Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28225

Federal Aviation Regulations (14 CFR

part 97) is amended by establishing,

amending, suspending, or revoking

Standard Instrument Approach

Procedures, effective at 0901 UTC on

the dates specified, as follows:

PART 97—STANDARD INSTRUMENT

APPROACH PROCEDURES

1. The authority citation for part 97 is

revised to read as follows:

Authority: 49 U.S.C. 106(g), 40103, 40113,

40120, 44701; and 14 CFR 11.49(b)(2).

2. Part 97 is amended to read as

follows:

§§ 97.23, 97.25, 97.27, 97.29, 97.31, 97.33,

97.35 [Amended]

By amending § 97.23 VOR, VOR/DME,

VOR or TACAN, and VOR/DME, or

TACAN; § 97.25 LOC, LOC/DME, LDA,

LDA/DME, SDF, SDF/DME; § 97.27

NDB, NDB/DME; § 97.29 ILS, ILS/DME,

ISMLS, MLS, MLS/DME, MLS/RNAV;

§ 97.31 RADAR SIAPs; § 97.33 RNAV

SIAPs; and § 97.35 COPTER SIAPs,

identified as follows:

Effective 18 June, 1998

Birmingham, AL, Birmingham Intl,

RADAR–1, Amdt 19

Crestview, FL, Bob Sikes, LOC RWY 17,

Amdt 2, CANCELLED

Crestview, FL, Bob Sikes, ILS RWY 17,

Orig

Louisville, KY, Louisville IntlStandiford Field, NDB OR GPS RWY

1, Amdt 8A, CANCELLED

Louisville, KY, Louisville IntlStandiford Field, ILS RWY 1, Amdt

11B, CANCELLED

Louisville, KY, Louisville IntlStandiford Field, ILS RWY 19, Amdt

9B, CANCELLED

Louisville, KY, Louisville IntlStandiford Field, ILS RWY 35L, Orig

Louisville, KY, Louisville IntlStandiford Field, GPS RWY 17L, Orig

Louisville, KY, Louisville IntlStandiford Field, GPS RWY 35R, Orig

Louisville, KY, Louisville IntlStandiford Field, GPS RWY 29, Orig

Effective 16 July, 1998

Fernandina Beach, FL, Fernandina

Beach Muni, GPS RWY 13, Orig

Marshall, MN, Marshall Muni-Ryan

Field, VOR RWY 12, Amdt 7

Marshall, MN, Marshall Muni-Ryan

Field, ILS RWY 12, Amdt 1

Cleveland, OH, Cuyahoga County, ILS

RWY 23, Amdt 13

Dayton, OH, Dayton-Wright Brothers,

LOC RWY 20, Amdt 5

Dayton, OH, Dayton-Wright Brothers,

NDB OR GPS–A, Amdt 1

Okmulgee, OK, Okmulgee Muni, VOR

OR GPS–A, Orig

Okmulgee, OK, Okmulgee Muni, VOR

OR GPS RWY 22, Amdt 1,

CANCELLED

Pawtucket, RI, North Central State,

VOR/DME RNAV RWY 5, Amdt 6,

CANCELLED

Pawtucket, RI, North Central State,

VOR/DME RNAV RWY 23, Amdt 5,

CANCELLED

Nashville, TN, Nashville Intl, ILS RWY

2R, Amdt 5

Salt Lake City, UT, Salt Lake City Intl,

RADAR–1, Amdt 15, CANCELLED

Salt Lake City, UT, Salt Lake City Muni

2, RADAR–2, Amdt 1, CANCELLED

Land O’Lakes, WI, Kings Land O’Lakes,

NDB OR GPS RWY 14, Amdt 9

Land O’Lakes, WI, Kings Land O’ Lakes,

NDB RWY 32, Orig

Effective August 13, 1998

Galena, AK, Edward G. Pitka, Sr., GPS

RWY 7, Orig

Galena, AK, Edward G. Pitka, Sr., GPS

RWY 25, Orig

Nome, AK, Nome, GPS RWY 2, Orig

Nome, AK, Nome, GPS RWY 9, Orig

Nome, AK, Nome, GPS RWY 27, Orig

Yakutat, AK, Yakutat, GPS RWY 11,

Orig

Yakutat, AK, Yakutat, GPS RWY 29,

Orig

Tuscaloosa, AL, Tuscaloosa Muni, VOR

OR TACAN OR GPS RWY 22, Amdt

14

Camarillo, CA, Camarillo, GPS RWY 8,

Orig

Camarillo, CA. Camarillo, GPS RWY 26,

Orig

Redlands, CA, Redlands Muni, GPS–A,

Orig

Gainesville, GL, Gainesville Regional,

GPS RWY 10, Orig

Gainesville, FL, Gainesville Regional,

GPS RWY 28, Orig

Tallahassee, FL, Tallahassee Regional,

ILS RWY 27, Amdt 5

Boone, IA, Boone Muni, GPS RWY 14,

Amdt 1

Boone, IA, Boone Muni, GPS RWY 32,

Orig

Baltimore, MD, Baltimore-Washington

Intl, ILS RWY 28, Amdt 12

Baltimore, MD, Baltimore-Washington

Intl, ILS RWY 33L, Amdt 8

Ord, NE, Evelyn Sharp Field, NDB OR

GPS RWY 13, Amdt 4

Ord, NE, Evelyn Sharp Field, GPS RWY

31, Orig

Lawton, OK, Lawton-Ft Sill Regional,

VOR RWY 35, Amdt 20

Lawton, OK, Lawton-Ft Sill Regional,

ILS RWY 35, Amdt 7

Lawton, OK, Lawton-Ft Sill Regional,

RADAR-1, Amdt 4

New Lisbon, WI, Mauston-New Lisbon

Union, GPS RWY 32, Amdt 1

Cody, WI, Yellowstone Regional, GPS–

B, Orig

Note: The FAA published an Amendment

in Docket No. 29199, Amdt No. 1865 to Part

97 of the Federal Aviation Regulations (VOL

63, No. 81, Page 23209; dated April 28, 1998)

under Section 97.33 effective June 18, 1998,

which is hereby amended to read:

* * *Effective August 13, 1998

Delano, CA, Delano Muni, VOR RWY

32, Amdt 7

Delano, CA, Delano Muni, GPS RWY 32,

Orig

Porterville, CA, Porterville, Muni, GPS

RWY 12, Orig

Porterville, CA, Porterville Muni, GPS

RWY 30, Orig

The following procedures are

rescinded:

Tracy, CA, Tracy Muni, GPS RWY 25,

Orig

Tracy, CA, Tracy Muni, GPS RWY 29,

Orig

[FR Doc. 98–13746 Filed 5–21–98; 8:45 am]

BILLING CODE 4910–13–M

DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Parts 207, 208, 212, and 380

[Docket OST–97–2356]

RIN 2105–AB91

Aviation Charter Rules

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule.

