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Risk at the Center of Regulatory Revisions

The air charter industry may be on the brink of changes as federal regulatory agencies and operators increasingly focus on the implementation of the new 14 CFR Part 5 safety management system (SMS) rule, illegal charter, and security.

Factors driving the changes include a renewed interest in many facets of business air charter operations as well as an overall governmental lens on aviation safety and security. “At the same time, there has been increased media coverage of business aviation, focused attention on the industry in Washington, DC, and limitations on enforcement actions over those who are operating illegally,” according to Jenny Ann Urban, Managing Director of Air Charter and Maintenance at the National Air Transportation Association (NATA). 

This renewed attention to air charter should come as no surprise, as more people discover private flying. According to Adam Cowburn, Managing Director of Alton Aviation Consultancy in New York, the charter market received a significant boost between 2020 and 2022, primarily driven by three major trends. “Those trends were a reduction in commercial airline service, immediate health concerns related to COVID-19, and significant wealth creation driven by surging equity markets in a zero-interest rate environment along with strength in certain key business sectors such as technology,” he said. 

The result, said Cowburn, was that an entirely new set of customers entered business aviation. “The charter market was the greatest beneficiary of that given its lower barriers to customer entry, relative to fractional or whole aircraft ownership,” he noted. 

Shifting to Culture of Safety Risk Management 

For the air charter industry, regulatory changes are already taking place, with the SMS requirement being the most recent. Published on April 26, 2024, with an effective date of May 28, 2024, the rule requires part 135 operators to submit their SMS Declaration of Compliance to the Federal Aviation Administration (FAA), attesting that they have met their obligations under the rule, no later than May 28, 2027. 

“The implementation of an SMS will be one of the biggest challenges the air charter industry is facing due to its self-reporting feature,” said Barry Lambert, Executive Vice-President, Charter, Maintenance, and Aircraft Sales, at Southern Sky Aviation in Birmingham, Alabama. “That will mean a cultural change, because a lot of people will need to be convinced that they will have to report their own mistakes without fear of job loss or reprisals,” he stressed. “It has to start with the people doing the actual work, and not with management. For those who have done their jobs for the past 30 to 40 years, this is going to be a major change. That is why you must understand the cultural shift and the impact it will have on your operation.” 

To illustrate, Lambert noted that it took Southern Sky Aviation, which has three mid-size and one light jet on its charter certificate, about a year-and-a-half to get its pilots comfortable with self-reporting under the FAA’s Aviation Safety Action Program (ASAP), utilizing the Air Charter Safety Foundation’s reporting tool.

Lambert added that an SMS is applicable to all employees of an organization and begins with a look at systems and processes, determining what needs to be done to improve them and how to make and sustain the changes – i.e. “change-management.” 

Not surprisingly, an SMS can be a very complicated program to create, as stressed by Andrew Schmertz, CEO of Farmingdale, New York-based Hopscotch Air. The company has four Cirrus SR 22s in on-demand charter service. “For a small operation, it’s a lot of work,” he said. “Among the procedures it needs to incorporate are emergency response, an ASAP, a risk management tool, a flight hazard tool, and numerous reports.” 

Schmertz reported that while Hopscotch Air has had “certain components” of an SMS already in place, the carrier is currently developing a program consistent with the just-released regulations, targeting year-end 2024, at the earliest, to present its SMS for FAA approval. 

According to Jeff Causey, COO of Causey Aviation Service (CAS), safety management systems “play a key role” in improving operational safety. With 6 to 12 corporate turbine aircraft on its charter certificate and another 15 to 20 under management, the company, which operates mainly out of Raleigh-Durham International Airport (RDU) and Piedmont Triad International Airport (GSO), first established an SMS in 2011. CAS also runs a part 145 repair station. 

It is important to note that although many operators already have an SMS in place, they may need to revise the system to meet requirements of the new rule as well as submit a Declaration of Compliance by the deadline. 

“The FAA has implemented a very sensible SMS rule with a very reasonable path to compliance,” he stated. “One key element of SMS is that it creates a safe way to report potential safety concerns without risk of penalties for the person making the report. I believe that the FAA must ensure that its inspectors respect this aspect of SMS; if they do not, they risk destroying the essence of a system that is designed to ensure safety. We can’t address safety issues unless they are reported. 

Safety Record Should Factor into Industry Scrutiny 

On June 17, 2024, the FAA announced plans to publish a Notice of Proposed Rulemaking (NPRM) focusing on possible new regulations applying to certain on-demand public charter operators. Unlike private for-hire operations, these carriers are governed by both FAA part 135 regulations and Department of Transportation (DOT) part 380 economic requirements. The FAA’s announcement also cited the creation of a Safety Risk Management Panel (SRMP), slated to be established by the end of 2024. 

The FAA’s action, some claim, is the result of heavy pressure from some scheduled airlines and pilot unions to curb the rise of public charter operators emerging as formidable competitors. One frequently cited example is JSX, a growing nationwide public charter carrier with a fleet of Embraer ERJ 145 regional jets, configured with 30 seats each, and flying under parts 135 and 380, as the regulations currently permit. 

