or simply charter another airplane for owner 2. But will they do that, of course not, since they'd either lose their commission in scenario 1 or lose face to the owner in scenario 2.

Now if I were you, I'd simply be a pilot in this case “Sir my employer, ABC management, dispatched me on the trip, since we also operate under FAR 135, ABC instructed me that since Mr. Smith is an owner this trip should be run under the provisions of FAR 91.” Of course, if it was an obvious illegal charter you need to turn it down. This one’s certainly not obvious. Protect yourself by asking your superior (Chief Pilot) point blank if this trip could be construed as an illegal charter, then just for good measure I'd ask his superior (DO). All the while I'd conveniently have a fellow pilot around to witness me asking them those questions.

You asked if this trip were legal if Owner 1 eats the cost of a trip for Owner 2? You bet, that would be no different than Owner 1 taking his mother-in-law back to Arkansas. Covered by 91.501b4. That's one of the reasons you own an airplane so that get rid of your mother-in-law.

You asked what charges the owner of aircraft 2 can pay and still be legal. 91.501d spells it out clearly, also notice 91.501d10. With that little inclusion your hourly rate can be pretty close to almost the charter rate*. HOWEVER, for your company to charge for the flight under 91.501d you need to have a written time share, interchange, or joint ownership agreement as required by 91.501c. And my POI believes that under 91.23 he is required to have a copy of the 91.501c1 timeshare agreement before it becomes “legal”**.

*CJ2 burns 150 gallons per hour x $2.50 per gallon = $375 X 100% (=$750) + oil , ramp fees, catering etc. your hourly fee can be close to $1000 per hour and still fit into 91.501d.

** This little point seemed extremely trivial to me and I’ve never looked into its actual legality, if the POI wanted a copy of the timeshare agreement he can have one.

 

[pa56pa]

Verbal means nothing, repeat NOTHING!!!!!! Never, ever, ever!!!!

just FYI guys.... if you ever get into a "verbal" agreement, and you don't have anything in writing... YES, that is admissable in court and can be taken evidence..... but Rice is correct.... DONT EVER GO THERE... get it in writing..

I'm not a lawyer either.. just my stepfather... lol

 

[pa56pa]

clarification..

Verbal means nothing, repeat NOTHING!!!!!! Never, ever, ever!!!!

just FYI guys.... if you ever get into a "verbal" agreement, and you don't have anything in writing... YES, that is admissable in court and can be taken evidence..... but Rice is correct.... DONT EVER GO THERE... get it in writing..

I'm not a lawyer either.. just my stepfather... lol

 

[English]

501261,

Thanks. I can always count on you on this board for accurate info.

I wish you were my chief pilot.