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Online Extra

Should You Manage Your Flight Department Under Part 91 or Part 135?

What You Need to Know to Make the Choice

One of the most common questions for anyone new to business aviation is should I operate under Part 91 or Part 135 of the Federal Aviation Regulations (FARs).

The distinction between these two parts of the FARs plays a central role in determining the ownership and operating structure for business aircraft. In general, Part 91 governs private aircraft operations, while business aircraft flights for compensation or hire are normally conducted under Part 135. There are, of course, exceptions to this general rule.

The majority of business aircraft owed by companies or individuals are operated under Part 91. The Federal Aviation Administration (FAA) created the regulation for private operators not offering their services for compensation or hire. Part 91 generally prohibits companies or individuals from publically offering transportation for hire. With this prohibition in mind, the FAA did build in certain flexibilities to Part 91 that allow business aircraft operators to receive limited reimbursement for private flights.

For example, under Part 91, Subpart F, operators of aircraft over 12,500 pounds or turbojet powered aircraft may enter into a time sharing agreement with another company or individual that allows for recovery of certain costs attributed to a specific flight. Subpart F also allows the use of an aircraft among business affiliates so long as the travel is “within the scope of, and incidental to, the business of the company.” If the proper degree of affiliation exists and the aircraft use is for a legitimate business purpose, a company may recover the costs of aircraft use by an affiliate.

For operators of small airplanes and all helicopters, the NBAA Small Aircraft Exemption does allow use of the options for cost reimbursement under Part 91, Subpart F. This exemption has been approved by the FAA and is only available to NBAA Members.

Business aircraft available to the public for compensation or hire (also known as charter) are normally operated under Part 135. In order to conduct flights under Part 135, the operator must first obtain a certificate from the FAA. The main advantage to holding a Part 135 certificate is the ability to offer an aircraft for charter and obtain revenue to offset the costs of aircraft ownership. If an aircraft is used infrequently by its owner, charter can be helpful in making aircraft ownership financially viable.

This added flexibility also comes with increased FAA surveillance. As a certificate holder, there are a number of operational, maintenance and training requirements issued by the FAA that must be followed. For example, aircraft operated under Part 135 have more stringent requirements regarding runway length needed for landing. There are also significant costs involved with both obtaining a Part 135 certificate and complying with FAA requirements once the certificate is issued.

From operational issues to Federal Excise Taxes, the decision whether to operate an aircraft under Part 91 or 135 will have far reaching consequences. With this in mind, Members are encouraged to review resources on the NBAA web site, consult with qualified aviation counsel and consider attending educational events, such as the NBAA Tax, Regulatory & Risk Management Conference before making this important decision.

FOR MORE INFORMATION

Visit NBAA's Aircraft Operating & Ownership Options web page at www.nbaa.org/admin/options.

The NBAA Tax, Regulatory & Risk Management Conference proceedings mentioned in this article are also available for purchase as a digital recording via NBAA's On-Demand Education. NBAA Members are eligible for a discount. Learn more.