read the bold part in red from ac120-12a for an explanation of having contracts for a select few clients in private carriage, sometimes called a 'contract carrier':
U.S. Department
of Transportation
Federal Aviation
Administration
Advisory
Circular
Sdject: PRIVATE CARRIAGE VERSUS COMMON Date: 4124186 AC No: 12042A
CARRIAGE OF PERSONS OR PROPERTY Initiated by: AFS-820 Change:
1 0 PURPOSE. This advisory circular furnishes Federal Aviation Administration
(FAAmnnel and interested segments of industry with general guidelines for
determining whether current or proposed transportation operations by air
constitute private or common carriage. If the operations are in interstate or
foreign commerce, this distinction determines whether or not the operator needs
economic authority as an "air carrier" from the Department of Transportation.
Operations that constitute common carriage are required to be conducted under
Federal Aviation Regulations (FAR) Parts 121 or 135. Private carriage may be
conducted under FAR Parts 125 or 91, Subpart D. Operations conducted under FAR
Section 91.181, which permits certain charges to be made, may also be subject to
these guidelines , particularly the "time sharing" provisions of FAR
Section 91.181(c)(l). It should also be noted that lease agreements -entered
into under FAR Section 91.181 are subject to FAR Section 91.54, "Truth%
leasing clause requirement in leases and conditional sales contracts."
2 CANCELLATION. Advisory Circular 120-12, Private Carriage Versus Common
Cirriage By Comercial Operators Using Large Aircraft, dated June 24, 1964, is
canceled.
3 BACKGROUND. "Common carriage" and “private carriage" are common law terms.
The Federal Aviation Act of 1958 uses the term "common carriage" but does not
define it. It has therefore been determined that guidelines giving general
explanations of the term "common carriage" and its opposite, "private carriage,"
would be helpful,
4 GUIDELINES.
to the public,
A carrier becomes a common carrier when it "holds itself out"
or to a segment of the public, as willing to furnish
transportation within the limits of its facilities to any person who wants it.
Absence of tariffs or rate schedules, transportation only pursuant to separately
negotiated contracts, or occasional refusals to transport, are not conclusive
proof that the carrier is not a common carrier. There are four elements in
defining a common carrier; (1) a holding out of a willingness to (2) transport
persons or property (3) from place to place (4) for compensation. This "holding
out" which makes a person a common carrier can be done in many ways and it does
not matter how it is done.
a. Signs and advertising are the most direct means of "holding out"
but are not the only ones.
AC 120~12A 4124186
b. 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.
c. physical1 y holding out without advertising where a reputation to serve
all is gained is sufficient to constitute an offer to carry all customers. There
are many means by which physical holding out may take place. For example, the
expression of willingness to all customers with whom contact is made that the
operator can and will perform the requested service is sufficient. The fact that
the holding out generates little success is of no consequence. The nature and
character of the operation are the important issue.
d. Carriage for hire which does not involve "holding out" is private
carriage. Private carriers for hire are sometimes called "contract carriers," but
the term is borrowed from the Interstate Commerce Act and legally inaccurate when I*
used in connection with the Federal Aviation Act. Private carriage for hire is
carriage for one or several selected customers , generally on a long-term basis.
The number of contracts must not be too great, otherwise it implies a willingness
to make a contract with anybody. A carrier operating pursuant to 18 to 24
contracts has been held to be a common carrier because it held itself out to serve
the public generally to the extent of its facilities. Private carriage'has -been '
found in cases where three contracts have been the sole basis of the operator's
business. Special adaptation of the transportation service to the individual L
needs of shippers is a factor tending to establish private carriage but is not
necessarily conclusive.
e. A carrier holding itself out as generally willing to carry only certain
kinds of traffic is, nevertheless, a common carrier. For instance, a carrier
authorized or willing only to carry planeloads of passengers, cargo, or mail on a
charter basis is a common carrier, if it so holds itself out. This is, in fact,
the basic business of supplemental air carriers.
f. A carrier flying charters for only one organization may be a common
carrier if membership in the organization and participation in the flights are, in
effect, open to a significant segment of the public. Similarly, a carrier which
flies planeload charters for a common carrier, carrying the latter's traffic,
engages in common carriage itself.
& Occasionally, offers of free transportation have been made to the general
public by hotels, casinos, etc. In such cases, nominal charges have been made
which, according to the operators, bear the expense of gifts and gratuities.
However, the operators maintain that the transportation is free. The courts have
held that such operations are common carriage based on the fact that the passengers
are drawn from the general public and the nominal charge constituted compensation.
Par 4
4124186 AC 120912A
h. Persons admittedly operating as common carriers in a certain field (for
instance, in intrastate commerce) sometimes claim that transportation for hire
which they perform in other fields (for instance, interstate or foreign commerce)
is private carriage. To sustain such a claim, the carrier must show that the
private carriage is clearly distinguishable from its common carriage business
and outside the scope of its holding out. The claimed private carriage must be
viewed in relation to and against the background of the entire carrying activity.
Historically, Civil Aeronautics Board decisions have concluded that only in rare
instances could carriage engaged in by a common carrier be legitimately
classified as private.
i. In summary, persons intending to conduct only private operations in
support of other business should look cautiously at any proposal for revenuegenerating
flights which most likely would require certification as an air
carrier.
je Persons who have questions concerning intended operation of their
aircraft are encouraged to discuss their proposed operation with the Regional
Counsel of the FAA region in which it intends to establish its principal
business office. Such early interviews will materially assist the applicant
in avoiding many of the "pitfalls" which could result in illegal common carriage
operations.
klliam T. Brennan
Acting Director of Flight Standards
Par 4