SUMMARY: DOT is amending its charter

air transportation regulations to update

the rules, make changes reflecting

current operating procedures and

include the following specific

modifications:

Eliminate the 10-day waiting period

after the filing of a prospectus or an

amendment before Public Charters may

be advertised or sold;

Allow charter operators to accept

payment by credit cards for Public

Charter flights;

Delete the minimum contract size of

20 seats for passenger charters;

Permit direct air carriers to sell

charter flights within 7 days of

departure;

Codify the Department’s practice

allowing a ‘‘sub-operator’’ to buy into

another Public Charter operator’s

prospectus as a principal;

Eliminate the requirement for brief or

‘‘mini’’ prospectus to be filed by direct

air carriers conducting foreignoriginating flights for foreign charter

operators;

Consolidate the rules applicable to

U.S. and foreign direct air carriers into

a single part; and
28226 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

1Specifically, comments in this proceeding were

filed by Aeronautica de Cancun, Air 2000 Limited,

Air Canada, Air Espana S.A., Air Transport

Association of America (on behalf of Alaska

Airlines, American Airlines, Continental Airlines,

Delta Air Lines, Trans World Airlines, United Air

Lines, and USAir), Airline Brokers Company,

Association of Retail Travel Agents, American

Society of Travel Agents, American Trans Air,

Apple Vacations, Av Atlantic, Azores Express,

Balair, Bruce Hall Sports, Condor Flugdienst, First

of America Bank, Funway Holidays, Funjet, Great

American Airways, GMV International, HapagLloyd Fluggesellschaft, Harrah’s Casino Hotel

Atlantic City, Jamaica Express, Marazul Charters,

Military Travel Corporation, Minnesota Department

of Transportation, MLT Vacations, National Air

Carrier Association (on behalf of American Trans

Air, Evergreen International Airlines, Miami Air,

Tower Air, and World Airways), National Bank of

Royal Oak, North American Airlines, NW Tours,

Northwest Airlines, Private Jet Expeditions,

Regional Airline Association, Relvas Tours, Rich

International Airways, Ryan International Airlines,

Santo Tours, Schwaben International, Security

Pacific National Trust Company (New York),

Sunbird Vacations, Sunburst Holidays, The Surety

Association of America, Trans Global Tours, Trans

National Travel, Trans World Airlines, Travel

Impressions, United States Tour Operator

Association, Worldwide Airline Services d/b/a

Leisure Air, and a number of individuals.

Broaden the definitions of

‘‘immediate family’’ in parts 212 and

380 to include the member’s (or student

participant’s) spouse, children, and

parents, whether or not they share a

household with the member. This action

is taken at the Department’s initiative

and responds to President Clinton’s

Regulatory Reinvention Initiative.

EFFECTIVE DATE: The rule shall become

effective on June 22, 1998.

FOR FURTHER INFORMATION CONTACT:

Charles W. McGuire, Chief, Special

Authorities Division (X–57), Department

of Transportation, 400 Seventh Street,

SW., Washington, DC 20590 (202) 366–

1037.

SUPPLEMENTARY INFORMATION:

Background

On September 16, 1992, the

Department of Transportation issued a

notice of proposed rulemaking (NPRM)

[57 FR 42864, September 16, 1992]

which proposed to (1) replace the filing

of prospectus for Public Charters with

an annual registration by charter

operators; (2) eliminate the regulation of

‘‘major changes’’ in charter itineraries

and the specific terms of Public Charter

operator-participant contracts, but

require that consumers receive actual

notice of important terms affecting the

charter; (3) simplify the financial

security arrangements applicable to

charter operators; (4) eliminate the

financial security arrangements

applicable to direct air carriers; (5)

permit consumers to make credit card

payments to charter operators for Public

Charters; (6) remove the prohibition

against charter sales within 7 days of

departure by direct air carriers or

charter operators affiliated with direct

air carriers; (7) simplify and eliminate

unnecessary requirements applicable to

non-public charters (i.e., single entity,

affinity, and mixed charters), and add

provisions for the operation of

gambling, junkets; and (8) consolidate

the rules applicable to direct air carriers

into a single part, removing obsolete and

repetitive references and requirements.

Comments and reply comments on

the Department’s proposals were filed

by 17 direct air carriers, 20 charter

operators, 6 trade associations, 3 banks

that serve (or served) as depository

banks for charters, 1 state department of

transportation, and 15 private citizens.1

While many of those responding

supported the basic goals of reducing

the burden of paperwork, simplifying

the regulatory process, eliminating

obsolete requirements, and liberalizing

relationships in the marketplace, when

it came to the proposed changes to the

basic consumer protection provisions of

the regulations, the majority urged the

Department to retain the existing

requirements. Except as discussed

below we have decided not to adopt

many of the rule changes proposed in

the NPRM.

Discussion of Comments

The issues specifically addressed by

commenters agreeing of disagreeing

with proposals in the NPRM or offering

alternative approaches fall primarily

into the following categories: (1) Filing

Requirements: (2) Protection of the

Charter Participants’ Expectations; (3)

Protection of the Charter Participants’

Funds; (4) Financial/Security Rules

Applicable to Direct Air Carriers; (5)

Direct Air Carrier Responsibilities; (6)

Use of Credit Cards for Payments to

Charter Operators; and (7) Other

Matters.

(1) Filing Requirements

The NPRM proposed to substitute an

annual registration requirement for U.S.

charter operators in place of the present

prospectus filings for each series of

flights. This form would identify the

applicant and its ownership, and would

certify the existence of a contract with

the carrier and the existence of a valid

security agreement and that both

complied with the requirements of Part

380. The applicant would be required to

notify the Department within 10 days of

any change in the required information.

Once the proper registration was filed,

the charter operator could begin sales

immediately without filing a flight

program and without waiting the 10

days for approval. The proposed

treatment of foreign charter operators

was slightly different in that they would

still be required to seek authority in the

U.S. as they do now.

While commenters generally

approved of the proposal to require only

an annual registration by charter

operators, three of the industry

associations (Association of Retail

Travel Agents, American Society of

Travel Agents and National Air Carriers

Association) commented about several

essential requirements of the

registration process which permit the

Department to regulate or discipline

charter operators. The commenters

referred specifically to the filing of

schedules and changes thereto as well

as to the certification that required

security agreements to be in place. One

of the associations also stated that if one

believes the existing bond/escrow rules

should be retained, then ‘‘specific

identifying information for the

operator’s escrow accounts should also

be provided and kept current.’’ The

purpose of the proposed relaxation of

prospectus filing rules in the NPRM was

to make the process less burdensome

and possibly less expensive for the

charter operator and to reduce the

Department’s regulatory workload. We

are sympathetic to these comments and

our further review of the mechanism of

this proposed change leads us to

conclude that the removal of the current

system of prospectuses and

amendments would compromise charter

participants’ ability to be assured of the

legitimacy of charter programs and our

ability to maintain useful records

necessary to monitor Public Charter

programs. The Department will not

adopt the change proposed in the NPRM

to replace the prospectus filing with an

annual registration.

(2) Protection of Public Charter

Participants’ Expectations

Current charter rules contain

provisions designed to protect the

expectations of members of the public

flying on Public Charters (14 CFR

380.30–380.33a). These rules prescribe

the essential elements of contracts

between charter operators and charter

participants, and provide that certain

major changes (hotels, flight dates,

origin and destination cities, price)

would entitle charter participants to

cancel and receive a refund. The rules

included precise requirements regarding

the time for notifying charter

participants of such changes and

providing refunds where applicable.

In the NPRM, we proposed to

eliminate the current provisions in the

Public Charter rules that (1) specify the
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28227

2 In order to satisfy the requirements of this

section, the notice would have to be in writing and

in a form that allows the participant to review it.

