AOPA Pilot Magazine - March 2020 - 26

FOR THE RECORD

Who's in control here?

BY JARED ALLEN

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

JARED ALLEN is

the AOPA Legal
Services Plan senior
staff attorney and
an instrument-rated
private pilot.

26 | AOPA PILOT March 2020

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.
AOPA
EMAIL jared.allen@aopa.org

AOPA Pilot Magazine - March 2020

Table of Contents for the Digital Edition of AOPA Pilot Magazine - March 2020