Are they more a matter of unfair competition and a 'less than level playing field', or is it more serious than that. Some of those whingeing about it at the mo are given to making reference to the accidents at Biggin and Teteboro, and to implying that the aircraft being chartered on the grey market are less than perfectly airworthy, and flown by cowboys, amateurs or the terminally inept.
One can see that there may well be huge implications when it comes to liability and the validity of insurance, but does it go deeper than that?
And how big is the problem?
Illegal Operations
The European Business Aviation Association, EBAA, is preparing to launch a campaign aiming to draw attention to, and raise awareness of, the problem of ‘Illegal Operations’ or grey market charters.
The official campaign will see the EBAA distributing a flyer entitled “Is your flight legal?” to brokers, FBOs, airports and other interested parties, and was preceded by a media round table organized by aviation PR specialists Emerald Media.
Four senior figures in the aviation charter world outlined the case against such illegal charters, describing the extent of the problem and explaining its repercussions. The panel consisted of Marwan Khalek of Gama Aviation, David Macdonald of international charter provider Air Partner plc, Aoife O’Sullivan of aviation law firm Gates and Partners, and Anne Seckington of the UK BBGA (The British Business and General Aviation Association).
‘Illegal Operations’ describe flights when an operator carries passengers for financial gain (or for other consideration) without having the required commercial AOC (air operator’s certificate), and without being properly approved to carry paying passengers by the appropriate regulatory body. This constitutes an illegal public charter. Alternatively, when aircraft registered outside a particular market – for example US or Caribbean registered jet operating in Europe – is offered for hire where they may not be authorized to fly commercially without proper permission.
In some cases, there have been attempts to use dry lease agreements to attempt to get round the requirement to have an AOC to undertake public transport operations. But those leasing aircraft under such terms often do not understand that under the terms of such a dry lease they effectively become the aircraft operator and become responsible for all compliance and liability, and may still be undertaking an illegal operation.
Though no-one seems able to accurately quantify the extent of the grey market charter problem, those within the business aviation industry seem to be agreed that it is extensive, some insiders suggesting that it perhaps accounts for as much as half of current charters. Most agree that it is a problem that is growing, and Marwen Khalek observed that the “apparent increase in the number of illegal charters is causing concern to the professional operators within the industry. We are happy to compete on an even playing field, but in many cases we are clearly not on such a level surface."
This growth is perhaps an inevitable consequence of the current economic landscape, according to Air Partner product director David Macdonald, as the owners of business aircraft “see an opportunity to make some money to cover costs, and as passengers see the availability of discounted charters.” It is being facilitated by what MacDonald calls “pseudo aviation companies”, who are brazenly offering and promoting illegal charter flights in the marketplace, often using websites which may superficially appear to belong to a normal charter operator or broker.
The EBAA round table said that the problem of illegal operations was especially prevalent in particular countries, and focused particular attention on Russia, where legal and tax restrictions on the import of foreign-made aircraft and on the foreign ownership of business aircraft has impeded the establishment of a properly structured and regulated, coherent charter sector.
Surprisingly, there was less concern about the situation in the Middle East. Marwen Khalek said that: “The Saudi Market remains very challenging in terms of grey charters, but the rest of the region seems to be becoming far more professional about the way in which it works - primarily because there are a large number of licensed operators. As a result, charter rates are already very competitive.” David MacDonald agreed, noting that: “Prior to the emergence of the licensed carriers the promotion of private jet charter in the region was very difficult, but the large number of licensed carriers in the Middle East now allows us to promote charter more to our western and local clients in the region." Air Partner has enough faith in the Middle Eastern market that it launched a pre-paid JetCard for the region (which has become the third region to be so served by Air Partner) at the Business Travel Show in Dubai in October. This promises the card-holder competitive, fully inclusive fixed price aircraft availability (guaranteed at 48 hours’ notice), with no ferry costs and no fuel or airport surcharges, with no ‘peak time’ restrictions, and with return trips qualifying for a 15 per cent discount. Unused flight time is refunded and the resulting credit does not expire.
But while the sector does not see the Middle East as being a particular cause for concern, it is affected by the problem.
And the problem of illegal operations is one that raised serious implications, according to specialist aviation lawyer Aoife O’Sullivan, who also believes that many aircraft owners, and charter passengers are simply unaware of the consequences of grey market charters.
Quite apart from the possibility of fines being imposed on people operating illegal charters, the aircraft operator risks invalidation or denial of insurance cover (since he will inevitably be operating in contravention of insurance policy conditions) and may compromise any financing arrangements, as most financing contracts will include a clause stating that the aircraft may not to be used for public transport.
Whether he or she realizes it, the private owner who allows their aircraft to be used for illegal public charter takes on the liabilities, operational risk, and responsibilities that an AOC holder would normally assume, and does so without the protection of valid insurance.
With a growing (and some think worrying) trend in Europe towards the criminalisation of aircraft accidents, there is a growing risk that the private owner could face criminal prosecution and sanction if, in a worst case scenario, they could be shown to have failed to exercise due care as the aircraft operator.
Illegal and grey market charter operations may put pilots in an invidious position, likely to be held accountable if investigations are made into whether an aircraft is legally entitled to undertake charter operations, especially during ‘ramp checks’. Any pilot flying a grey market charter is also doing so without enjoying the protection of an operator’s operations manual, and may come under pressure from the customer to cut corners, ignore limits or otherwise breach regulations.
While there is widespread recognition that there is a problem, Gama Aviation CEO Marwan Khalek believes that the enforcement of the relevant regulations is effectively non-existent, and that there is no serious disincentive to those who choose to offer illegal charters.
Though there is some provision for ramp inspections (not least under the SAFA or Safety Assessment of Foreign Aircraft programme) inspection and enforcement is under-resourced. Karwen himself believes that the industry itself should be more energetic in reporting suspicious activity to national regulatory bodies, and that there is a real need for a more responsive inspection regime. Many brokers and operators are frustrated that when particular suspicious flights are reported, authorities are seldom able to react in time before the aircraft has departed.
The forthcoming EBAA “Is my flight legal?” leaflet will aim to increase awareness and understanding, and to highlight the considerable risks and liabilities that corporations and business travellers may face if they do fly with an non AOC operator. It is expected to suggest that passengers themselves should ask whether the aircraft on an AOC, should ask for proof that valid insurance covers the aircraft for public transport operations, and that there is a valid permit to fly in order to protect themselves.
But this is only the first salvo in what may be a lengthy battle, and the charter operators and brokers behind this initiative will have to overcome suspicions that the problem is being exaggerated in extent and seriousness, and that, during a major economic downturn, some AOC holders may be eager to blame others for their losing charters.