2-536. DIRECTION AND GUIDANCE.
A. General. This
chapter provides direction and guidance on the application process of Title 14
of the Code of Federal Regulations (14 CFR) part 91, subpart K (part 91K), Fractional Ownership. This process, if followed, will lead to successful
compliance with Title 49 of the United States Code (49 U.S.C.)—formerly the Federal Aviation Act (FA Act of 1958)—and 14 CFR.
Under no circumstances will an applicant be issued management specifications (MSpecs) until Flight Standards District
Offices (FSDO) and Regional Flight Standards Division (RFSD) offices are
confident that the prospective applicant is capable of fulfilling the required
responsibilities, is willing to comply with 14 CFR in an appropriate and
continuing manner and can conduct all requested authorizations safely.
B. Three Gates.
Included in the five phases of the application process are three gates. The
three gates are particular points in the process at which requirements must be
met before proceeding to the next part of the application process.
NOTE: In some cases, the guidance and suggested sequence of
events in this document may not be entirely appropriate. In such situations,
the Federal Aviation Administration (FAA) and applicant should consider
existing conditions and circumstances.
C. Fraction Ownership
Programs. Fractional ownership programs are subject to an FAA oversight
program similar to that provided to air carriers, with the exception of line
checks and en route inspections. FAA aviation safety inspectors (ASI) conduct
scheduled and unscheduled inspections and surveillance of personnel, aircraft,
records, and other documents to ensure compliance with the regulations.
Before the publication of part 91K, there was no regulatory definition of fractional ownership. Most fractional
ownership programs were operated under part 91. Some programs incorporated the fractional ownership principles related to
sale and purchase of aircraft, but aircraft were then leased to an air carrier
and operated under 14 CFR part 135
of the regulations. Other programs operated under part 91, aircraft were leased to an air carrier, and owners had the option of
operating rules. Further, numerous programs were marketed as “fractional
ownership programs” or variations of fractional ownership programs that do not
meet the regulatory definitions or program elements.
B. Current. Title
14 CFR part 91
K establishes regulatory requirements for fractional ownership programs and
their program managers and owners. This regulation defines the program and
program elements, allocates operational control responsibilities and authority
to the owners and program manager, and provides increased operational and
maintenance safety requirements for fractional ownership programs. Title 14 CFR
section (§) 91.1001
defines the applicability and elements of a fractional ownership program.
Subpart K further defines the owner and program manager responsibilities and
safety standards. Fractional ownership programs and operations are subject to
the applicable provisions of part 91, in addition to the specific requirements for these programs defined in part 91K. Title 14 CFR § 91.501
assigns rights and responsibilities of owners, fractional owners, and program
managers. Additional requirements can be found in part 91, subpart F.
C. Programs Not Fitting
Regulatory Definitions. Shared aircraft ownership or management arrangements
that do not fit within the regulatory definitions or applicability of part 91
subpart K should be reviewed on a case-by-case basis to determine the
appropriate regulatory requirements. For example, a shared aircraft arrangement
where the owners pilot their own aircraft might more appropriately fit the
definition of a flying club or other ownership option not subject to part 91K. Operations that involve compensation should be closely examined to determine
if they can be operated under the provisions of 14 CFR § 91.501
(interchange, joint ownership, or time share), under exceptions to part 119, 135, or 121, or whether they are subject to the rules applicable to air carriers or
commercial operators. Programs marketed as fractional ownership programs that
do not meet the regulatory definitions of a fractional ownership program should
not continue to market the program as a fractional ownership program. These
programs are encouraged to change their marketing names to reflect the
appropriate regulatory requirements.
2-538. DEFINITIONS AND ELEMENTS.
Definitions of a fractional ownership program and the elements of that program
are summarized below.
A. Affiliate of a
Program Manager. A manager that directly or indirectly controls, is
controlled by, or is under common control with another program manager through
one or more intermediaries. The holding of at least 40 percent of the equity
and 40 percent of the voting power of an entity will be presumed to constitute
control for purposes of determining an affiliation.
B. Dry-Lease Aircraft
Exchange. An arrangement, documented by the written
program agreements, under which the program aircraft are available, on an as-needed
basis without crew, to each fractional owner.
C. Dry-Lease Aircraft
Exchange Agreement Among All the Owners. This
agreement requires all owners to provide their share(s) of their aircraft to
other owners in the program. It allows an owner to use any aircraft in the
“program aircraft pool” for that program manager or affiliate of that program
manager. An owner’s share of an aircraft equates to a predetermined number of
flight hours, or ratio of flight hours, in the type or types of aircraft in the
program fleet. The dry-lease exchange provision applies to affiliate programs,
but does not allow the dry-lease exchange among other fractional ownership
programs that are not affiliates.
