commercial or non-commercial: that is the question

March 12, 2019

The new EASA Basic Regulation (Regulation 1139/2018) came into effect in September 2018, repealing and replacing Regulation 261/2008. Attorney Giulia Mauri explains what the changes mean for you

Amongst the many changes brought by the new Basic Regulation, there is one that it is extremely relevant for Business Aviation. The new Basic Regulation removed the previous definition of ‘commercial operations’ and aligned such definition with the one used in the Chicago Convention and in Regulation 1008/2008. As such, the new Basic Regulation defines commercial air transport as ‘an aircraft operation to transport passengers, cargo or mail for remuneration or other valuable consideration’.

Until 12 September 2023, the implementing rules adopted on the basis of Regulation 261/2008 will still refer to the ‘old’ definition of commercial operations as included in Regulation 261. At the end of such transitional period, the new definition of ‘commercial air transport’ will be fully enforceable.

This change is quite relevant for Business Aviation operators that operate private, non-commercial flights and that have structured their operations on the basis of the previous definition.

The Implications of the Change

Regulation 216/2008 defined commercial operations as ‘any operation of an aircraft in return for remuneration or other valuable consideration, which is available to the public, which is performed under a contract between an operator and a customer, where the latter has no control over the operator’.

This definition entailed that the following operations of an aircraft could qualify as being a non-commercial operation:

  1. not in return for remuneration or other valuable consideration,
  2. which is not available to the public,
  • which is not performed under a contract between an operator and a customer, and
  1. where the customer has some control over the operator.

This definition was very helpful as it gave some guidance to operators and civil aviation authorities alike as to what operations could be considered ‘private’. For example, on the basis of this definition, civil aviation authorities usually authorised the exploitation of fractional ownership systems, where the customers are also owners of the aircraft and have control over its operation, or closed ‘club’ systems, where the flights performed are solely available to a restrict group of club members and are not available to the public.

Now that this definition has been cancelled, civil aviation authorities and operators alike are left without guidance. In fact, as we have seen above, the new Basic Regulation returns to the broad original definition of commercial aviation as used under the Chicago Convention and Regulation 1008/2008. The Convention on International Civil Aviation (also known as the Chicago Convention), signed in 1944 and which serves as the constitutional chart for international civil aviation, defines commercial aviation as ‘the transport of passengers or cargo for remuneration or hire’. Likewise, Regulation 1008/2008 on common rules for the operation of air services in the Community provides that ‘no undertaking established in the Community shall be permitted to carry by air passengers, mail and/or cargo for remuneration and/or hire unless it has been granted the appropriate operating licence’.

What is a ‘Non-commercial Operation’?

Neither European law, international law or national laws define what ‘non-commercial operations’ are. Non-commercial operations must therefore be defined as any activity that is not included in the definition of ‘commercial operations’. This means that the consequence of this change in the Basic Regulation is that now the only criteria that should differentiate a commercial operation from a non-commercial one is the fact that non-commercial operations should be carried out without ‘remuneration’.

This is an extremely difficult criteria to meet, especially when one takes into account that most private operations include in one way or another an element of ‘remuneration’. Indeed, neither the Chicago Convention nor Regulation 1008/2008 were drafted to take into account the specificities of (private) Business Aviation. Moreover, (private) Business Aviation is an ever-evolving sector where new business models appear every day, ranging from fractional ownership to clubs to cost-sharing activities and pilots’ clubs.

The various regulations and international conventions mentioned above do not contain any definition of ‘remuneration’ or of non-commercial operations. This means each State has developed its own approach to what is allowed under its respective national law in order for the flight to be considered non-commercial. The result is a European system that is not uniform, and which allows for variation from country to country.

The UK CAA, for example, does not apply the concept of ‘commercial vs non-commercial operations’, but it does refer to the concept of ‘public vs private transport’. Public transport operators must hold a national air operator’s certificate. The UK CAA has issued very detailed and useful guidelines clarifying the meaning of commercial air transport, public transport and aerial work. According to the UK CAA, for example, if the only payment involved is the payment of the pilot, then the flight is considered private for airworthiness purposes.

The UK regulation also contains a definition of the term ‘club environment’, which is helpful in determining how and when club-type operations are considered private, as well as an explanation of the regulations applicable to jointly owned aircraft.

The criteria and guidelines established by the UK CAA are not included in European or international laws, and therefore are only applicable in the UK, where even here they may be varied at any time by the UK CAA.

In other European countries, any person who is not a member of the crew is a passenger. If such passenger pays some ‘remuneration’ to be carried on board, such flight should be considered commercial. The ‘remuneration’, however, must be linked to a contract of transport of passengers or cargo. Thus, in a joint ownership scenario, the operating costs of the flights should not be considered as remuneration. The same should apply to remuneration paid to service providers that help manage the aircraft, organise the flights, find the pilots, etc.

However, each national authority has its own approach and its own criteria: some allow non-commercial operations under fractional ownership schemes where the owners co-own parts of an aircraft, others allow such co-ownership not only when the co-owners own parts of the plane, but also if the co-owners are co-shareholders of a company that owns a plane, etc.

Operators are therefore often left to their own devices when interpreting the law, and rare are the civil aviation authorities that have issued guidelines and that are ready and willing to help operators when they wish to start private operations.

The result of this legal framework is a lack of harmonisation and lots of uncertainty for operators and aviation authorities alike.

The changes to the definition of ‘commercial aviation’ in the Basic Regulation take away the only official European guideline that operators had in relation to what would be the elements to consider when starting non-commercial operations.

The Interim Period

The New Basic Regulation provides for an interim period during which EASA should issue some implementation measures in relation to various topics, including the definition of ‘commercial aviation’.

This would be a good opportunity to work in cooperation with European and national Business Aviation associations to try and provide for implementation measures or guidance material that could help new entrants and existing operators better understand existing laws and regulations so as to act in full compliance with them.

Attorney Giulia Mauri is a partner at Pierstone Brussels. She has more than 20 years’ experience in advising national and international clients on all aspects of aviation and transport-related transactions, including asset-finance and leasing, regulatory issues, carrier’s liability and litigation matters. She also acts as a mediator and is the co-founder of Mediation4Aviation, a mediation platform dedicated to the aviation industry. Giulia co-chairs the European and Legal Affairs Committee of the European Business Aviation Association and is an active member of the Industry Affairs Group of the European Regions Airline Association. www.pierstone.com/team/giulia-mauri; giulia.mauri@pierstone.com; +32 02 899 23 62.