U.S. Department

of Transportation

Federal Aviation

Administration

June 14, 2006

Mr. Michael Goldman

Silverberg, Goldman & Bikoff, L.L.P.

Suite 120

1101 30th Street, NW

Washington, D.C. 20007

RE: Requirements for Operators Holding a Part 125 Letter of Deviation
Authority

Dear Mr. Goldman:

We received your letter requesting a legal interpretation of the
requirements for operating an aircraft pursuant to a Letter of Deviation
Authority ("LODA") issued in accordance with 14 C.F.R. § 125.3. The
facts as outlined in your letter are as follows. Company A operates a
Boeing 727 under a LODA issued in December 2005. The LODA authorizes
noncommercial operations and allows Company A to operate the airplane
without a Part 125 certificate or operations specifications (OpSpecs).
The LODA also exempts Company A from other specified sections of the
rule.[^1] Company A uses the airplane to transport its owners, officers,
employees and guests in noncommercial operations for Company A's
business purposes. Company B is a related entity that is partially owned
by Company A. Company B desires to use the airplane to transport its
employees for Company B's business purposes. Based on the foregoing, you
asked whether Company A could transport Company B's employees on flights
for which Company A has no business purpose, or if Company B should
obtain its own LODA and dry lease the airplane to transport its own
personnel. For reasons more fully explained below, Company A's
noncommercial LODA does not permit the carriage of Company B's employees
on flights where Company A has no business purpose for the flight other
than the carriage of Company B's employees. Thus, Company B must obtain
its own LODA to operate the airplane and transport its employees.

As an initial matter, it is helpful to clarify which set of Federal
Aviation Regulations apply to the proposed operations. Generally,
corporate operations not involving common carriage are governed by Part
91-Subpart F, and specifically §§ 91.501(b)(5) and (b)(6). In this case,
however, you may not rely on § 91.501(b), but instead, must consider the
requirements of part 125 because of the size of the airplane.[^2]

Part 125 contains rules governing the certification and operation of
airplanes with a passenger seating configuration of 20 or more seats, or
a maximum payload capacity of 6,000 pounds or more ("Part 125
Airplanes") when common carriage is not involved. Part 91-Subpart F
contains rules governing the operation of large and turbine powered
multiengine aircraft. It is the intersection of Part 125 and Part 91-
Subpart F that is of critical importance in resolving your inquiry.

**[Part 91-Subpart F and Part 125]{.underline}**

Part 91-Subpart F contains exceptions to some of the commercial
operating rules, allowing certain operations to be conducted under Part
91 that would normally be required to be conducted under other
commercial regulations. Specifically, § 91.501(b) states that certain
operations may be conducted under the rules in Part 91-Subpart F instead
of under the commercial operating rules in Parts 121, 129, 135, and 137
when common carriage is not involved. You will note that the language in
§ 91.501(b) specifically excuses operators from having to comply with
parts 121, 135, 137 and 129, but does not include an exception for Part
125.[^3] Therefore, an operator conducting a flight not involving common
carriage in a Part 125 Airplane, is not excused from the applicability
of Part 125. This is because one of the purposes of Part 125 is to
ensure that all commercial operations conducted in Part 125 Airplanes,
but not involving common carriage, are conducted in accordance with the
additional safety requirements in Part 125.

When the FAA originally proposed Part 125, it specifically stated that
the purpose of the rule was to amend the applicability of Part 121 so
that those rules would apply only to common carriage operations with
airplanes certificated to carry 20 or more passengers or a maximum
payload capacity of more than 5,000 pounds.[^4] The agency further
stated that "\[c\]ommercial operations conducted with those airplanes,
but not involving common carriage, would be governed by proposed Part
125."[^5] In light of the purpose of the rule, it is helpful to clarify
the meaning of "commercial operations" and "operations not involving
common carriage" when determining the impact of Part 125 on Part 91
operations.

**[Commercial Operations]{.underline}**

A commercial operation is any operation where the operator receives
anything of value in exchange for carrying another person or another
person's property.[^6] The operations described in §§ 91.501(b)(3),
(b)(5), (b)(6) and (b)(7) are commercial operations because they involve
an actual exchange of money. The operations described in the other
subparagraphs in § 91.501(b) may also be viewed as commercial in certain
circumstances because the FAA construes "compensation" to include
anything of value, including valuable good will. One of the reasons the
agency adopted § 91.501(b) was to allow operators to conduct these types
of commercial operations without having to obtain a commercial operating
certificate. However, this did not change the nature of the operations
themselves. They continue to be commercial operations because
compensation is involved.

