If you're using your plane less often now compared to when you first purchased it, you might be checking out different ways to cut down your ownership expenses. When you have a good management program, either with the Chief Pilot/Director of Operations of your own flight department or with a well respected management firm, you quite possibly have your expenditures already reduced to the minimum costs possible without impacting the basic safety of your operation. So what else can you do? A good alternative would be to use your jet to bring in income when it sits idle.
There are several ways you'll be able to earn income from your aircraft. A number of aircraft owners will first consider letting their associates use the aircraft in exchange for payment. At first glance that is a fast and very easy method to earn revenue to counterbalance fixed expenses - but be careful. Federal Aviation Administration (FAA) and Internal Revenue Service rules and regulations bar supplying an aircraft with pilots to a third party for payment unless you possess your own air carrier certificate. Most non-aviation tax and law professionals do not fully understand the intricacies of aviation regulations, so it is best for you to confer with a tax and legal professional that specializes in aviation to avoid unintentionally violating restrictions.
One way you could legally earn revenue with your aircraft is by supplying your plane to a third party, without having fuel or crew, as a dry lease arrangement. Stemming from FAA commercial regulations, you'll be able to only take payment for the use of the aircraft, and can't supply a flight crew or fuel together with the plane. You'll have to have a written dry lease agreement in place and there can be negative tax consequences, so it's a good idea to check with aviation-specific tax and legal experts before you proceed.
Ensure that your aircraft manager submits the lease agreement to the Federal Aviation Administration for acceptance and notifies your insurance provider. Dry leasing your aircraft then puts "operational control" in the hands of the lessor when your aircraft is being controlled by the third party, who must also think about the liability issues involved.
The vast majority of aircraft owners have a preference for the easiest method of earning revenue with their aircraft - putting their aircraft onto a charter company's Part 135 air carrier certificate. Contrary to what you may have been told, operating the aircraft on a charter certificate is really really simple and economical. Even though there are some "super-sized" management companies with inflated month-to-month and conformity charges, a good number of charter operators are concerned with developing a reasonable structure that creates value for the aircraft owner as well as a shared business benefit.
Allowing a charter company to use your jet permits you to legally make charter revenue and cut down your own liability in the operation of your aircraft. Most importantly, the charter income gained could offset a substantial part, if not all, of your operating expenses.
Chartering can be the most convenient way for you as an aircraft owner to legally generate income since it is possible to set the terms on how much charter income you want, and when you would like the aircraft available for charter operations. The majority of dry lessors will be expecting to have the aircraft readily available at their convenience, even while charter operators are more concerned with meeting the aircraft owner's needs first. Chartering will enable you to maintain use of your aircraft while maximizing the use of revenue-earning flights with your aircraft.
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