Between 30 and 35 people turned out for an educational session on illegal charter operations hosted by the National Air Transportation Association and “Business Aviation Advisor,” an online and print publication at Van Nuys Airport on Aug. 24.
The attendees were in person at Aeroplex Group Partners at the airport and online for the session conducted by Ryan Waguespack, senior vice president with the association and attorneys David Norton and David Hernandez.
In an interview after the session, Waguespack said this year reports about illegal charter operations to a special hotline set up by the Federal Aviation Administration show a 40 percent increase.
“It is a significant problem because the business aviation traffic continues to track upwards as well,” Waguespack said. “There are risks involved that you may not be aware of. That is why we get out there and do as much education as possible. We will continue doing those efforts in the months and years ahead.”
Norton, who works in the Dallas office of Shackelford Bowen McKinley & Norton, explained just what makes a charter operation illegal. The FAA has a regulation called Part 91 that sets the guidelines for solo pilots flying airplanes. It governs having an airworthy plane, tells you to have proper training and that you must obey certain rules in talking with air traffic control, Norton said.
Under Part 91, an aircraft owner or operator has little contact with the FAA, he said, adding: “You are expected to know the rules and obey the rules.”
However, if the operator of the aircraft operating under Part 91 rules accepts reimbursement for allowing others to travel aboard the plane, that is considered a commercial operation and would fall under Part 135, the air charter rule.
“You need an air carrier certificate to do that,” Norton said. “You have to comply with a whole other layer of rules regarding maintenance and training and operational stuff. It is a more onerous structure and it’s done on purpose. The FAA’s job is to protect passengers.”
Part 135 is for both operators and paying passengers.
Norton compared a Part 91 flight with getting a rental car because the renter is responsible for everything, while Part 135 was more akin to hailing a taxi, where you pay for the transportation service.
“You (the customer) become responsible for the conduct of the flight. A lot of customers don’t understand that, and, in their mind, they are getting in the taxicab with the documents they have signed,” he added. “It is more in the nature of a rental car, and they don’t understand the risks they are taking by doing that.”
The risks an operator of a Part 91 aircraft takes on if they are doing an illegal charter are many, said Hernandez, who works in the Washington, D.C. office of law firm Vedder Price.
They start with civil penalties and then go from there. The total amount the FAA can fine an illegal charter operator is $250,000 per flight. There is also reputational risk of being named in an FAA press release about the action, he said.
If there is evidence of criminal behavior, the FAA could refer the matter to its inspector general who would refer it to the FBI and assistant U.S. Attorney’s office to prosecute the parties criminally, he continued.
And if there is a Part 135 operator involved, the FAA could seek revocation of the air carrier’s certificate, Hernandez said, adding, “They have done that three times in the last 18 months.”
Those are just the regulatory risks.
There are also related tax issues, which gets the IRS involved.
If the FAA says you should have been operating as a Part 135, the IRS can come in and say all those illegal flights should have federal excise taxes, plus interest and penalties, collected on them, Hernandez said.
If an illegal charter operation involves an accident or other such incident and if the aircraft involved has been financed under a loan or lease, it could trigger a default under the owner-lease agreement, he added.
“So that’s what could happen,” Hernandez said. “In short, nothing good.”
To identify a legal charter operation, a person can go to the association’s website and type in the tail number, Waguespack said, adding that all charter operators must display their charter certificate number on the aircraft.
Norton said it all comes down to asking the question, and if an aircraft owner or operator cannot cleanly and clearly respond “yes,” that is a problem.
“It’s asking the question, that is the main thing,” he continued. “If they (the customer) are handed a document that says pilot services agreement that means they are being offered a Part 91 operation. If they don’t understand what’s going on, then red flags should start going off. If they are leasing the airplane, that is not the same thing as buying a flight on it.”