**[Operations Not Involving Common Carriage]{.underline}**

Section 119.3 defines "operations not involving common carriage" to
mean:

1.  noncommon carriage;[^7]

2.  operations in which persons or cargo are transported without
    compensation or hire;

3.  operations not involving the transportation of persons or cargo and;

4.  private carriage.[^8]

Under this definition, two types of operations are commercial because
they involve compensation or hire (*i.e.*, noncommon carriage and
private carriage); and two types are noncommercial (*i.e.*, operations
in which persons or cargo are transported without compensation or hire
and operations not involving the transportation of persons or cargo).

**[Part 125 and Section 91.501(b)]{.underline}**

Considering the definitions of "commercial operations" and "operations
not involving common carriage" together, it becomes clear that the
operations described in § 91.501(b) meet all of the elements. It follows
then that the FAA would not excuse operators from complying with Part
125 when it adopted § 91.501(b) because to do so would have rendered
Part 125 meaningless and defeated the purpose of the rule, which was to
ensure compliance with Part 125 for all commercial operations conducted
in Part 125 Airplanes, but not involving common carriage. Section
91.501(b), therefore, was specifically drafted to allow certain types of
commercial operations to be conducted under Part 91, instead of the
rules in Parts 121, 135, 137 or 129. However, § 91.501(b) does not
reference Part 125 and does not allow commercial operations not
involving common carriage to be conducted under Part 91 if the operator
uses a Part 125 Airplane.

Having established that the plain language of § 91.501(b) does not
excuse operators of Part 125 Airplanes from complying with Part 125 when
conducting commercial operations not involving common carriage, the next
question to resolve is whether Part 125 Airplane operators may engage in
§ 91.501(b) operations if they hold a Part 125 LODA exempting them from
the certification requirements. The answer to that question is no.

**[Part 125 LODAs and Section 91.501(b)]{.underline}**

When the FAA adopted Part 125, it included provisions for deviation
authority. Section 125.3 states that the Administrator may issue a LODA
providing operators relief from specified sections of Part 125. A LODA
records the FAA's decision to exempt the LODA holder from the
requirement to obtain a Part 125 operating certificate or OpSpecs. A
LODA may also be issued to Part 125 certificate holders to record the
FAA's decision to excuse the certificate holder from other provisions in
Part 125.[^9]

In recent months, there has been considerable debate about the impact of
LODAs on corporate operators. The debate has centered largely on LODAs
that were issued as "full" or "blanket" deviations from Part 125. Some
have interpreted the term full or blanket deviation to mean a complete
exemption from all Part 125 requirements, while others have viewed the
term as a misnomer that has resulted in an inconsistent application of
the rules.

Although full deviations from Part 125 might have been justified in rare
and isolated circumstances, the agency never intended for full or
partial deviations to be issued indiscriminately.[^10] Instead, full
deviations were contemplated for unusual circumstances or operations of
a very limited scope. In no case, however, should a deviation be issued
for any purpose that would completely eviscerate the rule. As stated
above, the purpose of Part 125 is to ensure that all commercial
operations conducted in Part 125 Airplanes, but not involving common
carriage, are conducted in accordance with Part 125. Therefore, any
deviation (full or partial) that allows those operations to be conducted
in Part 125 Airplanes *without* complying with Part 125, is improper.
Moreover, it would be illogical to allow an operator who is *not*
meeting all of the additional safety requirements in Part 125 to conduct
any commercial operation, even if common carriage is not involved.
Accordingly, the FAA declines to interpret the deviation authority in
Part 125 as a basis for allowing an operator to conduct commercial
operations not involving common carriage in a Part 125 Airplane under
part 91.[^11] This specifically includes the operations described in
§ 91.501(b).

**[Other Safety Considerations]{.underline}**

In recent years, and particularly after the 9/11 terrorist attacks, the
agency has been greatly concerned about full/blanket deviations, in
part, because of the reduced oversight for full/blanket deviation
holders. Recognizing that the liberal deviation policy could have
adverse safety consequences, the agency began taking steps to correct
this trend. In August 2002, FAA Flight Standards at headquarters decided
that no further blanket deviations should be approved.[^12] This
decision was made in light of the FAA's authority in § 125.3(b) to
terminate or amend LODAs at any time; a provision included in the rule
for the very purpose of reining in deviation authority that proved to be
inconsistent with the agency's safety goals. The FAA did not summarily
revoke LODAs, but it did require all local Flight Standards District
Offices (FSDO) to reevaluate previously issued LODAs and determine that
operations were consistent with regulatory requirements.

The FAA acknowledges that certain guidance appearing in the 8700
Inspector's Handbook may have caused confusion regarding LODAs in
general, and Part 91 operations in Part 125 Airplanes in particular. The
FAA Office of Flight Standards has taken steps to resolve this problem,
and issued amended guidance to its inspectors that reflects the opinions
given here. The regulatory and enforcement divisions of the Office of
the Chief Counsel consider this interpretation to be the definitive
explanation of the proper scope of a LODA and authorized operations.

