Best Practices for Reporting, FAA Response, and Recent Enforcement Activity
Illegal charter operations have been on the FAA’s radar since 2005 with the Challenger crash at Teterboro, when Platinum Jet Management and Darby Aviation brought the Department of Transportation (DOT) and Federal Aviation Administration’s (FAA’s) attention to illegal charter activity. The enforcement proceedings against these two companies – and their owners and employees – were closely watched by industry, with Platinum Jet and Darby receiving DOT penalties and FAA revocation of certificates, as well as federal fraud indictments, guilty verdicts, and even jail time for some executives and employees.
Since then, the FAA and charter industry have taken measures to reduce the prevalence of illegal charter. These measures include aggressively encouraging reports of suspected illegal charter activity, FAA investigations into illegal charter allegations, and subsequent DOT and FAA enforcement actions, including some substantial civil penalties.
Reporting Illegal Charter
In 2008, the FAA established the Illegal Charter Reporting Hotline, administered by NATA and subsequently managed by the Air Charter Safety Foundation. The hotline was staffed by an independent third party and received dozens of calls a year. Now, the FAA and NATA encourage suspected illegal charter reports be submitted through the FAA Hotline (hotline.faa.gov or 1-866-835-5322).
What types of activities should be reported? As examples, a pilot might report a request from a non-certificated entity to fly a commercial flight or perhaps a “demo flight” that seems suspicious, or a charter operator or client might report deceptive marketing practices or a broker who might be crossing the line of legality.
The FAA Hotline online form allows two types of reports:
• Unsafe and/or unauthorized aviation activity that might violate an FAA regulation, order, or other provision of Federal law related to aviation safety; and
• Reports of fraud, waste, abuse, misconduct or mismanagement related to FAA programs, personnel, organizations, or facilities.
Suspected illegal charter activity should be submitted under the first option: unsafe and/or unauthorized aviation activity. Reporters are encouraged to provide as much detail as possible and summarize the events in the Narrative Description field. For example, answer as many of the following questions as you can:
1. Your contact info
2. How you became aware of the issue
3. Aircraft(s) N#
4. Pilot and/or operator of the aircraft
5. Passenger names and contact info
6. Date of flight(s)
7. Departure and destination of the flight(s)
8. Whether a lease is in effect for the aircraft
9. How the flight was arranged
10. Who arranged the flight(s)
Reports may be submitted confidentially, allowing the FAA to contact you; for Office of Audit and Evaluation (AAE) disclosure only; or anonymously.
NATA discourages anonymous reports, as the inability to follow up with the reporter for additional information can severely limit the FAA’s ability to properly investigate.
“The FAA knows a reporter of suspected illegal charter activity might not have answers to all of the questions above, but be prepared to share as much information as you have, so the FAA can determine if additional investigation is appropriate,” said Jenny Ann Urban, NATA’s Managing Director, Air Charter and Maintenance. “Be patient. Investigations can take several months, especially if multiple parties are involved and the FAA must untangle a convoluted web of operators, aircraft owners, pilots, and lessees.”
Illegal Charter in Focus in the FAA Reauthorization Act of 2018
Section 540 of the FAA Reauthorization Act of 2018 (P.L.115-254) required the Secretary of Transportation to submit a report providing analysis of reports on illegal air charter operations received through FAA’s illegal air charter hotline and other sources during the 10-year period preceding enactment of the statute.
In its April 2021 report to Congress, the FAA explained the economic incentives for illegal charter operators, the FAA’s reporting process, and the agency’s investigative process after receiving a report of illegal charter activity. After receiving a report, the FAA generally refers the report to the local Flight Standards District Office (FSDO). The Special Emphasis Investigations Team (SEIT) also receives the report. The FSDO or SEIT will then conduct an initial analysis of the report and might open an investigation.
If illegal activity is uncovered during the investigation, inspectors may refer matters for legal enforcement action if the conduction is intentional or reckless. The consequences of such enforcement action may be civil penalties or certificate action against the operator or pilots. Other investigations determine if pilots and/or operators are unaware that their operations are illegal. In those cases, the parties might work through the Compliance Program to come into compliance and avoid future illegal operations.
