On August 15, 2014, six months after our initial request for an official ruling concerning our expense-sharing platform, the FAA responded. Regrettably, the FAA’s letter fails to answer the only two questions it raises. What is clear, however, is that the FAA arbitrarily grounded planesharing, for now. The ruling declares any form of expense-sharing to be compensation, regardless of whether it originates on a ridesharing platform or not.
Before we go any further, here is the FAA’s traditional legal framework:
- The “Common Carriage” Rule: Private pilots cannot hold out to the public a willingness to transport persons for “compensation.”
- The Exception: The sharing of expenses is an exception to “compensation.”
- The Common Purpose Test: The expense-sharing exception only applies if the pilot and passenger share a common purpose in the destination of the flight, i.e., the pilot and passengers each have a reason for traveling to the destination.
As such, the common purpose test ensures that a pilot’s motivation for sharing expenses while flying is not rooted in compensation. Rather, it ensures that a pilot who takes advantage of the expense-sharing exception is engaged in the genuine sharing of expenses because the pilot and passenger each have separate business at the destination. This is how pilots have been able to legally defray their expenses for decades.
The Flytenow platform simply applied this framework to the technological age. We allowed pilots to post where they were going, and enthusiasts with a common purpose in the destination to join them and split the costs – same as it’s always been. So what’s changed? Simply put, the FAA chose not to apply the common purpose test and ruled all expense-sharing to be compensation. The ruling summarily concludes that pilots using the platform are engaged in compensation, and thus, “common carriage”.Nowhere does the letter apply the “common purpose” test to any ridesharing platform flight(s), which is the single most important factor in determining whether compensation exists. "For this reason, the FAA has required a private pilot to have a common purpose with his or her passengers and must have his or her own reason for traveling to the destination.”
"Based on the fact that the FAA views expense-sharing as compensation for which an exception is necessary for private pilots, the issue of compensation is not in doubt."
Translation: Because expense-sharing is an exception to compensation, it is compensation. Put another way, the FAA claims that an exception includes what it excludes. This logic swallows the expense-sharing exception and deems all expense-sharing to be compensation. Prior to this statement, the common purpose test determined whether expense-sharing was or was not compensation.
Most pilots know that “holding out” is defined very broadly, so it is no surprise that the FAA did not delve into the issue beyond the general statement that posting a flight to a website is “holding out.” The problem is that “holding out” only applies if compensation occurs. Without compensation, “holding out” does not apply because §119(k) says “no person may advertise or otherwise offer to perform an operation subject to this part” What’s this part? See the Applicability section of Part 119. “Holding out” applies to “an air carrier or commercial operator, or both, in air commerce.” Again, the issue is compensation.In the face of an unprecedented and impending pilot shortage, and Private Aviation operations at one of its lowest points in history, we will do everything we can to defend your private pilot privileges. Flytenow was built by pilots for pilots. We are keeping the platform up and running, but removing all forms of expense-sharing. This means that a pilot will no longer be able to use Flytenow to share expenses, but may still find others to fly with. Based on the ruling, this means that flights cannot possibly be seen as “common carriage.”
Now more than ever, innovation and regulation intersect due to new and exciting technologies, and regulators are almost always too slow to adapt. This has been true since the advent of the automobile, when regulators passed laws banning “the running of horseless carriages,” to today’s regulatory monopolies that companies such as Uber and Airbnb have disrupted.If you are a pilot, an aviation enthusiast, or are interested in the development of ridesharing in aviation, please sign up for updates by creating an account at www.flytenow.com or subscribing to this blog.