Frax regulations emerge as NPRM, comments due

 - May 19, 2008, 8:58 AM

After an arduous trip through the federal bureaucratic processes, the FAA published its notice of proposed rulemaking (NPRM) for FAR Part 91 Subpart K last month, a new section that will regulate fractional-ownership operations and make some modifications to Part 135 on-demand charter requirements to level the competitive playing field.

The agency accepted virtually all of the proposals put forth by the Fractional Ownership Aviation Rulemaking Committee (FOARC), which was commissioned by FAA Administrator Jane Garvey in 1999 to assist the agency with developing operational guidelines to help it regulate the burgeoning fractional-ownership industry.

Publication of the NPRM in the Federal Register on July 18 set in motion a 90-day period for interested parties to make comments. Even though the feds agreed with the majority of the FOARC’s final product, which the 27-member committee adopted unanimously, the FAA said it anticipates “quite a lot of comment,” which will have to be considered before the final rule can be issued. Publication of the rule is targeted for next summer.

The comment period on Part 91 �Subpart K will continue until October 16, and NBAA, which was a member of the FOARC, sent out an “alert bulletin” to its membership urging that they review the NPRM and submit comments directly to the FAA. According to the association, Part 91 remains “materially unchanged” for traditional business aircraft operators, which was its primary goal in the rulemaking process.

In fact, Subpart K is modeled after many of the best safety practices and standards already used by NBAA members. Although these are codified for the first time within the FARs under Subpart K, they are required only of fractional operators.

The FAA acknowledged that while fractional-ownership programs have consistently achieved one of the safest records in aviation, the proposed rulemaking is aimed at maintaining the safety of these programs. It said that the NPRM is based on many of the best practices already existing in corporate and commercial aviation, as well as air-carrier regulatory standards.

According to the newly proposed definition, a “fractional-ownership program” is possible when an individual or corporation purchases at least a one-sixteenth share of an airplane. The aircraft is then placed in a “pool” to share with other owners of aircraft. The pooled aircraft are managed by a company that provides aviation expertise and management services for those owners.

The NPRM stated that aircraft owners flying aboard aircraft they own or lease exercise full control over and bear full responsibility for the airworthiness and operation of the aircraft. “Under these circumstances, the FAA has determined that the appropriate level of public safety is provided by imposing general operating and flight regulations and oversight under Part 91,” the agency said.

The FAA explained that airline passengers have no control over, or responsibility for, the safety of aircraft in which they are flown, and passengers who are transported by Part 135 on-demand operators or Part 121 supplemental operators also have no responsibility for the operation of the aircraft on which they are aboard. Therefore, these operators are regulated by the more stringent regulations and oversight under Part 121 and 135.

The agency noted that these policies and different levels of responsibility were reflected in the development of the other sections of Part 91, which govern much of business aviation. “In creating the new subpart, the FAA continued its longstanding policy that individuals and corporations may operate their aircraft under Part 91 and included these operations as the cornerstone of the new subpart,” it said.

Growing Segment

The FAA said that ever since Executive Jet Aviation created the concept of fractional ownership of aircraft by individuals and corporations in 1986, the number of companies offering fractional-ownership programs has grown, and during the 1990s it was “substantial and sustained.” As of early last year, the leading fractional-ownership programs managed approximately 465 aircraft on behalf of 3,446 shareowners.

The agency said the NPRM was undertaken because it determined that current
regulations do not adequately define fractional-ownership programs and do not clearly allocate responsibility and authority for safety and compliance with regulations.

Under Part 91 Subpart K, a fractional-ownership program must have a designated program manager; one or more owners per fractional-ownership program aircraft, with at least one aircraft having multiple owners; possession of a fractional-ownership interest in one or more program aircraft by each fractional owner consisting of a minimum interest of at least one-sixteenth share for subsonic, fixed-wing or powered-lift fractional-ownership program aircraft or at least one-thirty-second share for a rotorcraft fractional-ownership program aircraft; a dry lease aircraft exchange agreement among all the owners; and multi-year program agreements.

The FAA said the core of definition is the concept of a “minimum fractional-ownership interest.” In setting a minimum interest, the FOARC sought to prevent potential abuse by someone who might try to offer air charter under the guise of a fractional-ownership program.

“The FOARC determined, and the FAA agrees, that aviation safety would be compromised if a person were permitted to offer what would amount to air-charter services under proposed Subpart K,” the NPRM said, “thereby evading the important safety and supervision requirements of Part 135 applicable to such service. Therefore, ownership interests that meet all the other criteria of fractional ownership, but are less than the minimum ownership interest, would not be eligible to operate under Subpart K.”

Because the NPRM closely followed the FOARC recommendations, it met with the approval of the general aviation industry groups most directly involved. NBAA, the National Air Transportation Association, General Aviation Manufacturers Association and Helicopter Association International all had seats on the FOARC from its inception in October 1999.

Laying Down the Law

The FAA said it undertook the new rulemaking because it determined that current
regulations “do not adequately define” fractional-ownership programs and “do not clearly allocate responsibility and authority” for safety and compliance with the regulations.

It added that elements of the proposal would provide, in certain of the regulations
applicable to fractional-ownership programs, a level of safety equivalent to certain regulations that apply to on-demand operators. Conversely, it said, changes are also proposed to some Part 135 regulations that apply to on-demand operators meeting certain criteria to permit these operators an alternate means of compliance for certain commercial operations. That removed many of the contentious issues that had separated the two camps and paved the way for consensus on the new rule.

NBAA president Jack Olcott noted, “The regulations governing traditional flight departments were protected, and in certain areas–such as pilot night-currency requirements of Part 61 and the operational requirements for Part 135–the proposal updates the regulations to reflect current aircraft and training technology.”

Jacqueline Rosser, NATA specialist for flight operations, said the NPRM provides what her organization wanted in relation to drug and alcohol testing, allowing Part 135 operators to use 85 percent of runway length for full-stop landings, easing weather reporting requirements and conducting proving tests. NATA represents many on-demand charter operators who successfully argued that many of the current Part 135 rules put them at a competitive disadvantage with fractional operators.

The FAA said it intends to implement the proposed rule, if adopted, within a 15-month compliance period using a phased-in compliance schedule. It would allow continued operations under the existing Part 91 while incrementally transitioning to the new regulatory requirements. A 30- to 60-day training period for FAA employees would follow adoption of the final rule.

Publication of the final rule is targeted for next June, and Garvey reportedly would like to see it in place before her term as Administrator ends in August next year. But AIN has learned from a reliable source that there is still a “diversity of opinion” within the FAA over the preamble, which defines fractional operations and explains the reasoning for placing the regulation under Part 91.