Sharing Economy Attracts New Business To General Aviation

 - June 2, 2014, 4:15 AM
New companies are betting that a business model built on sharing will prove its value in the aviation market, as it has for cars and hotels. Photo: Matt Thurber

Until recently, the sharing economy enabled by modern technology has been limited to industries less regulated than aviation such as taxicabs (Uber, Lyft, Sidecar), hotels (Airbnb) and cars (RelayRides). But now the sharing economy is coming to general aviation, in the form of new ways to rent airplanes (OpenAirplane) and systems for sharing expenses and empty seats in Part 91 non-commercial aircraft (AirPooler and Flytenow). There is no sign yet that the sharing economy has reached the highly regulated charter market, although some saw empty-leg broker BlackJet as such an attempt.

The advent of sharing economy products in general aviation (GA) raises questions about how they fit into the current regulatory and insurance liability landscape but also suggests ways of expanding general aviation’s utility without significant financial commitments.

Opening the Rental Market

OpenAirplane launched in June last year as a system that allows a pilot to get an annual checkout at a participating rental operation and rent the same model of aircraft from any other participant without requiring another checkout. As of late April, OpenAirplane had 197 airplanes available to its members at 58 rental providers in the U.S., including Alaska and Hawaii. Now OpenAirplane is allowing aircraft owners to make their aircraft available for rental through the OpenAirplane system, even if that aircraft isn’t leased to or operated by a flight school/rental provider.

AirPooler is a membership system that allows members to choose from flights listed by AirPooler pilots and pay those pilots their share of the operating expenses in exchange for filling an empty seat on the flight. AirPooler started with pilots who were members of certain preselected flying clubs, but now it is testing adding pilots who own airplanes and want help defraying operating expenses. Flytenow is similar and says it can be used by aircraft owner-pilots and renter-pilots.

From a regulatory standpoint, OpenAirplane raises no questions. Airplane rental is entirely between the owner and the renter, and FAA regulations barely cover rental activities. The only applicable regulation, 91.409(b), requires a 100-hour inspection for “an aircraft carrying any person (other than a crewmember) for hire, and no person may give flight instruction for hire in an aircraft which that person provides, unless within the preceding 100 hours of time in service the aircraft has received an annual or 100-hour inspection…”

Pure renting of an aircraft does not constitute “carrying any person for hire” unless the pilot renting it decides to carry another person and charges that person for the flight. If the pilot is a flight instructor and uses that aircraft for instruction and bills for that instruction, a 100-hour inspection would be required.

Pooling Empty Seats

The AirPooler shared-expenses system is designed to offer empty seats to anyone who wants to join a pilot on a flight he would make anyway, regardless of whether other people come along and share the cost of the flight. All occupants have to share the expense of the flight, so for a flight in a Cessna 172 with one pilot and three passengers, the expenses would be split four ways. If only one passenger flew, then the expenses are split two ways. According to AirPooler, the expenses can include rental and fuel costs (if fuel is not included in the rental rate or for aircraft owners) and airport fees (landing fees and tie-down costs associated with the trip).

AirPooler doesn’t charge pilots to use the system. Passengers pay for their share of the expenses by credit card, then AirPooler deposits the amount due to the pilot into the pilot’s account. Passengers also pay an administrative fee “based upon a percentage of the amount of the passenger contribution,” according to the AirPooler terms.

The key to keeping AirPooler legal is that pilots can’t plan a flight to attract seat-fillers to share expenses. Asked about how AirPooler ensures that pilot-members are not creating flights/trips just for the purpose of carrying AirPooler passengers, AirPooler co-founder and CEO Steve Lewis explained: “Wherever technically feasible, we have built features into our technology that prohibit pilots from engaging in such behavior. For example, the system will not permit pilots to list flights that overlap. In addition, AirPooler takes reasonable steps to ensure that pilots who may use our system are aware of relevant regulations, and our terms of service require pilots to agree to use the system in a way that is lawful and consistent with regulations. Ultimately, pilots are responsible for their own behavior.”

Adventure On Tap

Flytenow was started by four university student co-founders with $25,000 in funds–a pre-seed investment of $15,000 from Dorm Room Fund and $10,000 from Idea, Northeastern University’s Venture Accelerator. What is interesting about the funding mechanism for Flytenow is that the venture is attracting money from venture capital-like organizations, at a time when financial support for general aviation is not exactly booming and Chinese companies have bought many Western GA manufacturers.

“I hope that’s going to change,” said Flytenow CEO and co-founder Matt Voska, a pilot who believes that innovative companies like his offer attractive opportunities for investors and underscore further inroads by GA into the sharing economy. “We think we can get a lot more exposure to general aviation and get those pilot numbers up again.”

Unlike AirPooler, Flytenow is targeting passengers who are seeking an aviation adventure, not looking for a convenient way to get to a specific destination. “We’re trying to get more people flying,” he said, and the hope is that this will attract people who might want to learn to fly. “With just our first two flights we had two people who loved it so much that they’re already committed to learning to fly.”