D. Fractional Owner or Owner.
An individual or entity that possesses a minimum fractional ownership interest
in a program aircraft and that has entered into the applicable program
agreements, provided, however, that in the case of the flight operations
described in 14 CFR § 91.1001(b)(6)(ii), and solely for purposes of requirements pertaining to those flight
operations, the fractional owner operating the aircraft will be deemed to be a
fractional owner in the program managed by the affiliate.
E. Fractional Ownership
Interest. The ownership of an interest or holding of a multiyear leasehold
interest and/or a multiyear leasehold interest that is convertible into an
ownership interest in a program aircraft.
Ownership Program or Program. Any system of aircraft ownership and exchange
that consists of all of the following elements:
· The provision for fractional ownership program management
services by a single fractional ownership program manager on behalf of the
or more airworthy aircraft
or more fractional owners per program aircraft, with at least one program
aircraft having more than one owner
of at least a minimum fractional ownership interest in one or more program
aircraft by each fractional owner
dry-lease aircraft exchange arrangement among all of the fractional owners
program agreements that cover the fractional ownership, fractional ownership
program management services, and dry-lease aircraft exchange aspects of the
G. Fractional Ownership
Program Aircraft or Program Aircraft.
aircraft in which a fractional owner has a minimal fractional ownership
interest and that has been included in the dry-lease aircraft exchange pursuant
to the program agreements; or
the case of a fractional owner from one program operating an aircraft in a different
fractional ownership program managed by an affiliate of the operating owner’s
program manager, the aircraft being operated by the fractional owner, so long
as the aircraft is included:
In the fractional ownership program managed by the
affiliate of the operating owner’s program manager, and
In the operating owner’s dry-lease aircraft
exchange pursuant to the program agreements of the operating owner’s program;
aircraft owned, in whole or part, by the program manager or affiliate that has
been included in the dry-lease aircraft exchange and is used to supplement
H. Fractional Ownership
Program Flight or Program Flight. A flight, under part 91, subpart K, when one or more passengers or property designated by a fractional
owner are on board the aircraft.
Ownership Program Management Services or Program Management Services.
Administrative and aviation support services furnished in accordance with the
applicable requirements of part 91K, or provided by the program manager on behalf of the fractional owners
include, but are not limited to, the:
and implementation of program safety guidelines;
furnishing, or contracting of pilots and other crewmembers;
and qualification of pilots and other crewmembers and personnel;
and coordination of the program aircraft and crews;
of program aircraft;
of recordkeeping requirements;
Development and use of a program
operations manual and procedures; and
for and maintenance of management specifications and other authorizations and
Ownership Program Manager or Program Manager. The entity that offers
fractional ownership program management services to fractional owners and is
designated in the multiyear program agreements referenced in 14 CFR § 91.1001(b)(5)(vi), to fulfill the requirements of the rule applicable to the manager of the
program containing the aircraft being flown. When a fractional owner is
operating an aircraft in a fractional ownership program managed by an affiliate
of the owner’s program manager, the references in this subpart to the flight-related
responsibilities of the program manager apply, with respect to that particular
flight, to the affiliate of the owner’s program manager rather than to the
owner’s program manager.
K. Management Services.
The provision for management services by a single program manager or affiliate
program manager on behalf of the fractional owners.
program manager operational control and operating responsibilities are
specified in part 91K. Examples of management services are listed in 14 CFR § 91.1001(b)(8), and include, but are not limited to:
· The hiring, qualification, and scheduling of personnel,
pilots, and other crewmembers;
· The development of program manuals, training programs, recordkeeping systems, and other documents;
Application and maintenance of FAA
approvals, management specifications, and other authorizations; and
of the program aircraft.
approvals are issued to the program manager on behalf of the owners. The
program manager provides an agent for service on behalf of the fractional
owners. This does not prohibit the FAA from contacting an individual owner, if
warranted. However, most correspondence, program approvals and coordination,
and other contact will take place between the FAA and the program manager’s
agent for service or identified points of contact.
L. Minimum Fractional
Ownership Interest. Either:
fractional ownership interest equal to or greater than, 1/16 of at least one
subsonic, fixed-wing or powered-lift program aircraft, or
fractional ownership interest equal to or greater than, 1/32 of at least one
rotorcraft program aircraft.