Thus, reciting the notice in a radio commercial or

flashing a graphic in a TV commercial would not

suffice.

contents of the contract between the

charter operator and the charter

participant; (2) regulate certain ‘‘major

changes’’ in the price or itinerary that

would entitle charter participants to

cancel and receive a refund; and (3)

prohibit charter operators from

accepting charter participants’ payments

without first obtaining a signed

operator-participant contract

(§§ 380.31–380.33 and 380.12). In place

of these provisions, we proposed to

require charter operators to provide

prospective participants with notice of,

and access to, any conditions imposed

by the operator (proposed § 380.7). The

notice was to include, among other

things, the terms under which the

operator reserves the right to change the

itinerary or price of the charter, and the

charter participant’s rights to cancel and

receive funds under various

circumstances. The notice, which would

have been provided to the participant at

the time of sale, could have been part of

the charter operator’s brochures or other

solicitation materials. Just as with

scheduled service (See 14 CFR Part

253), if a participant did not receive

such notice, he or she would not have

been bound by any term restricting

refunds, imposing monetary penalties,

or allowing the operator to change the

itinerary or raise prices. The proposed

rule also provided that, if a person

purchased a charter and requested a

copy of the full operator-participant

contract within 5 days of the purchase,

that person’s payment would have been

fully refundable if she or she canceled

within 5 days after receiving the full

contract, or by the day of the flight,

whichever was earlier.

While some commenters supported

our proposed elimination of the

government-imposed contract

provisions and the requirement that

signed operator-participant contracts be

received with or before receipt of

payment for a charter flight, all who

commented opposed some part of the

notice of conditions offered as a

substitute. The National Air Carriers

Association and several charter

operators opposed that portion of the

proposed rule that would allow a

customer up to 5 days after purchasing

a charter trip to request a copy of the

full contract and an additional 5 days

after receiving the contract to cancel and

receive a full refund. One of the

commenters stated that such a provision

would present serious practical

difficulties, leaving charter operators

with no viable opportunity to resell a

late-canceling participant’s seat and

very likely incurring substantial

cancellation fees for accommodations

reserved for that charter participant. An

adverse side effect of this situation

described by the commenter would be

that on heavily booked flights potential

charter participants desiring to travel

would be turned away and denied travel

due to someone else’s tardiness in

deciding to cancel. It was suggested that

a full charter operator-participant

agreement be provided to the charter

participant at or before the time of

purchase. Then, when the charter

participant had made the purchase,

there should be no right to cancel and

receive a full refund on the basis of

dissatisfaction with the terms and

conditions. Referring to the practice in

the scheduled air carrier industry where

the passenter is required to purchase a

ticket within 24 hours after making a

reservation, a commenter proposed that

the section could be revised to provide

that, in cases where the full agreement

is furnished to the charter participant at

time of purchase, the contract review

period is limited to one day during

which the customer may cancel and

receive a full refund. The commenter

also noted that the charter participant

always has the right to obtain and study

the contract and take any time necessary

to fully consider the terms and

conditions prior to paying.2 We believe

that the commenters have raised valid

concerns over the details of the

proposed notice of conditions and how

it would work in practice.

We also received comments urging us

to retain some or all of the ‘‘major

change’’ provisions of our current rules,

particularly those dealing with material

changes in the origin or destination of

the flights, the departure/return dates,

the hotels provided, and the price of the

trip. The current rules require that

charter participants be informed of any

such changes and in many situations be

given the opportunity to cancel and be

given a full refund if they find the

changes unacceptable.

The existing rule states that beginning

10 days before departure, operators and

carriers may not cancel a charter (unless

it is physically impossible to operate) or

raise the price. If at any time the

operator changes a date or city, or raises

the price by more than 10 percent,

affected participants have the right to

cancel and receive a full refund.

Participants must be notified of such

‘‘major changes’’ within 10 days.

Overbooking on charters is banned.

The NPRM proposed to abolish all of

those protections. For example, the

operator would simply be required to

provide notice of the existence of any

contract conditions that permit him to

make such changes. Under the proposed

rule, operators could wait until the day

of departure to cancel a flight due

simply to lagging sales. They could

change the destination of the charter, or

move the departure date by a week, or

raise the price by $200 two days before

the flight; if anyone wanted to cancel as

a result, the operator could impose a

100 percent cancellation penalty—and

then resell the seat.

The regulatory reform rationale

driving the NPRM was an attempt to

redefine a part of the industry that

appeared to be heavily restricted by

artificial distinctions among the various

kinds of air transportation available to

the public. To accomplish this, the

Department proposed to remove

administrative burdens on airlines and

charter operators, simplify financial

security requirements, and liberalize

sales of charters by eliminating time

constraints, operator-participant

contracts, major change rules, and

requirements for non-public charters. It

was noted that current charter rules still

impose limitations on direct air carriers

flying charters that are relatively

stringent compared with those relating

to the operation of scheduled air

service. Similarly detailed requirements

apply to charter operators who sell

charter reservations to the general

public. A significant part of the

consumer protection features of the

current rule concerns price changes,

cancellations, itinerary changes and the

contents of operator-participant

contracts designed to ensure

participants’ expectations.

The notice requirement proposed in

the NPRM was modeled on the contract

disclosure rule for scheduled service, 14

CFR Part 253. However, charters work

differently from scheduled service; all

the market forces that might modify the

behavior of a scheduled carrier are not

in play in charter service. By the nature

of the scheduled system, carriers

operate flights even where the revenues

on a particular operation don’t cover

their costs (i.e., the load factor is low).

However, flight cancellations due to

lack of participation and other changes

are more likely to occur on charters, and

when they do occur are likely to be at

the last possible moment allowable

under the rules, currently 10 days before

departure of the outbound flight. Absent

the current rule banning cancellations

within the last 10 days before departure,

a charter operator could wait to cancel

or make another major change until two
28228 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

3Term security agreement would be defined as it

is today to include either a surety bond, or a surety

trust agreement or letter-of-credit that provides

protection equal to or greater than that provided by

a bond (See new § 380.2). The agreement would

have to be for an amount that would cover all oneway or round-trip flights that the Public Charter

operator will actively advertise, sell, or operate at

any one time, including any flights that may be

completed but are within the 60-day period for the

filing of claims.

or three days before planned departure

in hopes of getting sizable bookings

through wholesalers shortly before

departure. Allowing charter operators

unfettered discretion to fail to keep their

end of the bargain with consumers

would be unfair.

Also, when scheduled-service flights

experience irregularities, passengers

have more options than charter

passengers because:

• Scheduled carriers operate more

frequent flights than do charter

operators. For example, if an 8 a.m.

scheduled flight to Denver is canceled,

the same carrier can usually rebook a

passenger on another of its, or another

airline’s, Denver flights no more than a

few hours later.

• Many scheduled airlines have

agreements with each other so that one

scheduled carrier can put passengers

from its canceled or delayed flight on

another airline’s flight, at no additional

cost to a passenger.

• Scheduled carriers operate many

different routes; they may serve more

than one airport in the same city. If they

cancel a flight they might be able to

reroute the passengers via another city

or to another airport at the same

destination city with limited

inconvenience to the passengers.

