The risks of operating a business aircraft are very low, but they are not zero. In the event of an accident, an owner can face a significant liability issue - thus a corporation may look to insulate itself from some of the risk by having a degree of separation between itself and the aircraft.

Insulating oneself may involve having the company aircraft placed into a single-purpose entity, a flight department company (Bizplane1, LLC). In the case of the business aircraft, the regulation governing a commercial operation is FAR Part 135. Without this certificate, our hypothetical flight department's pilots can have their licenses revoked for providing illegal charter. This issue even comes into consideration if a senior executive wants to reimburse the company for personal use of the business aircraft.

If the parent company wants to have the additional liability protection that separation may provide, having the aircraft in a Part 135 charter entity is one way to do it. The aircraft operator has command and control of the aircraft in FAA terms. Thus, the parent corporation has that level of separation for risk management and the CEO can charter the plane for personal use if so desired.

 So why not just get your own Part 135 operating certificate? Let us count the reasons. The process can be time and money consuming. 

Obtaining & Maintaining Part 135

The FAA has very specific requirements for obtaining and maintaining a commercial operating Part 135 certification. In order to become certified that these requirements are met, there is a lengthy review and approval process. Issuing new Part 135 certificates is not the FAA's primary mission and with budget restraints, the process can be very long - 18 to 24 months long!

Operating & Maintenance Specifics

The Part 135 operator also must have very specific aircraft operating and maintenance procedures in place, and they must be fully documented and approved by the FAA. The organizational structure of the operator is also mandated by the FAA to have certain positions such as chief pilots and directors of maintenance. These positions must comply with certain experience and training requirements. The operator must comply with drug testing and record-keeping too.

Owners’ Citizenship

A possible issue with some corporations owning a Part 135 operator is the actual owners' citizenship. The Part 135 rules stipulate that the entity's ownership as well as several of the major management positions be held by US citizens. If your corporation does not meet the FAA defined citizenship requirement, it cannot own a Part 135 operation.

 Alternative Separation...

There is, however, another way to achieve separation: You can place the aircraft with an existing charter company, and the aircraft can still be in a separate LLC owned by the parent company while the crew can be employees of the existing charter company.

With the execution of specific management and charter agreements, the parent company can charter its own aircraft. In this case, the charter-management agreement can also allow the charter operator to charter out your aircraft while not in use by your company. This chartering can generate some revenues to offset the costs of owning an aircraft.

For this procedure to work well, there needs to be a clear understanding between all parties involved, however, not only for legal and operation purposes, but also for financial considerations.

To make the operation legal to the FAA, the crew does need to be under the control of the charter company, not the aircraft owner/parent company.

While the primary means of risk management for a business aircraft are training and insurance, the option to operate the aircraft under Part 135 may be one to consider if additional risk management strategies are desired by your company.

Business aircraft are amazing. They are capable of speeds approaching that of sound, range exceeding that of most airliners, and comfort and convenience that make every trip productive and restful.  But there are limitations that must be respected and followed, cautions David Wyndham.

Limitations on aircraft extend to more than just the laws of physics or the bounds of engineering.  Here in the US, the Federal Aviation Regulations (FARs) establish a set of safety parameters in an effort to balance what the aircraft (and crew) are capable of achieving with what is prudent from an approach to safety. Furthermore, there are multiple levels of safety, and what was acceptable last week may not be acceptable today just because of how the aircraft is being operated or who is in control..

The FARs do not assume a uniform standard of safety. They are designed to let those with the most responsibility and authority have the most leeway in the operation of the aircraft. The FARs also make some judgments as to the ability of the passenger to control the flight. Underlying all these boundary conditions is the rule that the pilot in command is the final authority regarding the safe operation of the aircraft.

At the most restrictive safety-level is the scheduled air carrier. The airline passenger has no control over the aircraft.  He or she cannot schedule a trip, change the destination or hire the pilots. The paying passenger is under no obligation to understand any of the FARs. The only rule the paying passenger must know is the 3-1-1 rule by TSA!Under air carrier operations, the FARs absolve the passenger from all responsibility as to the safe conduct of the flight. In return, the FARs place the most restrictive level of safety on the aircraft and crew as to how the aircraft is operated. Things like weather requirements for take-off, approach and landing, the length of a crew’s work-day, and what must be functioning on the aircraft for it to be dispatched are all tightly controlled by the FARs.

The next basic safety level also covers paying passengers, but it applies to on-demand charter (FAR 135). The charter regulations also state that the paying passenger has no responsibility for the safe conduct of the flight. Unlike the airline passenger, however, the charter passenger does have the ability to schedule a trip, change the itinerary and state who else flies on the aircraft.  The charter passenger is assumed to have more “knowledge” of the flight. Within that, the FARs allows a bit more leeway in terms of how the aircraft can be operated. It is still restrictive of things like weather requirements, crew duty day, etc. but not to the same level of the scheduled air carrier.

The most flexible level of safety lies with the owner, or owner-operator. This individual does not buy a ticket, but has a significant level of authority over selecting the aircraft, hiring the pilots and deciding how the aircraft is to be operated. The FAR covering these operations are called FAR Part 91. FAR 91 covers a wide range of not-for-hire flying, including the private pilot flying a small plane to her favorite airport lunch-spot on a sunny afternoon to the global business jet carrying executives to far flung locales. While the operations under FAR 91 can differ considerably, they all confer the responsibility for the flight to the owner and operator. 

This regulation is the most flexible in what the pilot(s) are allowed to do. One example of this is a “zero-zero” take-off. This means the aircraft can take off with zero forward visibility and zero-feet cloud height. There are aircraft with that capability! There are also considerable levels of risk in the event things go wrong. If the aircraft and crew are capable of such a feat, then FAR 91 may allow it. Please note that even if FAR 91 allows a certain privilege, the prudent  pilot may not elect to pursue such a course of action.

The big restriction under FAR 91 is compensation. Yes, you can buy a business aircraft and hire pilots to fly it for you, but you cannot offer your aircraft and pilots to others outside the owner’s responsibility for a fee. FAR 91 does allow some sharing of expenses - think of it as chipping in for gas—but  it is very clear that in order to maintain the flexibility of the regulations, there is no commercial for-hire activity.

Where this aspect of the FARs can be a source of confusion lies in the fact that on a given day, the same trip may be flown under different regulations. Yesterday, your own business aircraft may have safely and successfully flown on a trip that you specify. Today, your aircraft is not available. You may schedule a charter aircraft of the same type as your own aircraft. The weather and conditions may be exactly the same, but you may be told that you can’t fly the trip that you just flew yesterday. The for-hire charter flight is different from the private flight in your company aircraft, so different regulations apply.

The FARs are designed to protect the “flying public.”  As such, the same aircraft can have different “capabilities” depending on how it is being operated.