Owners of business aircraft frequently face the question of whether their aircraft should be operated under 14 C.F.R. Part 91 (“Part 91”) or Part 135 (“Part 135”). And it isn’t uncommon for owners to simplistically choose Part 91 because they have been led to believe that Part 135 is far too expensive and restrictive. Unfortunately, that answer isn’t necessarily the correct answer for all circumstances. The question is more complicated and requires a thorough analysis of the facts.
Generally speaking, it is true that aircraft may be operated under Part 91 with fewer restrictions and regulatory requirements than when operating under Part 135. However, from a risk management perspective, Part 135 exposes the charter customer to the least amount of regulatory and legal liability risk. As a result, it is necessary to understand the key distinctions between operations under Parts 91 and 135 in order to determine how they apply to a particular situation.
Let’s look at some of the differences between Part 91 and 135:
The operator of an aircraft has primary legal liability for injury to persons or property arising from an aircraft accident or incident regardless of whether the operation is conducted under Part 91 or Part 135. The operator is the party who exercises authority over initiating, conducting or terminating a flight (“Operational Control”). The operator of the flight has legal liability whether the operator is the actual owner of the aircraft or merely a lessee.
An entity that owns an aircraft may operate that aircraft under Part 91 as long as (1) that operation is incidental to its business, and (2) the operator is paying for those operations out of its normal revenue without receiving compensation or reimbursement from some other person or entity. That is, the entity must derive at least 51% of its revenue from business that is unrelated to its use of the aircraft, and then use and pay for that use incidental to that primary business activity. In such a situation the entity is exercising Operational Control of the aircraft and as the operator it has liability for its operation of the aircraft.
Expanding on this concept, an entity whose sole purpose is to own the aircraft (an “SPE”) may not operate the aircraft without certification from the FAA to act as an air carrier, i.e., it must have a “Part 135 certificate.” However, it is common under the FAA’s rules for an SPE to own the aircraft solely for the purpose of leasing it to other parties. For example, an aircraft may be owned by an SPE and then leased to an individual or business lessee who will then operate the aircraft under Part 91 pursuant to a “dry-lease,” with, as noted above, such lessee’s use being incidental to the lessee’s primary non-aviation-related business. A dry-lease is a lease for the aircraft alone, without crew, and may be with or without fuel, with the lessee then being responsible for providing its own flight crew either directly (e.g. lessee’s employee(s)), or hired as independent contractors from an outside source (e.g. a pilot services or aircraft management company). In this situation, the lessee is exercising Operational Control, and as the operator of the aircraft it has assumed all regulatory and civil liability for each of its operations of the aircraft under the lease (regardless of how it obtained its pilots, who performs the maintenance, and so forth).
Conversely, where the Part 135 certificate holder exercises Operational Control over the aircraft and all flights, that Part 135 certificate holder has assumed regulatory and civil legal liability for injury to persons or property arising from an aircraft accident or incident. Passengers on the aircraft do not have legal liability.
An aircraft owner, whether SPE or otherwise, may lease an aircraft to a Part 135 certificate holder under a dry-lease. The Part 135 operator then provides the crew (either using the Part 135 operator’s employees or independent contractors who are then agents of the Part 135 operator) and conducts operations pursuant to its Part 135 certificate. In most cases the entity that owns the aircraft will not have any legal liability for the Part 135 certificate holder’s operation of the aircraft.
In addition to risk management, various differences between operational conditions and limitations under Parts 91 and Part 135 must also be considered. These include:
- Airport Limitations:
- Runway Length Requirements.
Part 91 - Runway length requirements are determined solely by aircraft requirements and limitations.
Part 135 - The aircraft must be capable of landing within 80% of the runway length. This affects/limits access to a significant number of smaller airports that may be more conveniently located to the ultimate destination.
- Weather Reporting.
Part 91 - An aircraft may begin an instrument approach to airports where there is no weather reporting and the pilots determine when they approach the airport whether they can land safely. Additionally, an aircraft may depart from an airport below IFR weather minimums.