M. Multiyear Program Agreements that Cover
Fractional Ownership, Management Services, and the Dry-Lease Exchange Aspects
of the Program. An owner and program manager will sign contracts concerning
the sale or long-term lease of the aircraft, provision of management services,
and for the dry-lease exchange provisions of the program. Contracts generally
last 3 to 5 years and reflect an ownership interest in the aircraft. Additional
contractual requirements and elements are specified in part 91
for the program manager to comply with specified regulations,
· The owners’ right to audit programs,
designation of the program manager as an agent for service, and
for the FAA to contact the owner.
N. One or More Owners per
Fractional Ownership Program Aircraft, With at Least One Aircraft Having More
Than One Owner. The owners’ names are depicted on the aircraft’s
registration certificate. A long-term lease arrangement is considered to be a
method of financing an ownership interest and is considered equivalent to an
ownership interest. At any time, the program manager may own an entire aircraft
or shares in an aircraft. The program manager may also buy back shares in
accordance with contract requirements. These aircraft or aircraft shares are
called “core aircraft” and are considered a necessary element of the aircraft
fleet. The percentage of core aircraft in a fleet may vary. However, this
percentage should be a minority percentage, except for the initial inception of
O. Possession of a Minimum
Fractional Ownership Interest in One or More Program Aircraft by Each
Fractional Owner. A substantive ownership interest is the essential element
to validate fractional ownership as a private operation under part 91. A minimum share is at least 1/16 for a subsonic, fixed-wing or powered-lift
fractional ownership program aircraft or at least 1/32 for a rotorcraft
fractional ownership program aircraft. Programs that provide more than 16
owners per aircraft, including subleased shares that result in an ownership
interest smaller than 1/16 (or 1/32 for rotorcraft), are required to be
operated under part 135
or part 121, as applicable. Ownership interests are converted to a number of hours based
on a predetermined ratio or formula. Each owner’s use of the program aircraft
cannot exceed the ownership share. Other methods of allocating owner’s hours of
use may be used such as a point system or allocated number of days of use
provided the formula is predetermined, and equates to hours of use, and the
owner’s use does not exceed the ownership share. The need for additional hours
or use can be obtained through a number of means, including:
Purchase of additional shares within
of additional aircraft outside of that program
P. Two or More
Airworthy Aircraft. A minimum of two aircraft is required in order to
establish the dry-lease exchange element of the program. A program with a
single aircraft and multiple owners does not meet the definition of fractional
ownership and might more appropriately be classified as joint ownership,
partnership, or another form of shared aircraft ownership. An aircraft that is
briefly or temporarily unairworthy because of
mechanical failure or required maintenance or inspection does not affect this
definition of airworthy aircraft or the ability of the program to continue to
operate under part 91K.
2-539. OPERATIONAL CONTROL.
A. Operational Control
Responsibilities. Title 14 CFR sections (§§) 91.1003
define operational control responsibilities inherent in a fractional ownership
owner is in operational control when that owner directs the carriage of persons
or property and the aircraft is carrying those persons or property. That owner
has operational control of that flight regardless of whether that aircraft is
owned by that individual owner, or is an aircraft from the dry-lease exchange
program manager has operational control when using the aircraft for training,
sales demonstration, ferry, or positioning flights.
program aircraft can also be leased to an air carrier and operated under part 135
or 121, as appropriate, to the seating configuration and payload capacity of the
aircraft. When the aircraft is operated by an air carrier, the air carrier has
B. Safe Operations and
Compliance with Regulations. The owner of the aircraft or share of the
aircraft is ultimately responsible for safe operations and compliance with the
regulations. The owner(s) may delegate the performance of tasks to the program
manager and can rely on the program manager for aviation expertise and management
services. In addition, part 91
K, specifies certain responsibilities of the program manager, including recordkeeping, establishing safety programs, preparing
manuals and training programs, maintaining management specifications (MSpecs), and other aviation services. When tasks are
delegated, both the owner and the program manager are jointly and individually responsible
for compliance. Any enforcement will be reviewed on a case-by-case basis to
determine which party or parties had responsibility for operational control of
any flight or operation. Enforcement could result in suspension or revocation
of MSpecs, which could ultimately affect all owners
in the program.
C. Operational Control
and Management Service Contracts. Part 91K, requires certain contracts pertaining to operational control and management
services responsibilities. These include:
contract between the owners and program manager that requires the program
manager to comply with the applicable regulations.
contract that provides the owner the right to audit the records of the program
manager that pertain to operational safety of the program and show compliance
with the regulations and MSpecs.
contract that designates the program manager as the owner’s agent for service
to receive correspondence from the FAA. While the FAA will generally correspond
through the agent for service or other designated contacts, the FAA has the
right to contact the owner(s) directly, if necessary.
