All posts tagged 'aircraft rental'

Can You Barter For Aircraft Rental And Expenses? FAA Says "Yes"

As you may know, the FAA defines compensation very broadly. Compensation may include not only the exchange of money, but also the exchange of value. With this expansive view of compensation as a backdrop, the FAA was recently asked whether it was permissible to barter services in exchange for (1) a private pilot's pro-rata share of operating expenses under 14 C.F.R. § 61.113(c) and (2) rental of an aircraft.

In the first scenario presented to the FAA, a private pilot (Pilot A) who is also in the business of aircraft detailing desires to barter aircraft detailing services in exchange for Pilot A's pro-rata share of expenses on common-purpose, recreational flights in an aircraft owned by Pilot B, also a private pilot, and with Pilots A and B as the sole occupants of the aircraft during the flights. The common-purpose for the flights would be the building of pilot time as allowed by applicable regulations.

For purposes of the request, the FAA was asked to assume that the aircraft's type certificate does not require operation by two crewmembers, the flights are operated under 14 C.F.R. Part 91, and during the common-purpose flights one pilot is acting as pilot in command and the other pilot is strictly a passenger and not a required crewmember.

Pilot A would perform aircraft detailing services for Pilot B's aircraft. Pilot A and B would determine the fair market value of the aircraft detailing service and that amount would applied to Pilot A's pro-rata share of the operating expenses of the flights shared by Pilots A and B.

Based upon this first scenario, the FAA answered the following questions:

Question 1: Does Pilot A's bartering of services in exchange for Pilot A's pro-rata share of the operating expenses of a common-purpose flight with Pilot B comply with 14 C.F.R. 61.113(c)?

Answer: Yes, as long as the amount of the bartered services did not exceed Pilot A's pro-rata share of the expenses, otherwise Pilot B would be in violation of § 61.113(c).

Question 2: May Pilots A and B agree upon the fair market value of the aircraft detailing services to be bartered against Pilot A's pro-rata share of the operating expenses for the common-purpose flight?

Answer: Yes, the two parties to the transaction would need to reach an agreement with respect to the fair market value and, although FAA regulations do not require a written record of the agreement, they could certainly make such a record. (I would certainly recommend that the parties have a written agreement executed at the time of the transaction, rather than trying to later come up with documentation to prove the agreement as to fair market value.)

Question 3: May the fair market value of the aircraft detailing services be applied prospectively to Pilot A's pro-rata share of operating expenses for future/successive common-purpose flights with Pilot B?

Answer: Yes.

Question 4: What documentation, if any, would Pilots A and B need to evidence their compliance with 14 C.F.R. § 61.113(c) in this scenario?

Answer: None. The FAA does not require any documentation. (However, having appropriate documentation will definitely help in proving compliance.)

In the second scenario provided to the FAA, a private pilot (Pilot A) who is also in the business of aircraft detailing desires to barter aircraft detailing services in exchange for rental of an aircraft owned by Pilot B for personal flights operated under 14 C.F.R. Part 91 and in which Pilot A would be the sole occupant. The FAA was asked to assume for purposes of the request that the aircraft being rented is a type certificated aircraft with a standard airworthiness certificate and is not subject to the Truth-in-Leasing requirements of 14 C.F.R. § 91.23.

Question 5: Does Pilot A's bartering of services in exchange for rental of Pilot B's aircraft violate any regulations administered by the Federal Aviation Administration?

Answer: It does not violate any FAA regulations.

Question 6: May Pilot A and B agree upon the fair market value of the aircraft detailing services to be bartered against Pilot A's rental of Pilot B's aircraft?

Answer: Yes, as long as the flight is not for compensation or hire.

Question 7: May the fair market value of the bartered aircraft detailing services be applied prospectively to Pilot A's future/successive rental of Pilot B's aircraft?

Answer: Yes, as long as the flight is not for compensation or hire.

Question 8: What documentation, if any, would Pilots A and B need to evidence the barter arrangement under this scenario in order to comply with any applicable regulations?

Answer: FAA regulations do not require documentation.

Although the FAA's answers were short and sweet, without any in-depth analysis of the regulations' application to the factual scenarios, at least the FAA has provided some guidance regarding the viability of barter transactions in connection with aircraft use, rental and expenses. As with most situations when dealing with the FAA, having a paper trail to document your compliance is a good idea. Thus, if you are going to enter into a barter arrangement, make sure you have something in writing that not only explains the barter transaction but also substantiates the fair market values upon which the barter transaction is based.

Thanks to the FAA's guidance, aircraft owners and pilots now have another option for aircraft use and rental. And that's a good thing.

Are You Insured When You Rent an Aircraft?

When you rent an aircraft from an FBO or some other aircraft owner, you know that as pilot-in-command you have responsibility for operating that aircraft in compliance with the FARs. But other than having to face the wrath of the FAA, what is your responsibility if something bad happens during a flight (e.g. an accident)?  Ideally, you hope you have insurance to cover you.  Unfortunately, when you rent an aircraft, that may not always be the case. The estate of a renter pilot found that out the hard way in a recent case.

In Knezovich v. Hallmark Insurance Co., a student pilot rented an aircraft from an FBO. While he was operating the aircraft solo, he was involved in a midair collision that took his life, as well as the life of the pilot and passenger in the other aircraft. A number of wrongful death lawsuits ensued.  Additionally, the estate of the deceased student pilot sued the insurance company that insured the aircraft seeking a judgment declaring that the insurer owed the estate a duty to defend and indemnify the estate in the wrongful death lawsuits.

Ultimately, the Court determined that the insurer was not required to defend or indemnify the estate of the deceased student pilot because the policy language specifically excluded coverage for a pilot, student or otherwise, who rented an aircraft.  Since the student pilot rented the aircraft for a solo flight, rather than a flight in which he received instruction from one of the FBO's flight instructors, the Court held that the insurance policy did not provide coverage.

Although this is an unfortunate situation for the deceased pilot's estate, this case serves as a reminder to anyone who rents aircraft to confirm that insurance coverage is in place that will protect the renter.  It isn't enough to simply ask the FBO or aircraft owner whether they have insurance. You need to be sure that coverage is in place to protect you, the person renting the aircraft.  If the aircraft owner's or FBO's insurance doesn't provide coverage, you need to know that so you can understand your risk and either obtain coverage elsewhere or go without.

For more information regarding aircraft insurance, please read my articles Aircraft Insurance Coverage: Will You Have It When You Need It? and My Policy Says What?!: Understanding An Aircraft Insurance Policy.

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