Aviation Business Journal 1st Quarter 2013 - 26

Doing Business in a Part 135 Environment
Continued from page 25

determine which entity holds
operational control.
Aircraft used for Part 135 flights
must be owned, leased, or otherwise
legally controlled by the air carrier.
The air carrier must have legal
possession of the aircraft during all
Part 135 flights. However, aircraft
owners may still conduct their own
flights under Part 91 and retain
operational control of those flights.
If the aircraft owner takes the
aircraft for Part 91 flights and faces
a maintenance problem, the aircraft
MUST be repaired in accordance
with the air carrier’s approved
maintenance program. If the aircraft
owner takes the aircraft to a repair
station unfamiliar with the air carrier’s
program or to a mechanic who does
not comply with drug and alcohol
testing requirements, the aircraft
might have to undergo a complex
airworthiness conformity validation
check. In other words, it is absolutely
critical that aircraft owners (and all
pilots) contact the certificate holder
with any maintenance concerns prior
to repairing the aircraft.
Several aspects related to
crewmembers can also indicate which
entity holds operational control. First,
pilots used for Part 135 flights MUST
be either employees (i.e. receive a
paycheck and W-2 from the air carrier)
or agents of the air carrier. Pilots not
directly employed by the air carrier
must sign an agency agreement prior
to flying any Part 135 flights.
The air carrier is accountable for
the acts or omissions of its agents.
Although the individual is not a
direct employee in terms of taxation,
benefits, or other standards, the agency
agreement ensures that the pilot knows

26	

he or she is working for the air carrier
and must comply with all air carrier
mandates and policies during flights
operated by the air carrier.
Crewmembers must also be trained
and tested, hold appropriate airman
and medical certificates, be qualified
for Part 135 operations, and be listed
by name and certificate number.

Operational Control Prohibitions
The FAA’s operational control
policies prohibit a number of activities
by an air carrier. First, an air carrier
may not share its authority to conduct
commercial operations. The most
common way to violate this policy is
to allow the aircraft owner to accept
compensation directly for flights.
The air carrier may not use a
fictitious name or DBA if the intent
of using the DBA is to obscure the
entity which holds (or should hold)
operational control.

“Mixed Use” Aircraft
Remember, most aircraft used in
Part 135 operations are not owned
by the certificate holder. Typically,
the aircraft are owned by private
individuals or corporations and are
managed by the certificate holder.
This means flights could be either
Part 91 or Part 135, and this is often
determined on a flight-by-flight basis.
Keep in mind, ALL maintenance
must be conducted in accordance
with the Part 135 requirements and
air carrier’s GMM or maintenance
procedures.

“Mixed Use” Aircraft and
Operational Control
Who holds operational control of
a “mixed use” aircraft? Two scenarios
are common in Part 135 operations.

In the first scenario, the air carrier
holds operational control of all ondemand Part 135 flights — that is,
any flight for hire or compensation
— plus training, maintenance, and
repositioning flights. In this scenario,
the aircraft owner retains operational
control during Part 91 flights for the
owner. (The owner does not have to
be on the aircraft — the passengers
could be family members, friends,
colleagues, etc. The key point here
is that no compensation can be
exchanged for the flight and the
owner is responsible for the flight.)
In the second scenario, the air
carrier holds operational control at all
times. This scenario is less common,
as it means the aircraft owner
NEVER holds operational control
and therefore the owner’s flights are
conducted under Part 135. There are
tax implications to this scenario, and
it is rarely chosen based on business
issues alone.

Operational Control and Business
Decisions
Operational control issues, such
as which entity holds operational
control for specific types of flights, are
typically described in the air carrier’s
management agreements.
As previously mentioned,
operational control has many tax
implications, including whether a
federal excise tax is collected, what
depreciation schedule is used, and
more. These are complex issues
that will not be addressed in detail
here, but you should be aware that,
although operational control seems to
be an operations issue only, it is also
a business decision for the aircraft
owner and air carrier.

Aviation Business Journal  |  1st Quarter 2013
Aviation Business Journal 1st Quarter 2013

Table of Contents for the Digital Edition of Aviation Business Journal 1st Quarter 2013
