Legal issues headline agenda at NATA’s charter summit

 - July 31, 2007, 9:14 AM

In recent years the charter industry has drawn unwanted attention, as high-profile accidents have prompted the FAA to train a microscope on the industry’s operating practices. A review of the regulations governing the industry was among the most controversial topics at the National Air Transportation Association’s Air Charter Summit, held from June 27 to 29.

The 300 attendees at the summit represented charter operators, brokers, regulators and service providers. Feedback from attendees was uniformly positive; the consensus was that giving NATA’s charter audience their own conference instead of lumping them in with the Aviation Industry Expo earlier in the year made for a more intimate atmosphere where it was easier to interact with colleagues away from the commercial pressure of a regular exposition. (Earlier this year, NATA decided to split its annual convention into two meetings, the FBO Leadership Conference at the Aviation Industry Expo and the Air Charter Summit.)

“As the national representative of the air charter industry, we knew there was a need and desire for a specialized, focused event like the summit,” said NATA president James Coyne. “The fantastic turnout and enthusiasm shown by attendees clearly indicates that we have fulfilled that need.”

FAA leaders played a key role at the summit, with a keynote address delivered by Nicholas Sabatini, associate administrator for safety; a regulatory review by James Ballough, director, Flight Standards Service; and Hooper Harris, manager of the FAA’s commuter, on-demand and training center branch; and a contentious presentation headlined by FAA operations law manager Joseph Conte on charter brokering and legal issues that have been recent subjects of charter operator enforcement actions.

Other sessions focused on charter industry vendor relations and the impact of the FAA reauthorization battle on air charter.

A Transportation Security Administration charter security briefing was open only to authorized air carrier representatives. Finally, the summit wrapped up with a meeting of the board of governors of NATA’s newly formed Air Charter Safety Foundation, which was created “to enhance the safety and security of air charter in the U.S.” Through research, collaboration and education, the foundation intends to promote the use of safety management systems and provide objective, accurate information about U.S. air charter providers. Lindsey McFarren, NATA’s manager of regulatory affairs, has been appointed director.

Empty Legs, Dropped Jaws
The panel session on brokering generated the most audience feedback and head-scratching. The issue that grabbed attendees’ attention surfaced when FAA attorney Joe Conte tried to explain how the agency determines the difference between an on-demand Part 135 charter operation and a scheduled Part 135 commuter or Part 121 airline operation. As NATA put it in its summit wrap-up, “Jaws dropped when an attorney [Conte] with the FAA explained to attendees that the manner in which many empty legs are posted or otherwise offered to the public may in fact violate the FAA’s rules prohibiting scheduled service in turbine-powered aircraft under Part 135.”

Here is how Conte put it: “If the broker holds out the departure location, the departure time and the arrival location, then we’re going to expect the direct air carrier to conduct that operation in accordance with our scheduled operating rules, not the on-demand rules.”

The way that operators can get into trouble with these rules, Conte explained, is by publishing itineraries for flights that are going to fly anyway but that might have empty seats that could be sold for additional revenue. The planned flight might be an unscheduled charter operation, but advertising the availability of seats on that flight with a departure and arrival location and departure time might make that a scheduled and thus illegal operation.

The same could be true of an empty leg, a flight to reposition the airplane. If those three criteria–departure location, arrival location and departure time–are published either on the Internet, in an advertisement, on paper or even verbally, Conte said, “if you’ve done these three things, you or an agent–a broker, perhaps–from an FAA perspective, that’s a scheduled operation.”

He further explained that holding out in writing the departure location and time and then communicating the arrival location verbally counts just the same. “Then you’ve satisfied all three elements from an FAA perspective as to what is a scheduled operation,” he said.

One area of wiggle room in the issue of on-demand versus scheduled operations is the window of time during which the departure might take place. The smaller the departure window, the more the FAA might consider that flight to be scheduled. This issue is becoming a concern to the FAA with the existence of databases that list seats for partially occupied flights, Conte explained.

He used a hypothetical situation to clarify his remarks. In the scenario he used an air carrier telling a potential client that a charter from A to B at 9 a.m. costs $3,500. But then if the carrier says that the cost could be considerably lower, say $258, to leave at 5 p.m. because the aircraft will be flying its regular cargo run at that time, he said, “that from an FAA perspective is a scheduled operation.”

Customer Request Irrelevant
For those who argue that it was the customer who asked for the flight, Conte said, “It’s not a defense to say the customer first asked for a particular flight if you then follow up and say, ‘But if you go at 5 p.m., you can go for $258.’ You’ve just said, ‘We’ll take you from A to B at 5 p.m. for $258.’ From an FAA perspective, the fact that the customer asked for a different departure time, for a 9 a.m. departure time, which is different from the flight that you’re doing six days a week anyway at 5 p.m., is not a defense when you then mention to the customer the 5 p.m. flight at $258. That’s not a theoretical flight; that flight is taking place at 5 p.m. to carry the [cargo].”

