Pilot Counsel

Commercial operations and the private pilot

March 1, 2004

In a past column, I addressed the often-elusive line between private and commercial air operations (see " Pilot Counsel: Private vs. Commercial Operations," July 2003 Pilot). I cited the case of a pilot who had his commercial pilot certificate suspended for 120 days because of an abortive attempt to characterize his aircraft rental operations as private. Both the FAA and the NTSB disagreed with his characterization.

Here is another case that finds a pilot struggling with the dividing line between what is legitimately a private passenger-carrying flight and what is technically a commercial operation. This case shows that a pilot doesn't have to actually receive payment from his passengers in order to run afoul of the commercial regulations. The legal concept of "compensation or hire" is broader than merely a monetary payment. The result in this case is that the pilot lost his private certificate for 270 days, even though, in conducting a flight for a friend as a favor, he received no payment for the flight.

A restaurant owner was hosting a Super Bowl party at his bar and grill on a nearby island. He had charged the partygoers a flat rate for the party, one that included air transportation. Unfortunately, some of the arrangements that he had made with air charter operators fell through. Some of the people who had paid were stranded. The restaurant owner needed more transportation. He turned to a friend who was a pilot. His pilot-friend flew the stranded patrons to the party. It took four flights using a Piper Cherokee Six and a Piper Cherokee 180. The pilot didn't believe he was doing anything wrong. As far as the pilot was concerned, these flights were legal as long as he received no payment, and "was doing a friend a favor."

The FAA didn't agree. After an investigation, the FAA charged the "private" pilot with carrying these passengers for "compensation or hire" without a commercial pilot certificate, and without an air carrier operating certificate. Neither of the airplanes was certificated under FAR Part 135 for commercial operations. The FAA also charged that the pilot's operations were careless. Based on these charges, the FAA ordered his pilot certificate suspended for 270 days.

The pilot appealed the FAA order to the NTSB. Before the board he argued the point that there was no compensation — he was transporting friends of friends to a party hosted by his friend. That's all. He received no compensation.

This argument did not prevail before the board, which upheld the FAA suspension. The pilot was found to have violated FAR 61.113(a), FAR 119.33(a)(2) and (3) (which prohibit operating as a direct air carrier without an air carrier certificate and operations specifications), and FAR 91.13(a) (which prohibits careless or reckless operations so as to endanger the life or property of another).

FAR 61.113(a) specifies the privileges and limitations of a private pilot. It provides that a private pilot may not "act as pilot in command of an aircraft that is carrying passengers or property for compensation or hire," and may not "for compensation or hire act as pilot in command of an aircraft." Regardless of whether it is the pilot who receives the "compensation or hire" for carrying the passengers, the operation is barred. The pilot may not receive compensation for acting as pilot in command even if no passengers or property are carried.

Quite probably both concepts were involved in this case. The important issue is the definition of compensation or hire. What the board had to say on this issue is important for private pilots (and for commercial and airline transport pilots exercising only private privileges). The board held that "compensation need not be direct nor in the form of money. Goodwill is a form of prohibited compensation." Presumably, the "goodwill" that the board was referring to had to do with the relationship between the pilot and the restaurant owner. The board noted that not only was the pilot a friend of the restaurant owner, but also he had done work for him in the past.

If there is a benefit to a business relationship in carrying passengers or property then that could constitute compensation or hire. The circumstances that seemed to influence the board in this case were that most of the passengers carried were not personally known to the pilot, and that it "strains credulity" that the pilot would freely transport people he did not know at a personal expense of more than $1,000.

While this case does not fully explain what constitutes compensation or hire, it gets us closer to understanding what the FAA and the NTSB will find to be compensation or hire. It helps us understand that operating too close to that elusive line could be risky to one's pilot certificate.

For completeness, I should mention FAR 61.113(b). It contains exceptions to the subparagraph (a) rule that contains the "compensation or hire" limitation. It does allow a private pilot to participate in certain "compensation or hire" operations under specified conditions. For example, a private pilot may be paid as a pilot as long as the piloting is merely incidental to his business or employment. He may share the expenses of a flight with his passengers as long as it is a bona fide sharing of only direct expenses among all of the occupants of the aircraft including the pilot. He may also participate in a charitable airlift, and search-and-rescue operations, sales demonstrations, and glider towing.