Part 91 lease

[SheGaveMeClap]

This has been talked about before, but I couldn't find it back. I know this is a touchy subject, but I'm going to ask it anyway. Here's the scenario:

Company A and Company B are friends. Both want an airplane, and Company A is larger than Company B. A would fly the airplane about 250 hours per year, and B would use it another 100 hours per year. Company A wants all the tax benefits of owning the airplane, and B doesn't care about the tax benefit, they just want the 100 hours of use. Neither company is interested in 134 1/2 with the airplane, it's for their exclusive uses.

I've seen situations where Part 91 companies set up dry or wet leases with other companies. Is there a way to set this up without the FAA crawling all over you?

Who is in a situation like this now? I know some companies have used a good aviation attorney with knowledge in this area. Can anyone make any suggestions on who to use? Or where to start?

I just want to get the agreement made without anyone getting into trouble and keep the FAA happy. Suggestions anyone? Feel free to PM me if you feel like it. Thanks in advance.

 

[Hawker800]

Obtain a good attorney that can handle partnerships in aircraft ownership, and can advise as to how the flight crew is compensated. Also get a very good tax professional for both Federal and State taxes. The NBAA is a great source of information. AOPA may also have some insight.
Good luck.

 

[Lead Sled]

We just went through all of this last year. No wet leasing allowed. You're talking a dry lease only and it's not that big of a deal, but there are a LOT of potential gotchas. Don't even think about doing it without a competent aviation attorney who is well versed in the FARs to guide you through the process. If you're serious, PM me and I'll put you in touch with the guy we used. He's one of the best there is and he's very reasonable.

LS

 

[SansPlane]

Filthy stinking rich... Well, two out of three ain't bad.

I am not sure how long this has been around but this is the first time I have seen it and I have to state that it is pretty cute - in a manly way of course, taking for granted that I fit the man profile… hair vegetable to you Lead…

 

[pal]

This has been talked about before, but I couldn't find it back. I know this is a touchy subject, but I'm going to ask it anyway. Here's the scenario:

Company A and Company B are friends. Both want an airplane, and Company A is larger than Company B. A would fly the airplane about 250 hours per year, and B would use it another 100 hours per year. Company A wants all the tax benefits of owning the airplane, and B doesn't care about the tax benefit, they just want the 100 hours of use. Neither company is interested in 134 1/2 with the airplane, it's for their exclusive uses.

I've seen situations where Part 91 companies set up dry or wet leases with other companies. Is there a way to set this up without the FAA crawling all over you?

Who is in a situation like this now? I know some companies have used a good aviation attorney with knowledge in this area. Can anyone make any suggestions on who to use? Or where to start?

I just want to get the agreement made without anyone getting into trouble and keep the FAA happy. Suggestions anyone? Feel free to PM me if you feel like it. Thanks in advance.

Applicable rules fyi.

Copy of agreement must be filed with FAA (Ok City and local FSDO), but an aviation attorney with prior experience in this area is recommended.


Title 14: Aeronautics and Space
PART 91—GENERAL OPERATING AND FLIGHT RULES
Subpart F—Large and Turbine-Powered Multiengine Airplanes and Fractional Ownership Program Aircraft

