Aviation is one of the few industries whose operational risks are many and most of them fatal. Despite the level of danger, it has a safety record that is trusted by all travellers due to the heavy regulations and compliance requirements on most aspects of operation, from flight safety to aircraft maintenance and control of human factors (Chittaro, 2017). The COVID19 pandemic, however, has revealed another trend that is affecting the entire industry apart from forcing the grounding of thousands of flights (Macilree & Duval, 2020). As commercial aviation grounded to a halt for the large part of 2020, a market opportunity opened up in business aviation for customers who have to travel but wish to minimize their chances of being infected by the virus at the airport or in flight. Among the new customers are those who can afford the high prices but lack the experience to fly in the narrow sector. As a result, many brokers and part 91 operators have found themselves operating illegal charter flights, knowingly or unknowingly. Operating illegal charter flights not only exposes the operators to severe penalties and fines from applicable regulatory authorities like the FAA but puts the whole industry under risk, given that commercial aviation has yet to recover from the consequences of the COVID19 pandemic.
Definition of Terms
Illegal Charter Flight
A general definition for judging if an aircraft is operated in an illegal charter flight is to follow the rule of thumb in the aviation industry that private aircrafts are not allowed to be used for commercial purposes. Therefore, when a passenger provides valuable consideration (such pay for any flight ticket) to fly on an aircraft that has a part 91 certificate instead of a part 135 certificate, they are flying an illegal charter flight (HFW, 2020). The rules change from one jurisdiction to another. It should be noted that aircraft operators holding part 91 certificates can fly commercial, but are subject to exemptions and approval from the applicable flight regulator, like the FAA.
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Broker
A broker is a stakeholder in the aviation industry who arranges flights for passengers or charter operations. As industry experts, brokers can exploit their networks to connect charter operators to passengers. Brokers, however, do not own, manage, or operate an aircraft and are restricted from falsely marketing themselves to their clients (New Flight Charters, 2016). Brokers have contributed significantly to the rise in the number of illegal charter flights worldwide, whether they do it intentionally or unintentionally.
Operator
Operators are entities who have type certifications from recognized regulatory bodies like the FAA to conduct commercial, personal, or charter flights. According to New Charter Flights (2016), operators in the US must hold a valid FAA Air Carrier Certificate under specific operations specifications and are subject to periodic inspections by the FAA Flight Standards District Office. As stakeholders in the aviation industry who plan, manage, and operate any flight, operators might be fully aware when they perform an illegal charter flight.
COVID19 and Business Aviation: The Rise of Illegal Charter Flights
While illegal charter flights were always a problem in the background, the COVID19 pandemic and its downturn in the industry has spelled doom on many stakeholders. According to Taylor (2020), the industry wide downturn has impacted flight operations and corresponding revenues that even the most stringent cost cutting measures can no longer save some operators. This is especially true of commercial aviation where fleets have been grounded worldwide racking up expenses (airport parking fee and maintenance) while the operators lack a stable revenue stream to offset the growing expenses. For a short while, business aviation benefitted from the brief disruption as more business turned to private charters due to the unavailability of commercial transport aircrafts. Regardless, business aviation was also affected, as business (charter) flights dropped by 79% in April, 2020 (Taylor, 2020). Therefore, the COVID19 pandemic created a market for business aviation. However, flight restrictions continued to increase that the sector could not fully take advantage of the opportunities to offset the other costs of operating a charter flight. While business operators with relatively large fleets could hold out due to higher cash flow and ability to take advantage of transient demand peaks, small operators risk failure. As a result, the operators have been more likely to be tempted to operate illegal charter flights and offset their accumulating losses.
Furthermore, there is another aspect of business aviation that has largely motivated operators to get into illegal charter flights. As a consequence of the pandemic, insurance premiums have been increasing with the growing number of grounded aircrafts, massive layoffs, and major revisions of the operator’s business plans. Part of the revision has been creating deeper partnerships with brokers who have contacts with different clients (passengers) willing to charter a flight. Either knowingly or unknowingly, business operators and brokers have joined hands to relieve the pressure put on them by the pandemic. After all, the aviation industry has fully cooperated with different governments and WHO to increasingly put on more restrictions on local and international flights in an effort to control the spread of the virus. Unfortunately, the governments have yet to provide financial relief to the operators (business and commercial airlines) to enable them to hold off long enough for the pandemic to end and resume normal flight operations. The outcome has been a gradual increase in the number of illegal charter operations. in the Asia-Pacific region, for instance, Malaysia, Indonesia, Thailand, and China have led in the number of illegal charter activities. This information is summarised in the figure below.
