Presentation by
Dayton Lehman, Jr.
Principal Deputy Assistant General Counsel for Aviation Enforcement & Proceedings
U.S. Department of Transportation, at the 2011 NATA Air Charter Summit
— June 8, 2011 —

• Overview -- Office of Aviation Enforcement & Proceedings
– Jurisdiction
– Compliance/Enforcement Areas
– Enforcement process
• Recent Matters Involving Air Charter Brokers
– Enforcement Actions Involving Brokers
– Trends in the Air Charter Broker World
– CSI Aviation Services, Inc. vs U.S. DOT
– Air Charter Broker Rulemaking
– Disclosure of the Operator of a Flight
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•
Jurisdiction
–
Economic (non-safety-related) aviation regulatory matters
•
Compliance/Enforcement Areas
– Unauthorized air service (e.g., licensing, including operating without appropriate liability insurance, cabotage, holding out/operating service without appropriate authority)
–
Airline competition
–
Consumer protection
• Advertising
• Civil rights (i.e., disability and security-related discrimination)
• Aviation disaster family assistance and passenger manifest requirements
• Other areas (deceptive advertising, oversales, notice to passengers, contract of carriage, refunds, baggage liability, public charters, code-share disclosure)
•
Enforcement Process
–
–
–
Formal and Informal – 14 CFR 302.400
Subpoena/Record Inspection Authority – 14 CFR Part 305/49 U.S.C. 41709
Penalties – 49 USC 46301
– cease and desist order
– civil penalties of up to $27,500 for each violation and $27,500 for each day each such violation continues
– $2,500 per violation per day for individuals or an entity that is a “small business concern” as defined in 15 U.S.C. §
632
–
Bans on individuals being involved in air transportation
–
Criminal penalties for knowing and willful violations (49 U.S.C. 46316)
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DOT’S JURISDICTION
● An economic license, or an exemption from such licensing requirement, is necessary in order to hold out or provide air transportation
– 49 U.S.C. §§ 41101 or (U.S carrier) or 41301 (foreign carrier)
– Exemptions
• 14 CFR Part 298 -- air taxi
INDIRECT AIR CARRIERS
• 14 CFR Part 380 -- public charter operator
• 14 CFR Part 296 and 297 -- U.S. and foreign air freight forwarder
• Order 83-1-36 (January 12, 1983) air ambulance operators
● Economic Authority is in Addition to any Necessary FAA Safety Authority
● DOT has authority over “ticket agents”* (BROKERS are ticket agents)
*a person (except air carrier or carrier employee) that as principal or agent sells, offers for sale, negotiates for, or holds itself out as selling, providing, or arranging for, air transportation. 49
U.S.C. 40102(a)(40)
– 49 U.S.C. 41712 and 14 CFR 399.80
• Unfair and deceptive practices generally
• Passing off as an airline, selling air transportation as confirmed without a binding commitment with an airline; misrepresenting quality or type of service or the safety relating information of a carrier or crew
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RECENT MATTERS INVOLVING
AIR CHARTER BROKERS
Our focus has remained on instances in which the broker has held out as if it were an air carrier and/or entered into contracts for air transportation with a customer and turned around and entered into a separate contract with an air carrier to operate a charter flight.
►
Global Air Services and Hap Pareti, $120,000 civil penalty
Order 2011-6-3, June 2, 2011
-related to Capital Airways (Part 125), $175,000 civil penalty
Order 2011-1-01, January 5, 2011
►New Flight Solutions dba New Flight Charters, $40,000 civil penalty
Order 2010-11-23, November 19, 2010
►Luxury Air Jets, $40,000 civil penalty
Order 2010-2-17, February 19, 2010
►V1 Jets, $40,000 civil penalty
Order 2009-10-11, October 21, 2009
● A complete list of all enforcement orders can be found at the following site: http://airconsumer.dot.gov/rules/consentorders.htm

No recent cases involving an air carrier “facilitating” unlawful conduct by a broker
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RECENT MATTERS INVOLVING
AIR CHARTER BROKERS

Brokering empty legs
 Broker (or 135 operator) lists “return” flights of one-way charters it has booked or of other one-way charters that it is aware of
 Problem arises if listing is so specific as to amount to a “schedule.” (see 14 CFR 119.3: carrier offers in advance the departure location, departure time, and arrival location. It does not include any passenger-carrying operation that is conducted as a public charter operation under part 380 )
 More of an issue for FAA if scheduled service requires Part 121 authority

Opaque aggregation

Possibility of aggregating customers without offering a schedule

Self-aggregation
 Charter “customer” comprised of individuals who form a group prior to retaining a broker as its agent to seek a charter carrier
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RECENT MATTERS INVOLVING
AIR CHARTER BROKERS (cont)
U.S. Court of Appeals for DC, Case No. 09-1307, April 1. 2011
●Air charter broker on GSA Schedule bidding on Federal government air transportation contracts.
● Court found that warning letter from Aviation Enforcement Office combined with DOT grant of exemption to CSI constituted “final agency action” reviewable by the court.
● Court stated that “central issue” in case is whether air charter broker contracting through GSA schedule is engaged in “common carriage” – found it was not – based on DOT’s failure to adequately address the issue but left open the possibility that DOT may conclude otherwise
●Are all warning letters “final agency action”? If so, what are DOT’s options?
● Are government contracts not in common carriage? May Part 125 operators bid on government contracts?
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RECENT MATTERS INVOLVING
AIR CHARTER BROKERS (cont)
● Began with ANPRM requesting comment on NTSB recommendation charter customer be told (1) name of broker, if any (2) name of operating carrier and (3) name of owner of aircraft
● Became vehicle for considering all broker issues
● DOT currently is well along in drafting
● Regulatory analysis difficult due to lack of public data
● Issues encompassed by potential rule include
▪ licensing of brokers: registration requirement?
fitness test or financial security?
notice or other consumer protection safeguards?
different treatment of U.S. and foreign brokers?
brokers providing air ambulance services?
● Recent Issues
▪ government contracts as common carriage
▪ disclosure by 135 carriers of the actual operator of a flight 8

RECENT MATTERS INVOLVING
AIR CHARTER BROKERS (cont)
● NEW LAW: Section 210, Airline Safety and Federal Administration
Extension Act of 2010, August 1, 2010
49 U.S.C. 41712(c) - It shall be an unfair or deceptive practice under subsection (a) for any ticket agent, air carrier, foreign air carrier, or other person offering to sell tickets for air transportation on a flight of an air carrier to fail to disclose, whether verbally in oral communication, or in writing in written or electronic communication, prior to the purchase of a ticket -
(A) the name of the air carrier providing the air transportation; and
(B) if the flight has more than one flight segment, the name of each air carrier providing the air transportation for each such flight segment.
(2) INTERNET OFFERS. – In the case of an offer to sell tickets described in paragraph (1) on an Internet Web site, disclosure of the information required by paragraph (1) shall be provided on the first display of the Web site following a search of a requested itinerary in a format that is easily visible to a viewer.
● Does this law apply to air charter brokers? Does is apply to 135 carriers?
● Section 41712 – broad enough to cover failure in general of air charter brokers and 135 carriers to disclose actual operator
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