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Petitioners explored the idea of purchasing a larger, longer
range aircraft that they could charter for a higher fee per hour.
In 1989, petitioners purchased a Dassault Falcon 200 jet (the
Falcon) for $5.2 million. Petitioners paid part of the purchase
price of the Falcon by trading in the Mitsubishi. Mr. Rabinowitz
thought they were getting a good deal on the Falcon because the
seller, US West Communications, was anxious to purchase a
different aircraft.
Initial Management of the Jet Charter Activity
Petitioners initially engaged an outside management firm,
Raleigh Enterprises, to manage the jet charter activity for the
first 6 to 8 months. To maximize the charter business,
petitioners obtained an operating certificate for aircraft
chartered to the general public (a rule 135 certificate) pursuant
to the requirements of the Federal Aviation Administration (FAA).
Raleigh Enterprises assisted with the process of obtaining the
rule 135 certificate and also maintained the jet, solicited
charter business, and generally managed the aircraft. Mr.
Rabinowitz decided to handle these matters himself within a year
of purchasing the Mitsubishi.
Compliance With FAA Rules
Petitioners maintained a rule 135 certificate for their jet
because they wanted to make it available for third-party
charters. See 14 C.F.R. secs. 119.33, 135.1-135.443 (2005). The
FAA requires a rule 135 certificate for an enterprise to charter
an aircraft for profit. An enterprise that cannot charter its
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