Update on FAA Policy Regarding “Operational Control” in Charter Management Arrangements
Over the last year, the Federal Aviation Administration’s (FAA) policy regarding “operational control” of aircraft in charter management operations has created considerable controversy and confusion within the industry. The FAA plans to issue a revised OPSPEC A008 for Part 135 operators early this fall that should clear up some of the confusion and varying interpretations within the FAA. However, Part 135 operators and private aircraft owners who have or intend to put their aircraft in charter need to be aware of this issue, and ensure their agreements and practices conform to current FAA policy.
Impetus for the Policy
In February 2005, a Challenger 600 aircraft overran the runway during an aborted takeoff from Teterboro Airport. The flight was operated by Platinum Jet Management (Platinum), an entity which did not hold an air carrier certificate, but rather had entered into a charter management agreement with Darby Aviation (Darby), whereby the aircraft was placed on Darby’s FAR 135 certificate. According to the National Transportation Safety Board (NTSB), Platinum employed the pilots, maintained the pilot training and drug test records, provided the maintenance, and booked and received payment for charters in its own name. This apparent lack of oversight by Darby, as well as other factors, led the FAA to conclude that Platinum, not Darby, was in operational control of the aircraft during the flight in violation of the Federal Aviation Regulations (FAR).1
This accident largely precipitated the FAA’s crackdown on the various charter management arrangements common in the industry. It is not unusual for the owner’s pilots to be trained and qualified to the Part 135 operator’s satisfaction, and then be used on commercial flights under the direction and operational control of the Part 135 operator under a pilot service agreement or similar arrangement. This is particularly useful where the aircraft is based in a location remote from the Part 135 operator’s primary base of operations. However, where the owner (or the owner’s related company) provides the pilots, it raises the question of whether the owner is in fact “wet leasing” the aircraft to the Part 135 operator. Since the owner (as lessor) would remain in “operational control” of an aircraft in a wet lease, it would violate the FAR for the owner to undertake a commercial flight.
FAA Proposed Policy
In October 2005, the FAA issued a “Notice and Request for Comments” on its wet lease policy2 and a draft revision to OPSPEC A008 regarding operational control. Without going into detail on the guidance, the draft OPSPEC allowed the owner’s pilots to be used by the Part 135 operator but only under limited circumstances. Further, FAA local and regional interpretations of the draft OPSPEC 008 (which has become the de facto policy) varies considerably. For example, in some cases, the FAA focused on the perceived loyalty of the pilot to his employer and the economic incentives the Part 135 operator would have to use the owner’s pilots as significant, if not determinative factors in evaluating whether the owner or the Part 135 operator was in operational control during commercial flights.
The proposed policy was strongly criticized by many in the aviation industry. The FAA, to its credit, began a series of workshops around the country to explain the policy and published additional information on its website.3 In addition, the FAA met with industry groups, such as the National Business Aviation Association (NBAA), to consider revisions to its policy.
FAA Revised OPSPEC A008
As of the publication date of this newsletter, we expect the FAA to issue the newly revised OPSPEC A008 early this fall that will address industry concerns. In particular, while the FAA will consider who employs the pilots as a factor in determining who has “operational control” of an aircraft, this will not be the determinative factor. Further, the FAA will look not only at the written agreements between the parties, but also the actual practices between the parties.
How to Comply With the FAA Policy
While the new OPSPEC A008 has not yet been issued, it appears that it will still be possible to structure charter management arrangements in which the owner’s pilots are used by the Part 135 operator on commercial flights. Such agreements may take the form of a dry lease of the aircraft between the owner and Part 135 operator in conjunction with an agency agreement between the Part 135 operator, owner and individual pilots. However, currently there is an enormous variation in how different charter operators structure their arrangements with owners. In some cases, basic charter management agreements may be insufficient to meet FAA requirements, and may raise tax or other legal issues as well. In this environment of enhanced scrutiny, it is important that these agreements be carefully drafted and crystal clear regarding which entity has possession of the aircraft and “operational control” of the aircraft during specific types of flights.
When issued, the FAA revision to OPSPEC A008 will probably remove some of the ambiguity as to how charter operators and owners can structure their arrangements. However, FAA inspectors will likely continue to closely scrutinize these arrangements (both in paper and in practice). Hence, it is important that owners and operators be cognizant of the FAA policy in entering into these types of charter management arrangements.
1 Opinion and Order in Blakely v. Darby Aviation d/b/a Alphajet International, Inc., NTSB Order No. EA-5159 (May 26, 2005).
2 Notice: Request for Comments, Wet Lease Policy Guidance, 70 Fed. Reg. 61684 (Oct. 25, 2005).
3 See http://www.faa.gov/education_research/training/part135/