Part 135 - An aircraft may not begin an approach to an airport that has no weather reporting facility unless the alternate airport has approved weather reporting. This may not only adversely impact whether or when a flight may depart, but it again has the potential to limit access to airports that are more conveniently located to the ultimate destination. Takeoff and alternate airport minimums also restrict whether and when a flight may be conducted.
- Flightcrew Member Restrictions:
- Pilot Agency.
Under both Parts 91 and 135 Flightcrew members must be agents of the party exercising operational control. This agency may be established by employment or contract. Flightcrew members who are employees of an entity other than the Part 135 certificate holder may be paid by their employer and still be agents of the Part 135 certificate holder provided the flightcrew members have entered into an appropriate agency agreement with the Part 135 certificate holder.
- Flightcrew member Duty Time Limitations and Rest Requirements.
Part 91 - Flightcrew member duty time and rest requirements are not imposed. This means the flightcrew members may operate the aircraft on multiple flights as long as they feel they are adequately rested and safe to fly.
Part 135 - Flightcrew members are requirement to comply with specific duty time and rest requirements. The rules are complicated, but generally provide for a maximum assigned 14 hour duty day, limitations on the number of flight hours during a 24-hour period and required rest periods. Once a flightcrew member has reached his or her limit, that flightcrew member may not fly until the applicable rest requirements have been satisfied.
- Drug and Alcohol Testing.
Part 91 - Drug and alcohol testing of flightcrew members is not required.
Part 135 - Certificate holders must comply with the same drug and alcohol testing requirements as air carriers operating under Part 121. Flightcrew members are subject to pre-employment/transfer, random, reasonable suspicion/cause, post-accident, return to duty, and follow up drug and alcohol testing pursuant to the Part 135 operator’s drug and alcohol testing program.
- Restrictions and Fees in Foreign Countries:
Part 91 - Operations may be subject to some additional fees, but are typically not required to obtain additional licensing to operate in foreign countries.
Part 135 – Certificate holders operating within foreign countries are subject to bilateral air transport agreements between the U.S. and those countries. These agreements subject the Part 135 operator to fees, regulations and additional licensing imposed by foreign countries for its commercial operations. The fees are typically passed on to the customer, increasing the cost of the charter flight.
- Maintenance and Equipment:
Any U.S. registered aircraft must be maintained under some form of approved maintenance program. Under Part 91 this is typically done under the manufacturer’s basic recommended maintenance program, and so long as the operator meets those requirements, no further compliance or oversite by the FAA is required. Under Part 135, the aircraft must be maintained in accordance with a program that has been specifically approved by the FAA for that particular operator, and while these plans are commonly based on a manufacturer’s programs, they also typically include additional requirements imposed on top of the manufacturer’s requirements. Thus, depending upon the age and condition of the aircraft and whether it is currently enrolled in any maintenance or warranty programs, the cost of maintenance for an aircraft operated under Part 135 is potentially higher than if the aircraft were operated solely under Part 91. Because a Part 135 certificate holder cannot operate an aircraft unless it can document that the aircraft has been continuously maintained under its FAA-approved program, the practical effect of this is that if the aircraft is held in an SPE and then leased to both a Part 91 operator for its occasional use and to a Part 135 certificate holder for its use, then the aircraft will need to be maintained at all times under the approved Part 135 program, so the cost differential between Part 91 and Part 135 maintenance programs will largely become irrelevant.
- TSA Security Requirements:
Part 91 – Operations are not subject to TSA security program requirements. Part 91 operators are not permitted to operate within sterile areas at airports.
Part 135 - Certificate holders operating aircraft with a gross take-off weight in excess of 12,500 pounds are required to have a TSA approved security program in place. The Part 135 operator’s flightcrew members are subject to criminal history records checks and certain training requirements. The security program requires timely transmittal of crew and passenger lists in advance of flights. This means that last-minute changes of passengers on a particular flight is usually not possible. Also, if the flight will be enplaning or deplaning within the sterile area of an airport then additional screening requirements must be met.
As you can see, operations under Parts 91 or 135 have both advantages and disadvantages. Owners and operators of business aircraft need to carefully consider each in the context of their own circumstances. An in-depth discussion with a knowledgeable aviation attorney is also recommended to make sure their decision is the right one for their situation.