Illegal Charter Reports Spike as Market Heats Up

 - September 1, 2021, 10:56 AM

The number of reports received by the illegal-charter hotline has jumped 40 percent this year as more people have turned to private flying for the first time, according to industry executives. This jump has caused these executives to become even more concerned that passengers are unaware of who is transporting them and to stress that this makes the need for education on illegal charter all the more important.

“It’s crazy right now with the amount of activity we’ve seen,” said National Air Transportation Association (NATA) senior v-p Ryan Waguespack, who has been working with the FAA and industry on the effort to combat illegal charter. Noting the turnaround of the charter market with new entrants and the lighter end picking up, Waguespack added that “now more than ever, we’ve got to continue to keep the pedal down and keep reaching into the market and educating.”

NATA has returned to the road to continue its educational campaign, hosting workshops throughout the U.S. that provide a venue for local operators, airport officials, and other interested parties to learn about what constitutes illegal charter and how to combat it. Joining in this effort are FAA officials and key industry experts, including David Hernandez, a shareholder at the law firm Vedder Price, and David Norton, a partner at Shackelford, Bowen, McKinley & Norton. Workshop locations are spanning from the East to West Coast, along with the Midwest and the Southwest.

Waguespack said attitudes on private travel have shifted. “Private travel has historically been viewed as a luxury and now it's being viewed more as an essential method,” he said. “And so, we're seeing a tremendous uptick in new entrants into the charter market and into the aircraft ownership market, which just continues to drive the need for true education on what you can and cannot do moving forward.”

Complicating matters are resources and the complexities of meeting with people during the Covid-19 pandemic, Waguespack said. The industry needs to be aware of how the trends are affecting activities and continue to spread the messages “even during these challenging times.”

Norton added that the big concern is “the flying public has no clue to ask the questions. We need to connect with a whole different story.”

Hernandez cited cases of people who just want to get to a family or other personal event and have a sense of urgency. “They say, ‘I want to do it as soon as possible, but I'm afraid of flying commercial' or 'I don't want to do that.’ Those are ones that are being victimized by unscrupulous actors in the industry.”

Waguespack praised the collaboration with the FAA on the effort. “Like all industries and all segments, we're challenged with resources. So, we're working together and collaborating,” he said. Plans call for developing educational videos from the presentations to focus on various aspects of illegal charter, he said.

This is important because as people call in tips to the hotline, they often don’t “understand how to articulate what really is going on,” Waguespack said. “They just have a sense that they've lost a customer to a particular aircraft that doesn't seem to be on a certificate.” But they don’t know how to take that further with specifics.

For its part, the FAA has stepped up enforcement. Hernandez noted that since January 2020, the FAA has publicly announced some $13 million in civil penalties, along with certificate actions against three carriers. “I think we were just seeing the tip of the iceberg. This is going to increase exponentially because it is so rampant,” he said. “There are a lot of people trying to squeeze more and more money out of the system. When you have a frenzied demand, you're going to have people out there that just don't care about regulatory compliance.”

The FAA is trying to do its job and keep up, Hernandez said, adding that the amount of recent enforcement activity in the charter market was virtually unheard of a decade ago. But the problem is so pervasive that “industry needs to step up and say, ‘we need to stop this,’” he noted.

Hernandez added that people who skirt the rules “view it as speeding or something insignificant” and ignore the consequences.

Norton contended that the industry to some extent has created a false sense of security with its safety record, and people have a lack of understanding of the pitfalls of illegal charter. “We in the industry to some extent created this problem," he said. "We have this incredibly safe air transportation system, and a lot of people don't understand that there are multilayers to that.”

As an example, he pointed out the differences between getting on board a single-engine airplane versus a Boeing 737 operated by a major air carrier or a Gulfstream G650 flown by a large charter operator.

The feedback Norton has received from his presentations at the forums suggests "a level of astonishment [among] the consuming public—[an attitude of] 'Why should I even care about this?’” He said operators have been grappling with this and they see it as a new problem. “The trouble is the public doesn’t really want to know about any of that stuff. They just want to go someplace and pay for it. And it takes a little bit of time to sit down with them, explain why they need to pay attention to that.”

A second issue is pilots never think they are going to crash. “So there are a lot of people in the industry that participated in [illegal activity] and they just don't see the big deal because they're going to be safe.”

However, it is a little more difficult to discern whether the activity falls in the “clueless,” “careless,” or “criminal” category—the three buckets that the industry and the FAA have been trying to address through education and stepped-up enforcement.

Norton noted that the criminal activities are the hardest to find but said there is a pretty good mix between clueless and careless. “We've had a couple of presentations, and you can see some of the folks in the audience with very concerned looks on their faces, hearing things that they hadn't really thought about or realized before,” he said. Some of his clients similarly have been surprised by all that’s involved, he said.

When people get involved with the industry, he said, “what they're really primarily focused on is tax. That’s an important thing to focus on, but it just never occurs to them that there's this other federal agency that might actually have something to say about air safety. You start talking about what the FAA rules are, why they're there, you get this astonishment.”

Hernandez, on the other hand, also contended that in some cases, there is intentional noncompliance “whether it falls into the criminal level or not.” He cited enforcement cases involving executives who have been cited for illegal charter activity on several occasions or operators that use equipment that they are not qualified to fly or that hire pilots who are not qualified for charter activity.

“These certificate holders and carriers are very sophisticated, operating all types of aircraft, and they're too knowledgeable not to know the difference,” Hernandez said. “Because if it was simply clueless, you just ask the question, 'Do I need an air carrier certificate?' If you are collecting money, it is a commercial operation.”

The repeat offenders—those that have systemic, prolonged violations—are the most serious cases. And Hernandez said he believes it is more common than people realize. But while the FAA is trying to ferret out those operations, its biggest tool is civil enforcement rather than criminal charges.

“People don't prosecute criminally because one, that's a lot more difficult. It's beyond a reasonable-doubt basis, a preponderance of the evidence,” he said. “You can get your pound of flesh by doing just a civil penalty. But we'll see one of these accidents result in death. And then you may see criminal prosecution.”

The FAA has handed out some hefty penalties, including ones that are reaching into the millions. Hernandez said these cases typically involve operators that have a history of activity, making a statement that “you guys are bad actors and we are going to whack you. We are going to hurt you this time.”

Beyond the FAA, other agencies are getting involved in investigating illegal-charter activity, Waguespack said. This includes the U.S. Customs and Border Protection (CBP). “They are getting more engaged,” he said, adding that this is a natural evolution of the maturation of data-sharing between agencies.