AMI certificate revocation spooks charter industry

 - October 29, 2007, 5:34 AM

AMI Jet Charter’s trouble with the FAA didn’t start on October 12, when the agency revoked AMI’s charter certificate, nor the week before, when it suspended AMI’s certificate, nor in March when the FAA began an investigation of AMI or even in September 2005, when the Department of Transportation fined AMI $250,000 for violation of foreign-ownership regulations. According to the FAA, AMI’s problems began in 1998 when TAG Aviation USA, which is owned by Switzerland-based TAG Aviation Holding, bought part of Aviation Methods, a Burlingame, Calif., charter/management company that then became AMI Jet Charter.

TAG Aviation USA currently owns 49 percent of AMI, and the rest of the company is owned by two AMI executives who are U.S. citizens. TAG Aviation USA manages about 120 business jets, and owners of 48 of those jets also made their airplanes available to AMI for use in charter operations. AMI’s total fleet numbers 79 airplanes, including the 48 TAG-managed airplanes.

Suddenly last month, according to the FAA’s actions, AMI Jet Charter was such a grave danger to the public that the agency had no choice but to revoke its Part 135 charter certificate, which it did on October 12.

The sudden grounding of an operator perceived by most in the industry as solid, safe and reliable raised many questions. What did AMI do that was dangerous enough to warrant an emergency certificate revocation? Did AMI fail to train its pilots? Did it fail to ensure that the aircraft it flies were maintained properly? Did AMI pilots not perform weight-and-balance calculations before takeoff? Did AMI pilots attempt to take off with the center of gravity so far out of limits that the jet would not rotate and ended up overrunning the runway and crashing into a building next to the airport and burning and nearly killing passengers and a local driver? The answer to all of the above was no.

AMI didn’t operate any of its flights like that, but one company that did–Platinum Jet Management–ended up launching the FAA into a close-up examination of operational control of charter flights, a key issue that the FAA believes was a significant factor in Platinum Jet’s overrun accident in Teterboro in February 2005. In its prosecution of AMI, the FAA cited operational control as a fundamental factor that led to its action against AMI.

Yet in finally revoking AMI’s Part 135 certificate, the FAA added another element in its long campaign focused on AMI: the issue of foreign ownership of the company and the FAA’s allegation that the Swiss owners of 49 percent of AMI created a dangerous situation by exercising control over AMI flights.

The Catalyst Crash

On Feb. 2, 2005, two pilots flying a Challenger 600 operated by Platinum Jet Management under the charter certificate of Darby Aviation of Muscle Shoals, Ala., failed to note that the airplane’s cg was well forward of the forward limit and ran off the end of Teterboro’s Runway 6 at about 110 knots carrying a full load of passengers, crossed over a six-lane highway, crashed into a building and caught fire.

While the NTSB’s finding of probable cause blamed the accident primarily on the “pilots’ failure to ensure the airplane was loaded within weight-and-balance limits and their attempt to take off with the center of gravity well forward of the forward takeoff limit,” one contributing factor–Darby Aviation’s failure to maintain operational control over Platinum Jet flights–became the focus of intense FAA activity.

Three other factors cited by the NTSB did not seem to receive as much FAA attention: illegal charters by Platinum Jet; inadequate surveillance and oversight of flights conducted under Darby Aviation’s Part 135 certificate by the Birmingham, Ala. FSDO; and “the FAA’s tacit approval of arrangements such as that between Darby and [Platinum Jet].”

On Sept. 9, 2005, the Department of Transportation, of which the FAA is part, served AMI Jet Charter with a consent order that claimed the company was conducting “unauthorized interstate and foreign air transportation…while under the actual control of a non-U.S. citizen corporation…” The order required AMI to stop violating the applicable regulations–49 U.S.C. 41101 and 14 CFR Part 298–and assessed a fine of $250,000, half of which was due immediately and the other half suspended, provided AMI continued to meet the rules during the subsequent 12 months, which it did.

AMI was formed in 1998, according to the consent order, when TAG Aviation Holding, a Swiss company, purchased part of charter operator Aviation Methods. TAG Holding’s U.S. division, TAG Aviation USA, owned 49 percent of the equity in AMI and 25 percent of AMI’s voting stock. TAG Aviation USA, the DOT added, “by dint of being owned by TAG Holding, is a foreign corporation for Departmental licensing purposes.” The DOT further pointed out that AMI’s president, more than two-thirds of its officers and directors and holders of three-quarters of its voting interest are U.S. citizens and that two U.S. citizens owned 51 percent of AMI’s equity.

Despite AMI’s insistence that it complied with the regulations defining the company as a U.S. citizen corporation, “a review by the Office of Aviation Enforcement and Proceedings of the totality of the circumstances showed that AMI was clearly under the actual control of TAG [Aviation] USA…”

AMI said that it spent more than $250,000 restructuring to meet all DOT licensing requirements. The DOT said it still felt that enforcement was needed and agreed to imposition of the $250,000 fine, minus $125,000 for good behavior. “AMI,” the DOT added, “in order to avoid litigation and without admitting or denying the alleged violations, agrees to the issuance of this order to cease and desist from future violations…”

The FAA set about educating the industry on the subject, starting with a series of operational-control workshops held throughout the U.S. during 2006 and culminating in the revision of operations specification A008, which focuses on operational control and spells out how operators are to comply with applicable regulations.

AMI and Operational Control
AMI was well aware of the issues raised by the Platinum Jet accident and keen to make sure its operations complied with the regulations. “Things were very much under control even before that,” AMI CEO Chuck McLeran told AIN. “However, we have made changes.” Starting in May 2006, AMI modified its contracts with owners of the airplanes on its charter certificate. It also sent representatives to every FAA operational control workshop and created its own operational-control compliance system to make sure it met the requirements.

