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The FAA's recent ruling against AirPooler suggests the “sharing economy” won't make it into American airspace anytime soon.

If you pay any attention to economic news you've surely seen frequent mention of the “sharing economy” these past couple of years. But what is it? The People Who Share blog defines “sharing economy” as “a socio-economic ecosystem built around the sharing of human and physical resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations.”

More casually, you could describe it as the current, Internet-enabled phenomenon whereinordinary people provide services which traditionally have only been available from strictly regulated businesses.

For example: everyday drivers using Uber or Lyft get in touch with people who need a ride and are willing to pay for it — people who otherwise would've been limited to buying a ride from a licensed taxi.

Ordinary homeowners or apartment-dwellers use AirBnB to rent rooms to travelers who otherwise would've had to stay in a motel, hotel or bed-and-breakfast. Private pilots used AirPooler and FlyteNow to find passengers willing to pay fuel and other expenses in exchange for a seat on their flight.

Governments oppose it

It's mostly accurate to say that government regulators thus far have been opposed to the “sharing economy,” for reasons ranging from consumer-protection concerns and tax-collection issues to protecting licensed businesses from unlicensed competition.

So the state of New York cracked down on people who used AirBnB to rent their homes out to travelers, the taxi industries and local regulators in states from California to Virginia cracked down on drivers offering rides through Uber and Lyft, and last week the Federal Aviation Administration announced that flight-sharing arrangements of the sort facilitated by AirPooler and FlyteNow violate FAA regulations.

The FAA sent AirPooler's attorneys a letter dated Aug. 13 (and available in .pdf form here), saying that flight-sharing violates regulations concerning the difference between private and commercial pilots:

A person who holds an airline transport pilot certificate or a commercial pilot certificate may act as pilot in command of an aircraft for compensation or hire and may carry persons or property for compensation or hire provided the pilot is qualified in accordance with [various FAA regulations].

Conversely, private pilots as a general rule may not act as pilot in command of an aircraft that is carrying passengers or property for compensation or hire nor, for compensation or hire, may they act as pilot in command of an aircraft.

Save on fuel

AirPooler maintains that its service simply offers private pilots a chance to save on fuel costs by splitting them with passengers who wanted to make that same flight anyway, akin to carpoolers doubling up to save on fuel costs. AirPooler CEO Steve Lewis told Bloomberg News that “There’s a really deep underlying economic basis [behind this and similar companies]. It’s much more than a fad for the shared economy because you have all these assets around that are being underutilized.”

AirPooler and FlyteNow say they plan to continue negotiations with the FAA so pilots and passengers can resume using their services. The FAA's letter does leave open a possibility for this to happen (though proving it might be a bureaucratic-paperwork nightmare for the actual pilots and passengers involved). The FAA said that regulation “61.113(c) contains an expense-sharing exception to the general prohibition against private pilots acting as pilot in command for compensation or hire” — in other words, it is indeed legal for private pilots to split gas costs and airport fees with their passengers, provided that's all they're doing.

However, the FAA continued, “a private pilot may not rely on that narrow exception to avoid the compensation component of common carriage. For this reason, the FAA has required a private pilot to have a common purpose with his or her passengers and must have his or her own reason for travelling [sic] to the destination.”

Presumably, this is okay if pilot and passenger connect through word of mouth — if you're a pilot wishing to fly to a distant beach and your next-door neighbor also wants to visit that beach, you can fly together and share costs without incurring FAA penalties.

However, according to the FAA letter, this doesn't apply to announcements on AirPooler because: posting specific flights to the AirPooler website, a pilot … would be holding out to transport persons or property from place to place for compensation or hire. Although the pilots ... have chosen the destination, they are holding out to the public to transport passengers for compensation in the form of a reduction of the operating expenses they would have paid for the flight.

So sharing a flight with your friend or neighbor to reduce your expenses is okay, but sharing a flight with someone you found on AirPooler to reduce your expenses is not. Sound confusing? That's why AirPooler and other start-up businesses need lawyers.

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