Flytenow began serving the Boston area on January 30. Like AirPooler, Flytenow monitors pilots’ listings to make sure they aren’t adding flights just to try to get a member to choose one of their empty seats. And if pilots list multiple overlapping flights on one day, that’s a clear signal that they are fishing for trips, not planning flights that they would do anyway.

Passengers pay Flytenow their share of the flight’s expenses ahead of time, as well as an administrative fee of $30, and if the flight is canceled their money is refunded. If only one seat is filled by a passenger, he or she pays just 25 percent of the shared expenses and the pilot pays the rest.

The Legal Viewpoint

Flytenow makes it clear in its terms of service that it does not provide any insurance coverage for any flights arranged through its systems. So the insurance that covers the aircraft is what covers any accident.

Likewise, AirPooler flights will rely on existing insurance coverage for the aircraft. “This is no different from the situation that would apply in the case of any accident that involves a passenger being carried by a pilot,” AirPooler’s Lewis told AIN. “The clubs that AirPooler has relationships with have consulted with their issuance brokers and have determined that their rental insurance policies cover their renters who use the AirPooler service.”

Both companies’ terms of service clearly state that they are not responsible for any losses and other legal complications that arise from use of their systems. According to Flytenow’s terms: “Flytenow does not procure liability insurance for, nor are we responsible for, any damage or loss whatsoever, including bodily injury, death and wear and tear of the pilot’s aircraft; nor does Flytenow procure insurance for, nor are we responsible for, any personal property left in the aircraft.”

Both companies clearly state that passengers cannot pay their pilots for any services on top of the shared expenses. If a passenger offers to tip a pilot, Flytenow’s Voska said, “the pilot can’t accept it. It’s no different from taking their friends flying. As a pilot, they’re not allowed to accept tips.”

AIN asked the FAA about possible legal ramifications of these kinds of services, and the response included: “Speaking generally and not in regard to any specific company or operation: The Federal Aviation Act of 1958 includes a concept called “common carriage,” which FAA Advisory Circular 120-12A addresses. An operator becomes a common carrier when it ‘holds itself out’ to the public, or to a segment of the public, as willing to furnish transportation to any person who wants it. There are four elements in defining a common carrier: (1) a holding out of a willingness to (2) transport people or property (3) from place to place (4) for compensation. A ‘holding out’ may be accomplished through the actions of agents, agencies or salesmen who may, themselves, procure passenger traffic from the general public and collect them into groups to be carried by the operator. It is particularly important to determine if such agents or salesmen are in the business of selling transportation to the traveling public not only through the ‘group’ approach but also by individual ticketing on known common carriers. Also, a pilot is being compensated if he/she receives payments for transportation costs, even it he/she is not making a profit.

“Section 61.113(a) of 14 CFR prohibits the holder of only a private pilot certificate from ‘acting as pilot-in-command (PIC) of an aircraft that is carrying passengers or property for compensation or hire.’ Subsection (c) provides the exception to (a) that is based on cost-sharing. But the exception in (c) is based on the flight being operated ‘for a common purpose’ between the PIC and the passenger(s). ‘Common purpose’ is not proven by merely showing that the PIC and passenger want to go to the same place.”

AirPooler says that it employs a former FAA assistant chief counsel, but Lewis said he couldn’t identify this person yet “because we are still completing certain elements of the retention process. However, once that process is complete, we will be happy to release that information.”

Flytenow is working with attorney Greg Winton, president of Aviation Law Experts. “He has been our mentor,” said Voska. “Our platform doesn’t dictate how you fly; it just connects you with people wanting to go,” he said. Flytenow’s frequently asked questions elaborated on this subject: “Flytenow facilitates common purpose because pilots, rather than enthusiasts, unilaterally dictate the destination (and purpose) of an adventure, and enthusiasts express shared interest in the specific date, points of operation, and adventure.

“Additionally,” Flytenow explained, “when you create an adventure, you are not ‘holding out’ under 14 CFR 119.5(k) because your adventure does not communicate to the public that transportation services are indiscriminately available but, rather, available only to an enthusiast who has a demonstrated common interest in the specific date, points of operation and adventure. Moreover, Part 119 applies to air carriers and commercial operators for compensation or hire, not pilots engaged in the genuine sharing of expenses under 14 CFR 61.113(a)-(d).”

The FAA, however, added: “…the exception in 61.113(c) is not an exception for Part 119 or other regulations; even if a pilot complies with the ‘sharing of expenses’ rules in 61.113(c), he/she is still operating as a commercial operator or air carrier and must have the appropriate certification.”

AirPooler and Flytenow aren’t the only systems set up to try to fill empty seats in GA aircraft. Other attempts include Pilot Share The Ride, SkyPool and others such as World Aero Club, which tries to match pilots with other pilots. Whether any of these can grow enough to make a remunerative business and remain clear of FAA scrutiny remains to be seen.