Flytenow modifies business model in face of FAA ruling

Private pilots have been legally sharing the expenses of flights for decades. So when ride-sharing website Flytenow co-founders Alan Guichard and Matt Voska set up shop to make it easier for pilots and passengers to connect for aviation adventures, they sought an interpretation of the expense-sharing rules and exceptions from the FAA to make sure all was OK.

What they received was a “huge shock,” said Guichard.

They feel the ruling focused solely on money, without taking into account the “common purpose” of a pilot and passenger getting together to fly somewhere.

Flytenow will petition the Washington D.C. district court to review the ruling. Paperwork was to be filed sometime this week.

Until then, Guichard and Voska changed the business model of the site to allow pilots and passenger to still find one another but no money is allowed to change hands.

So much for bringing the airport FBO bulletin board into the 21st century. Stay tuned.

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  1. says

    I don’t see how Flytenow dropping their transaction model changes anything. A pilot posting on their site looking to share costs of a flight with complete strangers will still be accused by the FAA to be “holding out.”

    Flytenow is putting the venture capital from their incubator Y Combinator to use here.

    Flytenow is attempting to defend their business model just as Airbnb and Lyft are. If the courts end up overturning the FAA’s interpretation of 14 CFR 119, it could open up some interesting new opportunities for private aviation. Flightsharing could end up being a handy feature for OpenAirplane too, but only if it were to become legal.

    I unpack this in detail in “Sometimes Regulations Are Written In Blood: Why Planesharing Is Grounded For Now” before the FAA ruling:

    I doubt that we’ll see that come from a judge in a district court, it will take congress and a rule change to create a safe harbor in which these sort of companies could operate to make this work.

    • says

      I think the transaction model that is being used and would be permitted under the CFRs is the posting of flights on Flytenow without a request for reimbursement. Any pilot who seeks reimbursement would be holding out.

      I will be interested in how the courts would rule on this; however, the most important component is insurance. I bet that if this is found to be permissible or if the rules are changed, the pilot will need to be sure to have the proper insurance coverages. This is a huge problem right now with Lyft and Uber.

      Insurance companies may seek to exclude such activities (use of a flight-share website) from coverage and require a rider which will cost extra and perhaps carry with it some experience/rating requirements in order to obtain. If so (and I think it likely), then whether or not it is permissible becomes moot.

      I don’t think these flight-share companies have the backing right now to get Congressional approval. I agree that Congressional action would likely be necessary to effect such a change. It will be interesting to see what happens.

      • says

        I thought the same thing about insurance Dave.

        But it turns out sharing costs like this is permissible in most pleasure & business policies. The fact that it isn’t permissible by the FARs would not lead to a claim being denied, as long as it’s within the language in the policy.

        Lyft-like aviation services are quite possible if the interpretation of the regulations, or the regulations change.

        • says

          I agree that there is an argument that it is covered now. There is also an argument that it is not covered now. I think, though, that insurance companies would change and add an exception to coverage if this were allowed. There would be too many claims in a flight share arrangement where you don’t know the passengers.

          My policy declarations page limits us to Pleasure and Business use.

          Pleasure and Business is defined in our policy as the following:

          “Pleasure and Business” means used in the business of the Insured, including personal and pleasure uses, but excluding any operation for hire or reward. Cost reimbursement shall be included within the definition of Pleasure and Business provided that such cost reimbursement is limited to:

          (1) Fuel, oil, lubricants, and other additives
          (2) Expenses of the crew, including food, lodging, and ground transportation, but excluding salary or wages
          (3) Hangar and tie-down costs away from the aircraft’s base of operation
          (4) Insurance obtained for the specific flight
          (5) Landing fees and similar assessments
          (6) Customs, foreign permit, and similar fees directly related to the flight
          (7) In flight food and beverages

          Commercial use (for which we are not insured) includes:

          “Commercial” means used principally in the business of the Insured, including student instruction, passenger or freight carrying for hire or reward, rental to others for the purpose of Pleasure and Business and those uses defined under Pleasure and Business.

