Purchasing an Existing Part 121, 135, or 145 Certificate: Part 1 – Knowing the Regulations
This is a post by guest author Dean Kantis, founder and owner of Micro Jet Network, Inc. Dean was asked to contribute to this blog because of his expertise in aircraft brokerage. Any thoughts expressed below are entirely Dean’s and do not necessarily reflect the views of Universal Weather and Aviation, Inc.
This business aviation blog post is part of a series on purchasing or applying for a Part 121, 135, or 145 certificate.
Have you ever wondered whether to purchase an existing Part 121 (Airline Certificate), Part 135 (Charter Operator Certificate), or Part 145 (Repair/Service Facility Certificate) from an experienced operator? This can be a viable alternative to starting from scratch and beginning the process to obtain a new certificate. The advantage to purchasing an existing certificate is that doing so allows operators to immediately carry over their business, instead of having to wait two years or more when going through the standard Federal Aviation Authority (FAA) application approval process.
The following is an overview of what you need to know if considering purchasing an existing certificate:
1. Definition of FARs
The FAA governs all aviation activities in U.S. airspace and has set regulatory rules referred to as the Federal Aviation Regulations (FARs). These FARs are part of title 14 Code of Federal Regulation (CFR) that covers a large spectrum of aviation-related activities such as maintenance, charter flights, and aircraft parts. Furthermore, there is a large list of FARs used to create a standard of aviation safety. For more information on FARs, please see the FAA website.
2. Certification information for operating under Part 135
The FAA has issued instructions on certifications for operating under Part 135 licenses. If a person provides transportation of persons or property for hire, that person must obtain a certificate under Part 119 with few exceptions. In the information that has been published by the FAA, one can find Part 135 data regarding demand, intrastate, visual flight rules, nine passengers or less, and single pilot certification processes. You may find the complete information published by the FAA, titled “Certification Information for Operating Under Part 135.”
3. Instructions for completing new FAR submissions
In order for a new applicant to get Part 135 approval, the FAA recommends that new applicants review FAA Part 135 certificate information, complete a package of required documents, and then ultimately submit a complete package to the Flight Standards District Office (FSDO) that has the jurisdiction over the particular Part 135 certificate holder in that particular area. Again, everything gets approved through the FSDO out of where the applicant wants to be based.
4. FAA sequestration and what that means to you in the long term
Since the government sequestration (cutbacks) started over a year ago, the FAA personnel have been downsized, and it is our belief that the FAA wishes to continue downsizing existing Part 121, Part 135, and Part 145 certificate operators over the next four years. We estimate that the FAA will cut half of the part-timers, not-so-clean-standing operators, and not-so-“cash-flow-positive” certificate operators. What does this mean? This could mean that an existing certificate operator who continues to operate a “clean” operation and who maintains good standing with the FAA should and will have a certificate that grows in demand, while those that do not might find themselves in violation of FAA regulations, eventually out of business, or immediately forced to close their doors. To understand what the FAA’s stance is on this, I asked the question:
Question: “I guess, what I and some of my readers would really like to know is, we are all hearing that the FAA sequestration and downsizing of staff have created the need to diminish the amount of Part 135s in existence by half, and that the FAA is stalling or pushing out new applicants, which means that it could take two years or so in order to get a new certificate. Can you comment if this is accurate? Or on what applicants can do to speed up the application process?”
Answer: “The FAA is not limiting the number of Part 135 or other certificates. The agency is processing certification requests in the order received and as resources allow. Budget cuts due to sequestration and the government shutdown in October 2013 increased the number of certification requests awaiting processing. The FAA’s safety organization, which handles certifications, is hiring employees, which will help decrease the application backlog.”
5. Who’s regulated by the FAA and who’s not
Besides charter operators that have been licensed by the FAA, there are also charter brokers. These charter brokers connect the clients with charter operators. While charter operators are closely regulated, charter brokers are not, even though they play an integral role. For this reason, the National Business Aviation Association (NBAA) has published a guide with best practices regarding regulatory guidance and information that helps protect charter brokers in the business aspect. For more information, you can see the NBAA’s guide entitled “NBAA Best Practices for Air Charter Brokering.”
Depending on your particular operation and anticipated timeframe in terms of commencing operations, there can be significant advantages in purchasing an existing 121/134/145 certificate. It’s important, however, to ensure that the current certificate holder has been running a “clean” operation and has maintained a good standing with FAA.
If you have any questions about this article or would like assistance in purchasing an existing Part 135 certificate or starting one, contact me at email@example.com.
Stay tuned for Part 2, which covers more information on purchasing or applying for a Part 121, 135, or 145 certificate.