Black market air charter is alive and well in Europe, the Middle East – and the U.S.A. How do we stop it?
Illegal Charter in the U.S.
In the United States, even in the shadow of the 2005 Challenger business jet accident at Teterboro — a Part 91 aircraft and crew operating on a Part 135 certificate illegally shared by two charter companies, a clear violation of Part 135 operational control provisions (see “The Dark Side of Charter,” August 2005, page 40) — illegal charter continues to occur. One aviation safety advocate who is convinced of this is Jim Ballough, who formerly headed the 's Flight Standards Service and after retiring from federal service began J. Ballough Global Aviation Solutions, a safety consultancy. It was in the wake of the TEB mishap that Ballough spearheaded the Part 135 revision of operational control rules (specifically, paragraph A008) and subsequent nationwide briefing and inspection of charter operators. One piece of evidence that convinces him is the yield of reports from NATA's illegal charter reporting hotline and resulting investigations by the FAA.
“I think it is impossible to measure the amount [of illegal activity], but the best gauge for that is the legitimate Part 135 operators, as they become aware of the perpetrators faster than anyone else,” he said. “The FAA has an obligation to investigate all complaints. Statistics were provided at the Air Charter Safety Foundation meeting [in mid-March] reflecting illegal activity and subsequent FAA investigations, and they will be published on the ACSF website. It's incumbent on the industry to help police that activity, and when the FAA becomes aware of it, they investigate the reports.”
The NBAA shares NATA's concern about business jet operators booking illegal charters, and Mike Nichols, the former's vice president of operations, education and economics, identified the two primary examples of it in the United States: the Part 91 operator who may be committing a violation inadvertently out of ignorance or, a Part 91 operator advertising as a commercial operator.
The former category, which Nichols specializes in unraveling for NBAA member companies, derives from lack of awareness of some of the more Byzantine strictures buried in the FARs and the boundaries they specify for private operators. Ignorance (never an excuse in aviation or tax law) of them could lead an operator to commit a violation without knowing it — until the local POI arrives for a little chat. As Nichols pointed out, these provisions identify “charging entities” within the corporate structure otherwise explicitly permitted by the FAA under FAR Part 91.501(b)(5). “The regulation is pretty complex, though,” he warned. The more complicated the corporate structure controlling (or sharing) the aircraft, the easier it is to bust one of those boundaries.
While the FAA has a general prohibition on payment for flights conducted under Part 91, there are some explicit exceptions found in Subpart F of Part 91, the most common of which is the “affiliated group exception,” 91.501(b)(5), which permits the company to receive reimbursement for up to the fully allocated costs of owning and operating the airplane for the carriage of employees, officials and guests of the company — and here's the caveat — as long as the flight is within the scope of and incidental to the company's business. “When the carriage is not within the scope of the business of the company or incidental to its business, 91.501(b)(5) is no longer an option,” Nichols said, “so a challenge for Part 91 operators who want to ensure they are not inadvertently conducting illegal charter flights is that they must understand any charge-backs or reimbursements that may be made for a particular flight.” That means it's incumbent on the company to set up procedures to ensure compliance with the FARs.
Time-sharing is another minefield. “If a flight cannot meet the requirements of the affiliated group exception,” Nichols continued, “companies may consider entering into a time-sharing agreement, the provisions of which are found in FAR Part 91.501(c)(1).” However, the company cannot charge the same amount that the affiliated group exception permits — the maximum it can charge under a time-share is specified in FAR Part 91.501(d), which lists 10 items that must be specific to the individual flight (at least there's some guidance there).
“You can't take an average of your costs,” Nichols cautioned, “it has to be the specific cost. It does not include typical fixed costs, such as pilot compensation, general insurance, hangar rent and so forth. What it includes are the variable costs for a specific flight.”