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The black and gray private charter market not only exists but is thriving in Europe, the United States and the Middle East. The difference is in concepts.
Non-commercial operators offering their services to operate commercial flights extort money from the uninformed consumer, risking the safety of their passengers and seriously damaging the businesses of law-abiding operators.
The problem is compounded by insufficient regulatory attention, including legislative gaps, limited means of oversight and suppression of illegal activities. As a result, it is difficult to unambiguously identify offenders and reliably measure the volume of illegal charters. The most effective “intelligence-gathering” tool to date on illegal charters is the vigilance of their law-abiding competitors. Indeed, no one will notice the thief faster than the one into whose pocket he climbed.
The United States has an illegal charter hotline run by the National Air Transport Association (NATA). All reports of alleged violations are forwarded to the Federal Aviation Administration (FAA) for investigation. There is no such mechanism in Europe yet. Moreover, the tangled knot of national aviation regulations of individual European states – even those that are members of the European Union – complicates the functions of overseeing the activities of operators and preventing such violations. Thus, the main tasks of combating this scourge fall on the shoulders of industry associations. In particular, the European Business Aviation Association (EBAA) has taken on a mission to educate European users of business charter services about the risks associated with flying in technology not approved for commercial transport and operated by pseudo-operators.
Charter barter?
“It is very difficult to identify violators because it is impossible to trace the fact of payment for the carriage, – says Greg Thomas, president of the Geneva-based operator PrivatAir. – Often the payment goes through third parties, offshore companies, brokerage firms, relatives of the owner, etc. the aircraft is often unknown. Sometimes even barter schemes are invented: you let me fly by plane, and I will allow you to live in my villa. “
EBAA President Brian Humphries believes that the share of illegal charters in a number of European countries reaches 40%. The percentage is higher in Eastern Europe and Greece, but there is no exact information, and no action is taken against violators. This situation has existed for years, however, according to Humphries, during the financial crisis, when incomes are falling and people want to get more for less money, there is a temptation for both passengers and brokers to turn to those who offer lower prices. “That is why we are trying to convey to users that the services of such illegal operators carry a high risk,” says Humphries.
In the Middle East, the existence of a gray market for business charters is no secret. “The total fleet of business jets in the Middle East numbers about three hundred aircraft,” explains Thomas. “Some of them are luxuriously finished Boeing and Airbus liners, but only a few could, in principle, be allowed to carry passengers on a paid basis. these planes have been used for commercial charters for many years at least.I recently met a broker who makes $ 5 million a year on charters that are operated on unlicensed aircraft, even if the organizations operating them adhere to high standards of service their activities are illegal. “
In Saudi Arabia, the authorities are trying to deal with the situation by issuing more commercial operator certificates. “For comparison: the register of Saudi Arabia today contains six air operator certificates, in the United States – two thousand, – continues Thomas. – Sooner or later, those who are now organizing illegal charters will have to go through all the necessary procedures to obtain an operator certificate. ready to deal a serious blow to the gray market. “
Oliver King, managing director of Avinode Marketplace in Gothenburg, Sweden, cites Greece and the Balkan region as hotbeds of illegal charters. “People are very aware of this practice, but regulators need to be involved to investigate and figure out what's going on,” he says. To complicate matters further, each European country has its own cabotage legislation. “If Europe had an open skies agreement, everything would have been easier,” King said. “But the current regime of bilateral agreements based on the results of negotiations between pairs of countries excludes the possibility of a simple solution.”
In the Middle East, King refers to the region as an emerging market, for which a gray zone is normal, because in the early stages of maturation, too much of the fleet is owned by private owners and everything related to business aviation is covered with a veil of privacy and confidentiality.
Causes and Effects
EBAA President Brian Humphreys notes two sides of the illegal charter phenomenon in Europe: firstly, the commercial operation of an aircraft that is not listed on the appropriate operator's certificate is a safety issue; secondly, making a charter flight in violation of cabotage rules is an economic issue.
According to the EBAA, an uncertified operator is the greater evil of the two, therefore, in its educational campaign, the Association first of all draws the attention of users to this category of violations.