At the end of the session, incredulous audience members questioned Conte’s explanation. One didn’t understand why a second customer buying an empty seat on a charter flight already scheduled for the first customer might think of the flight as being scheduled. “They’re both dealing with the same air taxi. It seems to me
the second customer realizes they’re not buying a ticket from American Airlines. And they don’t have the same expectation. Isn’t that what this is all about?”

Conte replied that it might not seem fair to a commuter airline that a charter operator could compete for the same passenger in those circumstances, yet the charter company doesn’t have to comply with the more stringent rules that apply to the airline. “That on-demand operator should be held to the same standard if it’s doing a scheduled operation as the scheduled operator,” he said. “Why do we have a difference among the rules?” he asked. “Maybe that’s the answer.”

An audience member asked about a “hypothetical” trip where a charter customer books a one-way flight from Los Angeles to Denver on Monday, then on Wednesday the operator gets a call for a trip out of Los Angeles, but the airplane is still in Denver. What if, he asked, he posts on a Web site that his company has an airplane in Denver and needs to get it back to Los Angeles on Tuesday to make it in time for Wednesday’s flight? “All I’m posting is that I’ve got an empty leg, and if you want to schedule a charter, we’ll charter. If you don’t schedule a charter, that airplane’s going to fly [Part] 91 from Denver to Los Angeles. It will not be scheduled. That’s not a [Part] 135 scheduled charter flight.”

Why, Conte asked, wouldn’t everyone post those empty seats for repositioning flights and say, “If you want to come on board it will cost you $300. You definitely had to get the airplane from Denver to Los Angeles. That flight was definitely going. That’s not a theoretical flight. When you communicate that schedule to a potential revenue passenger, it’s a scheduled operation as soon as that revenue passenger gets on the airplane and you operate it.”

For clarification, the questioner asked, “You cannot post [it]?”
Conte replied, “You can post them all you want. But the nanosecond you get a revenue passenger who takes you up on that holding out, then it’s a scheduled operation.”

This response was met with loud groans and derisive laughter from the Part 135 operators and charter brokers in the audience.

Obstacles to Cooperation
Another audience member offered his opinion. “I want to share a little bit of irony. We sat here this morning and listened to [the FAA’s] Nick [Sabatini] and Hooper [Harris] and Jim [Ballough] talk about the cooperative work with NATA. And what we’re hearing now is, ‘We don’t like the way you guys are doing charter because it looks too much like scheduled flight.’

“When was that regulation written that gives us those three elements? It was probably carved out in 1958. Can we open our minds to say, ‘Maybe these aren’t the right criteria today?’ It’s easy to say ‘Here’s what was written and I can find all the points to support it.’ The hard part is working together. Why can’t we work on this?”
NATA president Coyne tried to mollify the attendees and pointed out that the industry and regulators need to work together. “I think they do understand that we have a dynamic industry,” he said. “If you just heard what he talked about and compare that to what DayJet is planning to do in Florida, you might reach the conclusion that DayJet is planning to do something that [the FAA] wouldn’t approve.
But I know that DayJet and [the FAA] are working together to reach some sort of compromise.

“My hope is that they will be open minded because this is a dynamic and changing industry and the issue of filling up deadheads will be a key to the economic viability of our industry. We have to reach out to the FAA and others and not be dogmatic and not say we’re right. They do have to represent other parts of the industry like the commuter airlines, which are certainly going to push back, but we’ve got to push back too. As we work productively and collaboratively, we can secure an industry that provides for our customers the benefits that they really want. That’s what we’re all trying to achieve.”

Conte concluded, “What I’ve outlined for you are the rules as they exist and to alert you to things that the FAA is looking at. I’m not saying that the agency won’t entertain recommendations from the industry as to where you could carve out exceptions, where exceptions make sense. I’m just giving you the facts. You may not like it. It’s just kind of a friendly caution that based on what the existing rules are now, I’m not in the enforcement division, but there are FAA enforcement attorneys who are prosecuting these cases.”

NATA offered to help the charter industry understand the information Conte presented at the summit and is drafting guidance to help operators navigate the applicable regulations. Conte’s presentation and an FAA legal interpretation are available on NATA’s Web site (www.nata. aero.acs). Finally, NATA stated, “Operators are encouraged to consult appropriate legal counsel with specific questions about their empty-leg flight offerings.”

AIN will report on other details from NATA’s first Air Charter Summit in the charter special report in the November issue.