We conclude that while the notice

regime of Part 253 (Notice of Terms of

Contract and Carriage) has worked well

to protect schedule passengers, our

proposal to apply a similar approach in

the charter area would likely result in

an unacceptable risk to charter

participants. The American Society of

Travel Agents (ASTA) commenting on

the proposed annual registration

thought it might be worth trying but

‘‘charter operators should still be

required to file copies of promotional

material containing the proposed flight

schedules at least 10 days before a

flight.’’ ASTA went on to say that the

requirement would be ‘‘to discourage

the publication of fictitious flight

schedules which are then changed at the

last minute to convenience the tour

operator or the airline.’’ This theme was

also expressed by the Association of

Retail Travel Agents (ARTA) which said

that ‘‘we realize from experience the

need for updated promotional materials

containing proposed flight schedules at

least 10 days before flight.’’ ARTA

continued this discussion stating that

‘‘Agents need to see the exact product

available to enable them to fully inform

their customers so that prices and

scheduling can be compared for

customer benefits.’’ Comments from the

University of Minnesota touched the

broader scope of the issue stating that

the present process for regulating Public

Charters, including the filing process,

had proved to be beneficial and

necessary. We will retain these

provisions along with the other parts of

the customer protection package in the

final rule.

(3) Protection of the Charter Participants

Funds

We tentatively concluded in the

NPRM that the present financial

security requirements applicable to

Public Charters should be revised.

Under the current rules, Public Charter

operators must obtain either (1) an

acceptable security arrangement in an

amount equal to the charter price for the

air transportation if air-only or, if land

arrangements are involved, in an

amount equal to one, two, or three times

the price of the air transportation

depending on the duration of the charter

trip; or (2) an acceptable security

arrangement in the amount of $10,000

per flight up to a maximum of $200,000

for 20 or more flights plus a depository

(escrow) account at a bank, into which

all payments by or on behalf of charter

participants must be deposited and from

which they may not be removed except

under specified conditions (§§ 380.34,

380.34a, 380.35).

We postulated that existing financial

security requirements may be unduly

burdensome on or costly to Public

Charter operators, and proposed to

substitute one or more of the various

options set forth in the NPRM for the

existing surety/escrow combination.

The options proposed in the NPRM

were: (1) A security agreement 3 in an

amount of at least $30,000 times the

number of flights up to a maximum of

$600,000; (2) a security agreement

sufficient to cover the cost of air

transportation sold but not yet provided

to consumers (i.e., a ‘‘rolling bond’’

under which the amount of the security

could increase or decrease over time as

the number of charter participants who

have paid but have not completed their

travel changes); (3) a requirement that

U.S. or foreign direct air carriers

participating in Public Charter programs

bear financial responsibility for charter

participant funds paid for charter air

transportation (i.e., by either refunding

moneys paid or providing the

transportation for which it was paid) in

the event of insolvency or other failure

to perform by the charter operator; (4) a

security agreement in an amount not

less than the charter price for the air

transportation (whether or not the

charter flights being sold include land

arrangements); or (5) a security

agreement in an amount not less than

the cost of the charter trip paid by the

participant, including air transportation

and land arrangements, if applicable.

None on these options included

retention of the existing surety/escrow

system of protecting charter participant

funds; however, in view of comments in

earlier rulemakings in support of the

present escrow system, we specifically

asked for comments on whether we

should retain that system.

Virtually all of the parties and

individuals that commented on the

NPRM discussed the financial security

options, with a large majority in favor of

retaining the surety/escrow option for

charter operators permitted under the

present rules. Those who commented on

the specific alternative financial

security measures generally noted that

each would provide a measure of

financial protection, but the comments

were varied as to which, if any, should

be adopted. Several commenters felt the

escrow requirement should be done

away with, but that the amount of any

required security agreement should be

less than the $30,000 per flight/

$600,000 maximum amount proposed.

Of those opposed to the current

surety/escrow option, several charter

operators cited administrative burdens

and large fees imposed by banks. One

charter operator complained in

particular of fees of between $175 and

$260 per departure, which it asserts are

not offset by interest earned on an

escrow account, and of being assessed

other expenses related to maintaining

the account, such as for wire transfer

fees, cancellation fees, and other charges

incurred by the bank to pay hotels, land

operators, and air carriers. Others

submitted comments against retention

of the current surety/escrow option,

primarily on the basis that such

arrangements have not always

sufficiently protected consumers’ funds,

particularly when operators have filed

for protection under bankruptcy laws.

In support of retaining the present

surety/escrow option, many individual

charter operators and an association

representing charter operators asserted

that the present system provides a

necessary discipline on the industry and

that financially stable and responsible

charter operators are not burdened by

the escrow system. One of these

commenters pointed out that the escrow

account system has worked well, when
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28229

4As with the air-only security agreement

discussed above, under this option charter

operators would be required to retain records

sufficient to enable us to ascertain the separate cost

to the consumer of the air and land portions of a

charter package.

properly administered, to provide

consumer protection at little or no cost,

and it should continue as an option. It

suggested, however, that there is no

need to require a security agreement,

such as the $10,000 per flight/$200,000

maximum required under present rules,

in addition to the depository account.

The members of the banking industry

that commented on the NPRM, as well

as the private citizens who commented,

were unanimously in favor of retaining

some form of protection requiring a

depository account. One bank that

handles charter operator escrow

accounts stated that the depository

method is the safest and most

economical manner in which to provide

protection of consumer funds, in

particular because of the high risk to

banks of surety bonds and trusts, the

costs of which must be passed on to

charter operators and, ultimately,

consumers. Another bank asserted that

the interest earned on escrow accounts

more than makes up for any charges

assessed by the banks for maintenance

of the accounts.

Many of the direct air carriers and

associations filing comments on behalf

of direct air carriers recognized that the

present surety/escrow system carries

with it certain costs and burdens. Most,

however, suggested that it be kept in

place because it has proven to be an

effective means of protecting charter

participant payments. One of these

commenters suggested retention of the

present escrow system, at least until the

Department has had an opportunity to

examine the effects on the charter

industry of other changes to the Public

Charter rules that may result from this

proceeding. Another suggested that if

there is to be a change, we retain the

present surety/escrow system, and, in

the interest of allowing the industry to

respond to market requirements, also

allow any of the other proposed systems

as optional requirements.

The $30,000-per-flight, $600,000

maximum alternative received some

support from several direct air carriers

and from well-established charter

operators. Many other direct air carriers

and charter operators, as well as

financial institutions, argued against

such a security agreement requirement

as being too expensive for many charter

operators to obtain and maintain. Other

commenters noted the requirement,

which would triple currently required

security amounts, would be

unnecessarily broad for the many smallaircraft, domestic charter operations, so

that the security required per flight

could far exceed the cost of the air

transportation. On the other hand, one

commenter noted that the $30,000-perflight figure could be insufficient to

cover certain wide-body aircraft

operations, while another felt that the

$600,000 maximum would be

insufficient to cover many large charter

operator programs.

We see merit in each of the

comments.We recognize that the

proposed $30,000-per-flight, $600,000

maximum amount might not fully cover

the operations of all charter operators.

However, we are also concerned that

adoption of the proposal could result in

a situation where charter operators,

particularly small businesses, would be

required to obtain security in an amount

far exceeding the cost of the flight, if it

could be afforded at all. We conclude

that we should not adopt this proposed

alternative for protecting participant

payments.

