If the proposed rule substantially is adopted, the FAA presently intends to implement it over a fifteen-month phased-in compliance schedule. This would facilitate the transition from the current Part 91 Subpart F (which will remain in place for other types of shared ownership programs) to the new Subpart K (for fractional ownership programs). The FAA also has requested comments with respect to the transition.

Shared ownership of general aviation aircraft -- including interchanges, time-shares and joint ownership -- has been around for years and was memorialized in 1972 in FAR Part 91, Subpart F. Fractional ownership differs from these other types of shared ownership primarily in the fact that, in a fractional ownership program, other aircraft from a pooled fleet may be substituted for the owner’s aircraft. This difference creates the issue. Some have argued that fractional ownership programs are substantially similar to, and competitive with, on-demand charter operations conducted under FAR Part 135, i.e., that they are commercial in nature. It also has been argued that on-demand charter operations are at a disadvantage because Part 135 imposes operating restrictions not found in Part 91.

The growth in fractional aircraft ownership programs has been one of the great success stories in aviation over the last decade. The first program was started in 1986 by NetJets, a subsidiary of Executive Jet. Today, there are over 500 aircraft, primarily jets, in fractional ownership programs and over 3,700 individual owners. NetJets remains the largest program manager, with approximately 345 aircraft in its programs and nearly 600 aircraft on order. NetJets publicly states that in the last six years it has placed $17 billion dollars in orders for business jets, approximately 40% of all business jet aircraft ordered in that period.

Other fractional ownership programs rapidly are emerging. Most of the airframe manufacturers, including those for transport category aircraft, now offer programs either individually or in cooperation with third-party managers. New third party managers also are emerging, most notably United BizJets, the recently created business aviation affiliate of United Airlines.

The success has not just been economic, however. As the NPRM states in the Preamble, "FAA and NTSB accident data for U.S.-registered turbine-powered aircraft during the ten-year period from 1987-1998 demonstrates that fractional ownership aircraft operations are very safe." 66 Fed. Reg. at 37521. This outstanding safety record, and the industry best practices underlying that record, are reflected throughout the NPRM.

The FAA has the statutory authority to create aviation rulemaking committees that are exempt from the Federal Advisory Committee Act. This provides the ability to initially discuss highly technical issues with interested parties in a collegial setting without the glare of government-in-the-sunshine requirements. In October 1999, the FAA convened the Fractional Ownership Aviation Rulemaking Committee (FOARC), consisting of twenty-seven representatives of a cross section of the business aviation and on-demand charter industries, foreign civil aviation authorities, the DOT and the FAA. The FOARC met for nine days late in 1999, including two days of public hearings. The FOARC presented its initial recommendations to the FAA in February 2000 and provided further input thereafter.

The NPRM represents the FOARC’s "unanimous consensus on all the committee’s recommendations, including those with respect to changes in both part 91 and 135." 66 Fed. Reg. at 37521. That is a remarkable accomplishment, to say the least.

The highlights of the NPRM are discussed below.

The central focus of the NPRM is the addition of Subpart K to Part 91. Subpart K would apply specifically to fractional ownership operations. While Subpart K is very detailed, there is an implicit consequence that is just as significant, namely, a fractional ownership program operating within these rules would have a safe harbor from any claim that it was conducting an unauthorized commercial operation. At the same time, a fractional ownership program could be operated under Parts 121 or 135 if the owners and manager elected to do so.

Under Part 91.2001(b)(1), there would be five requirements to meet the definition of "fractional ownership program:"

• a designated program manager who provides administrative and aviation support services including, at a minimum, safety guidelines, scheduling of aircraft and crews, maintenance, crew training, record-keeping and operations and maintenance manuals;

• one or more owners per aircraft, with at least one aircraft having multiple owners;

• each owner has a fractional interest of at least 1/16 of a fixed wing aircraft or 1/32 of a rotorcraft in the program. The fractional interest can be a traditional ownership interest, a multi-year lease or a multi-year lease convertible into an ownership interest. 91.1001(b)(3);

• a dry lease aircraft exchange agreement among all owners making program aircraft available, on an as needed basis without crew, to each fractional owner; and

• multi-year agreements between each owner and the program manager. This could extend to affiliates of the program manager, i.e., subsidiary companies in which the program manager holds at least 40% of the equity and voting interests. 91.1001(b)(9). This is a presumption, and the FAA would be free to find a proper "affiliation" with a less than 40% interest if there otherwise was a "sufficient nexus between programs." The purpose of the "affiliated program" provision is to make aircraft available to owners when the aircraft are under the supervision of a common program manager while, at the same time, preventing franchising.

Additionally, 91.1005 would: prohibit a fractional owner from receiving any third-party compensation for use of the aircraft other than that permitted today by Parts 91.321 and 91.501; and require that the total hours flown by a fractional owner may not exceed the total hours associated with that fractional owner’s share of ownership, i.e., any additional hours must be flown under Parts 121 or 135. This is intended to prevent "sham" fractional ownership programs.

Operational control determines regulatory responsibility for the safe operation of an aircraft. The proposed rule makes it clear that when an aircraft was being used at the behest of a fractional owner, that fractional owner would be in operational control. 91.1009. Upon entering a program, each fractional owner would have to be advised by the program manager of this responsibility and acknowledge that responsibility in a prescribed form. 91.1003. The passenger briefing before each flight also would have to include identification of the person in operational control and whether the flight is being conducted under Subpart K or under Parts 121 or 135. 91.1035(c).