McLeran also confirmed to AIN about a month before the FAA’s suspension/revocation action that, since March, the agency had been conducting an inspection of AMI operations. He said he couldn’t discuss what the inspection was about or what the FAA was looking for because the FAA had never shared that information with AMI. The FAA later acknowledged to AIN that it was investigating AMI but never explained the purpose of the investigation and refused all requests for interviews regarding AMI.

Even though the FAA had been investigating AMI for seven months, it took no formal action until October 4, when it suspended the company’s charter operating certificate. AMI appealed, but on October 12 the FAA took pre-emptive action by ratcheting up its case and revoking AMI’s charter certificate. According to the FAA, “AMI and TAG knowingly, intentionally and willfully engaged in a scheme and/or deceptive practice to make it appear to federal regulatory entities, including the FAA, as if AMI remained in control, including operational control, when in fact TAG exercised control of passenger-carrying flights ostensibly operated under the authority of AMI’s air carrier certificate.”

The revocation focuses on the issue of foreign ownership and control and the dangers that this presents to the flying public, while the suspension details a number of alleged infractions (see sidebar page 90, “FAA versus AMI Jet Charter”) having to do with operational control but not related to foreign ownership.

In the suspension notice, the FAA said that it was continuing its investigation into the question of foreign ownership, but in the meantime it had found that “significant safety issues may exist regarding AMI’s operations which cannot wait [for] the conclusion of our investigation. Specifically, it appears that personnel and procedures followed to exercise operational control over Part 135 operations are not in compliance with the FARs and AMI’s operations specifications.”

The suspension and revocation suggest that the FAA believes that allowing AMI to continue operating is too risky. The language in the emergency order reads, “The Acting Administrator further finds that an emergency requiring immediate action exists with respect to safety in air commerce or air transportation.” The FAA declined to answer AIN’s query about why it waited so long to shut down AMI given that it had spent the past seven months investigating this allegedly dangerous operation.

The AMI situation raises many questions, and perhaps most important among them: Does this action against AMI signal that the FAA is cracking down on charter operators by nitpicking them to the point where they are forced to shut down? Many industry experts told AIN that no charter operator could withstand the scrutiny that was applied to AMI.

Another question raises the issue of the value of charter auditing services. AMI received the highest rating–platinum–from auditing firm ARG/US, after an audit conducted in November 2006. If the FAA can be so convinced that a company such as AMI puts the flying public at risk, are the private auditors missing something?

ARG/US didn’t add the specific operational-control issues to its audits until after January 2007, according to Joe Moeggenberg, ARG/US president. “The AMI certificate was one of the better operations that we audited in 2006. I reviewed the audit report again [recently], and the audit team that we sent there was impressed with the overall operation,” he said. Platinum-rated charter operators are required to implement a safety management system (SMS), and AMI was one of the earlier adopters of an SMS, something that the FAA itself has been pushing hard for the charter industry to adopt.

Moeggenberg, like many in the charter industry, has a hard time understanding why the FAA felt suddenly compelled to take such drastic action against AMI. Why did the agency target AMI and what is it hoping to accomplish?

“I think the FAA was trying to get the attention of the industry and I think it succeeded,” said Moeggenberg. “I read the suspension order and I think it would be difficult for any operator the size of AMI to satisfy the FAA on any one of those 38 issues. If they uncovered safety issues seven months ago, if it was [truly about] safety of flight, why wasn’t this certificate suspended a long time ago? I think the FAA really needed to get everyone’s attention, and it did. This is a serious issue that the whole industry needs to take notice of.”

NATA president Jim Coyne agrees, and on October 15 he issued a sharply worded letter critical of the FAA’s treatment of AMI. In the letter, Coyne said that he was “extremely angered” by the FAA’s decision to revoke AMI’s charter certificate and called it a “shocking development.” He added, “NATA believes that this action against AMI is driven more by arrogance and a failure to understand how Part 135 is different from Part 121 than by true concerns about the safety of operations conducted on AMI aircraft.”

Coyne told AIN, “If they can call the AMI situation an emergency, then they can call almost anything an emergency.…We really don’t believe this is going to serve any good purpose other than create less understanding.… Bringing in [the issue of] foreign ownership has nothing to do with operational control.”

The FAA lawyer who has been heading up the AMI investigation is Eastern Region counsel Loretta Alkalay. The FAA has refused to permit AIN to interview Alkalay.  
The FAA earlier this year launched a series of special-emphasis inspections of all charter certificate holders. The agency will not reveal how many special-
emphasis inspections it has conducted or the results.

In the meantime, all that operators can do is try to comply with the regulations and maintain a good working relationship with their FAA overseers.

“Everybody should duck and run,” said charter expert Kevin Harkin. “If AMI is being scrutinized this way, I and other operators should scrutinize their procedures.”

The FAA itself is not above being scrutinized, not just by the aviation media but also by its overseers at the DOT. In September, the House Committee on Transportation and Infrastructure asked the DOT Inspector General’s office to review the FAA’s oversight of commuter and on-demand charter operators. The committee is concerned about whether the FAA has enough information about operators to perform proper oversight. While the DOT announcement doesn’t mention Platinum Jet, perhaps the agency’s audit of the FAA will finally address the issue of what happened to the FAA’s oversight when Platinum Jet was flying illegal charters and, in the opinion of many in the charter industry, subjecting passengers to real safety risks instead of peripheral issues such as whether a partially Swiss-owned company truly would do anything to compromise the safety of its customers.

'AMI certificate revocation spooks charter industry' PDF