§ 91.501 Applicability.
(a) This subpart prescribes operating rules, in addition to those prescribed in other subparts of this part, governing the operation of large airplanes of U.S. registry, turbojet-powered multiengine civil airplanes of U.S. registry, and fractional ownership program aircraft of U.S. registry that are operating under subpart K of this part in operations not involving common carriage. The operating rules in this subpart do not apply to those aircraft when they are required to be operated under parts 121, 125, 129, 135, and 137 of this chapter. (Section 91.409 prescribes an inspection program for large and for turbine-powered (turbojet and turboprop) multiengine airplanes and turbine-powered rotorcraft of U.S. registry when they are operated under this part or part 129 or 137.)
(b) Operations that may be conducted under the rules in this subpart instead of those in parts 121, 129, 135, and 137 of this chapter when common carriage is not involved, include—
(1) Ferry or training flights;
(2) Aerial work operations such as aerial photography or survey, or pipeline patrol, but not including fire fighting operations;
(3) Flights for the demonstration of an airplane to prospective customers when no charge is made except for those specified in paragraph (d) of this section;
(4) Flights conducted by the operator of an airplane for his personal transportation, or the transportation of his guests when no charge, assessment, or fee is made for the transportation;
(5) Carriage of officials, employees, guests, and property of a company on an airplane operated by that company, or the parent or a subsidiary of the company or a subsidiary of the parent, when the carriage is within the scope of, and incidental to, the business of the company (other than transportation by air) and no charge, assessment or fee is made for the carriage in excess of the cost of owning, operating, and maintaining the airplane, except that no charge of any kind may be made for the carriage of a guest of a company, when the carriage is not within the scope of, and incidental to, the business of that company;
(6) The carriage of company officials, employees, and guests of the company on an airplane operated under a time sharing, interchange, or joint ownership agreement as defined in paragraph (c) of this section;
(7) The carriage of property (other than mail) on an airplane operated by a person in the furtherance of a business or employment (other than transportation by air) when the carriage is within the scope of, and incidental to, that business or employment and no charge, assessment, or fee is made for the carriage other than those specified in paragraph (d) of this section;
(8) The carriage on an airplane of an athletic team, sports group, choral group, or similar group having a common purpose or objective when there is no charge, assessment, or fee of any kind made by any person for that carriage; and
(9) The carriage of persons on an airplane operated by a person in the furtherance of a business other than transportation by air for the purpose of selling them land, goods, or property, including franchises or distributorships, when the carriage is within the scope of, and incidental to, that business and no charge, assessment, or fee is made for that carriage.
(10) Any operation identified in paragraphs (b)(1) through (b)(9) of this section when conducted—
(i) By a fractional ownership program manager, or
(ii) By a fractional owner in a fractional ownership program aircraft operated under subpart K of this part, except that a flight under a joint ownership arrangement under paragraph (b)(6) of this section may not be conducted. For a flight under an interchange agreement under paragraph (b)(6) of this section, the exchange of equal time for the operation must be properly accounted for as part of the total hours associated with the fractional owner's share of ownership.
(c) As used in this section—
(1) A time sharing agreement means an arrangement whereby a person leases his airplane with flight crew to another person, and no charge is made for the flights conducted under that arrangement other than those specified in paragraph (d) of this section;
(2) An interchange agreement means an arrangement whereby a person leases his airplane to another person in exchange for equal time, when needed, on the other person's airplane, and no charge, assessment, or fee is made, except that a charge may be made not to exceed the difference between the cost of owning, operating, and maintaining the two airplanes;
(3) A joint ownership agreement means an arrangement whereby one of the registered joint owners of an airplane employs and furnishes the flight crew for that airplane and each of the registered joint owners pays a share of the charge specified in the agreement.
(d) The following may be charged, as expenses of a specific flight, for transportation as authorized by paragraphs (b) (3) and (7) and (c)(1) of this section:
(1) Fuel, oil, lubricants, and other additives.
(2) Travel expenses of the crew, including food, lodging, and ground transportation.
(3) Hangar and tie-down costs away from the aircraft's base of operation.
(4) Insurance obtained for the specific flight.
(5) Landing fees, airport taxes, and similar assessments.
(6) Customs, foreign permit, and similar fees directly related to the flight.
(7) In flight food and beverages.
(8) Passenger ground transportation.
(9) Flight planning and weather contract services.
(10) An additional charge equal to 100 percent of the expenses listed in paragraph (d)(1) of this section.
[Doc. No. 18334, 54 FR 34314, Aug. 18, 1989, as amended by Amdt. 91–280, 68 FR 54560, Sept. 17, 2003]

 

[SheGaveMeClap]

In my case the agreement would be in the form of a lease, not joint ownership. One of the companies doesn't want to own the airplane, the other does. I don't think fractional rules would apply here.

 

[con-pilot]

The key is under sub part d.

(d) The following may be charged, as expenses of a specific flight, for transportation as authorized by paragraphs (b) (3) and (7) and (c)(1) of this section:
(1) Fuel, oil, lubricants, and other additives.
(2) Travel expenses of the crew, including food, lodging, and ground transportation.
(3) Hangar and tie-down costs away from the aircraft's base of operation.
(4) Insurance obtained for the specific flight.
(5) Landing fees, airport taxes, and similar assessments.
(6) Customs, foreign permit, and similar fees directly related to the flight.
(7) In flight food and beverages.
(8) Passenger ground transportation.
(9) Flight planning and weather contract services.
(10) An additional charge equal to 100 percent of the expenses listed in paragraph (d)(1) of this section.
[Doc. No. 18334, 54 FR 34314, Aug. 18, 1989, as amended by Amdt. 91–280, 68 FR 54560, Sept. 17, 2003]

This is a simple lease agreement. As it was pointed out above have an Law Firm familiar with this section draw up the lease agreement.

 

[Len]

"Copy of agreement must be filed with FAA (Ok City and local FSDO), but an aviation attorney with prior experience in this area is recommended."



Maybe I need to read it a 5th time but where does it say you have to file the agreement with the FAA? Not argumentative, just curious...

 

[ekuflyer]

"Copy of agreement must be filed with FAA (Ok City and local FSDO), but an aviation attorney with prior experience in this area is recommended."



Maybe I need to read it a 5th time but where does it say you have to file the agreement with the FAA? Not argumentative, just curious...

Look at
§ 91.23 Truth-in-leasing clause requirement in leases and conditional sales contracts.

 

[pal]

In my case the agreement would be in the form of a lease, not joint ownership. One of the companies doesn't want to own the airplane, the other does. I don't think fractional rules would apply here.

Take a closer look and don't let the title fool you. The majority of the paragraphs and subparts do not apply to "joint ownership," particularly from paragraph b down. As pointed out above, paragraph d details what you can charge for lease/timesharing.

 

[SheGaveMeClap]

Pal,

I see what you are saying after further reading. However, this part is also concerning:

By a fractional owner in a fractional ownership program aircraft operated under subpart K of this part, except that a flight under a joint ownership arrangement under paragraph (b)(6) of this section may not be conducted

At any rate, I've gathered alot of information with help from several individuals involved in this thread. I know which direction to go from here. Thanks alot for your help.

 

[RubberNeck]

We are think of doing the same thing. Can I be done from an in house 91 operation or do the pilots and aircraft have to be employed through a separate company. and can it be an umbrella company from main one???
Thanks

RN

 

[Lead Sled]

We are think of doing the same thing. Can I be done from an in house 91 operation or do the pilots and aircraft have to be employed through a separate company. and can it be an umbrella company from main one???
Thanks

RN

PM me.

LS