It should be noted that illegal charter flights should not have emerged as a serious challenge without the slacking of local and international aviation regulators. While some of them, like the FAA, have been doing more to fight the challenge, others have yet to prioritize on the issue. In a survey conducted by HFW (2020), 75% of the respondents reported that the fines and penalties for operating an illegal charter flight in some countries was not significant enough to deter noncompliance with the set regulations. Furthermore, the regulators are not fast enough to respond to the strategies employed by the operators. For instance, HFW (2020) reports that some of the illegal charter flights are marketed and sold as cost sharing flights, sales demos, and flight training for those willing to pay. With the lack of support from aviation regulators, HFW (2020) reports that operators, brokers, and other stakeholders are unwilling to report the illegal charter operations for the following reasons. First, they are uncertain of the regulator’s stance on the subject matter, thus are not sure about how the regulators will respond. Secondly, the aviation industry is small and closely connected. Therefore, reporting on others would not only earn a stakeholder the reputation as one who reports on others, but also affect their business. For instance, the brokers might decide to no longer refer potential clients to their services. These and other factors have combined to create an environment where illegal charter flights can operate without consequence from the regulators and other applicable authorities.
How Illegal Charter Flights Harm the Aviation Industry
As discussed previously, the aviation industry is currently in a precocious situation as a consequence of the COVID19 pandemic. The few operators who have managed to continue scheduled and sporadic flights risk more than they currently gain from the few illegal charter flights. For instance, the operators, especially in the US and Europe, risk exposure to penalties and fines from the applicable regulatory bodies. Secondly, these operators risk damaging their reputations, which is a scarce and marketable commodity. Thirdly, in case the operator is leasing an aircraft or its entire fleet, they risk breaching the covenant, thus exposing themselves to other liabilities and repossession of the aircraft by the lessor (HFW, 2020). Lastly, should any accident or serious incident happen in flight or during take-off and landing, the illegal nature of the flight invalidates any insurance coverage. As a result, the operator is exposed to significant liabilities in terms of damages for personal injury, ground damage, and death (HFW, 2020). These damages are enough to bankrupt the operator. Furthermore, the track record and public trust that the entire industry has built over the years will be tarnished. Therefore, all aviation stakeholders have a vested interest in not only reporting, but also actively fighting against illegal charter flights. However, these are not the only damages illegal charter flights pose.
Any registered aircraft operator with a valid part 135 or 91 certificate invested a lot of resources to get to their level. For instance, they must have paid exorbitant amounts of resources to not only gain their certifications, but also to be able safely perform their operations within the regulatory limits. These costs include, but not limited to, investing in the appropriate and required training for all their personnel and paying the required amount to obtain and sustain the insurance coverage. With the COVID19, insurance premiums have also increased as the operating risks for the operators continue to change and the situation worsens. Therefore, illegal charter flights deprive the aircraft operators of their legally deserved revenue streams that could have supported their operations and tide over the pandemic, but still be in a shape to resume operations once things get better. In other words, by complying with the regulations despite the associated costs, legitimate operators are legally entitled to be rewarded and not have their revenue streams usurped by noncompliant stakeholders. Furthermore, in the case of an accident or incident, the illegitimate operators.
So far, the argument has been made for the operators who unknowingly operate illegal charter flights thinking they are legitimate flights. Part of the complications come from the lack of understanding about the industry regulators. For instance, the FAA has guidelines on proper regulations, such as what constitutes a legitimate dry lease. Without such knowledge, fraudulent lessors can take advantage of unwitting operators who will be left responsible when the regulators actually determine that the aircraft charter is illegal. Such fraudulent operators are actively eroding the minimum trust required to work in the industry. According to HFW (2020), such entities willing to flaunt regulatory restrictions are also more likely to skip other industry safety nets. For instance, they might fail to comply with the strict training requirements for their pilots or keep up with the strict maintenance standards. As a result, they will overlook the safety standards and, eventually risk passenger safety. Though there have been no reported serious incidents or accidents, the trend is a big threat to the industry’s safety culture. If illegal charter flights are allowed to continue and even grow, they might be the right gateway for other stakeholders to take advantage of the lack of regulatory oversight and break even more sacred rules of the aviation industry. In other words, illegal charter flights should not be tolerated as they are a slippery slope towards an unsafe operating industry.
