by Gregory J. Reigel
© December, 2015 All rights reserved.
As you may know, one of the ways a private pilot is permitted to reduce the cost of a particular flight is to share that expense with the passenger(s) on the flight. The applicable regulation, 14 CFR 61.113(a), provides that “no person who holds a private pilot certificate may act as pilot in command of an aircraft that is carrying passengers or property for compensation or hire; nor may that person, for compensation or hire, act as pilot in command of an aircraft.” However, Paragraph (c) of the regulation states “[a] private pilot may not pay less than the pro rata share of the operating expenses of a flight with passengers, provided the expenses involve only fuel, oil, airport expenditures, or rental fees.” This creates an exception to the prohibition on private pilots receiving compensation for flying.
Using this exception, and presumably with the Uber and Airbnb ride sharing concepts in mind, two companies, Flytenow and AirPooler, created websites that would allow a private pilot to offer his or her planned flight to potential passengers who would be willing to share the expenses of the flight under Section 61.113(c). However, before the concepts really took flight, both AirPooler and Flytenow requested legal interpretations from the FAA regarding whether their business concept was in compliance with federal aviation regulations. The FAA responded to both requests with a resounding “no.”
The FAA concluded that a private pilot using a web-based service to offer flights to potential passengers would be holding himself or herself out as a common carrier to transport persons from place to place for compensation. The regulations prohibit that type of operation by a private pilot. Rather, under the proposed scenario the FAA stated that the pilot would need to have both a commercial pilot certificate and also an air carrier certificate. The FAA’s decision relied upon the FAA’s previous interpretations of the terms “compensation” and “holding out” as they are used in the regulations. Flytenow disagreed with the FAA’s interpretations and its application of both the definitions of “compensation” and “holding out” as they applied to its business model. It then filed a petition asking the D.C. Circuit Court of Appeals to set aside the FAA’s legal interpretations. In a not-so-surprising decision, the D.C. Circuit Court of Appeals rejected Flytenow’s petition in its entirety and confirmed the FAA’s interpretations.
First, the Court confirmed that a private pilot’s receipt of any reimbursement of expenses is compensation. Thus, given the FAA’s broad view of “compensation,” a private pilot’s receipt of a pro-rata share of a flight’s expenses from passengers would be compensation, albeit permitted compensation under Section 61.113(c).
Next, the Court had no trouble determining that private pilots using the Flytenow website to offer flights would be “holding out” as the FAA interpreted that term. The Court observed that any potential passenger could arrange for a flight by simply using Flytenow’s website. And although use of the website was limited to members, in order to become a member, a potential passenger merely needed to sign up. Further, the Court did not think that a member pilot’s authority to decide not to accept particular passengers limited the “holding out” by that pilot. Thus, the Court agreed with the FAA’s position that a private pilot’s sharing of flight expenses with passengers obtained through the Flytenow website would be contrary to the regulations.
However, the Court went on to note that “pilots communicating to defined and limited groups remain free to invite passengers for common purpose expense-sharing flights.” It confirmed a previous opinion by the FAA that a private pilot’s posting of a flight on a bulletin board may be permitted in certain circumstances. The Court also stated that “[o]ther kinds of internet-based communications, such as e-mail among friends, for example, seem unlikely to be deemed ‘holding out’ under the FAA’s interpretation.” Finally, perhaps in fear that its decision would be misinterpreted, the Court concluded by stating “[p]rivate pilots continue to enjoy the right to share expenses with their passengers, so long as they share a common purpose and do not hold themselves out as offering services to the public.” So, what does this mean?
Well, for starters, it means that offering flights through a broadly based flight-sharing system or website open to anyone (e.g. John Q. Public) is likely going to be interpreted as “holding out.” However, the Court’s language does suggest that making flight-sharing available to a more limited or defined pool of potential passengers may not be considered “holding out.”
Unfortunately, the Court did not provide any further guidance on where the “holding out” threshold would be crossed. Somewhere between “communications between friends” and “communications to the public at large” is neither specific, nor is it helpful. Finding the sweetspot where the pool of potential passengers is large enough to justify the business model for flight-sharing, yet still small enough that it is not “holding out,” may be difficult. But for those who may want to pursue or revisit this type of flight-sharing arrangement, it is better than a complete ban.
EDITOR’S NOTE: Greg Reigel is an attorney with Shackelford, Melton, McKinley & Norton, LLP, and represents clients throughout the country in aviation and business law matters.