The Gray Market is now Black and White

legal v. illegal
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14 CFR § 61.113(c) defines what may and may not be charged for a Part 91 flight

FAA and industry have worked to reduce any misunderstandings

No Longer Gray

Insurance has two hammers NOW 

The vagaries of 14 CFR § 61.113(c) have given rise to calling illegal flights as “gray. That excuse should no longer be allowed. The FAA and industry have engaged in a long, thorough and informative campaign[1] explaining the whys and wherefores of the criteria used to distinguish between these two categories of operation. Below is an excellent article about FAA Notice Number: NOTC2238 another in a series of exposition of these rules.

Here are a few similar efforts to educate over the past four years:

FAA Dragnet On The Gray Market

Shedding Light On The Gray Market By NBAA

Gray Charters Become A Federal Case

Red Flags For Charter Consumers

More And More On HOLDING OUT Part 91 And Part 135

FAA Should Increase The VOLUME On Its Attack Of The GRAY CHARTER MARKET

FAA Special Emphasis Investigation Team  Great Consumer Information, And  Increase Impact With Targeted Audience.

Each of these and many more useful papers have eliminated what had confused those who “unintentionally” erred in the past. Ignorance no longer is a viable excuse; what is and what is not illegal has moved the question through the shades of gray to black.

consequences

Consequences of flying in the gray market are increasingly punitive- civil penalties, loss of PPL, bad publicity, and denial or blockage to a legal way of doing business. The last point may need some explanation—it’s move 3 on the regulatory chess board.

  1. The FAA finds serious violations of the FARs against the aircraft owner and possibly even the pilot.
  2. The owner decides that the demand is there and moves to applying for a DOT P298 exemption and an FAA P135.GA chess board
  3. BAD NEWS– both may be blocked by the record of FAR violations.

Insurance often has hammers that are quicker and more punishing. Their options also include positives for reducing safety risks:

GA insurance policyHammer 1—aircraft insurance policies ALREADY include EXCLUSIONS for aircraft flown without the required FAA authority. That means if an unauthorized gray market flight crashes, the owner could be personally liable for 100% of the damages.

Hammer 2—after being found of violating the completely clear requirements of §61.113( c ), your renewal for your insurance may be denied or at least requiring a long, uncomfortable conversation with your insurer.

Positive Reinforcement Insurance companies already recognize the value of reducing safety risks by reducing fees for operators adhering to SMS. Contrary to general opinion, the process of receiving Part 135 authority is not that difficult and the attendant SMS program will be fitted to your organization’s abilities and needs.

One thing for certain is that the insurance policies are clearly written in black and white !!!


FAA Letter Hits, Again, At Illegal Compensation For Carrying Passengers

Mark Phelps

February 1

 

NOTC2238

The FAA issued a letter (Notice Number: NOTC2238 DATED Feb. 1) again addressing the misuse of expense sharing and misunderstandings related to pilots’ certificate privileges when it comes to operations involving compensation. The agency cited unauthorized Part 135 operations (carrying passengers for compensation) as a nationwide problem,putting the flying public in danger, diluting safety in the national airspace system, and undercutting the business of legitimate operators.”

The first issue—expense sharingis explained in the letter by clarifying the limitations of this activity. “One commonly misapplied provision is the expense sharing exception contained in § 61.113(c), which permits a pilot to share the operating expenses of a flight with passengers provided the pilot pays at least (may not pay less) his/her pro rata share of the operating expenses of that flight. Those expenses are strictly limited to fuel, oil, airport expenditures, or rental fees. In addition, only reimbursement from the passengers is allowed.” Pilots are also cautioned to be careful they are not liable to accusations of publicly “holding out” their services to the public.

fuel-oil-airport-expenditures-or-rental-fees

Along those lines, another litmus filter for whether it is OK to collect contributions from passengers is the “common purpose test.” The pilot collecting expense money must be able to document that they have their own reason for travel to the destination. From the FAA: “For example: A private pilot is flying to Stillwater, Oklahoma, to visit her mother in the hospital over the weekend. Five of her friends would be coming with her to attend a football game that same weekend. She CAN legally share expenses because she has a reason to fly to Stillwater (visit her mother) not simply to transport her friends.”

Importantly, however, “If she has too many friends going to the football game [and] she has to make a second trip to pick up the rest, she CANNOT legally share expenses on the second trip because her purpose for flying to Stillwater was complete when she arrived the first time. The second flight was solely for the transportation of passengers.”

The second consideration the FAA cites involves pilots misunderstanding the differences between the privileges of their certificates and the limitations on the type of operation. The FAA notes that commercially rated pilots sometimes contend they can legally carry passengers for hire without complying with Part 119 requirements for the “operational rules” involved. The agency urges: “Prior to conducting any operation, a pilot must also determine what operational rules the flight is conducted under, whether the operator has the appropriate operational certification [a Part 119 certificate], and whether the pilot has the requisite qualifications.”

 

commercial pilot, part 91 airplane and "paying" passenger



 

[1] Contrary to popular belief, to be lawful a rule need not be self-evident nor do its standards have to be tied directly to some measure of safety. The §61.113( c ) measures are meant to be enforceable and capable of distinguishing between permitted and foul.

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