company, then that company may become subject to significant civil penalties for conducting its per se commercial flights under Part 91. If a certificated air carrier is conduct- ing operations for that flight depart- ment company and agrees to fly the aircraft under Part 91, then it may be subject to an FAA action against its own certificate. If operators are conducting flights that require special authorizations they don’t individually hold, then that can lead to civil penal- ties as well. And all of these issues don’t touch on separate certificate actions the FAA could take against the pilots individually, as well as significant denial-of-coverage issues that could arise with respect to the operator’s insurance. Finally, it is also important to note: if you are conduct- ing, what the FAA considers to be, a commercial operation (even when you don’t realize it), then you very likely may be conducting an operation the IRS considers to be commercial in nature as well, and therefore could be subject to federal excise taxes for that flight—but that is an issue for another article on a different day. Conclusion These rules can admittedly be very confusing, and noncompliance is rampant, but the fact that non- compliance is common won’t save you if you are the operator that has come to the FAA’s attention. So what is someone to do? The short answer is that for each, separate flight of an aircraft, the parties need to go through the following analysis: First, identify who is the opera- tor of the aircraft. Is it the registered owner, or is it a party such as an individual or an air carrier that has assumed operational control of the aircraft under a dry lease? Second, ask if that operator is receiving any form of reimburse- ment compensation or value in exchange for conducting the flight. If the answer is no—the operator is an individual covering the costs herself, or is a company using the airplane incidental to its underlying business with no reimbursements being sought or paid in either case— then go forth and fly under Part 91. If the answer is yes and the opera- tor is the certificate holder who is being paid to carry passengers under Part 135, then that analysis is easy— go conduct the flight as permitted under its Part 135 certificate. If it is a company that is using the aircraft incidental for its business use, then further analyze the situation to see if any of the 91.501 exemptions apply. If they don’t, then either don’t accept any reimbursements or find a way to have the flight conducted under Part 135. And finally, if the proposed operator is a flight department com- pany—don’t do it! Don’t become an operator under “Part 134 ½.” Either have the flight conducted under Part 135 by the air carrier or look at some other option, such as dry leasing the aircraft to parties that can act as their own Part 91 operators. David T. Norton is a partner and head of the aviation practice at the law firm of Shackelford, Bowen, McKinley & Norton, LLP, in Dallas, Texas. He holds a B.S. from the USAF Academy, an M.B.A. from the Louisiana Tech University, and a J.D. from the Southern Methodist University Law School. He has an internationally recognized practice that focuses exclusively on business aviation industry regulatory, transac- tional, tax, dispute resolution and risk management issues. He is very active in many business aviation industry- related committees and groups, such as serving as Industry Co-Chair of the joint FAA/Industry RVSM LOA Process Enhancement Team of the Performance based Advisory Rule Marketing Committee. He was a regular com- missioned officer in the U.S. Air Force from 1984 to 1993, serving primarily as a KC-10A pilot and aircraft commander, and currently holds FAA certification as an airline transport pilot (multi-engine land) with a DC-10 type rating, a com- mercial pilot (single-engine land), and as certified flight instructor, instrument and multi-engine, and advanced ground and instrument instructor. Please feel free to call him directly at (214) 780-1407, or E-mail him at dnorton@ shackelfordlaw.net, if you have any questions concerning the article. Aviation Business Journal | 1st Quarter 2017 23