Another method of financial security

discussed by the NPRM is a security

agreement sufficient to cover the cost of

air transportation sold but not yet

provided to consumers. This ‘‘rolling

bond’’ alternative would allow the

amount of the security to increase or

decrease over time as the number of

charter participants who have paid but

have not completed their travel

changes.4 This option was addressed by

one charter operator and two of the

banks. The charter operator was in favor

of the option but one of the banks

declared it ‘‘unworkably difficult’’ to

administer since it could involve

maintaining records and accounts

involving dozens of charter flights and

thousands of charter participants each

day. We have determined not to adopt

this option at this time since, under the

rolling bond concept, the amount of

coverage with respect to the protection

of funds is determined solely by the

charter operator and we are not

convinced such a program could be

administered to afford effective

consumer protection. We will not adopt

the rolling bond as an alternative

security measure.

Another option that we have

concluded should not be afforded to

charter operators is to permit a direct

carrier to agree to bear financial

responsibility for charter participant

funds paid to the charter operators,

either by refunding moneys paid or

providing the transportation paid for by

the consumer. Most of the direct air

carriers and their associations

commenting on specific alternative

proposals strongly urged the

Department not to adopt this option.

The many objections to adopting this

financial security measure centered on a

concern that holding a direct air carrier

to be the guarantor of a charter

operator’s obligations would change the

fundamental relationship of the two

entities where direct air carriers have

historically been merely contractors

supplying services, without any

effective means to assess or control the

financial risks associated with such

responsibility. It was argued that the

direct air carrier and a non-affiliated

charter operator have at best an arm’slength relationship and that the airline

has no realistic opportunity or

capability to effectively investigate the

charter operator’s financial status,

managerial competence, or compliance

disposition. It was also pointed out that

the airline is not a party to any

agreement between the charter operator

and the participants and should not be

placed in the middle of any disputes

arising out of the participants’

dissatisfaction with the arrangements.

Relating to the discussion above, one

major direct air carrier and its affiliated

charter operator, in a joint comment,

suggested that the Department should

adopt the option, expanded to allow a

direct air carrier to assume financial

responsibility for all of the obligations

of an affiliated charter operator,

including the affiliate’s obligations for

those flights for which it is not the

direct air carrier. Permitting the direct

air carrier to stand behind the

obligations of its affiliate would,

according to this commenter, afford a

greater incentive to monitor the charter

operator’s business and provide a

superior level of protection for

consumers in those cases in which he

direct air carrier is a scheduled carrier

with wide operations. Several other

commenters suggested that no affiliation

should be required between the direct

air carrier performing the flights and the

charter operator whose programs would

be backed.

Although we are somewhat receptive

to this proposal, particularly where

there is a true affiliation between the

charter operator and direct air carrier

(e.g., where one controls, is controlled

by, or is under common control with the

other), we are concerned that a blanket

approval of this type of arrangement

could lead to abuses, either where the

direct air carrier overextends itself and

guarantees a large charter program for

which it has insufficient capacity

available to operate in the event it

becomes necessary to do so, or where

financially weak direct air carriers

‘‘rent’’ their backing to charter operators

seeking to avoid the financial security
28230 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

5 Indeed, adoption of this option may enhance

competition in other ways, as is apparent from the

comments of one party that arranges both charter

and scheduled service tour packages, and, as an

enhancement to consumers and retail agents, elects

to advertise the fact that it places in escrow the land

portion of the scheduled service tours.

6Moreover, as part of their continuing obligation

under new § 380.10 to ensure that any Public

Charters they conduct are in compliance with the

rules, we also expect that the direct air carriers

performing the charters will ensure that the security

agreement is at least in an amount sufficient to

cover the cost of the air transportation to be

provided as set forth in the direct air carrier

charters operator contract.

rules. We have decided, therefore, not to

expand the rule as requested, but to

review any such proposed arrangements

on a case-by-case under the waiver

provisions of § 380.9. Any direct air

carrier seeking to provide such

guarantees to operators must be

prepared to demonstrate to our

satisfaction that it has the wherewithal

to undertake such an arrangement,

particularly if it involves a substantial

charter program.

One financial security option

proposed in the NPRM is a security

agreement in an amount not less than

the charter price for the air

transportation, whether or not the

charter flight being sold includes land

arrangements. Some of those that

commented on this option were

concerned about the lack of protection

it entails for the land portion of a

charter participant’s payments and

pointed out that it may provide less

protection than is available today. As

has been the case for years, today any

consumer can purchase as a ‘‘package’’

from a retail travel agent or other entity

a tour that includes travel on scheduled

service and land arrangements that are

independent of the air service. While

the air portion of the price of the tour

is ‘‘protected’’ after the ticket is issued,

in the sense that the direct air carrier is

obligated to honor the ticket for

transportation or provide a refund, there

is no Department-mandated protection

for the land portion of the tour price.

We reasoned that, to the extent present

requirements place charter operators at

a competitive disadvantage in providing

services to consumers at the lowest

possible price, it may be in the public

interest to modify those requirements.

Under this financial security option, we

could do so without providing any less

protection than that afforded purchasers

of tours using scheduled service.5

In the NPRM, we also expressed our

concern that the availability of this

option, under which only the air

transportation portion would be

protected by a security agreement, could

be subject to abuse if a charter operator

would attempt to allocate only a small

portion of the total tour package cost to

the air transportation to be provided.

We presented several possibilities for

dealing with this problem, including a

requirement that charter operators state

separately their prices for the air and

land portions of a package or a

requirement that charter operators retain

records sufficient to enable the

Department to ascertain the separate

cost to consumers of the air and land

portions.

We have concluded however that we

should not adopt this proposal. Charter

air tours involving land

accommodations are distinguishable

from tour packages using scheduled

service. As discussed earlier, in the

event of a flight cancellation or change,

passengers using scheduled service have

more options than do charter passengers

and they are more likely to reach their

destination in a timely fashion without

serious inconvenience or monetary loss.

Passengers using scheduled service are

therefore less likely to forfeit any

portion of their land arrangements as a

result of a flight irregularity or other

problem. We thus remain concerned

about a system that would fail to protect

the land as well as the air portions of

a charter participant’s trip. The present

rule in this regard appears reasonable

and to have worked well and, on

balance, we see no reason to change it

at this time. The Department has

authority to handle potential abuses in

this area through its general authority to

investigate and prohibit unfair and

deceptive practices or unfair methods of

competition (e.g., 49 U.S.C. 41712).6

The comments on the alternative of

requiring a security agreement that

would cover the cost of both the air and

land portion of a charter trip received

little direct support. Those opposed to

the proposal cited the expense, in

general, of obtaining such security. The

opposition, however, was based on

supposition that the Department would

require such a large security agreement.

In recognition of the fact that the

expense of obtaining and maintaining

financial security in an amount

sufficient to cover the charter operator’s

cost of air and land may be unattractive

to, or unattainable for, some charter

operators, we will not adopt this

financial security alternative as a

requirement.

We continue to believe that there is a

need for protection of charter

participants’ funds and for their right to

receive refunds for services paid for but

not received. As we pointed out in the

NPRM, there is a unique financial risk

inherent in the sale of charter

transportation by charter operators that

have not been required to meet our

fitness requirements, and we conclude

that the public benefits of retaining

financial protections for charter

participant funds significantly outweigh

the cost of compliance.

