Holding Out!
 

Hello folks,

Working on commercial ground take home quiz for college and I have two scenarios, just wanted to run them by here to see if I got it right...

Two scenarios;

I think this one is illegal and he is "holding out" ... He doesn't have the intention to go to Fresno himself but he wants to carry passengers for hire, he is approaching them for this contract. If there was a contract between them, maybe it would not have been illegal. Am I on the right track?

I think this one is the opposite since the family is approaching our pilot, he is not offering his services as a package or "holding out" as a commercial operator, it is legal.



Thanks!

Whether or not Jesse is holding out is only part of the equation. Jesse is providing the aircraft as well as pilot services, and is performing an illegal charter operation (one which would require a 135 certificate).

Your parents involvement may or may not be an illegal charter, and insufficient information has been provided.

Bear in mind that in both cases you are moving persons or property from one point to another for compensation or hire.

Don't get too wrapped around the axle regarding holding out. It's only part of the equation, pointing to common carriage.

Also bear in mind that holding out may be as simple as responding to a reputation or a perceived willingness to undertake the flight.

John, what is the significance of "long term basis" when it comes to private carriage then? I figured the second applies to private carriage, since we are all going to vacation with that intent.

What JB said.

Common Carriage involves ready availability to the public or a subset of the public. In the first example there is clear holding out to the public, which leads to common carriage without a 135/121 cert (clear violation).

Technically the parent scenario would be a violation also.

1. The pilot must pay his pro-rata share.
2. There must be common purpose for the travel. Was the pilot going on vacation as well, or just driving the Rents? If he had no reason to do the flight other than to carry his parents, then that's a violation even if he his pays his share.

The parent scenario is very hypothetical....anybody who wanted to do that would just arrange the money transfer on the down-low and nobody would ever know (or even care in the case of your parents). There would be a presumption of common purpose and pro-rata cost sharing unless it was blatantly obvious to the contrary.

To make that flight technically legal, the pilot would have to "arrange" for a reason to travel (join in the vacation) and pay his pro-rata. Another option would be for the parents to rent (or own) the plane, and pay the pilot to fly them (not concerning ourselves with club rules and insurance issues).

However...even with common purpose, pro-rata costs, or a pax-provided airplane there is still the question of the value of the flight time to an entry-level pilot. The FAA has in the past considered flight time as a form of compensation. But again, in the case of family members the presumption will be legit shared purpose and pro-rata costs. In the case of a typical student who gets support from his parents, the pro-rata cost is probably irrelevant...the family's finances are co-mingled anyway.

Even with a financially independent child, I'm willing to bet that a tax-free gift of flight time would be perfectly legal as well.

Lots of rabbit-holes with this topic...

Thanks Rick and JB again. Makes a bit more sense now. I am not in the commercial phase yet but I appreciate that this homework is preparing me. Good stuff.

The pro rata issue relates to the private pilot certificate, as a means of establishing the fact of flying for compensation or hire. A commercial pilot has no requirement to pay his or her pro rata share, and is not enjoined against (prohibited from) flying for compensation or hire.

The point of having a commercial pilot certificate is the privilege to fly for hire or compensation.

The issue with flying persons or property from A to B for compensation or hire is the question. Central to that question is who provides the aircraft. That question isn't cut and dried, either. In the case of the parents, if the pilot provides the aircraft, it becomes an illegal charter if the parents pay the pilot to fly them. The issue of holding out may or may not be in play, and the pilot doesn't need to advertise. Word of mouth or reputation is enough.

If the parents rent the aircraft and the pilot is an instructor at the rental facility, it places the rental facility and the pilot in jeopardy of doing an illegal charter, even though the parents have rented the aircraft. Rentals aren't made to people who aren't qualified to rent, and given the pilots employment status with the rental facility, the matter would very likely be handled as an illegal charter (which brings in a host of other violations, such as drug and alcohol testing, training, etc).

