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For the record: Who’s in control here?

Don’t be left high and dry on a bogus dry lease

Over the past year, we’ve seen the FAA intensify its efforts to shut down “illegal charter operations,” or flights transporting paying passengers in a way that runs afoul of the air carrier certification and operating rules.

Those intentionally violating the FARs are the primary targets of the FAA’s efforts, and rightfully so. However, it seems an additional focus of the FAA is ensuring that aircraft supposedly operated under “dry lease” agreements, a common and legal arrangement for an aircraft owner to contract out use of an aircraft, are not “wet leases” in disguise.

The difference between a dry lease and wet lease—which likely requires air carrier certification—is often misunderstood. For the uninitiated, one of the FAA’s concerns about leases is that “irresponsible companies” may purport to operate under a dry lease, but in reality are operating illegally as uncertificated air carriers.

The difference between a “dry” and “wet” lease has nothing to do with fuel. In a dry lease, the aircraft owner provides an aircraft to a lessee without any crew. The lessee is responsible for providing his or her own flight crew and accepts “operational control,” defined by FAR 1.1 as “the exercise of authority over initiating, conducting or terminating a flight.” Generally speaking, the lessee becomes the aircraft operator and is accountable for all aspects of the aircraft’s operation. In a wet lease, the lessor provides both the aircraft and the crew, and by doing so, retains operational control of the flight.

Whether an aircraft is wet or dry leased directly affects the FARs that apply to the aircraft’s operation. A wet lease generally requires operations to be conducted under Part 121 or 135 by an air carrier certificated under Part 119 (FAR 91.501 is a common exception). When dry leasing, the lessor is not required to hold an air carrier certificate and the lessee may operate the aircraft following Part 91 rules (or, if the lessee is an air carrier, operation under parts 121 or 135 is also possible).

To determine the validity of a dry lease, the FAA conducts a case-by-case analysis of the lease terms and how the arrangement realistically works to determine whether the lessee effectively assumed operational control of the aircraft. Intended for those seeking to lease aircraft—but also helpful for pilots—is Advisory Circular 91-37B: Truth in Leasing, which provides several questions intended to clarify who will maintain operational control of an aircraft, such as who assigns the crew; accepts flight requests; ensures the flight, aircraft, and crew comply with the FARs; decides how, when, and where the aircraft is maintained; determines fuel and weather requirements; and pays costs such as fuel and airport fees.

Whether the crew is truly acquired by the lessee independently of the aircraft is also determined on a case-by-case basis. Any restrictions by the aircraft owner on where a lessee may hire crew are red flags. It’s easier to demonstrate this independence if the crew is acquired from a separate, unrelated entity. If the aircraft and crew are provided by an owner or furnished by two entities who appear to be “acting in concert,” the FAA may conclude the arrangement is a wet lease.

Most investigations into an aircraft’s operations begin with the pilots. Ramp inspections may be followed by demands under FAR 61.51 for pilots to present their logbooks to the FAA for inspection, an easy way for inspectors to determine the who, where, and when of an aircraft’s operation. In some instances, the FAA has issued administrative subpoenas for pilots to produce other flight records, or even submit to a deposition to testify about flight operations.

Although unintentional FAR violations may be resolved with the FAA’s Compliance Program, should the FAA determine that legal enforcement action is appropriate, the potential consequences are severe. For instance, in 2017 the NTSB upheld the revocation of an airman’s certificates for conducting flights that should have complied with provisions of parts 119 and 135, but did not. Beyond regulatory sanctions, operating illegally may also compromise insurance coverage in case of a mishap.

Commercial pilots and ATPs who believe they have been hired to fly an aircraft under a dry lease allowable under Part 91 must be extremely diligent in confirming that the operations are not actually a wet lease and required to comply with part 119 and 135 rules. Inquire about the terms of the lease, any relationship between your employer and the aircraft owner, and the questions posed in AC 91-37B. And of course, avoid getting caught up with any “irresponsible companies” or you might just be left high and dry.

Email [email protected]

Jared Allen

Mr. Allen is AOPA’s Legal Services Plan (LSP) senior staff attorney and is an instrument-rated private pilot. He provides initial consultations to pilots through the LSP when the FAA has contacted them about potential FAR violations. Jared has helped numerous pilots successfully navigate through compliance actions.

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