The NBAA “Small Aircraft Exemption” – An Enormously Helpful Tool for the Business Small Aircraft Operator
Royal Flying Doctor Service Beech King Air
A fundamental concept under FAA regulations is that if the operator of an airplane is receiving any reimbursement in exchange for carrying passengers around – even if it is simply sharing fuel costs with an affiliate – then that flight is commercial in nature and the operator should have commercial certification to conduct that flight.
The FAA realized many years ago, however, that if you are a business operator who is not holding out to the public, then there are situations where some limited cost sharing might make sense, so they created a number of very narrow exceptions to the general “commercial operations rule” I’ve described above – those exceptions are found at 14 C.F.R. Sec. 91.501. If used correctly, the Sec. 91.501 exceptions can be enormously useful tools for the safe and efficient use of business aircraft.
David Norton, Shackelford, Bowen, McKinley & Norton, LLP
Unfortunately, these exceptions only automatically apply to “large” and multi-engine turbine aircraft, so operators of smaller and/or piston aircraft generally cannot use them. But, again many years ago, the FAA, working with the National Business Aviation Association, agreed that it made sense for small aircraft operators to be able to use these rules in certain circumstances, and granted a “blanket exemption” to such operators who are NBAA members and who comply with the terms set out in this exemption. All of that said, over the last two or three years – especially in light of a proliferation of improper leasing and “illegal charter” operations that have been popping up in the industry as a whole – there was a growing concern within the FAA that it did not have sufficient transparency as to who was using this blanket exemption. In light of these concerns, the FAA recently agreed to once again renew NBAA’s small aircraft exemption, but it has included new notification requirements in order to make it easier to monitor those small-aircraft operators that are using the exemption — see NBAA’s news release on this renewal, together with links to the exemption itself and the related guidance from the FAA here:
Update: FAA Extends NBAA’s Small Aircraft Exemption Until 2022
Some final thoughts on this. These exceptions are quite often misunderstood and misapplied. For example, they are generally designed to only apply to companies using aircraft in support of their non-airplane businesses (for example, a holding company that simply flies its aircraft around for the benefit of the owners of that company are considered “per se” commercial operators by the FAA and must have commercial certification to operate) rather than individuals operating airplanes for their own personal use; the amounts of reimbursement are generally very narrow and limited such that the “exception doesn’t swallow the rule,” i.e., they are not designed to allow an operator to make a profit from the use of the aircraft; and they generally are not to be applied to passengers who have no relation to the operator (i.e., you can’t simply walk into the office and ask if you can “time share” the company’s business aircraft).
In summary, the cost-sharing exceptions found at 14 C.F.R. Sec. 91.501 can be enormously useful tools for the proper, non-commercial use of business aircraft, and due to NBAA’s continued efforts (with a little additional and arguably very appropriate tweaking by the FAA), these benefits will continue to extend to the business operators of small aircraft as well.
David T. Norton, Shackelford, Bowen, McKinley & Norton, LLP
Direct: (214) 780-1407
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