FAA steps up response to illegal charters
One or more business aviation bees regularly invade the FAA cowl. The loudest bee of late has been illegal charters, as evidenced by the agency’s proposed penalties. Last August, he targeted five companies with proposed penalties totaling more than $1.2 million, and two months later he proposed a civil penalty of $1.38 million against Campbell Oil Company and Executive Aircraft Services. , in each case for carrying out illegal charters.
Basically, unless an exception applies, it is illegal to charge or receive compensation for transporting passengers or property without having an FAA-issued Air Operator’s Certificate. Such a flight would also technically be illegal if a charter certificate holder failed to comply with FAR Part 135 and other applicable requirements and regulations (including the requirement to use commercial or air transport pilots, as circumstances, as opposed to private pilots). But the term “illegal charter” generally refers to commercial flights carried out by an operator who does not have a certificate at all.
Illegal charters can be difficult to spot, but the buzzing bee has allowed the agency to work to improve training for frontline inspectors tasked with identifying them. By contrast, training aircraft owners and operators not to concoct illegal charter schemes has proven more difficult. Last May, the FAA tried a different approach. You can’t fly on illegal charters without pilots, which is why the agency sent a letter to 471,000 certified pilots, warning them against participating in flights that violate FAA rules. Putting pilots on the lookout for illegal charters makes sense; pilots can get themselves into hot water to steal such charters, and they can also concoct their own illegal charter schemes even though they have commercial ratings.
Unlike airline pilots and other commercial pilots, private pilots are not permitted to carry passengers for pay or hire, but FAA regulations allow them to share the costs of a flight with passengers (“shared flight “), assuming certain conditions are met. First, the trip must take place primarily because the pilot wants or needs to fly to the destination, not because the passengers want to get there and the pilot agrees to take them. In other words, the journey to the destination must be the common goal of pilot and passenger. Second, in the FAA’s view, unlawful “compensation” may include the passenger paying a greater share of the flight costs than the pilot; the regulations thus provide that “a private pilot cannot pay less than the share of the operating costs of a flight with passengers”. And the expenses that can be shared are limited to “fuel, petrol, airport expenses or rental fees”. Pilots often circumvent these rules, intentionally or not.
Creative businessmen have tried without much success to cobble together businesses based on FAA flight-sharing rules. Suppose, for example, that pilots publish on a website the date on which they would fly to a specific destination. If others with access to the website were willing to pay a proportionate share of the flight costs to accompany the ride, it would reduce the cost of the trip for the pilot. But to do so, posting on the pilot’s website would effectively amount to “holding” a will to carry passengers, and the FAA’s view is that flights on this basis would be “public transportation” requiring a certificate of charter and (at a minimum) one commercial flight. license for pilots.
Another way to exploit illegal charters is to piggyback on legitimate contracts such as dry leases. A bareboat lease is a transfer of possession of an aircraft to another party. What makes it “dry” is that the rented plane is delivered without pilots; the lessee, as operator, is expected to provide its own pilots, because leasing an aircraft with pilots is equivalent to providing the lessee with a full transportation service — a wet lease. But lessees interested in illegal charters are unlikely to have qualified pilots, and so may simply arrange to hire the lessor’s pilots under a service contract separate from the lease. The FAA, however, doesn’t care if you get the plane and its crew under separate agreements; the lease is still “wet” if the lessor’s pilots are in the cockpit, and commercial rules apply accordingly unless there is an applicable FAA exemption.
The FAA offers specific exemptions for flights under arrangements the agency considers wet leases — trips where passengers may be charged even if the flight is not operated under a certificate. commercial operation. In addition to providing flexibility and relief from charter rules, these exemptions offer operators who do not have a certificate the option of presenting a de facto charter flight as operated under an exemption.
For example, FAA regulations allow charges for “flights to demonstrate an aircraft to potential customers,” that is, people interested in buying it. Allowable charges are limited to twice the actual cost of fuel for flights plus certain specific incidental expenses (such as landing fees and crew travel costs). Expensive fuel and creative accounting – not to mention false claims of possible buying and selling of the aircraft – can create opportunities to make money on supposed demonstration flights.
Time-sharing agreements, supposed to be billed on the same basis as demo flights (twice fuel plus incidentals), offer similar opportunities for creative accounting. Here, however, it is not necessary to pretend that an aircraft is presented for sale. In the FAA’s view, however, timeshare flights should be operated by “businesses,” not individuals. Also, pursuant to a co-ownership agreement, as defined in FAA regulations, a registered co-owner may charge other registered owners for operating flights, and charges are not limited to twice fuel.
Again, plane owners are cooking up clever schemes to get around the rules – why not sell your friends a 1% stake in your plane so you can make money by charging them for flights? As a result, the FAA is looking for de minimis “co-owners”. A co-ownership agreement between a 90% owner/operator and 10 owners of 1% each will obviously set off red flags for the agency, but anyone who doesn’t own enough planes to look like a bona fide owner (for opposition to an illegal charter customer) is likely to raise a red flag for the FAA. Any co-ownership agreement must therefore be reviewed beforehand by the aviation consultant.
Flushing out illegal charter programs can be difficult, but those in the cockpit are relatively well placed to do so. And the FAA isn’t the only source of complaints about illegal charters. Legitimate charter operators are concerned about illegal competition and charter customers are concerned about security. After all, there’s a reason the FAA has higher standards for commercial operators and pilots.
You can report suspected illegal charters to a helpline sponsored by the Air Charter Safety Foundation.