          Since Personal and Business use excludes “any operation for hire or reward” (for which I would have to have Commercial use coverage and which I am sure costs more), I think the insurance company has an “out” to deny coverage if I had a claim today related to a flight under a Flytenow arrangement after MacPherson.

          I think another “out” for them is the following exclusion in my policy:

          “[I]f piloted by a pilot not properly certificated, qualified and rated under the current applicable Federal Aviation Regulations for the operation involved, whether or not said pilot is designated in the Declarations”.

  2. says

    This wasn’t a “ruling”. It was a letter of interpretation from the FAA chief counsel indicating how the FAA would likely rule in an enforcement action. Letters of interpretation have been overturned by the NTSB and Federal Courts before, but it is not common. This letter was based on years of consistent application of the regulations.

    The biggest problem with the regulations–the Code of Federal Regulations (CFRs) applying to aviation–is that nowhere do they set forth the definition of common carriage, which is a common law notion. Because this is common carriage (1. Holding out 2. to transport persons or property 3. from one place to another 4. for compensation), the 61.113 exception does not apply. The CFRs (notably, 61.113) do not make any mention of this idea of “common purpose” either. That is from prior letters of interpretation and NTSB cases, etc.

    The CFRs need to be amended to put into the regulations these rules that pilots are to beheld accountable to. It is not realistic to expect private pilots to wade through mountains of letters and NTSB/Federal court decisions to discover what they are and are not permitted to do, especially in an area that is of a fairly high concern to so many. In this process, if the flight-share companies can get clarification that what they are doing is OK, then all the better. But we all need clear rules set out in the CFRs for us all to follow without reference to letters that are not listed or included with the CFRs.

    As to the idea that all the flight share companies are doing is taking the airport or FBO bulletin board to the internet, I think the FAA has said that a bulletin board may be considered holding out. I have never seen posts like this on a bulletin board at my airport, but it seems like the practice does go on with the FAA turning a blind eye unless the pilot is blatantly acting as an illicit charter company.

    See Haberkorn and the Article, Come Fly with Me, in the Sept/Oct 2010 issue of FAA Safety Briefing, mentioned in Haberkorn:

    Haberkorn Letter:

    “The holding out can be accomplished by any “means which communicates to the public that a transportation service is indiscriminately available” . . . There may also be a holding out without advertising, where a reputation to serve all is sufficient to constitute an offer to carry all customers. Whether or not the holding generates little success is not a factor ”

    Come Fly with Me, in the Sept/OCt 2010 issue of FAA Safety Briefing:

    “This doesn’t mean that you can’t ask people to fly with you and share some of the costs, but the sole purpose of your flight can’t be just to transport your passengers from one point to another. Asking your flying buddies if they want to split the costs of flying to Oshkosh with you and flying with friends to that resort on the coast you’re all going to share and sharing the flying costs—those would be okay. However, sharing expenses with a passenger on a flight to a place you would not otherwise be flying to would be a problem.”

    “Hold the Line on Holding Out

    “Holding out” can be as complex as publishing a flight schedule for a major airline or as simple as posting a notice on an FBO bulletin board (or the Internet) telling everyone you’re the one who will fly them to that prime vacation resort and make their dreams come true. Many FAA inspectors also like to fly for pleasure, and they read those bulletin boards, too. They might not be too happy with your advertisement for Old Bessie’s “charter service” when they find out you don’t have a part 135 certificate, but at least they won’t take you to task for promising to make your prospective client’s dreams come true.

    Many pilots believe that they can easily avoid the compensation or hire restrictions of the regulations by making other arrangements. The FAA, however, interprets “compensation” very broadly. For example, the FAA has long held that logging flight time for the conduct of a flight is compensation. Most of us, and especially those of us seeking that coveted left seat at a major air carrier, know how valuable flight time can be. So, if someone requests that you use your superior piloting skills to take them to that resort of their choice and you decline any monetary payment, but still log that flight time while not paying the costs of operating the aircraft, you’ve received compensation.