D. Owner’s Operational Control
Responsibilities. The program manager is required to brief the owner on the
owner’s operational control responsibilities at the time the initial, renewal,
or extension of a program contract is signed. The owner must review and sign an
acknowledgement of these responsibilities. The details that must be contained
in this acknowledgement are contained in 14 CFR § 91.1013.
E. Basic Contracts and
Agreements. Basic contracts and agreements must be signed as part of the
overall program. These include documents pertaining to the sale of the aircraft
share(s) and multiyear program agreements pertaining to management services and
the dry-lease exchange program. The industry standard is 3-5 years contract
Acknowledgement/Contract Certification Statement. As part of the
certification process, the program manager can submit an owner
acknowledgement/contract certification statement instead of individual
contracts. This statement certifies that the required contracts contain the
necessary regulatory provisions. See Figure 2-17.
RESERVED. Paragraphs 2-540 through 2-555.
Figure 2-17, Certification of the Execution of Agreements
I, ____________________, an
officer of ______________________ (the Program Manager), which manages the
___________ fractional ownership program (the Program), certify that the
Program satisfies the eligibility requirements of Title 14 of the Code of
Federal Regulations (14 CFR) part 91, subpart K and that the agreements required under 14 CFR part 91, subpart K have been executed. These agreements include:
1) A Dry Lease
2) A Management
Statements of Acknowledgement of Fractional
Owner’s Operational Control Responsibilities.
The owners and I understand
that the Federal Aviation Administration (FAA) has the right to inspect all
Dry Lease Exchange Agreement or other program agreements between the program
manager and owners related to aircraft exchange address the following:
Mandate that two or more airworthy aircraft
be available in the long term.
2) Allow the fractional owners of
an aircraft to use (through the program manager) aircraft owned by other
fractional owners within the same program.
3) Clarify that the program
manager will schedule the aircraft from within the dry lease exchange pool and
provide other aviation expertise and services to the owners.
4) Specify this is a multiyear
Management Contract or other agreements between the program manager and the owners
related to program management services address the following:
Specify this is a multiyear program contract
2) Require the program manager to
ensure that the program conforms to all applicable requirements of part 91, subpart K
3) Provide the owner or owner’s
designee the right to inspect and to audit the records of the program manager
that related to the operational safety of the program and those records
required to show compliance with the management specifications and all
4) Designate the program manager
as the owner’s agent to receive service of notices from the FAA
5) Acknowledge the FAA’s right to
contact the owner directly
6) Prohibit an owner from
carrying persons or property for compensation or hire on a program flight
except if such operations are carried out in compliance with 14 CFR part 121
7) Limit the flight hours used
during the term of the multiyear agreement to the total hours associated with
the owner’s share of ownership
8) Prohibit the sale or lease of
aircraft interest that is lesser than the “minimum fractional ownership
interest” unless the flights associated with that interest are operated under
and are conducted by an air carrier or commercial operator certificated under
9) State that the program manager
will provide the owner the following operating services and functions:
and implementation of safety program guidelines
furnishing or contracting of pilots and other crewmembers
and qualification of pilots and other crewmembers and personnel
and coordination of the program aircraft and crews
of program aircraft under the terms of this Agreement
of record keeping requirements
and use of a program operations manual and procedures
for and maintenance of management specifications and other authorizations and
approvals from the FAA
in the recognition of hazardous materials
III. Each owner in the
fractional ownership program has signed an Acknowledgment of Owner’s
Operational Control Responsibilities, and under the Acknowledgment, the owner
understands that owner is in operational control of a program aircraft and the owner
must operate that program aircraft in accordance with 14 CFR Part 91, Subpart K when:
1) Owner has the
rights and is subject to the limitations applicable to the owner as set forth
under sections 91.1003
2) Owner has
directed that a program aircraft carry passengers or property designated by the
The program aircraft is carrying those passengers
The owner understands that the
owner is in operational control of a program aircraft, even where the owner
leases the program aircraft from another owner through the Dry-Lease Aircraft
Exchange (or Interchange) arrangement.
The owner understands and
agrees to the responsibilities and potential liabilities described below. When
the owner is in operational control, the following apply:
1) Owner is
responsible for safe operations and for complying with all applicable laws and
regulations and the management specifications issued to program manager
2) Even though
owner may delegate to the program manager performance of some or all of the
tasks associated with carrying out owner’s responsibilities, owner continues to
be jointly and individually responsible, along with the program manager, for
performance of these tasks and for compliance with applicable requirements
Owner may have liability risks in connection
with the operation of the program aircraft, including possible liability risks
for at least enforcement actions for any noncompliance, and liability if a
flight-related occurrence causes personal injury or property damage