After careful consideration of all of

the comments in this proceeding, we

have determined that we should retain

the existing financial security rules as

the means by which charter operators

provide financial protection for

consumer funds. A number of

commenters stressed the view that

significant benefits of the present

system outweigh any administrative

burdens and costs of compliance. Such

comments from those intimately

involved in the charter industry,

particularly those parties upon whom

the costs and burdens of the escrow

requirements most heavily fall, together

with the demonstrated benefits of the

existing surety/escrow system, convince

us that we should retain the existing

system.

As a final point on the protection of

consumer funds, we note elsewhere in

this rule that we are allowing the use of

credit cards as a means by which charter

participants may pay for charter flights.

If charter customers follow the trend of

scheduled air transportation passengers,

upwards of 70 percent of charter

participants will be paying for their

trips by credit card and not by cash or

check. Those paying by credit cards will

also be afforded the protections of

Federal credit card laws.

(4) Financial Security Rules Applicable

to Direct Air Carriers

Under the current rules, direct air

carriers conducting charter flights are

required to establish either (1) a surety

bond in an unlimited amount, or (2) an

escrow account into which all charter

payments are to be deposited until after

the flight is operated (14 CFR 207.17,

208.40, 212.12). These requirements

apply to all U.S.-originating passenger

charters, including Public and ‘‘nonpublic’’ type charters, as well as

Overseas Military Personnel Charters

originating outside of the United States.

Direct air carriers using escrow accounts

that engage in direct sales of Public

Charters (i.e., without using an

independent Public Charter operator)

are also required to meet the bonding

requirements of Part 380 applicable to

Public Charter operators in addition to

their flight escrow account.

We indicated in the NPRM that we

were tentatively of the view that the

present financial security requirements

applicable to direct air carriers

conducting charters, including direct
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28231

7U.S. and Canadian air taxi operators that

perform Public Charters are also subject to the

financial security requirements applicable to direct

air carriers. Under the proposed rule, those

requirements, contained in §§ 298.38 and 294.32,

would also have been eliminated.

sale Public Charters, were unnecessary,

and we proposed to eliminate those

requirements.7

Comments on this proposal were filed

by several air carriers, charter operators,

travel agent associations, and banks.

Most of the direct air carriers agreed

with the proposal that financial security

arrangements should no longer be

imposed on direct air carriers since

airlines conducting charters are subject

to the same fitness requirements as

those operating scheduled flights;

indeed, many carriers that operate

charters also provide scheduled service.

Moreover, scheduled flights are not

subject to any such financial security

requirements. These carriers also stated

that the current security requirements

are costly restrictions that produce little,

if any, benefit while placing charter

operations at a competitive

disadvantage to scheduled service.

The proposed rule change was

opposed by one air carrier, several

charter operations, two travel agent

associations, the banks, and most of the

individuals filing comments, citing

airline liquidations and bankruptcies in

recent years and the apprehension they

assert will be felt by charter operators

who will be hesitant to take a chance on

new entrants in the industry without the

financial controls that are now in place.

One commenter stated that more and

more charter flights are being provided

by new entrant U.S. and foreign carriers

and that, since these carriers are the

leading edge of competition in charter

markets, it would be counterproductive

to adopt a charter rule that has the effect

of reducing their access to charter

traffic. Another commenter stated that

charter deposits transferred to direct air

carriers represent relatively large sums

of money in a single transaction with

transfers made shortly before the flight

operates, and it is not unreasonable, in

these circumstances, for the direct air

carrier to continue to provide depository

protection for these sums, which have

been afforded such protection while in

the hands of the charter operator.

Another commenter cited its concern

that participants could claim against a

charter operator’s security agreement if

they do not receive the charter trips they

have purchased even though the charter

operator had paid the direct air carrier.

We will continue to require direct air

carriers to maintain a surety or escrow

account for the protection of customer

payments for charter flights that they

operate. Our decision to retain this

requirement is premised, in part, on our

view that even though such carriers

have been subjected to a ‘‘fitness’’

evaluation by the Department, the

charter participants’ funds should

continue to be protected after leaving

the security of the charter operator’s

escrow account and until the charter

participant has received the service that

was promised. Moreover, in the event of

a stranding, charter participants are less

likely than scheduled passengers to be

carried by other airlines or to benefit

from ticketing procedures common

among scheduled carriers (e.g., where

travel on a defaulting airline is via a

ticket issued by another carrier, or viceversa).

(5) Direct Air Carrier Responsibilities

Under the proposed rules, direct air

carriers would be responsible, as they

currently are, for ensuring that any

charter they conduct meets the

requirements of the charter rules—that

is, they would have to take reasonable

steps to verify that the Public Charter

operators with which they contract meet

the registration and financial security

requirements of Part 380, and single

entity or affinity charters meet the

definitional requirements for those

charter types (proposed §§ 212.30(d)

and 212.5(f)). Direct air carriers would

be free to establish whatever contractual

requirements they deemed necessary in

order to ensure compliance with the

rules. Direct air carriers would also be

responsible, as they have been in the

past, for providing return transportation

to any charter participant who has

purchased round-trip transportation and

whom they transported on an outbound

flight, unless that charter participant’s

return flight is covered by a contract

with another direct air carrier (proposed

§ 212.3(e)). We also proposed to add a

provision to Part 380 (proposed

§ 380.10) to state that, should the direct

air carrier fail to make a ‘‘reasonable

effort’’ to verify that the Public Charter

operator had met the Department’s

financial security requirements, that air

carrier would bear the responsibility to

provide the charter transportation or

refund the air transportation portion of

the charter participant payments in the

event of the charter operator’s failure to

do so.

The inclusion of the requirement to

provide return transportation was

opposed by several direct air carriers

and charter operators, principally

because the NPRM had proposed to

eliminate prepayment requirements that

are a part of current regulations

(§§ 207.13(b), 208.32(e), 212.8(a),

380.11) for both the outbound and

return leg of charter round trips. The

commenters stated that these

prepayment rules worked as a

mechanism to ensure that the direct air

carrier would have the funds to either

compensate the charter participants or

cover the cost of transportation and that,

without payments from the charter

operator to cover the flights, the direct

air carrier would have to endure a

significant financial burden for which it

was not responsible. One commenter

proposed that the rule be revised to

limit the direct air carrier’s

responsibility to the funds it had

received from the charter operator to

pay for the return leg. While the air

carrier can always require the charter

operator to pay the full price of the

flight up front as a contractual matter,

we agree that the rules should retain the

prepayment requirements and the

carrier will be responsible for the return

air transportation of all round-trip

Public Charter participants that it

carries outbound, as in the current rule.

This rule was written to protect the

charter participants by ensuring that the

charter operator had not only engaged

the services of an air carrier but had also

paid for the flight. We will retain the

prepayment requirements of Parts 207,

208, 212, and § 380.11.

Comments were also received from a

number of direct air carriers arguing that

the refund-or-provision-oftransportation requirement proposed in

new § 380.10 is an unfair and

unworkable expansion of the

‘‘reasonable effort’’ concept of the

current rules (§ 380.40). One carrier

stated that this requirement would make

the direct air carrier both the regulator

and the guarantor of a charter operator

and would ‘’reformulate the nature of

charter transportation. Recasting the

carrier as the overseer of the charter

operator would fundamentally change

what has been understood to be a

supplier-purchaser relationship.’’

