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FAA Regulations and the “Sham Dry Lease”

By: The CTS Team   •  

FAA regulations take leasing rules seriously - pilots may want to brush up on these rules

The FAA issued an informational letter reminding all pilots that the regulations for operational control MUST be followed when flying for compensation or for hire. At the very least, that means that private pilots may never, ever, EVER act as PIC if money is involved (which of course, we already knew).

But it also means that even commercial or airline transport pilots must “watch their P’s and Q’s” when flying for hire as part of a wet lease or dry lease. According to the FAA, one of the most disturbing trends that they’re seeing is the use of computer and cell phone applications to facilitate air transportation by connecting potential passengers to aircraft owners and willing pilots. Some of these apps enable the provision of both the aircraft and the crew to customers seeking transportation by air. 

To meet the operational requirements for a specific “for hire” flight, the pilot(s) must be employed (as a direct employee or agent) by the certificate holder with operational control of the flight, or the pilot must hold a certificate issued under 14 C.F.R. Part 119. 

Another common grey area is the “sham dry lease” or the “wet lease in disguise” operation. This occurs when one or more parties act in concert to provide an aircraft and at least one crewmember to a potential passenger. This would be seen when the passenger enters into 2 independent contracts with the party that provides both the aircraft AND the crew. It could also be seen when 2 or more parties agree to provide a bundle (for example when the lessor of the aircraft conditions the lease to add a professional services agreement with a specific pilot or group of pilots).

One more red flag is “flight sharing”. Private pilots are allowed to share certain operating expenses with the passenger(s) on a pro rata basis, but can only share fuel, oil, airport expenditures and/or rental fees. To properly conduct an expense sharing flight, the pilot and passengers must have a common purpose and the pilot cannot “hold out” as offering services to the public. In other words, they must have a legitimate common purpose and the pilot should be the one who chooses the destination. Advertising in any form (word of mouth, website, reputation, social media) is not allowed.

For more information on sharing flight expenses, common purpose and holding out, see the following documents:

Unauthorized 135 operations continue to be a problem for the flying public. Not only does it create safety issues, but it also takes away from the business of legitimate operators. Anyone having any questions about dry-lease agreements or sharing expenses should refer to the FAA Regulations for clarity or ask your local FSDO for assistance.

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