Criticism of NBAA eases over fractional NPRM

 - November 27, 2007, 7:07 AM

With the beginning of this month marking the halfway point in the 90-day public comment period on the FAA’s notice of proposed rulemaking (NPRM) to regulate fractional- ownership operations under Part 91 Subpart K and make some modifications to Part 135, much of the early criticism by some NBAA members about the rule and the position taken by their association seems to have ebbed, or at least given way to more reasoned discourse.

When the NPRM was officially published by the FAA on July 18, and then posted on NBAA’s Web site, it seemed as if it rekindled the firestorm that raged within the organization throughout much of 1999.

On the heels of an NBAA “alert bulletin,” which urged members to review the NPRM and comment to the FAA before the October 16 deadline, there was a spate of letters on NBAA’s Air Mail lists, recalling the brouhaha that erupted three years ago when the NBAA board endorsed the regulation of fractional ownership under Part 91. Old wounds were reopened as the NBAA staff and board were again accused of not being responsive to members.

The job of answering the Air Mail missives fell largely to David Almy, NBAA v-p of strategic programs, although president Jack Olcott and some members of the board of directors also weighed in from time to time.

Asked early on if his views were personal or those of the board, Almy said that his opinions were his own, but that he was trying to reflect the views of the board, the staff and many members. He added that “official” comments, signed off by everyone, probably would be a long time coming.

Almy attends all board meetings, is a member of the NBAA senior staff and sat in on all of the meetings of the Fractional Ownership Aviation Rulemaking Committee (FOARC), which was commissioned by FAA Administrator Jane Garvey in 1999 to help the agency develop guidelines to regulate the rapidly growing fractional-ownership industry.

“As for the NPRM itself, a regulatory solution to the fractional situation was, and is, not as simple as some would suggest,” he said. “The FAA is generally unconcerned by the market effects of the FARs, and disdainful of those who hope to secure commercial gain via regulatory advantage.”

Almy pointed out to Air Mail readers that the broad challenge for the FAA in crafting a rule was to find a solution to the fractional question that would be unchallenged by any party. It would have to satisfy the FAA (which believed the regulatory status quo was unacceptable); the charter community (which believed that the existing FARs unfairly provided commercial advantages for the fractional community); and the fractional community itself (which believed that additional regulation under Part 91 could be acceptable, but regulation under Part 135 was not), while at the same time not doing any regulatory harm to Part 91 as it is used today by traditional flight departments (which was NBAA’s mandate).

Legal Challenges
If the FAA attempted to move fractional operations under Part 135, Almy theorized, it is likely that the fractional owners and providers would immediately have sought relief in the courts and/or Congress because they had operated under the current Part 91 essentially fatal accident-free for 12 years.

“Although it is legal speculation, I have been advised that a court challenge could have been successful and would likely have kept fractional operations under [old] Part 91, which no one believes would have settled the matter, but would have cost several years of time and huge sums of money,” Almy said. “The FAA was aware of all this, and wisely looked for a better scenario.”

He further revealed that the FOARC did not have a solution that met all the conditions until well into its deliberations. Addressing some of the accusations that NBAA was unresponsive to the wishes of its members, he said that the preferences of NBAA’s membership, as reflected in opinion polls, were distributed to the FOARC on three separate occasions by Olcott.

As with the original report sent to the FAA by FOARC in February last year, the NPRM generated some early sniping and sharpshooting, in many cases indicating that the proposed rule had either not been read or not understood. But one correspondent said, “I think we all need to really read the NPRM before we start firing missiles at NBAA on this issue (deja vu all over again). I believe Subpart K does a pretty good job of protecting the interests of member companies.”

Contrary to the perception in some quarters, what eventually emerged from FOARC as Subpart K did not emanate entirely from within NBAA. But its genesis was a 6,600-word Safety Guidelines & Responsibilities for Fractional Aircraft Owners and Fractional Aircraft Program Managers scripted cooperatively by NBAA, the National Air Transportation Association and the General Aviation Manufacturers Association.

That served as the basis for the FOARC report, which was adopted almost in its entirety by the FAA as the NPRM for Part 91 Subpart K.

Critics who continue to harp that they were not consulted or were ignored, or were sold out by the NBAA board members and staff, should be reminded that when membership opinion was solicited in 1998 on whether fractionals should be regulated under Part 91, Part 135 or some new purpose-specific FAR, there was little response forthcoming.

A-year-and-a-half later, when FOARC released its recommendations, more than 1,000 copies were downloaded from NBAA’s Web page, but a request for comments generated only about a dozen or so. Likewise, within three weeks of the release of the NPRM in mid-July, comments on NBAA’s Air Mail also trailed off quickly, and a teleconference in the middle of last month to discuss specific concerns and solutions to the FAA’s fractional-ownership NPRM drew less than a dozen people, not counting NBAA staffers.

NBAA is continuing to urge its members to review the NPRM and send comments to the FAA. Comments that incorporate factual data on the effect of the regulation or solutions and alternatives to problems identified within the proposal will have greater value to the FAA during the development of the final rule, the association said.
Meanwhile, NBAA is developing an “issue list” to help focus on areas of the proposal that need improvement. “Hopefully, identification of the issues will foster continued discussion, both online and offline, so that in the end the FAA receives comprehensive, constructive comments,” said Doug Carr, NBAA director of government affairs. “Since this is merely the start of a list that will surely grow, I will provide regular updates to Air Mail as the issue list grows.”

Already, one of the most vexing questions is operational control, not only from a regulatory standpoint, but also in relation to liability concerns.

The FAA said it agrees with the FOARC recommendations that the proposed rule will satisfy its own concerns regarding share owners’ and fractional-ownership program managers’ accountability and responsibility for compliance with these regulations, particularly with respect to operational control issues.

Noting that the issue is covered in detail in the new NPRM, both in the preamble and the proposed regulations themselves (where operational control is mentioned at least 52 times throughout), Almy said: “I do not mean to suggest that FOARC or the FAA is correct in the proposal, nor is it beyond improvement. I do sense, however, that it may be wise to suspend discussion of operational control on Air Mail until all NBAA members have had a chance to read the NPRM in its entirety, understand the proposal and develop an informed response reflecting the reasoning and proposed regulations presented in the NPRM.”