The FAA acknowledged the timeliness of investigations may vary by FSDO, and the lack of a consolidated database to track the outcomes of reports hinders the agency’s ability to determine the effectiveness of reporting activities and the resources used to investigate reports.
Enforcement Action Examples
One of the largest civil penalties resulting from illegal charter was the 2018 Hinman Company (“Hinman”) case, in which the FAA alleged the company operated a de factor charter air carrier for compensation without the required FAA certification. Hincojet LLC, a subsidiary of Hinman Co., conducted the flights and then allegedly charged more than the expenses allowed in §91.501(d). The FAA alleged the company also double-billed clients– charging more than one client for a single flight. This was not Hinman’s first run in with the FAA over time share agreements. In 2016, the FAA inquired about the company’s multiple time share agreements.
The agency proposed a $3.3 million civil penalty.
Other recent investigations include:
• July 18, 2022 – Rosado Aviation, Inc. – $1.1 million – 52 flights
• November 2021 – 93 Air – $341,893 – 32 flights
• August 5, 2021:
* PottCo Airlease – $344,672 – 16 flights
* PottCo Tactical Air – $301,676 – 43 flight
* Wikert Air – $233,133 – 21 flights
* Oracle Air – $191,536 – 9 flights
* East Shore Aviation – $157,654 – 9 flights
• September 3, 2021 – Slice of the 406 LLC, 82; Sunny LLC; and associated parties – $339,716 –approximately 26 flights
These examples demonstrate not only the scale of the potential penalties, but the relatively low volume of flights which can result in enforcement action.
Additional Implications
FAA civil penalties and certificate action aren’t the only possible repercussions of illegal charter. Other federal agencies, including the U.S. Customs and Board Patrol, Internal Revenue Service, Transportation Security Administration, and even Securities Exchange Commission can levy fines and other penalties as a result of illegal charter activities.
Further, conducting illegal charter is very likely a breach of contract with the operator and/or aircraft owner’s insurance policy, which could result in denial of coverage in the event of an accident or incident.
“Illegal charter activity can mar the reputation of not only the operator – and even pilots – engaged in the activity, but it can give the entire industry a black eye,” said Urban. “It’s unfair for legitimate charter operators to have to compete with illegal operators. If you see suspected illegal charter activities, use the FAA’s hotline to report them.”
Validate Your Charter Aircraft Provider’s Credentials to Ensure Safe Operations
When you charter a private aircraft, are you certain the operator is authorized by the Federal Aviation Administration (FAA) to conduct commercial flights? Not verifying an operator’s credentials can put you and your family at unnecessary safety and even financial risk.
Certificated part 135 air carriers, or air charter operators, maintain a higher standard of safety than those required by noncommercial operators. These standards include more stringent pilot qualifications and training requirements, additional aircraft maintenance requirements, and additional FAA oversight. Part 135 pilots, mechanics, and other safety sensitive positions are also subject to mandatory preemployment and random drug and alcohol testing.
Flying with a legitimate, FAA-certificated part 135 air charter operator ensures the operator meets higher standards and is subject to continuing oversight by the FAA.
Further, the Department of Transportation requires commercial air carriers to obtain a minimum level of insurance coverage. Not only might an operator conducting illegal charter operations have much lower coverages—their policy may not cover an accident or incident at all, leaving passengers and aircraft owners without coverage for losses or injury.
When choosing an air charter operator, ask the operator for a copy of its:
1. FAA-issued part 135 air carrier certificate.
2. Insurance certificate.
Be highly suspicious of any company that will not provide these two documents.
Look closely at any arrangement that delegates to you, as the passenger or lessee, responsibility for maintenance activities or requires you to pay the pilots or aircraft owner directly. In a traditional, legal charter arrangement, the air charter operator is responsible for training and paying pilots, maintaining the aircraft, and ensuring appropriate compensation is made to the aircraft owner.
Before entering any dry lease or other arrangement with an operator that transfers these responsibilities to you, have the agreement reviewed by qualified legal counsel.
Finally, verify the air carrier’s certificate validity with the FAA at faa.gov/charter.
Flying with an illegal charter operator might seem like an inexpensive alternative to a certificated charter company, but that savings could come at a significant cost to you; your family, friends, and colleagues; and even bank account.
Learn more about how to avoid illegal charter and help ensure a safe flying experience at Avoid Illegal Charter.