Earning Income Through Private Flight Operations with a Private Pilot License: Cost-Sharing Arrangements Explained

Traveling privately by air can burn a hole in your wallet fast. Expenses like aircraft rentals, fuel, landing fees, and more rack up quickly. Given the success of pooling costs in shared taxis and fuel costs during road trips, it’s natural for private pilots to want to do the same with flights. However, this practice is a slippery slope towards commercial operations.

The Federal Aviation Administration (FAA) recognizes this issue and has established guidelines for cost-sharing, making it less confusing for pilots. Understanding these guidelines is crucial to ensure legal, cost-effective private flights without any ambiguity.

In plain English, a private pilot can't pay less than their fair share of the operating expenses for a flight carrying passengers, provided the expenses only involve fuel, oil, airport expenditures, or rental fees.

Here's a relatable scenario: You're traveling with three passengers (total of four people). You're required to pay at least 25% of the operating expenses. If you pay less, the FAA might view you as flying for compensation, which is a big no-no in private flights.

If you own your aircraft, you can split the cost of fuel, oil, or airport expenses. However, other expenses like aircraft maintenance and insurance cannot be divided when you own the plane[1]. On the other hand, when you rent an aircraft, these expenditures are usually included in the rental fee, making it easier to share the expenses.

While the fundamental principles of pro-rata cost-sharing lie in 14 CFR 61.113 (c), there's a whole lot of fine print to be aware of. The FAA published Advisory Circular 61-142 in 2020 to help clarify these complexities.

Private Carriage vs Common Carriage

The FAA distinguishes between private carriage (like flying with friends) and public carriage (like flying with airlines). Common carriage becomes a commercial flight when a pilot:

Transport passengers or goods,
From one place to another,
For compensation or hire.

If all three conditions are met, the flight is considered commercial.

Holding Out

In the FAA’s definition, "holding out" is a murky phrase. It means that pilots can only solicit passengers to share expenses within a limited and defined group[2].

AC 61-142 lists examples of when operators are seen as "holding out":

Ticket agents or salespeople
Printed advertising (except at a Fixed-base Operator (FBO))
Emails (though this is somewhat grey)
The internet (since it doesn't comprise a limited and defined group)

To illustrate, if you fly with a coworker who shares the same business travel route, you're fine. However, advertising an open seat for others to book is considered "holding out."

Common Purpose

The "common purpose" rule often goes overlooked when it comes to cost-sharing. The FAA interprets the pro-rata cost-sharing regulations in 14 CFR 61.113 (c) to mean that only flights with a common purpose between piloting and passengers are acceptable.

To pass the common purpose test, you should ask yourself, "Who is picking the destination? Me or my passengers?" If you're flying to your own destination, you can split the costs with passengers who have their own reasons for traveling. If your passengers all have the same reason for traveling with you, you can share the costs[3].

In simple terms, you can't fly passengers just to make money or cover your costs. The flight must always serve a genuine purpose, whether it's business or leisure, and you mustn't act solely as a taxi service.

Commercial License Holders

If you hold a commercial or ATP license, you're allowed to fly aircraft for compensation, but not as a paid passenger flight. When an aircraft is flown for compensation, an operator’s certificate issued under Part 119 is usually required, and you'll need to operate under Part 121 or 135 regulations[4].

However, if you don't operate under Part 121 or 135, you're effectively exercising private pilot privileges and must abide by the pro-rata cost-sharing rules.

Wrapping it Up

Cost-sharing can make expensive air travel more manageable. Just remember to stay within the FAA's rules to ensure your flights remain legal and will not result in losing your license. The FAA's guidelines detail that private pilots can share direct operating expenses on a pro-rata basis, with no possibility of compensation beyond their share of the expenses[5]. Proper understanding of these regulations is crucial for safe and legal private aviation.

References:1. FAA F flying Cost-sharing2. FAA AC 61-1423. FAA AC 61-1424. FAA F flying for compensation5. FAA AC 61-142

A private pilot conducting a sports flight can split the flight's direct operating expenses among participating passengers in a pro-rata manner, as long as the passengers contribute their fair share of fuel, oil, airport expenditures, or rental fees. However, a private pilot is prohibited from soliciting passengers to share costs beyond a limited and defined group, as this may be considered "holding out," which is a potential violation of FAA regulations.