Often the question raised is "who would know?" Most often, the person turning you in to the FAA in such a case is a local charter operator. I've seen it happen a number of times before. Someone, even a single-pilot 135 operator, perceives a loss of business, and makes a call to the FAA. Next thing your'e answering questions, and enforcement action proceeds from there.

Doing it on the sly, trying to find cute ways to justify the compensation for the trip, can backfire. If the matter is investigated, such efforts may appear to be trying to hide the transaction or cover it up, which makes all parties concerned look bad.

On the subject of compensation or hire, you should also be aware that the FAA has held on a number of occasions, and has supported through Chief Counsel Legal Interpretations, that the logging of flight time is compensation, even if no money exchanges hands.

The pro rata issue, while chiefly applicable to private pilots, can be used to help establish that the pilot was paying his share, but in such a case holding out may continue to be a factor. If this weren't the case, then anyone could simply rent an airplane and hang a shingle saying "I'll fly you to baja, and pay half of the trip" to build time. That's an illegal charter, and holding out. (Ask me how I know that...I tried something similar in high school, and put flyers in the school office advertising the fact...and even listed a schedule of what it would cost people to be flown over the local sites on dates and so forth...it took no time at all before got negative feedback from a variety of sources in the aviation community).

Common purpose is useful in establishing the legality of the trip, but only in part. I once flew a group of people to Michigan for a football game. They bought me a ticket to the game. It could be argued that because we were all going to the game (the only sports event I've ever attended, incidentally), we had a common purpose, and that would be enough to establish the flight as not a charter. Not the case. It was very much a charter. That we were all going to the same location to partake in the same activity was incidental and nice, but not enough to establish the nature of the operation. The flight was consequently conducted through a Part 135 operation, under their certificate, and handled as a charter. No question of the legality in that case.

As Rickair7777 was pointing out, however, usually if you can do the flight under circumstances that would make you wholly legal as a private pilot, generally you're under good circumstance as a commercial pilot. This is to say that if you are doing pro-rata, do have a common purpose, don't hold out, and aren't doing it for compensation or hire, you're fairly golden. That is not always the case, as employment can complicate the matter (as in the example of a pilot who is working as an instructor for the rental facility, and provides the aircraft).

A higher level of certification is always held to a higher standard, and that's also taken into consideration when investigating and prosecuting a violation.

Entities have tried to get around the regulation in the past by renting, and paying the pilot separately, but often that just doesn't fly. If the entity (corporation, parents, or group of passengers) isn't entitled or able to rent the aircraft, essentially they're chartering the aircraft then shopping for a pilot. Doesn't pass the smell test, and can result in enforcement action.

This is one area that one should be especially careful. If you're not able to be fully and wholly in the clear with a legitimate charter, avoid any appearance thereof.

Thank you JB, I will save this answer for my school notes.

Can rule of thumb be "revenue" generating flight - common carriage? Or that in itself has to be explained as well?

No; I do a lot of revenue flights in single seat aircraft in which no common carriage takes place. Revenue is an aspect of the issue, but only a part.

For the purposes of the test question, I would say that they are both illegal operations. Various legalities/interpretations aside; always remember "What are they going to say at the hearing?" and does it pass the smell test. BTW, those situations are liable to come up in real life so be ready for them and be able to do the right thing. I have personally declined many flights over the years do to similar situations. If there is ever a grey area or you are in doubt you can contact the FSDO and ask. Attempt to get the answer in writing if not log the call and contact persons name. Additionally, I do not readily recall the access point though there is a government site where all of, or at least many, of the FAA's determinations/interpretations (largely from prior cases) are available. It is very interesting and informative. It is very necessary and beneficial to understand the law/rules and the spirit of them; though sometimes there are grey areas. A rule or law cannot be written for every possible situation or possibilty therefore we all need to avail ourselves of appropriate consultation on ocassion.

FAR Part 119.1(e) subsections? You will say no and I will get confused again :D