UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, DC

Request for Comments on Draft Clarification ofNovember 2012 Guidance on Review and Approval ofPublic Charter Operations and Prospectuses



### The Department ofTransportation's Office ofInternational Aviation and Office ofAviation Enforcement and Proceedings are revising their guidance on public charter operations and prospectuses, and request interested persons to submit comments on the revision no later than January 8, 2013. The draft revision is set forth below and an electronic version ofthis document is available in the docket at http://www.regulations.gov under docket number DOT-OST-2013- 0002 to facilitate the filing ofpublic comments before the document is published in final form. The offices plan to issue the revised guidance document in final form on or before January 14, 2013. You may file comments on the draft guidance document by any ofthe following methods: Federal eRulemakingPortal: 

### go to http://www.regulations.gov 

### and follow the online instructions for submitting written comments. Mail: 

### Docket Management Facility, U.S. Department of Transportation, 1200 New Jersey Ave., SE, Room Wl2-140, Washington, DC 20590-0001.
Hand Delivery or Courier: 

### West Building Ground Floor, Room W12-140, 1200 New Jersey Ave., SE, between 9 a.m. and 5 p.m. ET, Monday through Friday, except Federal Holidays. 

### Fax: (202) 493-2251. All comments received will· be posted without change to http://www.regulations.gov, 

### including any personal information provided.

### UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, DC

CLARIFICATION OFNOVEMBER2012 GUIDANCE ON REVIEW AND APPROVAL OF PUBLIC CHARTER OPERATIONS AND PROSPECTUSES

NOTICE On November 13, 2012, the Department's Office oflntemational Aviation and Office of Aviation Enforcement and Proceedings issued ajointnotice regarding future filings under 14 CFRPart 380, the Department's rule onpublic charters and enforcement policy under those rules. 1 That notice, which was an effort to prevent the kind ofharm to consumers that took place whenthe charter operator Southern Sky Air & Tours, LLC d/b/a Direct Air ceased service, explained that the Department would inthe future not approve prospectuses under Part 380 absent certain supplemental assurances designed to avoid practices evident inthe Direct Air case that were in violation ofthe public charter rules. Specifically, the notice described the offices' plan to reject public charterprospectus filings that do not affirmatively state that: (1) the contract between the charter operator and the direct air carrier is for the full price ofthe air transportation; and (2) the charter operator will retain control and access to its reservations records, and share those records with the direct air carriers. Furthermore, we stated that we would not permit the charter operatorto accept paymentby debit card (although we did state our willingness to consider waivers from this prohibition on demonstration that consumers would receive the protections ofthe Fair Credit Billing Act). The notice also stated that voucher programs, such as that offered by Direct Air, are not acceptable and will be considered to beperse violations of 14 CFRPart 380. Shortly after issuance ofthis notice, the Department received a number ofcomments from the public charter commtinity. Some comments questioned the legality ofthe notice

.. Other comments sought clarification or revision ofaspects ofthe guidance addressed inthe notice. In orderto have sufficient time to review and considerthese comments, we extended the effective date ofthe guidance to January 14, 2013. 2

77 Fed. Reg. 74729 (Dec. 17, 2012) 2 In additionto being published in the FederalRegister (77 Fed Reg. 69692 (Nov. 20, 2012)), the notice was also posted at www.regulations.gov and on the Enforcement Office website http://www.dot.gov/airconsumer/guidance-aviation-rules-and-statutes and was widely distributed byemail to persons who regularly communicate with the office.We have now fully considered the comments received and continue to believe that requiring supplemental assurances to prospectus filings is within our authority and is needed to prevent consumer harm. However, we agree with the public charter community that further clarification andrevision ofthe guidance is needed to make certainthat the assurances being requested as part ofthe prospectus filings address the practical business problems raised inthe comments we received but still preventthe problematic situationthat took place when Direct Air ceased service. As such, this notice modifies the prior guidance by providing citations to the existing laws that are the basis for the guidance, further clarifying the supplemental information/assurances that should be included inpublic charterprospectus filings and further clarifying our enforcement policy with respect to certain matters discussed in**th~** guidance.
Ourpriornotice stated that charter operators could not have contracts with direct air carriers that are limited to providing aircraft, crew, maintenance and insurance (ACMI). We stated that the contract betweenthe charter operator and the direct air carrier must be for the full price ofthe air transportation. 3 This guidance is based on section 380.11 whichprovides that a direct air carrier shall be paid in full for the cost ofthe chartertransportation priorto the scheduled date offlight departure. However, as a matter ofenforcement policy, we have decided not to take action against public charter operators that have ACMI contracts providedthat the charter operators and their escrowbanks offer assurances that all passenger funds in charterprograms are deposited in the relevant escrow and that the escrow banks involved maintain accounts and full and accurate accounting ofdisbursements to vendors such as fuel or ground handling providers in accordance with 14 CFR 380.34(b). 4 Our rules require that disbursements be identified on an individual flight by flight basis. Ourprimary intent is to reaffirm that all passenger funds must be deposited initially inthe escrow accounts, apart from certain deductions allowed intravel agent sales. For charter operators using a security instrument, under section 380.34(a) the amount ofthe security instrument must be unlimited or for the full cost ofthe air transportation. (See footnote 3). Another area ofclarification concerns control bypublic charter operators ofpassenger reservation records and the sharing ofthese records with direct air carriers. Ourprior notice indicated that we would not approve public charterprospectus filings that do not include an assurance that the public charter operator will retain direct control.ofall passengerreservation records and will share those records withthe direct air carrierto ensure that, inthe event ofa major disruption inthe program, the direct air carrier would be able to identify and contacttour participants regarding returning flights. Representatives ofcharter operators contended that the Department was creating newrequirements through guidance. However, a number ofsections in Part 380 require public charter operators to provide notifications to passengers under certain specific circumstances. See, e;g., sections 380.12 and 380.33. In addition, sections 249.21 and 380.36 require public charter operators to maintain passenger records for six months after the completion or cancellation ofthe flight or series offlights. To comply withthese obligations, public charter operators musthave access to passenger reservation records. In addition, section