Several commenters view the NPRM

language as a wholesale shift of

responsibilities away from the charter

operator, and argue that such shifting of

the risk for charter operator performance

to the direct air carrier will place greater

financial pressure on the direct air

carrier which, in turn, will make charter

activities less attractive. The

Department’s rational that such a rule

would minimize government oversight

of the charter industry and help protect

charter participants is a worthy goal, say

the commenters, but the way to achieve

it is not by handing the enforcement

role over to the airlines. Several

commenters stated that they should be

given an explanation of what constitutes
28232 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

8See Order 92–2–1, January 2, 1992 (America

West); Order 92–4–50, April 28, 1992 (Mark Air);

Order 92–6–17, June 11, 1992 (Faucett); and Order

94–3–34, March 21, 1994 (Express One). 9See also n.3, supra.

10Public Charter operators with bonds equaling

their total flight costs (or multiples thereof for trips

exceeding 14 days) have always been permitted to

accept payment in any form.

‘‘reasonable effort’’ so they will be on

notice as to what is expect of them.

Others suggested that charter operators

should be required to give the direct air

carriers a certification of compliance

with Department regulations, and that

should be sufficient to satisfy this

requirement.

We appreciate the concern of those

many commenters who feel that

§ 380.10 as proposed might be an

expansion of direct carrier

responsibility. Direct air carriers have

long been responsible under present

§ 380.40 for ensuring that charter

operators comply with all the

requirements of our Public Charter

rules. Indeed, our Office of Aviation

Enforcement and Proceedings has not

hesitated to pursue direct carriers for

violating this provision.8 Nevertheless,

we recognize that each situation

involving a charter problem presents a

different set for circumstances, and the

fact that a problem occurs may not be

causally related to a failure by a direct

air carrier to have ensured compliance

with Part 380. It was not our intent in

proposing the language in the NPRM to

make direct air carriers the guarantors of

charter operations. Our intent was

merely to clarify a significant obligation

of direct air carriers that has for years

been impressed upon them as a part of

our charter enforcement policy. Upon

reflection, we recognize that the present

language under § 380.40 is understood

and appropriate and we will make no

changes. Accordingly, we are omitting

this proposed section 380.10 from the

final rule and will retain the language of

§ 380.40 in its present form. We

emphasize to direct air carriers,

however, that in doing so we are not

diluting to any degree their longstanding obligation to ensure that

charter operators comply with Part 380.

Nor are we indicating any lessened

resolve on our part to enforce this

requirement to the extent necessary to

ensure that consumers are not harmed.

Based on the number of comments

received on this point, we recognize that

the term ‘‘reasonable effort’’ may require

further clarification. At a minimum, we

would expect direct air carriers to verify

that the Public Charter operators with

whom they contract have filed with the

Department a prospectus (that has been

accepted)—they can accomplish this by

contacting the Department’s Special

Authorities Division directly—and that

they have, in fact, entered into a

security arrangement in an amount

sufficient to meet the requirements of

our rules—they can accomplish this by

contacting the named securer/escrow

bank.9

(6) Use of Credit Cards for Payments to

Charter Operators

The Public Charter (Part 380) was

developed to protect the public by

assuring that the individual participant

receives the air flight and

accommodations contracted for and that

all payments to the charter operator are

securely held and properly used.

Among other provisions, Part 380

requires that each operator provide a

security arrangement based on its total

cost of the flights in its charter program

or both a bank depository account

(escrow account) and a $10,000 per

flight security arrangement. Most

operators choose the escrow account/

security arrangement combination.

When the depository/security

combination is used, payments to the

charter operator from or on behalf of

charter participants must be in the form

of a check or money order made payable

to the bank in which the escrow account

is located. In practice, checks not so

payable are endorsed over and

deposited into the escrow account. The

bank then disburses the money to the

direct air carrier and, thereafter in some

circumstances, to providers of non-air

arrangements that are part of the Public

Charter package. This check or money

order payment required was put in

place long before credit cards became a

preferred form of payment for charter

service. The NPRM pointed out that the

restriction in the rule against credit card

payments is inconsistent with the

reality of today’s marketplace and

denies consumers additional protections

that may be gained when they use credit

cards to pay for goods and services. For

example, if services are not received or

there is a problem, the consumer may

not be required to pay a remaining

amount and may even get a refund. The

NPRM supported the view that many

consumers prefer to use credit cards and

charter operators can also benefit by

offering the additional flexibility to the

customer. The NPRM also noted that for

years the Enforcement Office has as a

matter of enforcement policy permitted

charter operators to accept payment by

credit card so long as certain consumer

protection conditions are met.

Virtually all the commenters

supported the rule change to allow

direct credit card sales for Public

Charters. Based on the comments and

recent experience, the Department has

decided to allow charter operators with

depository accounts 10 to accept

payment by credit card from charter

participants into those accounts. If the

credit card merchant account is separate

from the depository account, it must be

used solely as a conduit with all credit

card payments toward Public Charter

trips immediately remitted to the

depository account in full, without

holdback. If a separate bank is to be

used as a conduit for the receipt of

credit card payments, the Department

must be satisfied that there are adequate

procedural safeguards. For example, the

Department may require the charter

operator to furnish a copy of or certify

that there is in place, an agreement

between the charter operator and the

credit card merchant bank sufficient to

preclude participant funds from being

held back.

In situations involving direct

bookings by telephone, the Department

will allow the Public Charter operator to

accept credit card payments for its trips

provided that the charter operator

advises the customers: (1) That he or she

has the right to receive the operatorparticipant contract before making a

booking; (2) that the operatorparticipant contract will be mailed to

the participant within 24 hours of

accepting payment by credit card; and

(3) that the operator-participant contract

must be signed, and the signed portion

returned to the operator, before travel.

While the operator is free to establish a

deadline for participants who pay by

credit card to sign and return the

contract, a full refund must be made of

any amounts charged to a credit card for

any participant who cancels before the

operator-participant contract is signed.

(7) Other Matters

Minimum contract size and advance

purchase requirements. Many

commenters expressly supported our

proposal to eliminate the 20-seat

minimum contract size for less-thanplaneload charters, and the 7-day

advance purchase requirement for

Public Charters sold directly to the

public by direct air carriers or affiliated

charterers. Several, however, expressed

concern that the absence of these

provisions could lead to abuse,

especially in some international

markets. One stated that, in cases where

the United States has a restrictive

scheduled and a liberal charter

relationship with a foreign government,

carriers could, absent the current

minimum contract size and advance
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28233

purchase rules, set up basically

unrestricted direct sale charters to

circumvent scheduled route or capacity

limitations. This commenter and one

other felt that retention of these kinds of

restrictions on charters would help

prevent the undermining of bilateral

scheduled service regimes by charter

operations. Another commenter

expressed concern that carriers might

sell individual seats on charters without

complying with the requirements of our

Public Charter rules.

We have decided to eliminate the

minimum contract size and advance

purchase rules, as we proposed to do.

We recognize the concerns raised by the

commenters over the possible

implications of this change in some

international markets, but we find that

these concerns do not warrant our

retention of these restrictive provisions.

