The Problem of Illegal Charter Continued from page 29 » is providing one or more of the crewmembers, » is arranging for the train- ing of those crewmembers, » selects or assigns par- ticular crewmembers for particular flights, » employs and/or is directly pay- ing for those crewmembers, » has responsibility for determining the airwor- thiness of the aircraft, » has responsibility for ensur- ing that proper maintenance of the aircraft is performed, » has responsibility for initiat- ing and terminating flights, » has been specifically desig- nated to be in operational control of the flight, » is accepting regulatory liabil- ity and responsibility for the conduct of the flight, and » is providing insurance and/or otherwise address- ing any civil liability that can come out of a flight. Other than in situations where the aircraft and aircrew are explicitly provided together, no one of these items is absolutely dispositive in and of itself. And although what the lease says on its face can be very important, the more these factors collectively point to one person (who, by the way, can be the lessor, the lessee, or even a management company or pilot who is in the middle and arrang- ing everything), the more likely it is that this one person has assumed operational control of the aircraft. And, if that one person is not the lessee, then the agreement you are looking at is not a dry lease. Keep in Aviation Business Journal | 1st Quarter 2018 mind the old saying: “if it looks like a duck, and walks like a duck, and quacks like a duck, then it’s a duck.” A Chief Counsel Interpretation Letter issued as recently as December 28, 2017, summa- rizes the situation nicely: If the aircraft is dry leased, the FAA will conduct a case- by-case analysis to determine whether the companies assumed operational control of the aircraft. The Agency will evaluate Lessee’s discre- tion to procure independent flight crews, and will look for any pattern of evidence that denotes that the parties to the lease agreement “acted in concert” through a com- bination of transaction or dealings to furnish a “leasing package” that includes both the aircraft and crewmem- bers. The FAA will consider who maintains liability for the operation of the flights, who conducts maintenance, and who dispatches the Aircraft. . . . The goal of conducting this analysis is to identify and prevent execution of “wet leases in disguise” which seek to avoid part 119 certification. Ultimately, someone will have operational control of the flight. If the lease has successfully transferred that control to the lessee, then the lease can fairly be called a dry lease. If not, then operational control resides with either the lessor or some other party (such as the manager); and, that person with operational control: (a) is most likely the very definition of a commercial operator—a person who transports persons or property for compensation or hire, and (b) most likely must obtain commercial certification and conduct the flights in question under the applicable commercial rules, such as Part 135. Additionally, even when a true dry lease is in place, that does not necessarily end the inquiry. Just because a lessee has assumed opera- tional control of the aircraft under a dry lease does not necessarily mean that the lessee can conduct its flights under Part 91. For example, if the lessee is actually a “flight depart- ment company” (as noted above), then that company would still need to obtain an air carrier certificate and conduct its flights under Part 135. Moreover, if a dry lease transfers operational control to a lessee, who then turns around and further leases the aircraft to others in exchange for compensation, then the first lease may be dry but the second one is most likely wet. In short, you can- not stop just at the level of the first lease, but need to drill down to the final operator of the actual flights in question to see if they can be con- ducted under Part 91 or must be conducted under Part 135 instead. CONSEQUENCES What are the consequences of doing all of this wrong? First, from the regulatory standpoint—and keep- ing in mind that one of the FAA’s fun- damental regulatory obligations is to protect the safety of passengers, espe- cially when commercial operations are involved—you have to understand Continued on page 33 31
