Operational control: FAA’s interest extends farther back than last year
Well before the conclusion of its extensive investigation of AMI Jet Charter and emergency revocation of AMI’s charter certificate last year, the FAA investigated Chesterfield, Mo. charter operator American Air Network (AAN) and revoked its charter certificate without allowing the company to respond to the agency’s allegations. The two sides of the AAN story present sharply contrasting portraits of a company that, says the FAA, was renting out its operating certificate and a company, says a former AAN manager, that worked hard to operate within FAA regulations. What makes the story particularly intriguing is the final outcome: the FAA shut down both AAN and AMI, but the financial penalties differed vastly. AAN (whose safety record included fatal accidents) was hit for $56,000, but the agency clobbered accident-free TAG/AMI for a record $10 million.
Throughout 2006, the FAA held a series of meetings to explain the concept of operational control to the charter industry and to help educate its own inspectors, who seemed to be unclear about the concept. At many of those seminars, the FAA officials running the meetings used AAN as an example of how not to run a charter operation. A former AAN manager who attended one of the operational control seminars told AIN, “I was absolutely disgusted at the misrepresentation of the facts at that workshop. I was disgusted with their giddiness, their glee, at how they represented what they did and how they used it as part of their workshop.”
What got AAN into trouble was the FAA’s belief that AAN was “renting out” its Part 135 certificate to non-certified entities and thereby not exercising operational control over charter flights. “It was a very interesting process to go through,” the former manager said. “Before that, you could call me Mr. FAA. I knew the regulations and I had a solid relationship with the FSDO.”
AAN lost its charter certificate after a team headed by Mark Weitzenhoffer, manager of the FAA’s special emphasis team, conducted a no-notice inspection of the company in October 2005. This was eight months after the Platinum Jet Management overrun accident at Teterboro, which launched the FAA’s deep interest in operational control issues for Part 135 operators. The accident also spurred FAA scrutiny of certificate rental, whereby a charter certificate holder allows non-certified companies to pay a monthly fee to place aircraft on the holder’s Part 135 certificate. Certificate rental was an issue in the Platinum accident, too.
To the FAA, AAN’s business model appeared to be a case of certificate rental. According to the former AAN manager, “The business model for American Air Network was that [AAN] would charge a monthly management fee and that would allow someone to have [AAN] manage the aircraft and to advertise for charter but they would have to stipulate that the aircraft was operated by [AAN].” AAN would put the client aircraft through a thorough review at its Chesterfield headquarters to make sure it conformed to Part 135 requirements, met all the maintenance standards and was current with its inspection status, and pilots had to undergo indoctrination training at AAN. From then on, he said, AAN complied with all applicable FAA regulations, including maintenance, pilot training, flight and duty times, and so on.
Every AAN client flight had to meet a number of requirements before being released, according to the manager. “This included ensuring the pilot and copilot were current and on the AAN roster, that they met duty and rest time requirements and that the proposed flight would not cause exceedances of those times, that all paperwork from previous flights was closed and that maintenance and inspections were up to date.
We had in place a system similar to a Part 121 release,” he said. “It was a tight process and something that worked well for compliance requirements. Twenty four hours a day, 365 days a year the aircraft could not move without a release.”
Further, all pilots were taught during indoctrination training that AAN was exercising operational control. And for Part 91 flights, the company had a release procedure to ensure that aircraft continued to be maintained to Part 135 standards.
At the beginning of the October inspection, which lasted a few days, according to the manager, Weitzenhoffer said, “We’re here to see how you operate and to understand the business model that you’re operating under.” FAA personnel from the Washington, D.C. headquarters and the southwest region office observed AAN’s operations, looked at maintenance records and asked many questions, according to the manager.
One of the factors the FAA was most interested in was how the money flowed through the company, who paid the pilots and who paid for fuel. The manager said that at the end of the inspection, Weitzenhoffer told him, “‘We have determined that you operate as advertised.’ This meant that when we discussed what our business model was and how we operated, at the conclusion he agreed that we operated as advertised.” Weitzenhoffer also told the manager there were some issues that his team would forward to AAN’s FSDO and then the process would be complete.
Within a month, however, Weitzenhoffer arrived at AAN’s headquarters with four armed local law enforcement officers and served AAN with a notification of emergency revocation. The 125 counts listed in the notice mostly had
to do with maintenance violations and the certificate rental issue, according to the manager.
AAN officials were surprised by the FAA’s action. “Our local FSDO was intimately familiar with our business model. In a five-year period we certified more than 125 aircraft in Part 135 conformity inspections, and in that process just the sheer number alone required a large amount of interaction with the FSDO. They were in our office monthly, if not weekly.”
In a hearing before NTSB administrative law judge William Mullins, AAN did not appeal the revocation because NTSB rules stipulate that under an emergency revocation, the judge has to consider the FAA’s accusations to be truthful. “That gives quite a bit of weight to the revocation,” said the manager. “We prepared for that hearing. We could repudiate all 125 counts that were in the emergency revocation. We had documentation. We had a solid argument. And the judge said, ‘I have to be very clear that I don’t care how well [AAN] conducted its business.’”
The manager added, “The issue at hand is in the guidance that he was provided; he could rule only as to whether or not [AAN] was conducting business as an air carrier in accordance with what the FAA’s definition was. At the time the only guidance you could find in FAA [material] was a blurb of a definition for operational control, and it said the exercise of authority in initiating, conducting and terminating a flight.”
