FAA Revisions to Advisory Circular 91-37A: Truth In Leasing

Learn how the revisions to AC91-37A will better explain leasing alternatives to charter and prevent illegal charter. Find out what the penalty is for flying illegal charter is and why the revisions are necessary.

Post Category: Jet Talk

The FAA is revising Advisory Circular AC 91-37A, Truth in Leasing, dated January 16, 1978.  Why? The regulation that the AC explains, FAR 91.23, has not changed.

The FAA isn’t revising the basic premise behind the FAR and the AC: “There are aviation companies certificated to offer charter air service; however, there are also dozens of other companies or individuals who have no air carrier or operating certificate but who are willing to violate the law by evading safety requirements. Before you sign for a charter air service, ask to see their air carrier operating certificate issued by the FAA.”

The Revisions Explain the Leasing Alternatives to Charter

FAR 91.23 and the soon-to-be AC 91-37B are intended to explain the leasing alternatives to charter.  A “dry lease” is the lease of an airplane without crew.  The problem is not how a dry lease is written.  The problem is how a dry lease can be used by a nefarious operator.  If someone offers an airplane with a dry lease and then offers to fly the leased aircraft-the lease is no longer “dry.”

The rule hasn’t changed and the problem hasn’t changed.  The FAA has often ignored illegal operators because they have been fully occupied inspecting the legal operators.

What Happens When a Pilot is Caught Flying Illegal Charter?

When the FAA does catch a pilot flying illegal charter, the penalty has been revocation.  Not a warning, not a suspension, but a career death penalty.  The FAA does seem to be stepping up enforcement based on a press release last fall:  The FAA proposed a $154,000 civil penalty against three companies and the individual who controlled those companies, for allegedly conducting illegal commercial flight operations.  But the press release isn’t reporting a decided case, just a “proposed” civil penalty.

But it is difficult to find instances where the FAA took decisive action against the customers of illegal charter.  And then, periodically, a vice cop awakening occurs within the FAA:  if you want to shut down the prostitutes, go after the johns.

The FAA wants to reach out and knock some sense into customers who choose to save money by using illegal charter.               

And it is that realization that explains why the FAA has revised an AC that has gathered dust since 1978.  The FAA wants to reach out and knock some sense into customers who choose to save money by using illegal charter.     

Some groups seeking charter air services may knowingly enter into an evasively worded arrangement if the price is made attractively low. If you are tempted to do so, consider that if you accept what amounts to charter service from a company that is not certificated to operate charter flights, you may forgo the protection of certain safety standards required by the FAA. You may also violate the law. Regardless of how the lease is named, there are a few questions that can clarify who will maintain operational control:

  1. Who makes the decision to assign crewmembers and aircraft; accept flight requests; and initiate, conduct, and terminate flights?
  2. For whom do the pilots work as direct employees or agents?
  3. Who is maintaining the aircraft and where is it maintained?
  4. Prior to departure, who ensures the flight, aircraft, and crew comply with regulations?

Note: If you are responsible for any of the criteria listed above, then you have some operational control and should clarify your leasing arrangements accordingly or you will be held accountable to maintain operational control.

Will The FAA Regulation Revisions Be Enough?

Why does the FAA hold back?  Perhaps because the accident statistics persist in making FAR Part 91 operations in turbine aircraft look safer than the charter alternatives.

The FAA has struggled for decades to explain that illegal charter is unsafe and illegal.  The irony about the revision to this AC is that the FAA is still pulling its punches.  “You may forego the protection of certain safety standards…”  Why does the FAA hold back?  Perhaps because the accident statistics persist in making FAR Part 91 operations in turbine aircraft look safer than the charter alternatives.  This is a sensitive subject within the FAA and in the industry.  So perhaps the FAA can be forgiven for watering down the safety warning.

“You may also violate the law.”  “May” again?  There are so many legal and factual variables in the real world of business aviation.  Timesharing agreements, demonstration flights, training flights: all of these are legitimate exceptions to the charter rules.  All have been abused.  The FAA saved many pages of explanations by simply saying “You may also violate the law.”

Reading between the lines of AC 91-78B, it is clear that the FAA craves less leasing and more charter, and more truth in legitimate leasing.  The changes to the AC won’t offend the associations, but they are not likely to bring about any serious changes where change is needed

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