Time to Review Your Aircraft Timeshare

By Lisa Harig and David Rifkind

For aircraft owners and operators with timeshare agreements or other operations under Part 91 of the Federal Aviation Regulations (FAR), now may be the time to review your compliance program.

The Federal Aviation Administration (FAA) recently proposed a $3.3 million civil penalty against The Hinman Co. (Portage, Michigan) for violation of the FAR. The FAA alleges that a company subsidiary, Hincojet, LLC, entered into a number of aircraft timeshare agreements and conducted operations not in compliance with FAR Part 91. By charging clients amounts in excess of what is allowable under Part 91, the FAA says that Hinman effectively operated these flights as commercial operations under FAR Part 135. Hinman was not authorized to conduct Part 135 operations, and neither were its pilots (who may face individual enforcement actions). The company will have an opportunity to formally respond to the FAA's allegations before a final penalty is assessed.

Under an aircraft timesharing arrangement, an aircraft operator may lease its aircraft with crew to a third party and seek reimbursement only for those expenses listed in FAR 91.501(d). These charges are limited to crew travel expenses, hangaring and tie-down costs, flight insurance, landing fees and airport taxes, in-flight catering, passenger ground transportation, flight planning, and an amount equal to twice the charges for fuel, oil, lubricants and other additives. Any charge in excess of those allowed under FAR 91.501(d) risks an FAA determination that the flight was commercial in nature and therefore subject to the requirements of Part 135.

The sheer amount of the proposed penalty in the Hinman case is a stark reminder that Part 91 should be strictly followed. We suggest reviewing your timeshare arrangements, as well as any inter-company reimbursement programs, to ensure compliance with the relevant regulations.

If you have any questions about FAR Part 91 or other matters relating to aircraft ownership and operation, please contact Lisa Harig, David Rifkind or the Stinson Leonard Street contact with whom you regularly work.

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