Offering Plane to Professional Client

First Post so forgive me in wrong category, etc…

I have a business client who has begun to give me a large portfolio of work recently and I offered to let him use my 2013 Cirrus SRT for my cost. He asked if it would be fine to use it if he provides the Pilot and pays for gas. Assuming the pilot is acceptable and I have my aviation attorney draft an agreement should damage occur and we are compliant with any FAA regulations, etc I’d like to find a favorable way to allow him to use the plane occasionally as a way to thank him for the business. It has been my custom in the past to charge an hourly rate that compensates me as owner for the soft and fixed costs of flight time and ownership. If he is using it with his pilot and paying for his fuel and oil I’d like to charge a modest hourly that would only be true cost of flight time (annual, TBO, chute re-pack, etc) and not include in the hourly costs that I would have to pay either way (Hangar, Jeppesen subscriptions, ETC). I’d welcome any input on how to arrive at actual numbers and any advice on setting up the relationship.

Hi, you’ll access much better advice on the member side by joining COPA. From first hand experience, its a complex matter from an insurance, liability (both you and your employer) and legal point of view.

It starts here

But branches out rapidly.

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So, you come to an aviation forum and ask the general public? And, if it’s acceptable to the pilots you’ll have your aviation lawyer draft an agreement? WTF?

Maybe, you should ask your aviation attorney if it’s legal?

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This is a legal matter as Dennis notes. Find a good aviation attorney (there are several on COPA). You may well find that there are significant hurdles (insurance being one), as well as making sure you don’t run afoul of the charter/commercial FAA regulations (e.g., making sure it’s a legitimate lease and not a charter without a charter certificate). I’m a lawyer but not an aviation lawyer; in fact, I engaged one when drafting our airplane partnership agreement with my partner (another lawyer). I’ve learned enough over the years that a lawyer who represents himself has a fool for a client laughing

Seriously, though, this kind of thing is not an internet poll. Don’t rely on “pilot online recommendations” to make legal decisions. If things go wrong, it could cost you money and your client relationship. So it pays to do this right from the get go.

Good luck!!

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Joel,

I appreciate the respectful input. The goal of the post was to seek practical advice (not legal) as well as hear successful experiences from similar arrangements or issues that would need to be addressed that may not be easily envisioned. I’m not sure why Dennis would take such a combative tone from a forum designed such as this one…again I appreciate the helpful comments.

BC

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I thought the saying was the attorney who represents herself or himself has a fool for a client and attorney! (Mom was an attorney and my sister just retired from her practice.) Good advice to a question from someone we hope will add to our group strength and become a member someday.

I’m sorry that you found my responsive “combative”. That wasn’t intended. What was intended is my frustration and annoyance at your question which, at it’s core, is stated by you above. You have proposed a very specific, often violated FAA infraction that has legal consequences. In fact, if you refer to the attached document, it references (4.3) Legal Opinion. That implies that it’s a legal issue.

You question above may constitute a legal violation. This is an industry regulated by the FAA, NTSB, DOT, local DOT, CBP, IRS and state taxing issues.
But, to answer your question, IT’S NOT FINE. YOU WILL LIKELY BE VIOLATING FAA REGULATION WHICH COULD RESULT IN THE LOSS OF PILOT PRIVILAGES AND OTHER CONSEQUENCES…

Govern yourself accordingly. This forum tries to keep people out of trouble, by pointing to possible solutions and learning opportunities. Sometimes, that philosophy comes across as harsh, because aviation consequences of error can be harsh.

I not mincing words because your question should be addressed with the 6000+ members of intensely devoted and knowledge member, rather than on a rarely traveled “guest” portion. Membership comes with the privilege of real insight.

Ummm, WTF?

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Well it’s incredibly complicated… I think is what Dennis was stating

If your client pays the pilot then it’s a commercial transaction and likely would be a charter if you charge close to “break even”. Being a charter comes with massive regulation and even tax issues

Your insurance likely precludes any business (revenue) use.

The easiest way would maybe explore a “dry lease” arrangement and get good advice regarding insurance and regulatory guidance…. Many of these end up being ruled as charters and violate part 91 owner rules.

I’ve got some friends who used to “dry lease” their jets to “friends and family”. I doubt their agreements were “kosher” but it’s irrelevant now as their jet insurance requires the owner to be onboard or get charter level insurance.

Why the hysteria and hostility? He wants to dry lease out his plane to someone who will provide their own pilot to fly it - a very common and legal thing to do. The business client aspect really doesn’t change anything. Not sure I’d ever want that kind of relationship with a client, but that’s not really my problem.

He also said “an acceptable pilot” i.e. someone he (or more likely insurance) deems qualified. Not “if it’s acceptable to the pilot.”

Anyway, Brad, my thoughts:

  • Join COPA! Seriously, tons more info to search through if you do.
  • Have an AVIATION attorney draft a lease agreement that clearly defines costs, operational control, etc. Lots of nuances here that can really screw you if you don’t do it right. If you have AOPA PPS you can start with a free consult with a panel attorney, many of whom can write this kind of agreement, otherwise maybe try Bart Peters @ Business Aviation Law
  • Check with your insurance: you will likely need commercial insurance or at least some kind of endorsement for dry leasing. Have the attorney read your current policy then reach out to your broker.
  • For numbers, calculate your average yearly maintenance and divide by average hours, add in reserves (engine, prop), and add 25%. Something like $100 would probably be really generous, but you need to figure out your numbers
  • On a professional note, just consider the possibility something goes wrong - what would fighting over hangar rash, ripped leather seat, etc do to your relationship with the client? Only you know whether this could get hairy.