Solutions to the Challenges
Responsibilities of the Passengers
Before boarding a chartered flight (legal or illegal), passengers (especially first-time business travellers) should request their brokers to submit copies of their Errors & Omissions insurance certificates. From a common law perspective, a broker is an agent of the customer (passenger) and the Error & Omissions insurance certificate protects the passenger from any mistakes the broker might make when performing their duties (New Flight Charters, 2016). For instance, if the broker books the passenger for an illegal charter flight, the absence of the insurance certificate makes the passenger liable for any mistakes made. As a result, legitimate and reliable brokers are always ready to share their insurance certificate upon request from their clients. Secondly, clients should always request their brokers to submit copies of their Excise tax forms as they can be made liable by the IRS to pay for the unpaid taxes together with applicable penalties. Therefore, any safety conscious broker or business flyer will always check these documents to protect themselves from being held liable in case something happens when operating or boarding an illegal charter flight.
Responsibilities of the Operators
To take advantage of the new market opportunities in business aviation, operators might consider performing their own charter operations. Therefore, avoiding operating an illegal charter flight (though unwittingly) would require the operator to request for lessor to produce their FAA Air Carrier Certificate (New Charter Flights, 2016). Other documents that should be provided are the FAA Operations Specifications A001 (Operating authorization), A006 (Management Personnel) and B050 (Areas of Operation). Requesting copies of these documents is standard practice in the aviation industry. Therefore, any lessor claiming to be authorized for charter operations should always be ready to share them. However, there are lessors who will be willing to submit forged documents. Therefore, any operator should always be ready to verify their validity. One method would be to ensure that the correct tail numbers have been included in the documentation or submit them to any applicable regulator for verification.
Responsibilities of the Regulators
Of all the stakeholders in the aviation industry, the regulators are the ones with the biggest responsibilities. For instance, it is their role to educate the rest of the industry about the compliance requirements for activities like charter flights. With such education, operators will not unwittingly operate illegal charter flights or be duped into doing so. Any that continue to do so would fully deserve the penalties and fines applicable to such offenses. Secondly, it is the responsibility of the regulators like the FAA to crackdown on fraudulent behavior. The figures below show how illegal charter flights are masquerading to evade regulatory inspections and punishment.
Aviation is one of the few industries whose operational risks are many and most of them fatal. Therefore, operating illegal charter flights not only exposes the operators to severe penalties and fines from applicable regulatory authorities like the FAA but puts the whole industry under risk, given that commercial aviation has yet to recover from the consequences of the COVID19 pandemic. For instance, the operators, especially in the US and Europe, risk exposure to penalties and fines from the applicable regulatory bodies. Furthermore, should any accident or serious incident happen in flight or during take-off and landing, the illegal nature of the flight invalidates any insurance coverage. Additionally, the entities willing to flaunt regulatory restrictions are also more likely to skip other industry safety nets. As a result, they will overlook the safety standards and, eventually risk passenger safety. Therefore, if illegal charter flights are allowed to continue and even grow, they might be the right gateway for other stakeholders to take advantage of the lack of regulatory oversight and break even more sacred rules of the aviation industry.
As a result, all stakeholders in the industry have a role to play in solving the problem. For instance, regulators should educate the rest of the industry about the compliance requirements for activities like charter flights. With such education, operators will not unwittingly operate illegal charter flights or be duped into doing so. Operators, on the other hand, should always perform their due diligence before signing any lease agreement. Such actions can include asking for copies of the FAA Air Carrier Certificate and the FAA Operations Specifications A001 (Operating authorization), A006 (Management Personnel) and B050 (Areas of Operation). Lastly, passengers (especially first-time business travellers) should request their brokers to submit copies of their Errors & Omissions insurance certificates and Excise tax forms.
References
Chittaro, L. (2017). A comparative study of aviation safety briefing media: card, video, and video with interactive controls. Transportation Research Part C: Emerging Technologies , 85 , 415-428.
HFW. (2020). HFW & AsBAA SURVEY: ILLEGAL CHARTER . Retrieved from https://www.hfw.com/downloads/002600-HFW-AsBAA-Survey-Illegal-Charter-Jan-2021.pdf
Macilree, J., & Duval, D. T. (2020). Aeropolitics in a post-COVID-19 world. Journal of Air Transport Management , 88 , 101864.
NBAA. (2020). Hot Topics: How to Avoid Illegal Charter Operations | NBAA - National Business Aviation Association. Retrieved 5 February 2021, from https://nbaa.org/flight-department-administration/aircraft-operating-ownership-options/hot-topics-how-to-avoid-illegal-charter-operations/
New Flight Charters. (2016). FIVE QUESTIONS FOR YOUR JET CHARTER SERVICE . Retrieved from http://newflightcharters.com/FIVE%20QUESTIONS%20FOR%20YOUR%20JET%20CHARTER%20SERVICE.pdf
Taylor, J. (2020). COVID-19 impact on business aviation operations and risk management. Retrieved 5 February 2021, from https://www.willistowerswatson.com/en-GB/Insights/2020/05/covid-19-impact-on-business-aviation-operations-and-risk-management