**[Regulatory Requirements for the Proposed Operations]{.underline}**

Having outlined the regulatory regime governing your proposed
operations, the FAA has determined that Company B is required to obtain
its own LODA in order to transport its employees. Company A would be
prohibited from transporting Company B's employees unless Company B's
employees were traveling as guests[^13] on a trip that was conducted
*entirely* for Company A's business purposes. In other words, Company
B's employees may travel on Company A's airplane, but only for trips
that Company A was going to make anyway. If the trip is for the benefit
of Company B, then Company A could not conduct the trip without holding
a Part 125 certificate authorizing noncommon or private carriage, or a
commercial operating certificate for common carriage. Accordingly,
Company B should contact the nearest FSDO and obtain a LODA to transport
its owners, employees, officers, and guests. The LODA should exempt
Company B from complying with specific sections of Part 125, but should
not provide a full/blanket deviation from the entire rule. The LODA
should limit Company B to noncommercial operations where no compensation
of any kind is received, including reimbursement for operating costs.
The LODA should also reflect that the carriage of any guests on the
airplane must be limited to flights conducted solely for Company B's
business purposes.

This interpretation was prepared by the Operations Law Branch of the
Office of the Chief Counsel and coordinated with the Air Transportation
Division of Flight Standards Service. We trust that it will be useful to
you in your continued operations.

Please contact Joe Conte of my staff at the address provided above, or
by phone at (202) 267-3073, if we can be of further assistance.

Sincerely,

Rebecca MacPherson

Assistant Chief Counsel for Regulations

[^1]: Specifically, the Letter of Deviation Authority provides relief
    from §§ 125.21, 125.27, 125.29, 125.31, 125.33, 125.35, 125.41, and
    125.43.

[^2]: The FAA notes that even if § 91.501(b) applied, Company A could
    not transport Company B employees as proposed because Company B is
    not a wholly owned subsidiary of Company A. *See* *Federal Aviation
    Decisions*, 1975-13, 1975-15, and 1985-17. (West Publishing Co.).

[^3]: The plain language of § 91.501(b) is also consistent with the
    plain language and policy underpinnings of § 119.1(e)(2). Section
    119.1(e) sets forth several types of operations that are excused
    from complying with the commercial operating rules in Parts 121 and
    135. However, those same flights would not be excused from complying
    with Part 125 if they were conducted in a Part 125 Airplane, where
    common carriage was not involved.

[^4]: *See* 44 FR 66324 (Nov. 19, 1979). In the final rule, the payload
    capacity was increased to 6,000 pounds or more.

[^5]: *Id*.

[^6]: *See* 14 C.F.R. § 1.1 (2006) (defining a commercial operator as a
    person who, for compensation or hire, engages in the carriage by
    aircraft in air commerce of persons or property).

[^7]: Noncommon carriage means an aircraft operation for compensation or
    hire that does not involve a holding out to others. Title 14 C.F.R.
    § 119.3 (2006).

[^8]: Private carriage is a common law term, not specifically defined in
    the Federal Aviation Regulations. It has been interpreted to mean an
    aircraft operation for compensation or hire that does not involve
    holding out, or that involves very limited holding out. It is often
    characterized by carriage for one or several selected customers,
    generally on a long-term basis.

[^9]: Ideally, Part 125 certificate holders would not be issued a LODA,
    but instead, would receive an authorization on their OpSpecs
    documenting the sections of Part 125 with which they do not have to
    comply. LODAs should be reserved for non-certificate holders to
    document their exemptions from the certification and OpSpec
    requirements, as well as from other specified sections of the rule.

[^10]: *See* 45 FR 67214 (Oct. 9, 1980) (The FAA notes that "it is
    difficult to foresee more than a few situations in which a deviation
    from the entire Part \[125 rule\] could be justified . . .").

[^11]: This interpretation is also consistent with other regulatory
    requirements. For example, § 91.321 allows a candidate in a Federal
    election campaign to pay an aircraft operator for campaign travel.
    These operators are permitted to conduct the flights under Part 91
    and receive compensation, without possessing a commercial operating
    certificate authorizing operations under Parts 121 or 135. However,
    if the operator is conducting the flights in a Part 125 Airplane,
    that operator is *not* excused from complying with Part 125. *See*
    §§ 91.321 and 119.1(e)(10).

[^12]: FAA Notice 8700.20 is enclosed for your review.

[^13]: The word "guest" is not defined in the Federal Aviation
    Regulations, but the FAA has interpreted it to mean an individual
    traveling on the airplane when no charge or fee of any kind is made
    in exchange for the transportation, including the reimbursement of
    operating costs. The guest must be traveling on a flight conducted
    solely for the operator's business purposes.