Fotolia/Montage John A. Manfredo
Fotolia/Montage John A. Manfredo

Is your charter deal too good to be true?

Illegal operations are on the rise. Here’s how they could hurt passengers and what the industry is doing to stop them.

With the charter world awash in new membership plans, shared shuttle services, and other innovative access models, you can likely find more than a few flight deals that seem too good to be true. Unfortunately, many of them are indeed not legitimate Part 135, or Part 380 per-seat operations, say industry authorities, who’ve now launched an intercontinental campaign against illegal—aka gray-market or Part 134½—charter.

“When people book a charter flight and see a price that’s unbelievably low, that should raise a red flag,” says John McGraw, director of regulatory affairs at the National Air Transportation Association (NATA), the business aviation trade group leading the effort in the U.S.

No one knows the exact extent of the illegal activity or its economic impact, but the consensus is that it’s increasing, spurred by the burgeoning variety of access schemes and lack of regulatory enforcement.

We’ll get to what this means for you, the consumer—or sometimes the inadvertent supplier, in the case of aircraft owners—but first the backstory.

At its ongoing town hall–style meetings in recent months, NATA has heard growing complaints from charter providers about illegal activity. After discussions with the FAA on “ways we can help [the agency] be more effective in taking action when someone is not following regulations,” McGraw says, the association formed its Illegal Charter Task Force in May. Europe’s BACA–the Air Charter Association (formerly the Baltic Air Charter Association) teamed with the European Business Aviation Association that same month in a complementary initiative.

This isn’t the bizav community’s first battle against illegal operations, which on the PR side typically focuses on the safety threat such flights represent to customers, but this time the charter industry’s economic survival is front and center. Complying with Part 135’s operational, crewing, maintenance, and other regulatory requirements is much more costly than ignoring them, giving an unfair pricing advantage to rule breakers.

“If we’re just going to accept this is allowed to happen, what’s the point of having AOCs [Aircraft Operator Certificates]?” asks Dave Edwards, BACA’s CEO. “There isn’t any benefit if people are just able to get away with” operating illegally.

But lack of actionable intelligence and thinning enforcement resources create tough challenges to the initiatives. Encouraging more industry reporting is a linchpin of the campaigns.

The Air Charter Safety Foundation has for years maintained an illegal charter hotline (888-759-3581) for reporting suspicious activity, but previously “there hasn’t been any feedback loop” enabling whistleblowers to learn the disposition of their reports, which dampens enthusiasm for calling, McGraw says. Under the current effort, the FAA will provide more information on the status of reports and investigations, which it hopes will stimulate call volume. BACA, meanwhile, is encouraging “members to engage with us and provide information.”

Education is part of the campaigns. Providers and consumers of illegal charter fall into three categories—“the careless, the clueless, and the criminal”—and most are in the first two groups, McGraw says. “We think customers are not sure what requirements [charter providers] are meeting or ignoring,” he adds. As for providers, “The majority…aren’t completely aware of the requirements and don’t dig in [to the regulations] as far as they should.”

The expanding range of access models presents another hurdle: even professionals “can’t always tell” whether a novel low-cost offering is legal, McGraw notes. “It’s complicated.”

Says Edwards: “This is why we call it gray-market charter. Sometimes there isn’t a clear description [of the questionable activity] for regulators” to determine their legality or to investigate.

While the forms it takes may be novel, illegal charter’s threat to you as a customer is the same as ever: you risk putting yourself in the hands of an operator that doesn’t use qualified crews or properly maintain aircraft, among other possible lapses. In a realm where safety experts routinely recommend flying with providers that meet third-party standards (Argus, Wyvern et al.) in addition to the FAA’s, saving money by booking charter with a company that ignorantly or willfully ignores even federal regulations is not the sign of a wise consumer.

Yet performing due diligence—or simply verifying an operator’s credentials—can be a challenge. The FAA's list of Part 135 operators is in a not-particularly-user-friendly Excel file, McGraw says, and it can be difficult to find on the agency's website. If the experts can’t always tell what’s legal, moreover, how can you? To help provide answers, NATA is updating and relaunching its Chartering an Aircraft, A Consumer Guide, and Risks of Illegal Charter publications.

If you own an aircraft and lease or otherwise make it available to a third party that uses it for illegal charters—a not uncommon source of such lift, according to authorities—you could face financial and other penalties. NATA notes that shady operators might not collect or pay the required Federal Excise Tax, and depending on the way the lease is written, you could be on the hook for any unpaid taxes—and for liabilities in the event of an accident.

Long term, if operators can’t compete with a rising tide of low-cost illicit lift, or determine that compliance isn’t worth the cost, the safety of the entire industry could go into a downward spiral, impacting you and every other charter consumer.

In a sign that the FAA is ready to take stronger action, in July the agency accused the Hinman Company, a Michigan-based real estate firm, of “conducting hundreds of commercial aircraft operations in violation of the Federal Aviation Regulations” by “failing to hold the required operator certificate for the flights being performed.” Hinman operated a Beechjet 400A and Hawker 900XP under a Part 91 time-share arrangement, charging passengers “more than the expenses allowed under Part 91,” the agency alleges; it hit the company with a proposed $3.3 million civil penalty in response.