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Charter Flights

Oct. 25, 2012

From time to time, divisions within the university contract with private air carriers for flight services that are not regularly scheduled commercial flights. Such contracts present a myriad of issues for Baylor and must be closely managed to ensure safety and compliance. The potential risks to Baylor include increased exposure to losses, perhaps uninsured and perhaps for individual managers, for death or injury, insurance complications, and non-compliance with federal aviation and taxation laws.

As a result of these concerns, Baylor requires a level of service from the proposed carriers that exceeds the requirements of federal law. Federal law has differing safety and insurance standards depending on the type of carrier; Baylor must therefore establish any higher standards by virtue of the contract process with the air carriers. Most small charters can be arranged through University Development; athletic team travel is arranged through the Department of Athletics.

Safety and Insurance: As a matter of safety and due diligence, Baylor acquires a safety records check on the air carrier (available from third-party vendors) and obtains proof of insurance (acceptable to Baylor) from the air carrier. Additionally, Baylor needs a copy of the Federal Aviation Administration certificate to demonstrate that the air carrier has proper certification to operate in the United States. This is also available from the air carrier. Finally, Baylor requires a safety check on the specific crew and airplane provided for the trip.

Contract Issues: The relationship between Baylor and the air carrier needs to be documented with a detailed contract. The contract addresses the services to be provided, the cost, and other critical issues. These issues include Baylor's requirements regarding safety and insurance discussed above, as well as additional flight operations rules. The flight operations rules incorporate the operational requirements recommended by the National Transportation and Safety Board after it investigated the accident involving the Oklahoma State University's basketball team. These requirements include some basic levels of service, such as two pilots, each with a minimum number of hours flying experience and time in type of aircraft used. Some carriers cannot meet these requirements and should not be used.

Aviation Law and Passengers: Baylor typically contracts for what is called a "single-entity charter." Because of federal aviation law, Baylor cannot resell seats on such a charter, either directly or indirectly. This means that Baylor cannot obtain compensation from passengers to allow them to travel with a sports team. It also means that Baylor cannot deduct the value of the seat from a gift credit to a donor. Resale of seats on a single-entity charter results in non-compliance with federal law. Resale of seats is possible if the charter is a "public charter;" however, Baylor in essence becomes an indirect air carrier and must comply with numerous federal regulations that create an administrative burden for the division.

Tax Law and Passengers: Although seats may not be resold either directly or indirectly, passengers who have a legitimate business interest in traveling with Baylor may do so without income taxation consequences to Baylor or the passenger. Persons who do not have a legitimate business interest in traveling should generally not travel on a Baylor charter. Documentation regarding passengers should include the legitimate business purpose and should be provided to the Tax Compliance Office.

If you have any questions regarding charter flights, please contact the Office of General Counsel (x3821), the Department of Risk Management (x4586), or the Tax Compliance Office (x8765).