However, the Preamble also makes it clear that the program manager "is jointly and severally responsible with the owner for the safe operation of the flight and for compliance with the Federal Aviation Regulations affecting that flight." 66 Fed. Reg. at 37526-7. See 91.1014, 91.1109 and 91.1115.

The responsibility ultimately placed on program managers requires substantial FAA oversight. To facilitate that oversight, the FOARC borrowed the concept of operations specifications from the regulation of air carriers under Parts 121 and 135.

Each program manager would be required to obtain from the appropriate FSDO, and to keep updated, a set of management specifications that detailed the program manager’s practices and procedures and exemptions and deviations. 91.1015. This would include a current listing of all program aircraft and owners. The list of owners, which is highly proprietary, could be maintained at the manager’s principal base of operations.

As mentioned above, if adopted, the FAA presently intends to implement the transition to Subpart K over a fifteen-month period. This will allow the FAA to develop guidance materials, inspector training and assignments and oversight and surveillance policies. The need for standardization and uniformity in these areas was emphasized by the FOARC.

The proposed rule includes detailed requirements with respect to flight crew. These requirements were recommended by the FOARC based on industry guidelines and best practices.

Each program manager would be required to staff with a minimum of three pilots per aircraft, and each flight would be required to be crewed by two pilots. Each pilot of a multi-engine turbine-powered fixed wing aircraft would be required to hold an airline transport pilot rating, and each pilot of other aircraft types would be required to hold a commercial rating. The FAA would be able to grant deviations to operators of smaller equipment. 91.1049.

Pilots for fractional ownership programs would be subject to safety background checks. 91.1051. Operating limitations (e.g., situations in which a second in command could not make a takeoff or landing) and pairing requirements also would be imposed. 91.1055.

The rule would establish flight, duty and rest time requirements for pilots flying fractional ownership program aircraft in program flights. 91.1057 through 91.1061. The FOARC based these on industry best practices and, with a few minor exceptions, they equal or exceed requirements imposed on air carriers by Parts 121 and 135. Although the FAA adopted the FOARC proposal in the NPRM, it also made it clear that it is open to other options, including applying the Part 135 requirements (which also may be substantially changed) to fractional ownership program flights. 66 Fed. Reg. at 37533.

Subpart K would impose training requirements on flight crew, flight attendant and maintenance personnel. 91.1063 through 91.1111. Although the FOARC did not recommend mandatory drug and alcohol testing, drug and alcohol misuse education programs would be required. 91.1047. Subpart K also would require, for program aircraft, the types of additional emergency equipment required for the aircraft if it were operating under parts 121 or 135, including CVRs, FDRs and TCAS. 91.1045

Perhaps the most difficult problem facing the FOARC was to assure that Part 135 and Subpart K would require equivalent levels of safety. In most instances, the Subpart K requirements were equal to or exceeded Parts 121 and 135. In some instances, however, requirements in Part 135 appeared overly restrictive when matched against their Subpart K equivalents.

Part 135.385 prohibits an air carrier from taking off for a destination airport unless the Airplane Flight Manual indicates that the airplane at normal loads is capable of a full stop landing at that destination airport within 60% of the effective length of the runway. There is no such limitation in Part 91 or the proposed Subpart K. The "60% rule" goes back to the early days of commercial aviation when it was not possible to predict landing distances with accuracy and uniformity. As far back as 1958, the Civil Aeronautics Board (which then had safety regulatory responsibility) stated that the rule deserved to be reconsidered.

The practical effect of the 60% rule is to exclude on-demand charter aircraft operated under Part 135 from many airports where Part 91 aircraft can operate. The FOARC recommendation, which is included in the NPRM, is to: increase the full stop landing distance from 60% to 85% for both the destination and alternate airports; and permit a program manager or eligible on-demand charter operator (those who meet the flight crew experience and pairing requirements of Subpart K) to develop, with FAA approval, other procedures for specific airports. The revised rule would be included in both Part 135 and Subpart K. 91.1025, 91.1037, 135.23, 135.385 and 135.387.

When emergency maintenance is performed on an aircraft operating under Part 135, the maintenance provider must be properly enrolled and subject to the provisions of an FAA-approved drug and alcohol misuse program. There is no similar requirement in Part 91. Many airports served by on-demand charter operators do not have such personnel at hand, particularly during evening and weekend hours. Stories of tire changes that cost $10,000 because of the need to bring in mechanics and resulting delays, and other extremes, were brought to the attention of the FOARC.

The NPRM proposes a new procedure in Subpart K and in Part 135 that would allow program managers and eligible on-demand charter operators to perform emergency, non-scheduled maintenance at airports that do not have available maintenance personnel meeting the drug and alcohol testing requirements. 91.1047(d), 135.251(c) and 135.255(c).

The NPRM addresses a number of other issues that seek to maintain equivalency between Subpart K and Part 135, including:

• permitting an alternate means for meeting the destination weather reporting requirement;

• eliminating the requirement in Part 135 for proving tests whenever a new aircraft type is added; and

• conforming the overwater emergency equipment requirements for both Subpart K and Part 135 to clarify that for pressurized turbine-powered aircraft operating at more than 25,000 feet, such equipment is not required unless the flight proceeds more than 30 minutes or 100 nautical miles from the nearest shore, whichever is greater.