The full cost ofthe direct air transportation includes the cost ofaircraft, crew, maintenance, insurance, fuel, ground handling, landing fees, reservations costs, passenger facility fees and taxes, and all other costs associated with the direct air transportation.

4 We are aware ofmarkets, for example Cuba, in which payments for ground services may only be made by the charter operator, not the direct carrier.14 CFR 212.3(±) requires direct air carriers conducting public charter operations to return passengers who purchased round trip transportation onthe charter and who were transported by that carrier on their outbound flights to their point oforigin. Without passengerreservation records, direct air carriers would be unable to comply withthis existing requirement. Therefore, we view the existing requirements as mandating thatpublic charter operators share these records with direct air carriers when needed to return passengers to their points oforigin. Representatives ofcharter operators also appeared to be under the misconception that the guidance would not allow charter operators to rely onreservations systems provided by thirdparties. Direct air carriers and charter operators canrely on such outside vendors for these services but mustensure that they still have access to the records. Our intent was and remains to emphasize to boththe charter operator and the direct carrierthe importance ofthe obligationto return passengers under section 212.3, and not to preclude the use ofthird-partyvendors. Both the public charter operator and the direct air carrier have discretion inhow to meet this obligation, butthe Department needs assurances inthe prospectus filings thatthe public charter operator will maintain access to the reservation records as required by existing rules and share this information with the direct air carrier in case ofa disruption in a charterprogram to comply with the requirement to return passengers under section 212.3. The third issue that we addressed in our guidance concerned the use ofdebit cards inthe purchase ofchartertransportation. OurNovember 13 notice prohibitedthe use ofdebit cards in the purchase ofchartertransportation, citing the explicit language ofsection 380.31 5

, which only provides for payment by check, money order or credit card, but not by debit card. We were particularly concerned that debit cards lack the chargebackprotections afforded credit card users underthe Fair Credit Billing Act (15 U.S.C. 1601 et seq.). As a matter ofenforcement policy, we have now determined not to pursue action against charter operators that accept payment by debit card ifthey canprovide assurances to the Departmentthat their merchant banks and credit card/debit cardprocessors will provide the same chargebackprotections to those using debit cards as credit card users receive. Ifa charter operator cannot obtain such assurances then it may not accept debit card payments for transportation. Finally, we wishto clarify ourpositionregarding vouchers. We stated in ourNovember 13 notice that the Enforcement Office would consider any voucherprogram similarto that offered by Direct Air to be aper se violation of 14 CFRPart 380. In the case ofDirect Air, the charter operator sold vouchers for travel at unspecified dates inthe future. Consumer funds did not, as a result, receive the escrowprotectionrequired under Part 380. However, the proscription on the use ofvouchers applies only to voucherprograms for which the charter operatorreceives money. Purely gratuitous or complementary vouchers distributed for passenger goodwill are not affected bythis policy and they will not be considered to beperse violations. This revised policy regarding approval ofcharter prospectuses, supplants the notice ofNovember 13, 2012, and will take effect 60 days from the date ofthis notice. Prospectuses filed after that date will not be approved without the supplemental assurances, outlined above. The Enforcement Office intends to undertake enforcement action, where appropriate, ifit obtains evidence ofviolations ofcommitments made inthose statements, or ofthe acceptance ofdebit
The provision cited should have been 14 CFR 380.34(b)(2)(i).purchases withoutthe appropriate assurances as discussed above, or ofsales initiatives such as the voucherprogram described above. Moreover, 14 CFR 380.24 continues to require the Department "to deny the exemption authority ofany charter operator, without hearing, if[the Department] finds that such action is necessary in the public interest oris otherwise necessary in order to protecttherights ofthe travelling public" and it will do so. Questions regarding this notice maybe addressed to the Office ofAviation Enforcement and Proceedings (C-70), 1200 NewJersey Avenue, S.E., Washington, D.C. 20590 oryoumay contact Lisa Swafford-Brooks, Chief, Aviation Licensing Compliance Branch (lisa.swafford-brooks@dot.gov), orNicholas Lowry, SeniorAttorney (nick.lowry@dot.gov) in that office, at (202) 366-9342.

By:

Paul L. Gretch Director Office of InternationalAviation
Dated: Samuel Podberesky Assistant General Counsel for AviationEnforcementandProceedings

An electronic version of this document is available athttp://www.regulations.gov