European operators await frax rule changes

 - September 28, 2006, 8:59 AM

The U.S. DOT’s unwillingness to ease unpopular restrictions on foreign charter operators flying into the U.S. is jeopardizing moves on the other side of the Atlantic to reform rules covering fractional ownership. Officials from the European Business Aviation Association (EBAA) and NBAA have acknowledged that no real progress has been made, almost two years after their joint industry working group agreed to level the competitive playing field for charter and fractional operations.

EBAA believes that plans for a European equivalent to the U.S. Part 91 Subpart K rules that allow fractional operations to be considered private (rather than commercial) cannot be implemented unless the U.S. makes life easier for European charter operators. Allowing fractional movements in Europe under private rules would largely benefit major U.S. fractional groups such as NetJets at a time when European charter operators say they are at a serious competitive disadvantage because they cannot easily fly customers into and out of the U.S.

As things stand, non-U.S. charter operators can make only six flights into the U.S. each year before they have to apply for a Part 129 foreign airline certificate. According to foreign operators, this is an excessively cumbersome and costly process for the relatively small number of charter flights they conduct each year.

U.S. charter operators are supposed to get clearance for flights into Europe but, according to leading flight-planning groups, this takes no more than a day and there is no limit on how many flights they can make.

In a bid to secure European agreement to the reform of fractional rules, NBAA is urging the DOT at least to allow foreign carriers up to 12 flights per year before they have to apply for the Part 129 certificate. It is also trying to get the DOT to pledge that it will process a foreign operator’s first application for a permit within five days and subsequent applications in 48 hours.

But DOT officials are steadfastly refusing to commit to completing permit applications in less than seven days, a timeframe European charter operators view as unworkable. According to EBAA officials, increasingly complex immigration requirements have further exacerbated the difficulties non-U.S. charter operators face when making flights into the U.S.

Steve Brown, NBAA senior vice president for operations, told AIN that the DOT does not appear to be opposed in principle to the request to permit foreign operators to make 12 flights annually. In his view, the matter is simply languishing on the desk of a DOT official and there is no serious impetus to push through the change. He also suggested that FAA officials might be obstructing moves to relax the restrictions.
Evidently, the delay has been exacerbated by the fact that the DOT is in
the process of getting a new leader, with Mary Peters nominated to succeed Norman Mineta as secretary (see story on page 4). NBAA intends to use the congressional confirmation hearing set to get under way this month as an opportunity to publicly press Peters for progress on this issue.

The moves toward allowing fractional operators in Europe to fly under private rules modeled after Part 91K have been advanced by the so-called industry working group-business aircraft operations (IWG-BAO) under the auspices of a task force established by the European Civil Aviation Conference (ECAC) and consisting of officials from both EBAA and NBAA.

The group has argued that the new rules are needed because U.S. fractional operators are currently in a legal limbo when they fly into Europe since European authorities have no direct equivalent to Part 91K rules. NetJets Europe currently operates under a full JAR-OPS 1 commercial license with its fleet registered in Portugal, but its U.S. fleet is covered by U.S. Part 91K rules.

Acknowledging the industry’s desire to ensure a level playing field between fractional and charter operators, the IWG-BAO has insisted that the proposed new private rules for fractional operations must be introduced as part of a reform package that would also include the U.S. government’s easing restrictions on foreign charter operations. It has also called for the U.S. to relax controls on “whole-plane” charters so foreign operators can make such flights into the U.S. without falling foul of cabotage rules.
The ECAC taskforce is due to consider the matter at a meeting on October 6. EBAA chief executive Brian Humphries said that the IWG-BAO will have to report the lack of progress on the U.S. side of the debate. He indicated that this may well result in the Europeans deciding that the fractional reforms cannot be advanced until the U.S. shows more willingness to compromise.

Meanwhile, both the European Aviation Safety Agency (EASA) and the transport directorate of the European Commission (EC) have indicated that they are willing to proceed with the IWG-BAO proposals on the regulation of fractional operations.
EASA rulemaking director Claude Probst has asked the industry group to make more detailed proposals on what rules would be appropriate for non-commercial business aircraft operators in the context of the expected new EU-OPS 2 operating rules. These are expected to be put in place when the EASA takes over responsibility for operational regulation from the Joint Aviation Authorities (probably in 2008).

At the same time, EC air transport policy director Daniel Calleja has said that he is willing to have the authority to negotiate with the U.S. DOT about the proposed market access measures for foreign charter firms. However, EBAA does not believe this would be the right way to break the deadlock, because EC and DOT continue to be at loggerheads about the long-running row over bilateral agreements for transatlantic airline traffic rights.

Nonetheless, EBAA and NBAA officials are trying to get the DOT to see that a refusal to improve market access for non-U.S charter operators could provide further fuel for the increasingly bitter debate about transatlantic trade issues. In areas ranging from airline traffic rights to technology transfer in joint defense programs, previously pro-American business leaders are more publicly condemning the U.S. government for what they regard as an anti-competitive “all take, and no give” approach to dealing with foreign industries.

For example, on September 13 Sir Digby Jones, former head of the Confederation of British Industry, used a speech to the UK Institute of Directors to accuse the U.S. government of a “bullying, protectionist” attitude to foreign trading partners. “We stand meekly by whilst America refuses to allow overseas airlines access to the domestic U.S. market, yet enjoys access to the European market,” he declared. “And why do we stand meekly by? All in the name of a so-called special relationship [between Britain and the U.S.]–some relationship when it is all one way.”

Earlier this year, EBAA officials had to contend with sometimes passionate opposition to the proposed private rules for fractional operations from charter operators among their own membership. The fact is that even if the U.S. government does ease the requirements for foreign operators wanting to fly into the U.S., the move doesn’t offer much for smaller operators whose aircraft fly only within Europe, and who face the prospect of greater competition from fractional operators.

Nonetheless, Humphries has insisted that Europe cannot dodge the issue of the new fractional rules because there is currently a gaping legal anomaly when it comes to regulating fractional operators. In his view there can be no level playing field for fractional and charter operators unless the authorities on both sides of the Atlantic enforce rules governing flight operations, and in Europe there simply are no rules to be enforced.

European charter operators have repeatedly expressed private concerns that some non-European fractional aircraft are being operated in a way that blurs the lines between private and commercial conditions. EBAA’s argument is that unless there are clear rules on what the limits of private operations are, there is no easy way for authorities to clamp down on such alleged practices and therefore no way to protect European charter operators from illegal competition.

As with Part 91K, the IWG-BAO’s proposed rules on fractional ownership would allow for operations to be categorized as private or commercial, according to whether– for any given flight–the fractional shareowner or the fractional program provider can be legally defined as the aircraft operator.

The group’s position is effectively that the distinction comes down to whether the shareowner or fractional program is legally accountable for a particular flight. Its proposed rules would allow the flexibility for the shareowner to indicate on every flight plan, before departure, whether or not it was being conducted under private or commercial rules.

The IWG-BAO members are also seeking transatlantic equality on rules governing runway length requirements for different categories of operator. When the U.S. government introduced Part 91K rules it allowed some relaxation of runway requirements for both Part 91 and 135 operations, but the Europeans have yet to make this move. This means that U.S. operators can fly an aircraft into an airfield that a European operator, flying exactly the same model, cannot use.