Can our EAA Chapter form a flying club?
No, EAA Chapters cannot operate aircraft. A chapter can build/restore aircraft or take donations of aircraft, but these assets must be transferred to a separate entity before they are flown. Chapter members, however, are encourage to from a separate non-profit flying club to improve the affordability and accessibility to aviation at their local airport.
EAA initially considered allowing EAA chapters to be a home for flying clubs, but for many reasons this was not attractive. For one, the cost of insurance became prohibitive because the liability of every incident/accident would flow through to EAA proper. In our investigation, the cost of insurance would exceed $8,000 per aircraft, which would be prohibitive. This cost only protected EAA and would be in addition to any insurance cost to the flying club for its activity.
The chapter model was also believed to be unattractive because only a subset of the chapter membership likely would be interested in a flying club. This can potentially create chapter relation issues, when chapter resources are going to support an activity that only benefits a subset of the membership.
What is the best way to acquire an aircraft for our club?
Chapter build projects, restorations, and donations are fantastic candidates for flying club operation outside of the chapter. Assuming the chapter is a 501(c)(3) and the Flying Club is not, these aircraft must be sold to the flying club at fair market value.
Many owners of underutilized aircraft are open to collaborating with a non-equity flying club through a lease agreement.
Lastly, clubs can purchase an aircraft from the used aircraft market but acquiring financing for these aircraft may be difficult if you are starting up a flying club and members are unwilling to personally guarantee the loan.
Can our flying club operate an experimental amateur-built aircraft?
Yes, flying clubs can operate experimental amateur-built (E-AB) aircraft. The core restriction found in the operating limitations (which are part of the airworthiness certificate) on E-AB aircraft is a prohibition on “carrying persons or property for compensation or hire.” This eliminates E-ABs from being rented by a CFI to a student for flight instruction. However, a CFI can be paid for time spent flight instructing in an experimental aircraft.
Can a chapter build project become a flying club airplane?
Yes, in fact chapters are encouraged to build aircraft to educate their members and promote homebuilding and restoration. These build projects can then be sold to a separate non-profit flying club. Chapters cannot operate or lease airworthy aircraft and must sell the aircraft prior to any flights.
If the chapter is a 501(c)(3), the aircraft must be sold at fair market value unless the purchasing entity is another 501(c)(3). However, the IRS does allow the labor to update the aircraft to be exclude from the fair market value, as long as that labor is in furtherance of the educational mission of the chapter. To help lower entry costs, the chapter may sell the aircraft on a long-term note. Another option, is to have the flying club purchase the kit and cover the other costs and yet have the chapter members build the project as an educational opportunity.
What is the difference between an equity and a non-equity flying club?
In an equity club, each member owns a share of the aircraft or stock in the corporation. To join the club, members buy a share and upon exit, they will sell their share. In non-equity clubs, members do not have a financial share in the aircraft; rather, they pay to become a member of a club that owns or leases the aircraft. Other than leasing an aircraft, there are many situations where the club owns the aircraft but members do not have a financial stake in the club; rather, they pay to be a part of the club and have no financial right to the aircraft. Much of EAA’s Flying Club guidance is primarily focused on the non-equity approach.
- Members own a share of the aircraft or corporation that owns the aircraft.
- Members usually own an equal share, but this is not always the case.
- The buy-in cost for new members is typically higher than non-equity clubs.
- Members have voting rights in decisions (aircraft management, maintenance, and upgrades) that is equal to their share in the club.
- Insurance rates for equity clubs tend to be more favorable.
- Financing is easier to secure for startups because members are more willing to co-sign for the loan.
- Members pay dues to the club, which either leases or owns the aircraft.
- Members do not have a financial right to the aircraft.
- The buy-in cost for new members is typically lower than for equity clubs.
- If the club is a lease-based non-equity club, members have less of a say in aircraft management, maintenance, and upgrades.
- Insurance rates for non-equity clubs tend to be less favorable.
- Financing is more challenging to secure for startups because members are less willing to co-sign for the loan.
Clubs may find it difficult to form due to the high buy-in. To help alleviate this challenge, one or more founding members will purchase the aircraft and sell shares to members as they join the club. There is also the opportunity for the club to purchase the aircraft from the founding members on a long-term loan through monthly/annual club dues. Once the loan is paid off, the club will own the aircraft.
How does our flying club become recognized by the IRS as a tax exempt “social club” under 501(c)(7)?
Your flying club must first file for incorporation within your respective state. To learn about incorporating in your state, visit your state’s government webpage. Many states provide these forms and information on their official websites.
Once you have taken care of the state paperwork, the club must apply for a federal employee identification number (FEIN). Click here to apply for FEIN. Your flying club would then file the IRS form 1024 along with IRS Form 8718. Form 8718 is just a payment voucher for the Form 1024 filing. Click here for Form 1024. Click here for Form 8718.
Visit the flying club tax-exempt basics webpage, to view a completed sample of Form 1024 and Form 8718 for a fictitious flying club. Click here to view sample forms.
What club documents should we have?