Hope that helps. I’m not an attorney, insurance broker, nor did I sleep at a holiday inn last night…

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This. The last person I’d want to dry lease my plane to is someone I have some other meaningful relationship with.

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Hi Brad
Don’t let the tone of this thread on your first try keep you from joining. I have had my tail lit a few times over my 18 years here and no regrets. Anyone whom owns a Cirrus should spend the small fee which seriously can save you thousands (in my case) in ownership costs.
We even have a thread on how to invest to earn enough to buy your next Cirrus : )

Something not answered is what to charge and there are many threads on the member forum showing how to breakdown hourly costs with many examples. You can also call a few rental companies to see what dry rate they charge for a similar aircraft. Nobody makes much money renting these things and your costs will be higher with less hours per year etc.

I figure my plane costs about $350-400 hr based on 80 or so hours per year of use.

Good luck and do get legal and tax advice from professionals on this.

Eric

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Thoughtcrime. Pre-crime.

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That’s your own responsibility. He asked a fair question to gain knowledge. Using “WTF” in your initial response does not engender trust or a sense of aid.

Take a walk. Get some perspective.

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You’re right Tom. On it’s face, the question is a fair question. The “WTF” response was really a response to that which should be known by every pilot. It’s part of what is fundamental to the FAA world we live in. It’s probably the area of aviation upon which the most FAA violations occur. It’s discussed on a regular basis in various aviation publications and certainly often mentioned in AOPA newsletters.
The question is frustrating because all pilots who are serious about the authority to act as pilots, should know. As is often said, lack of knowing the law is really no excuse. It’s fundamental to successful pilot privilages.
And further, the question is being raised on a “Guest forum” by a person who doesn’t see the value of participating in our community.

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One might consider the value of our Guest Forum if participation in such is viewed as counter to our community. COPA is not known for its hospitality towards guests and potential members with the almost-immediate response to any guest participation being, “you really need to join [read: pay us] if you want to engage.” Are they truly guests here or not?

I fail to see the egregiousness of the OP’s question — he didn’t suggest 135 ops.

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Guys, if this is how we respond to guests, we should close the guest forum. This is ridiculous. If you don’t have something constructive to say, saying nothing is free.

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What are you even talking about here - specifically? What is “it”?

I have a pretty good group of pilot friends and I bet less than 10% of them could explain dry leasing or operational control. Failing to see what’s “fundamental.”

Maybe let’s stick to making guests feel welcome?

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I hear your point Demian however, I disagree.
COPA was formed approximately 20 years ago. During that time tens of thousands of questions have been asked and well over a million discussions ensued and have been answered. COPA is a deep dive into aviation friendship, technical clarity, and adventure activities, along with discounts, monthly publications, and discussions for those serious about safety, and learning. This has been so because of the time, commitment, and caring of our members who give their time willingly, without compensation, to help those who help themselves by being involved.
Regrettably, we, who care and share, cannot save the world for those who choose not to be actively involved, even when that “involvement” is in their own interest.
You state . . . “you really need to join [read: pay us] if you want to engage.” is a crass way of putting it, but yes. My “YES” response needs further explanation. To start, NOBODY PAYS US. For the few who give volunteer their time to make our 6000+ member organization tick; we don’t get paid, but we still do it, so no, PAY US is an incorrect statement.
As with any successful and surviving organization, we ask a membership fee to cover the costs of operation. IF you are a member of COPA, I encourage you to review the available finances for COPA which are in the millions over recent years.

The “guest forum” was intended for simple and broad question about the world of Cirrus aviation. It is a leader opportunity to inquire about the COPA world. It was never intended for technical or legal questions or questions of depth. And that’s why we encourage simple questioners to dive deeper as a member.

I am taking the time to volunteer my responses because I care about this organization.
The question that generated much of this discussion was a legal question, whether it was intended or not. It was a question that required a response by a “professional”. response. While our members often "help with guided responses, we don’t tender, official legal, medical, mechanical or other types of guidance. And certainly not on the guest forum. We just try to be helpful.

You’re right Dan. Maybe 10% can, but 90% can’t. In fact “dry leasing” (or lack of it) or operational control (and its critical importance) is really not understood by most pilots. Neither is it understood why putting your aircraft in a corporation can be an FAA violation, or how pilot partnerships can cause major financial issues, and yet, it’s common for those in need of correct information to seek it from incorrect people. Likewise, Web MD is not the repository for good medical advice.
Asking about “expense sharing” is just such a question. An incorrect response can be very costly.

And yet, the 90% here play in the aviation industry which is heavily regulated by the FAA and other Federal and State agencies that levy very big penalties, some of which can be criminal.

What you DON’T know about the aviation industry can cause you (the pilot) very serious problems. Posing these type questions on the Guest Forum is dangerous for both those who ask and those who answer.
What is “fundamental” is that being a pilot is more than just flying a plane. It’s also about a broad range of operational, legal and medical issues, any violation of which can cause big big trouble for the pilot, for the pilot’s family, and for others.