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Photo Barry Ambrose

New Regulations Spell Good News for Charter Customers

You can breathe a little easier when shopping for charter and especially when dealing with charter brokers, thanks to regulations that the Department of Transportation (DOT) implemented on February 14. Entitled “Increasing Air Charter Transportation Options,” these rules require important new disclosures and guarantees of transparency. If you’re working with a well-qualified broker, you may not notice much change, but it’s still important to understand the reasons for the policies. If you do notice a big change, it’s time to scrutinize your provider.

The rules are significant partly because they mark DOT’s recognition of the charter broker as a new class of so-called indirect air carriers—entities permitted to arrange charter flights. The regulations are also noteworthy because of the disclosures that they require from both brokers and operators.

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Whether you’re weighing the relative merits of charter, a jet card, a membership program, or a share in a fractionally owned aircraft, we’re here to help.

Charter brokers have been unregulated since the industry’s dawn, yet many in the field have long called for oversight to rein in abuses like failure to provide an accurate estimate of the trip’s cost beforehand or to disclose the flight operator’s identity, practices that have tarnished the field’s image. Some brokers routinely kept the operator’s name concealed, partly in fear that clients would go directly to the source next time. Meanwhile, you couldn’t perform much due diligence without knowing the operator’s identity. Also, charter operators often subcontract flights, and historically not all of them have informed clients when that has occurred. 

In the aftermath of a pair of charter accidents more than a decade ago—which brokers weren’t involved in arranging—the National Transportation Safety Board (NTSB) concluded that charter customers often had little way of knowing the operator’s identity. The NTSB recommended that the FAA tighten its rules governing charter flights, but it left brokers unmentioned. Yet with the nascent Air Charter Association of America (ACANA) and others adding their voices to the call for standards, DOT began drafting proposed rules for brokers and operators, which it unveiled in 2013. Last September, after five years of comment and consideration, the final regulations were published. Brokers and operators are still figuring out a few fine points (some brokers are exempt from certain requirements), but the key benefits for you, the charter consumer, are mostly clear.

Under the new rules, brokers must make clear that they are only arranging the flight and have no operational control of the aircraft. And whether you’re dealing with a broker or operator, the first charter agreement/itinerary/contract for the trip must now identify the operator. In addition, should a change of aircraft be required, brokers and operators must inform you of this as soon as possible and get your approval of the substitute aircraft and any adjusted price. If you don’t approve, all payments must be refunded. 

Additionally, providers must now give you the real price of the trip—including all known charges for fuel, landing fees, FET, catering, etc.—and must identify additional expenses you could incur, such as for de-icing. 

Brokers must also disclose any relationship with the operator that could be deemed to influence their choice of that provider for the lift arranged on your behalf. Operators must do the same for subcontracted flights. However, brokers don’t have to tell you the nature of the relationship—unless you ask. That relationship could be a block-hour arrangement the broker has with an operator that gets you a better rate. Or it could involve an incentive for hours booked, as a result of which your flight might boost the broker to the next reward level—a fact that might have had an impact on the choice of operator. This disclosure-upon-demand also applies to operators on subcontracted flights.

The new regs also broadly define and prohibit unfair and deceptive trade practices for brokers and operators alike. These include misrepresenting the qualifications and safety records of pilots, the aircraft, and the operator. Also prohibited are falsely claiming certifications from auditing organizations. (Argus and Wyvern have long complained that some unaffiliated charter providers display their firms’ logos on their Web sites or other materials.) In addition, providers may not make untrue claims about the standards they impose on operators, aircraft, or pilots to qualify for the flights they arrange. 

As for the expanded options to which the law’s title alludes, DOT and the charter community believe the regulations will give brokers greater freedom to market their offerings and develop new services. One small example: Brokers are now allowed to have their name on materials distributed in the cabin—napkins, brochures, and the like—and even on the aircraft itself, provided the operator’s name is also prominently displayed, so you’re not confused about which entity is in control of the flight.

Penalties for providers who flout DOT’s rules aren’t specified and are civil rather than criminal; misdeeds typically result in fines meant to sting offenders financially, commensurate with their size and the gravity of the offense, rather than put them out of business.

The charter community and organizations including ACANA and NBAA have largely given the rules a big thumbs up. Notably, DOT declined to create a registry, certification or training requirements, or minimum standards for brokers themselves, as many in the industry advocate. But without the hefty margins that a lack of disclosure and transparency can allow, perhaps the community will purge itself of those who lack the skills for survival on a level playing field.

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