Uber for the Skies Gets Shot Down by Federal Regulators

FlyNowBy: Samuel Daheim

In December 2015, the United States Court of Appeals for the District of Columbia Circuit held the Federal Aviation Administration (FAA) rightfully concluded that private pilots, using a web-based service to offer flights to potential passengers, presented themselves as common carriers willing to transport persons for compensation.  Thus, the pilots had violated the terms of their noncommercial pilot licenses.  The pilots petitioned the Supreme Court of the United States for certiorari, and a response came on August 1, 2016.

The app in question, Flytenow, had developed an online service through which private pilots could offer their planned flight itineraries to passengers willing to share the pilots’ expenses.  After beginning operation in early 2014, Flytenow sought a legal determination from the FAA as to whether its business plan complied with the Federal Aviation Act of 1958 and the FAA’s various regulations.  The FAA determined that Flytenow’s pilots, who are licensed only as private pilots, would violate FAA regulations by continuing to offer their services via Flytenow.com without obtaining commercial licenses.

The FAA issues several categories of “airman certificates” to qualified pilots.  These certificates license pilots to fly in various capacities subject to specific terms.  Among these are “commercial pilot” licenses and “private pilot” licenses.  Commercial pilots are qualified to transport passengers and property in exchange for compensation.  Private pilots, on the other hand, are barred from receiving compensation from passengers.

There is no statutory definition of “common carrier.”  Instead, for thirty years the FAA has relied on a definition announced in its advisory circular.  The circular defines “common carriage” as services that meet four elements: (1) holding out oneself as willing to (2) transport persons or property (3) from place to place (4) for compensation.  The FAA determined that Flytenow met all four factors.  Among other things, Flytenow argued that the FAA’s determinations in regard to the first and the fourth elements were erroneous.

The DC Circuit addressed the compensation issue first.  The court noted that there are seven narrow, enumerated exceptions to the compensation bar that actually do permit private pilots to receive compensation under certain circumstances.  One of these exceptions is that a private pilot may share expenses with passengers, provided that the pilot does not pay less than pro rata share of the operating expenses, and that the expenses only include fuel, oil, airport expenditures, and rental fees.  The FAA argued that this exception does not redefine expense sharing as something other than compensation.  Instead, the exception narrowly authorizes some expense sharing notwithstanding the general private pilot compensation bar.  The Court agreed with the FAA, explaining that “[t]he text and structure of the [applicable] regulation[s] make clear that allowable expense sharing is still compensation.”

Flytenow further challenged the FAA’s determination, arguing that it was not holding itself out as a common carrier.  The FAA argued that the the “holding out” element is met by the pilots’ use of an online service to attract a broad segment of the public interested in travel by air, and to post specific flights to the website.  Once again, the court agreed with the FAA, explaining that although Flytenow’s website is putatively limited to members, membership requires nothing more than signing up.  Any prospective passenger searching for flights on the internet could readily arrange for travel via Flytenow.

This case might be seen as another example of the law’s struggle to catch up with society’s growing dependence on technology and the modernization of the marketplace.  It will be interesting to see whether the Supreme Court takes this case on.  And if so, whether it is convinced by the reasoning of the DC Circuit and the FAA.or whether efforts in Congress to loosen the FAA’s tight grip on the industry will be successful.

Image Source: skift.com

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