“Regarding the second group: if you are an operator registered in one of the 27 EU member states, you can operate flights throughout the EU without restrictions. But if you want to fly to a third country, then this is possible only if there are bilateral agreements with this country. If none, you need to get a permit, “explains Humphries.
He also notes that a non-EU registered operator wishing to fly from the EU to his country of registration must obtain permission from the local authorities. These flights are becoming more and more frequent as information about ferry flights (empty leg) spreads on the Internet. “Typical scenario: a foreign operator makes a one-way flight to the EU,” says Humphries. “Then he wants to sell the return flight instead of returning an empty plane to base. If he plays by the rules (and we suspect that many go to bypass), he must apply to the local aviation authorities, who will publish information about this flight and receive confirmation from local operators that they do not object to the operation of this flight by a foreign competitor. empty legs as if they weren't aware of these rules. “
When asked whether American operators violate European law, Thomas replies in the affirmative: “We often see that planes with numbers on N-, having delivered a client to Europe, perform local flights in anticipation of a return flight, as a part-time job. Or the return flight is put up for sale “This has become a common practice, especially during the economic downturn. But this is a direct violation of cabotage rules, so this activity is illegal, even for European operators. A German operator cannot operate a flight between two cities in France, for example, without obtaining permission from the French authorities.”
However, he said, even greater concern in Europe is caused by charters carried out on planes, owned by private owners and not allowed to perform commercial operations. “There are good reasons to distinguish between private and commercial travel,” he says. “This distinction is intended to ensure the highest standards of passenger safety. The idea of a private jet is that the owner has complete control over the operation and, within certain limits, sets his own standards. for profit, the same operational safety standards must be met as required of commercial carriers. “
Anti-competitive advantage
Thomas, who heads a company that has had to prove its compliance with European commercial carrier requirements, highlights the differences between the two categories of operators that are evident throughout. “For example, for commercial applications, materials and trim elements (seat cushions and covers, carpets and decorative veneers) – each individually and in combination with each other – must pass incombustibility tests and receive certificates of compliance with fire safety rules. plexiglass and luggage racks should not be shattered on impact, etc. For large aircraft, there is a ratio of passengers to flight attendants. All flight attendants must be properly trained and obtain supporting documents. Many of the private charters do not meet these requirements. “
As a result, the illegal gets a competitive advantage in the form of significantly lower overhead costs compared to a law-abiding operator. “PrivatAir,” Thomas continues, “operates ten aircraft in our corporate livery, and we also act as brokers for a number of operators that have passed our audit. We hold Swiss and German commercial operator certificates according to EASA standards, we have passed the international IOSA audit according to IATA standards, we are approved by Wyvern and Argus. No doubt, all this costs money. The mere fact of having a commercial certificate costs us 2 million euros per year. We are required to have the position of Quality Manager, Chief Pilot, the ground handling manager, etc. All documentation must be updated regularly. So we are losing the cost of the flight to a private jet owner who sells a car in his spare time. “
In a number of European countries, including the UK, commercial operators are subject to restrictions on the takeoff and landing characteristics of the aircraft, which, according to the EBAA, indirectly provoke the development of illegal charter business. “Whereas in the US a Part 135 (commercial) pilot can use up to 80% of the runway length based on his own risk assessment, in Europe a commercial pilot only has 60% of the runway,” explains Humphries. years of the last century, when at the dawn of commercial operation of jet liners several DC-8s and Boeing 707s skidded out of the runway as a result of a pilot error.This is where the dog is buried: this requirement does not apply to private operators and there is a strong temptation to declare a charter as a private flight, especially if there is a short runway at the airport of departure or destination. “
Another way to disguise an illegal charter is a short-term lease agreement. “We suspect that some companies fabricated leasing deals to circumvent the law,” Humphries says. “They entered into a short-term wet lease with clients and terminated it after the flight. Technically, this is legal, although not quite in the spirit of the law. We encourage authorities to put an end to this practice. “
Given the lack of oversight, Humphreys believes that “it is in the EBAA's best interest to do everything it can to ensure that members of the Association conduct legal activities in the best traditions of international practice. EBAA members, who are law-abiding business charter providers, are unhappy with dumping and unfair competition from illegal aliens.” He also assured that charter brokers are cooperating with the Association in the direction of suppressing illegal charters. In particular, Avinode is working to ensure that a “Subject to authorization” check box appears next to flyer charter advertisements where applicable.