Although FAA regulations don’t mention certificate rental, the AAN manager believes that although AAN was exercising operational control, it was doing so using a business model that was contrary to what the FAA thought met the legal requirements. “Part of our argument is where does it say this business model is contrary [to the regulations]?” he asked. According to the former manager, the FAA can change its policy at will; in fact he said that Mullins told AAN, “‘They can change it in this courtroom.’ Then the game was over for us,” he said.
AAN was dissolved and some of the aircraft went onto other Part 135 certificates, some were sold and AAN settled with the FAA. The settlement allowed the AAN managers to petition to obtain a new Part 135 certificate as long as they didn’t pursue a similar business model. “In the settlement,” the manager said, “they cleared all the certificate management personnel of any wrongdoing and stated that they would be able to continue in management positions [at the new charter operation].”
FAA records show that the agency assessed two civil penalties against AAN in April 2007, one for $7,000 for flight operations and another for $49,000 for maintenance violations. The records contain no details about the nature of those violations.
The former AAN manager maintains that the FAA didn’t give the company a fair shake because it never offered AAN an opportunity to correct anything that the FAA felt the charter operator was doing wrong. “Had this been elevated to an appeals court,” he said, “I’m certain that AAN would have prevailed.” More important, he added, is that “our attitude at AAN was always, we’re here to comply. If you have guidance you want us to follow, we follow it. If you want us to change our business model, we’ll change it.”
There are some parallels with what happened to AMI Jet Charter. Last October the FAA revoked AMI Jet Charter’s Part 135 certificate, and AMI was also not able to make any changes to mollify the FAA. Subsequently, the FAA levied the largest-ever civil penalty of $10 million against AMI
part-owner TAG Aviation Holding. Although both companies had their charter certificates revoked, the huge penalty that TAG agreed to pay dwarfed the penalties levied against AAN. Yet a search through FAA records shows that AAN has had a disproportionate number of accidents and incidents compared to AMI Jet Charter, especially considering that AMI’s fleet outnumbered AAN’s by about three to one.
In the FAA’s incidents database, AMI Jet Charter has one entry, for a windshield that broke after departure. AAN has seven entries that involve problems keeping airplanes, mostly Learjets, on runways and taxiways.
On Dec. 14, 1995, an AAN Aero Commander 1121 crashed after the pilots flew three instrument approach attempts into Guatemala City Airport in Guate-mala, killing both pilots. The NTSB database contains no information about the cause of the crash. According to the NTSB preliminary report, the pilots “reported to controllers on duty that they were low on fuel and could not proceed to their alternate airport.”
During a flight to Blue Grass Airport in Lexington, Ky., on June 30, 2002, an AAN Learjet 25C departed the runway after landing, killing one of the passengers. The NTSB concluded that the probable cause of this accident was “the captain’s addition of forward thrust during the landing rollout, which resulted in a lack of braking effectiveness and a subsequent runway overrun. A factor was the captain’s inability to deploy the thrust reversers for undetermined reasons.”
A lawsuit filed by the son of the passenger who was killed was eventually settled by AAN and other parties a couple of years ago, according to lead attorney Dave Rapoport. During depositions of the captain and copilot in preparation for the trial, Rapoport told AIN, the copilot admitted that “his checkride papers for his last checkride were falsified and he never had a checkride. He was an illegal pilot [and] he named the check pilot who signed the phony papers.” Rapoport said that he informed the FAA of what he learned during the depositions. “Then an awful lot of time transpired before they did anything.”
Rapoport said that Air Ambulance Care Flight International, a Clearwater, Fla. company that operated the accident airplane, had its charter certificate revoked and then it placed the Learjet on AAN’s charter certificate shortly thereafter. According to the NTSB report on the accident, the Learjet was placed on AAN’s approved airworthiness inspection program on June 19, just 11 days before the accident.
The NTSB report described AAN’s operations as follows: “According to the director of operations, the operator managed 17 contracts, in which, ‘dbas’ [doing business as] obtained their own customers, charged and collected fees for services under their own Department of Transportation-registered dba name, and incurred all expenses. The operator received signing and monthly flat fees and provided FAR Part 135 operational control, including pilot training/ records oversight, scheduled and unscheduled maintenance, crew scheduling and dispatch flight following. The operator managed 47 aircraft and 85 pilots.”
A Strong Message
The FAA announced the revocation of AAN’s charter certificate on May 12, 2006, although the hearing before judge Mullins took place in December 2005. “The FAA determined that AAN permitted flights for hire or compensation to be conducted on its air carrier certificate when individuals who did not hold an air carrier certificate exercised operational control of those flights,” according to an agency statement. “This case sends a clear message that the FAA will act when it finds evidence that any air carrier is engaged in the franchising or rental of its air carrier certificate. The Federal Aviation Regulations require that an air carrier maintain operational control of the aircraft and crews on its certificate.”
The former AAN manager insists that AAN always had operational control of all Part 135 flights flown under its certificate.
In a presentation on operational control, FAA attorney Allan Horowitz’s PowerPoint slides note that “AAN illegally rented out use of its air carrier certificate to uncertificated entities.” Factors that underlined the illegal nature of AAN’s operation included: “Listing the names of the owners or lessors of each aircraft (more than one dozen) on AAN’s op specs as dbas; each entity listed on AAN’s op specs held itself out as an air carrier; AAN received a flat monthly management fee for each aircraft.”
According to Horowitz’s presentation, “While it might be a profitable business venture, an air carrier may not rent/franchise-out use of its air carrier certificate to uncertificated entities because safety is compromised when the certificated air carrier is unwilling or unable to maintain operational control over commercial operations.” o