At a minimum, your club should maintain a current copy of the following documents:
- Articles of incorporation
- Operations manual/safety policy (including preflight checklists)
- Financial records and projections
- Insurance policy or policies
- Maintenance and inspection logs, and the aircraft pilot’s operating handbook
If the club maintains a record of squawks, there should also be documentation that notes required maintenance and the proper signoff.
If you enforce qualifications to rent an aircraft (e.g., current biennial flight review, current FAA medical, club safety meeting attendance), you should document those at the renter level.
How should we structure our pricing?
The price structure of your club will vary depending on the type of aircraft you operate, and if the club is an equity or non-equity club. To assist your club with determining a cost structure, EAA has put together a number of customizable flying club financial structures.
Please note, EAA’s Flying Club initiative is focused on keeping the cost to the members as low as possible. This will help grow the pilot population and keep more current pilots flying.
For sample flying club financial structures, click here.
How can our club best manage the aircraft maintenance?
It is important to set aside enough money for planned and unplanned maintenance. Routine maintenance will cost approximately $10 per tachometer hour. However, having an in-house A&P can help reduce that cost.
In addition to aircraft maintenance, be sure the club is setting enough money aside for the inevitable engine overhaul. To calculate the required savings per hour of flight time use the following equations.
Required savings per hour = Engine cost/(TBO-SMOH)
- Engine Cost: Cost of major overhaul and installation.
- TBO: Time between overhaul (typically around 2,000 hours for most GA aircraft engines).
- SMOH: Time since major overhaul.
$25,000/(2000-1000)=$25. Your club will need to collect $25 per hour to fund the impending engine overhaul.
The cost of an engine overhaul is subject to change over time. Be sure to update these numbers periodically and adjust your rental fees accordingly.
One hundred-hour inspections are not required for flying club aircraft, since they are not commercially operated. However, conducting inspections and maintenance every 100 hours is a good safety practice, especially for clubs that fly well over 100 hours/year.
What is a good pilot to plane ratio?
Based on the recommendation from a number of current flying clubs, 8-12 members per airplane is a good pilot-to-plane ratio. This number will fluctuate based on the number of hours the plane is flown, how many active members the club has, and if there are any supporting members. Please note, your insurance rates may also affect how many members you have in the club.
How can we improve our insurance rates?
According to Bob Mackey, senior vice president at Falcon Insurance Agency, Inc., administrative agent for EAA Insurance Solutions, here are some tips to help lower your insurance premium.
Establish your club’s organizational and tax-exempt structure before seeking insurance. Insurance companies look at flying clubs through the lens of their worst experience, so the more business-like your club is, the better the chance your club will get reasonable rates.
Here is a checklist of items the insurance company will look for:
- A legal structure for the club i.e. articles of incorporation, bylaws, and defined leadership positions.
- Operating rules.
- An established maintenance schedule and a designated maintenance officer.
- A safety officer and a plan for recurring safety programs.
- A finance manager (treasurer).
- A professional scheduling program.
- Weather minimums for members to fly the club airplane(s).
- Currency/checkride requirements.
- Make sure the aircraft is suitable for a flying club or make sure all the club members have the skills needed to fly the aircraft. The same things that cause an individual owner’s policy to increase will escalate the cost of insurance for a flying club — for example, a retractable gear aircraft versus a fixed-gear, a taildragger versus a tricycle-gear.
Do flight instructors need to be a part of the club in order to provide instruction?
No, but many insurance companies will require the policy to name the CFI as an approved instructor.
What is the difference between a wet rate and a dry rate?
A wet rate includes fuel in the hourly operating costs, while a dry rate does not include fuel and requires members to pay for fuel on their own.
A wet rate requires you to manage and negotiate a fuel agreement with a particular fuel provider, and increases the complexity of the club’s record keeping. A dry rate puts the onus on the pilot to fuel aircraft to a specific level after each flight, and is a simpler solution when it comes to record keeping.
How can we promote our flying club?
EAA can help you reach out to local members to help either grow or start a flying club in your area. Your club can also cross promote at chapter activities (i.e. fly-ins, Flying Start events, Young Eagles events, etc.).
EAA chapters are one of the best places to start when looking to form a club. EAA chapters are chock-full of aviation enthusiast looking to find an affordable way to fly. And you may just find an aircraft owner who is not using his/her airplane enough and would be open to using it to start a club.
A strong web presence that includes quick access to questions about club rates, presence of flight instructors, meeting times/club events, and club photos indicates an active and thriving club.
How can our club best manage scheduling, billing, and aircraft maintenance management?
Picking the correct software for scheduling, billing, and aircraft management will vary depending on the intent. The simpler the software the cheaper it will be, the more complex the software the more you can expect to pay. Some software can handle all aspect of club management including scheduling, billing, member record keeping, and aircraft management, while others will only offer a simple scheduling tool.
To view a full breakdown of the different scheduling software, click here.
Can clubs participate in chapter functions such as Young Eagles rallies and Flying Start events?
Members of separate non-profit flying clubs are encouraged to fly Young Eagles at chapter rallies, as long as they meet the Young Eagles pilot requirements. In addition, flying clubs are encouraged to participate in EAA Chapter Flying Start events by promoting the club to prospective pilots as a place where they can learn to fly.