    Goodwill obtained from providing a flight has also been determined to be compensation. Everyone knows how valuable a favorable news article or celebrity endorsement can be. Bartering can be considered compensation, too. You may want to think twice before you take someone flying in exchange for spending a weekend at their beach house. “

  3. SW says

    It also doesn’t help when the head of the FAA and lots of the regional/district managers are non-pilot administrators. They have no clue what it means to actually fly and ‘command’ an aircraft. They don’t get it!

  4. SR says

    These interpretations are really crazy. This is the same type of thinking that has the FAA saying that if you log your time as a private pilot participating in a 91.146 ride event (even if you suck up all aircraft expenses as a donation) you are being compensated. The rules do not include this extra info….if it is so important, 2g h we y need to update the rule itself. It sounds just like the issues with 3rd class medicals for private pilots versus light sport. Next thing you know, the DOT is going to make the same cost sharing rules for drivers. Imagine your friend asking you to take him to the store and so forth and then pays you for your gas…bingo, a violation if you do not have a for hire type license. The government needs to stay out of this nit picking

  5. Robert Duke says

    That’s what happens when you get lawyers involved with something that’s fun. Or anytime a lawyer gets involved into business the deals suddenly go bad/queer.
    Too many lawyers messing in everyone’s business. Too many lawyers in politics…congress, president, etc.

    • says

      It isn’t the lawyers fault–it is people suing each other. We live in a litigious society. Sure, there may be sleazy lawyers that take questionable cases, but the clients are the ones bringing them the cases.

      • Tom says

        The clients wouldn’t be bringing them the cases if the lawyer congressmen hadn’t created the legal system that makes it easier to bring the questionable cases so please don’t throw stones if you are in a glass house. What is needed is tort reform and its only more lawyers that can bring that about. There are 2 chances – slim and none!

        • says

          It is nice to blame Congress and lawyers, but the fact is this nation was founded on principals of common law from English jurisprudence. Those cases, especially tort cases, go back to time before memory in England. People have been suing each other in tort long before the United States was settled by the English.

          I agree, tort reform is a good idea, but do not blame your dissatisfaction of the current legal system on attorneys. If people didn’t think they had won the lottery every time they got into a fender bender, we would not have these kind of problems.

          Tort reform can work. Look at NY where soft tissue cases are virtually impermissible to bring. Then look at Virginia where soft tissue makes up a large percentage of total automobile accident cases. The personal injury lawyers advertise, but the clients decide to pick up the phone. Many have their favorite attorneys that they use every time. It is disgusting and ridiculous not to mention a waste of money and judicial resources. And who pays the cost? We the consumers–the insureds.

          But you and I can agree all day on tort reform. The issue at hand is the MacPherson letter of interpretation and lawyers that are involved, like it or not, in the day to day activities of government and society. These are not personal injury lawyers, and MacPherson herself (a lawyer representing flight-share company Airpooler) was herself an FAA attorney writing many of these letters of interpretation. Who is going to represent Airpooler or FlyteNow in hearing and administrative proceedings before the FAA? A lawyer does that.

          Who helps people with their wills and estate planning and estate administration? A lawyer does that. And who assists banks and people with their real estate transactions, building buildings, refinancing properties, buying and selling real estate, and keeping this economy moving? Lawyers do. Who helps pilots and A&Ps when they are wrongly accused by the FAA in an enforcement action? Lawyers do.

          Yes, business deals do sometimes “go queer” when a lawyer gets involved. Usually because a party has not considered one legality or another. But this is not always the case. The lawyer’s job is to counsel his or her client, point out issues, and bring issues to the forefront. The client makes the decisions. The client can (and frequently does) move forward in the face of his or her lawyer’s recommendations.

          We already have a great deal of lawyer involvement in aviation. Some of that involvement is positive for pilots. The MacPherson letter was not an example of lawyers “run amok”. It was an example of one lawyer’s (probably more than one) opinion of how the FAA would handle an enforcement situation under the CFRs in the circumstances outlined by Ms. MacPherson in her request for an opinion interpreting specific CFRs.

          • Tom says

            Lawyers writing wills and doing real estate transaction contracts: Apples

            Lawyers (“call me right now – I’m the hammer” ambulance chasers): Oranges

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