Three Revenue Ideas for a Part 91 Flight Department
You are director of aviation for a family-owned manufacturer operating one G550 under Part 91 with two crews and about 220 hours a year; fully loaded cost is roughly $4.1 million annually. At the quarterly review the CFO proposes three revenue ideas: (1) charge a wholly owned distribution subsidiary $9,800 per flight hour for about 40 hours a year of flying that subsidiary's managers to plants; (2) accept $14,000 per trip from an unrelated supplier who wants rides to a hunting lodge and to the company's plant tour, “just to cover fuel and crew”; (3) dry-lease the aircraft for 60 days to a local Part 135 charter operator during its upcoming 96-month inspection, with that operator supplying pilots, maintenance and its own operational control. The CFO's goal is to cut the flight department's net cost by $600,000. The aircraft is insured on a corporate policy that excludes common carriage and contains no pilot warranty for charter operations. The company holds no Part 135 certificate and has no plans to obtain one.
1. Evaluate each of the three proposals for legality, and say what you would approve.
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Proposal 1 - the subsidiary. Defensible only if it stays inside a single corporate enterprise: the flight serves the parent's business purpose, the parent retains operational control, the aircraft is not held out to anyone, and the subsidiary is charged an allocated actual cost with no element of profit. A per-hour figure that embeds margin, or any marketing of the service, is the FAA's classic “flight department company” fact pattern - a separate entity providing transportation for compensation, which requires a Part 135 certificate. Approve a documented cost-allocation method after legal review; do not approve a rate card.
Proposal 2 - the supplier. No. Compensation plus a willingness to carry a person who is not part of the enterprise equals common carriage, and the company has neither a certificate nor an aircraft on an OpSpec blurring. Calling it “fuel and crew” does not change the analysis; a commercial passenger-carrying operation under Part 91 also voids the insurance.
Proposal 3 - the dry lease. Permissible in principle: a dry lease to a certificate holder that takes operational control is one of the Part 91.501(b) large-airplane/turbojet operations. It becomes a wet lease - and a problem - the moment you supply a pilot, fuel, or direction over the flights.
Approve 1 in modified form and 3 with documentation; reject 2 outright.
2. What must be in place before the dry lease is signed, and what would convert it into an illegal wet lease?
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Before signature:
- A written lease that unambiguously transfers operational control to the charter operator, including who dispatches, who releases the aircraft, who designates the crew, and who is responsible for airworthiness and MEL control during the term.
- The truth-in-leasing statement required by 14 CFR 91.23 for large/turbojet aircraft, with the required notices to the FAA and a copy of the statement kept with the aircraft.
- The aircraft placed on the lessee's OpSpecs and brought into its approved maintenance program, with records, AD status, and life-limited parts handed over cleanly.
- Insurance: hull and liability written for commercial/charter use, with the lessor named as additional insured, and confirmation that your corporate policy does not exclude it. Verify the lessee's pilot warranty covers their crews.
- Export/registration and tax review by counsel, plus a return condition and hours/cycles cap so the asset is not consumed.
The wet-lease trap: supplying a company pilot “to help out,” paying for fuel, retaining scheduling authority, or having your chief pilot approve trips all shift operational control back to you. At that point you are operating a large turbojet for compensation without a certificate - the exact violation the lease was structured to avoid.
3. The CFO still wants $600,000 out. What legitimate levers do you offer, and what do you tell her about the insurance clause?
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Reframe from revenue to total cost and risk:
- Cost allocation inside the enterprise (proposal 1, done cleanly) recovers real dollars without creating a certificate obligation.
- Demand management: the 220 hours almost certainly include low-value legs. Publish a cost-per-hour by mission and eliminate the bottom decile; a 15% hour reduction is roughly $600,000 on a $4.1 million budget - the CFO's target without any regulatory exposure.
- Structural options: sell and move to a managed or fractional arrangement, or right-size to a smaller aircraft; model 5-year net present cost, not hourly rate.
- If genuine charter revenue is the goal: pursue a Part 135 certificate or place the aircraft with a charter operator under a properly documented dry lease and accept that the revenue is theirs, or buy lift commercially.
On insurance: the common-carriage exclusion means proposal 2 is uninsured, not merely unlicensed - one claim would be borne by the company and could follow the directors personally. Also flag that personal use of a business aircraft by the family creates imputed income (SIFL) that finance must account for. Tell the CFO plainly: the $600,000 target is achievable, but not through the two ideas that require a certificate the company does not have.