August 14, 2013
Have Companies Changed Their “Use of Personal Aircraft Practices” Since the FAA’s Final Guidance on Reimbursement?
– Broc Romanek, CompensationStandards.com
A while back, Ruth Wimer of McDermott Will taped a podcast with me on personal use of aircraft. Since Ruth wrote out her answers to some of the questions, I thought I would share them since they are so useful. Below is one answer:
The FAA guidance which came in the form of a letter to Mike Nichols, an executive at the National Business Aviation Association was a pleasant surprise. By way of background, the FAA has strict rules regarding chartering aircraft and generally requires the owner to obtain a Part 135 certificate if any payments or reimbursements are made for using piloted air transportation. There are however a few exceptions to this rule which can be used under the general Part 91 form of ownership which is the type of ownership generally used for business or personal aircraft. Part 91 provides for an exception for reimbursement for the use of aircraft “within the scope of the business of the owner” of the aircraft.
So generally speaking, an executive flying for his company’s business may reimburse for that flight, but in the so-called “Schwab” opinion issues several years ago, the FAA said that the personal travel by an executive did not qualify as “within the scope of the business”. Upon looking at the issue further, the FAA in the “Nichols” opinion decided that if certain conditions were met – pre-approval of the executives travel by the board and agreement that the use of the plane was desirable in order to be able to more readily call the executive back from his personal travel for business purposes, then the executive could in fact reimburse for the flight.
Mind you, even without the Nichols opinion, executives could reimburse under a timeshare agreement but only in an amount up to the legal limit for such reimbursements referred to as “double the fuel”, and other out of pockets. We believe that the position in the Nichols opinion has not been frequently used, but for those that have taken advantage of it, it has been greatly appreciated.