American subtleties
In the United States, illegal charters continue to operate even after the sensational crash of the Challenger 600 plane at Teterboro Airport in 2005. Then, during the investigation, it turned out that the plane, owned by a private person and certified under Part 91, was flying a commercial flight under a forged Part 135 certificate, which was illegally used two companies.
Mike Nichols, Vice President of the National Business Aviation Association (NBAA) for Operations, Economics and Educational Activities, describes two types of violators: they both operate according to Part 91 standards, but if some commit offenses out of ignorance of the laws, then the latter deliberately position themselves as commercial operators.
“US aviation legislation is very complex, with a lot of deviations, conditions and subtleties. And the more confused the structure of the company that owns or operates an aircraft, the easier it is to violate any clause out of ignorance, which, however, does not excuse wrongdoing,” warns Nichols regarding the first category of violators.
In general, US law prohibits charging for flights operated under Part 91 of the Federal Aviation Regulations, but there are a few exceptions, the most popular of which, the “affiliate group”, is contained in section 91.501 (b) (5). This clause allows the company to receive reimbursement of expenses related to the transportation of employees, officials and guests of the company under one subtle condition: the flight must be operated within or in connection with the company's business. In order not to violate this provision, the corporation must develop a memo to determine the legality of charging compensation for each specific flight.
Another minefield is time-sharing. If the flight does not meet the conditions of an “affiliate group”, the companies may enter into a time-sharing agreement based on Part 91.501 (c) (1). However, it is important to remember that it is not possible to receive full compensation for such a flight. The rules indicate 10 items for which the company can present an invoice. But they do not include fixed costs such as crew salaries, general insurance, hangar rent, and so on. These are solely the costs associated with this particular flight.
Management company traps
Another common mistake that general aviation (GA) operators make is misidentifying the legal owner and operator of an aircraft. “It is still common practice for an aircraft to be placed on the balance sheet of a separate organization, usually created specifically for this purpose,” says Nichols. “This is done in order to exclude the actual owner of the aircraft from potential operational liability. However, the legislation is unequivocal about that if the aircraft is owned and operated by a separate organization whose sole business is air travel, then that organization must be licensed as a commercial airline.
The very fact of registration of an organization as an owner of the aircraft, of course, is not illegal, but it is necessary to be aware of the legal consequences. “One of the most frequently asked questions to the NBAA board is: how to limit the legal liability of an aircraft operator? The recipe is simple: legal operation plus full aviation insurance,” says Nichols. you need to consult with lawyers versed in the labyrinths of industry legislation to avoid being included in the list of illegal charter operators. “
But that's not all: an inexperienced operator may inadvertently get into the network of a management company that offers to fly according to Part 91 (GA) standards in the interests of the aircraft owner and according to Part 135 (commercial operation) standards as business charters.
“Today, most of all misunderstandings are generated by the format of operational management with the participation of the management company, – says Nichols. – First of all, the aircraft owner does not distinguish between operational management and operation, mistakenly believing that the management company is the operator of the aircraft when performing flights according to GA rules. Secondly, some management companies misinterpret the situation of operational management and seek to gain full control over the aircraft, while still performing flights as a GA, in the interests of the owner. There is a rich ground for violations of not only aviation, but also tax legislation, and how only with such a company will an inspector from the FAA end up dealing with a tax representative knocking on the door. ” If, of course, it comes to proceedings.
There is no one to grab your hand
Given the fact that there are always those who want to cheat the system in any field of activity, the lack of control becomes a big problem. Jackie Rosser, NATA's director of regulatory affairs, explains that the FAA is not a policing system. Primarily due to the lack of field inspectors. All the forces of inspectors go to the control of operators who have operator certificates; thus, commercial exploitation is closer and more understandable to them. “Violators can only be stopped by fear of punishment. And on the issue of illegal charters, there are generally no preventive measures,” says Rosser. In the hands of the inspector there is simply no tool for influencing violators. “And what can you take from them? You can't take the plane away from them, you can take away the pilot's certificate,” Rosser continues. “But flying an airplane without a pilot’s certificate is an administrative, not a criminal offense and is punishable by a relatively small fine. will stop it a second time? Nothing, in fact. The whole FAA system is set up for people to voluntarily obey the general rules. But against a deliberate violator who goes to illegal operation of the aircraft for profit, the system has no antidote. There is no such structure and there are no inspectors. trained in police work “.