Asked what has prompted the agency to initiate actions to address public charter flights at this time, an FAA spokesperson referred to a press release, which specifically noted that public charter flights have rapidly expanded in frequency and complexity and, in some cases, appear to operate like scheduled airlines. According to the announcement, the FAA intends to initiate a rulemaking to amend part 110 definitions of “scheduled,” “on demand,” and “supplemental” operations so that public charters will be subject to the same operating rules, based on the same safety parameters, as other non-public charter operations. 

As FAA Administrator Mike Whitaker stated in the press release, “if a company is effectively operating as a scheduled airline, the FAA needs to determine whether those operations should follow the same stringent rules as the scheduled airlines.” Scheduled air carriers operating aircraft with 10 or more seats are subject to part 121 regulations. 

Also according to the press release, the proposed SRMP will assess the feasibility of a new operating authority for scheduled part 135 operations in 10-30 seat aircraft. The panel “will dig into the data as we (the FAA) work to address the risks that exist today as well as think about the future of the national airspace system.” 

“Competitive issues remain a primary driver of the focus on public charter operations, yet NATA maintains that any proposed changes take into account accurate data about the exemplary safety record of part 135/380 operations,” said NATA’s Jenny Ann Urban. NATA continues to remind law makers and regulators that part 135 public charter operators provide valuable, safe, and secure services nationwide, offering transportation solutions to many communities that are not serviced by the airlines. 

Asked to respond to this, the FAA spokesperson pointed out that the agency issued a Notice of Intent to consider revising the regulations to address the public charter issue. The notice, published in the Federal Register of August 29, 2023, drew 60,000 public comments on the proposal, which the spokesperson claimed were evaluated by the FAA. He did not mention airline and union pressure as factors. 

“The FAA announcement seems uniquely timed with the TSA’s (Transportation Security Administration) announced proposed changes to the Twelve-Five Standard Security Program (TFSSP) that sets forth security requirements for part 135/380 operators,” added Urban. “Regarding those changes, the TSA permitted public charter operators to submit comments to be considered by the Administration.” At the time of this article going to print, the results of comment adjudication had not yet been announced. Updates will be posted on www.nata.aero

Asked about changes to security rules, Michael Rucinski, CEO of the Washington, D.C.-based security consulting firm Hawthorn Hill LLC, reported that with increasing activity in the part 135 world, these operations will generally see a new assessment of risk and vulnerability. “This may apply across the public and private charter spectrum to include the growing number of part 380 operators, which may have prompted a new level of scrutiny,” he said. “To what extent that will happen is not known right now.” 

Illegal Charter Activity Poses Real Safety Risks 

An area of continued concern is illegal charter, when an operator provides for-hire service without a charter certificate. Greg Petersen, Chief Operating Officer of Solairus Aviation, a business aircraft management firm headquartered in Petaluma, California, reported that most illegal charter appears to be happening under what he called “the use of multiple dry leases.” It takes place more frequently under FAR part 91, covering private, not-for-hire operations. 

“FAR part 91 allows for use of an aircraft by people who do not own it—and are not recognized as its operator—provided they have authorization to use it,” Petersen explains. “There are also limited items for which the owner of the aircraft can receive remuneration for its use. Most of the ‘illegal charter’ is generally based on this type of arrangement. However, the rules are not adhered to, and the remuneration is typically more than that which would be authorized.” 

Along this line, Southern Sky Aviation’s Barry Lambert stressed that “the language within the FARs” needs to be refined to clearly define who can and cannot be compensated for a flight. “Along with that, there has to be actual enforcement instead of education,” he said. “If there are no repercussions, why follow the rules?” 

Lambert also pointed out that illegal charter flights run by unidentified or even named management companies typically do not meet the mandated operating or maintenance standards followed by certificated charter operators – nor is there compliance with TSA security requirements. Because of this, they are able to offer a cheaper service, undercutting trip pricing by the legitimate operators. 

“Anyone that can afford to pay the bill can rent a plane through an illegal charter operator without any background checks,” said Lambert. “Also, such operators do not meet the insurance requirements for transporting people or property, so the renter (of the aircraft) is likely not insured. They also evade the 7.5% Federal Excise Tax, which makes the legal charter operation more expensive.” 

For now, according to Jeff Causey at Causey Aviation Service, the illegal charter industry is growing. 

“I don’t think the public has much understanding of the difference between illegal charter and certificated operators, and I don’t think the FAA has the resources to address the issue effectively,” he stated. “I would like to see the FAA continue to move toward more efficient and streamlined regulation of certificated operators while using tools at their disposal to identify and make contact with suspected illegal operators. The illegal operators pose far greater risk to the public, and therefore there should be at least as much regulatory focus on the illegal, as well as the certificated operators.”

By Paul Seidenman & David Spanovich

 

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Welcome to the Aviation Business Journal, the official publication of the National Air Transportation Association (NATA).

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