The lack of FAA resources was the starting point for the establishment of the NATA hotline. This idea emerged after the Teterborough disaster and was originally funded by an FAA grant, and then became supported by the Association's own resources. Whether the federal service will be able to move the case based on the results of the call depends on the quality of the information provided. The information is being processed and collected, but it may take years before an investigation is started. It is almost impossible to get feedback from clients of an illegal charter company. And it is almost impossible to prove this information.
“If I, as a non-operator, advertise air transport services in print, I will be grabbed by the hand by the Department of Transportation for publishing false information. There were precedents when brokerage firms came under fire for the phrase“ our fleet. ”But from the FAA's point of view, this is not a violation, and they will not be able to do anything while the plane is on the ground.And they will not know that illegal charter flights are being carried out on it, unless someone informs them about it, since the protocol of routine random inspection of GA operators doesn't exist, “explains Rosser.
What to do?
In Europe, the situation with the suppression of illegal charters is no better. The greatest zeal in this matter, according to Humphries, is shown by the French authorities. Britain has also pledged to tighten controls. “Since legal action is difficult on this issue, as an industry association, we try to approach it from the other side, informing passengers and charter brokers about the illegality of some common practices, – explains Humphries. – More than 4 thousand brochures circulated to industry organizations, and the text is on the EBAA website. We are not the police. We try to promote best practices, our method is education, we work with authorities, brokers and users. “
In fact, the passengers of business charters themselves must take care of their safety and, first of all, be informed about the risks of illegal charters. According to NATA's Rosser, there should be a three-step approach to the topic of illegal flights. First, the FAA must authorize a “strike team” to spot GA operators with the right to prosecute violators. Secondly, there should be a massive educational campaign among business charter users. In addition to brochures and user manuals, Rosser believes, it is necessary to involve the media so that the low cost of such services automatically casts doubt on their legality and quality. Thirdly, it is necessary to ensure the availability of information about the operators, they have a certificate of a commercial operator and the aircraft included in it for business charter clients. At the moment, the client practically cannot independently find out whether the flight is legally operated. Meanwhile, Rosser says, the passenger has the right to know whether the plane he is flying on and the operator who is operating the plane is certified.
It is important to convey to the client audience that advertising on the Internet may contain a veiled offer of illegal charter such as a training or demonstration flight. Brokers who advertise a huge “proprietary” park fall into the same category. In other words, if it is difficult to believe in the proposed conditions, then you probably should not believe in them.
Broker liability
Charter brokers play a critical role in keeping their clients informed and safe from illegal operators. Although there are no uniform standards or procedures for certification of brokers, Rosser believes that “a self-respecting broker must notify the client that he owns intermediary functions, and the carrier will operate the flight. If there were registration or accreditation of brokers with the Ministry of Transport, this would allow “weed out” most of the dishonest players.
From a European point of view, says Thomas from PrivatAir, “the role of a broker is difficult to overestimate. Many clients who first use business aviation services do not understand the rules of the game, do not have an idea of the capabilities of certain types of aircraft. It is strange that the rights of a passenger buying a trip to a travel agency is protected by the relevant legislation, and a private flight costing several hundred thousand dollars is not regulated by anyone. “
He also draws attention to the issue of the charter operator's insurance. “If the owner of the aircraft, not being a commercial operator, receives payment for the transportation of third parties, the aircraft insurance will be automatically canceled, since the insurance company signed up for private flights. The insurance premium for private operation is much lower than for commercial operation. And in the event of an accident or disaster to the victim. the passenger or his relatives will be quickly explained that they will not receive any compensation, since the flight was made illegally. “
Clients must be trained to ask the right questions. However, some of them, even realizing that the flight was illegal, take risks for a lower price. In the mind of the passenger, the belief is unshakable that, in any case, everything related to air transportation is somehow regulated. “We are proud to be able to explain to our clients all the benefits of legal charters,” says Thomas.
David ESLER, AVIATION WEEK
Source: ATO