Significantly, as we noted in the NPRM,

the final rule will allow the Department

to limit or prohibit the operation of

direct sale Public Charters by a foreign

air carrier if we find that such action is

necessary in the public interest. Thus,

we have ample ability to redress

problems that might arise, should such

action prove necessary. Furthermore, we

believe that the rule as adopted makes

it clear that any sale by a direct air

carrier of an individual charter seat to

the public must be done under the

direct sale provisions of Part 380.

Additional information with charter

operator registrations. Several

commenters proposed that we require

additional information from Public

Charter operators at the time of their

registration under the proposed filing

system. Three commenters suggested

that operators be required to file a copy

of their promotional material showing

flight schedules to be operated. Another

suggested that operators be required to

provide a copy of the contract of

carriage they would enter into with their

charter participants. A third suggested

that operators be required to file a

certification of any complaints made

against them by state or local consumer

agencies.

We will not adopt these suggestions.

With respect to the filing of promotional

material with flight schedules, the

current prospectus filing requirement

includes flight schedules, and, as is now

the case, we will request copies of

advertisements when appropriate. The

other two suggestions, for charter

operators to file copies of their operatorparticipant contracts, and certifications

of complaints, are not required under

our current rules, and we see no public

interest reason to impose these burdens

as a part of this proceeding.

We will, however, amend the rule

with respect to the information required

to be filed on the ownership of the

charter operator (Part 380, Subpart E—

Registration of Foreign Charter

Operators) to replace the reference in

the proposed rule to ‘‘stockholders’’

holding 10 percent or more of the

company’s stock with ‘‘persons’’ owning

10 percent or more of the company,

since the proposed rule did not take into

account the fact that many charter

operators may be sole proprietorships or

partnerships that do not have

stockholders. Moreover, in order to

accurately determine the citizenship of

the charter operator, we will require

that, if any such persons are themselves

organizations or corporations, the 10

percent owners of those companies

must also be identified back through the

company’s structure to individual

persons who own stock in the ultimate

‘‘parent’’ company of the charter

operator. Requiring such information is

also consistent with our procedures in

reviewing the ownership structure of

direct air carriers.

Filing of claims against Public Charter

operators and securers, and payment of

claims. Three commenters suggested

shortening the provision in proposed

§ 380.6(d) that allows Public Charter

participants 60 days after the

termination of a flight to make a claim

against the Public Charter operator (this

requirement is contained in current

§ 380.34(d)). The commenters argued

that retaining the 60-day claim period

requires operators to maintain

expensive security instruments for this

period, and that there is no need for

such a long period since charter

participants will know no later than

upon returning from their Public

Charter whether their payments were

lost in progress to the providers of

services—most commonly airlines and

hotel operators—or that refunds are due

under the operator-participant contract,

e.g., for a flight cancellation or other

major change requiring a partial or full

refund.

Another commenter urged a

requirement that claims against a

security instrument be paid within 45

days of their submission.

We will not adopt these suggestions.

With respect to the 60-day claim period,

we note that while in some cases a

Public Charter participant will

immediately know of the need to submit

a written claim, there are other

instances, such as a delay in obtaining

a promised refund from a charter

operator, where the charter participant

may not realize this need until well into

the claim period. The 60-day claim

period has been a part of our charter

regulations for many years, and has, we

believe, worked well in providing

charter participants sufficient time to

seek redress of problems they have

encountered on Public Charters. We

find no public interest reason to modify

this provision at this time.

With respect to requiring the payment

of claims within 45 days, we do not

believe that such a condition is

warranted. The resolution of claims can,

in some cases, be a complex, timeconsuming process, involving

negotiations between and among the

charter participant, the charter operator,

and the securer, and at times the use of

the courts. Mandating a 45-day period

for claim resolution could be disruptive

to this process, to the detriment of all

parties. In any event, should a charter

operator unreasonably delay the

resolution of a claim, such that its

action represented an unfair or

deceptive practice within the meaning

of 49 U.S.C. 41712, it would be subject

to enforcement action by the

Department.

Payment of claims under security

agreement. One commenter objected to

proposed § 380.6(a)(1), which pertains

to payments by a securer to charter

participants with claims against the

charter operator’s security agreement,

because it would permit the entity

providing the security to make payment

to claimants without the charter

operator’s agreement or a judgment from

an appropriate court of law. The portion

of the rule of concern to the commenter

states that the securer shall pay a

claimant where it ‘‘is determined by the

person providing the security or

adjudged by a court of competent

jurisdiction’’ that payment is due to a

claimant. The basis for the objection is

the commenter’s concern that the

securer will have no incentive to deny

even the most frivolous of claims filed

against the security agreement, since

any amounts it pays out to claimants

will be recoverable from the charter

operator’s collateral that secures the

agreement.

The security agreement is intended to

compensate consumers for claims

incurred under the operator-participant

contract, as a result of flight

cancellations, and/or for major changes

not accepted by the participant, in all

cases in which the participant has not

received an appropriate refund. That

compensation should be provided as

soon as practicable. To require in all

cases the approval of the charter

operator or a court judgment prior to

payment could unnecessarily delay

compensation from being made for

legitimate claims. We do not share the

commenter’s concern that a securer
28234 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

11Under 14 CFR 380.30(a), solicitation materials

for Public Charters must identify the charter

operator and the direct air carrier. Under 14 CFR

380.32(a), operator-participant contracts must state

the name and complete mailing address of the

charter operator. A sub-operator has its binding

commitment for a specific number of seats on

Public Charter flights shown in another Public

Charter prospectus already filed with (and accepted

by) the Department, but also must file its own

prospectus and is bound independently by our

charter rules. Unlike an agent, for example, a suboperator advertises and sells as a Public Charter

operator using its own escrow bank and security

agreement. (Order 87–7–10, July 2, 1987, n. 2 at 3.)

12The sub-operator concept was devised as a way

for direct air carriers to avoid the downsides of split

charters and at the same time to permit multiple

Public Charter operators to share a planeload

charter contracted by a Public Charter operator.

Heretofore, there has been a 20-seat minimum

contract size. It has never been intended for use by

middlemen brokers selling off most or all of the

aircraft to Public Charter operators. Unless the

direct air carrier is fully bonded, payments should

go from the sub-operator’s escrow account to the

direct air carrier’s escrow account with the primary

Public Charter operator responsible for payment of

the difference between the amount paid by one or

more sub-operators and the amount it has agreed to

pay the direct air carrier for the flight. Without a

waiver granted upon a showing that it is in the

public interest, sub-operator contracts may not

exceed half of a planeload charter.

could feel free to make payments to

claimants without concern for the actual

legitimacy of their claims, since in

doing so it would, at a minimum, risk

losing future business and open itself to

potential liability to the charter

operator. It is our intent that securers

approach such matters using a

‘‘reasonableness’’ standard, and give

consideration to all facts surrounding

the flight cancellation or other problem

that gave rise to the claim. So long as

the charter operator is available, we

would expect the charter operator to be

given a reasonable opportunity to

comment before the securer makes

payments. We will adopt the rule as

proposed, since it will benefit

consumers who experience problems for

which the charter operator has failed to

provide timely compensation.

Flight delays and substitute air

transportation. One commenter urged

that we retain the current requirements

in §§ 208.32a and 208.33 that require

charter air carriers to take certain action

in the event of flight delays of specific

periods. Under these regulations,

charter air carriers in some instances

provide substitute air transportation for

the charter passengers involved, and in

some instances provide payment for

incidental expenses including food and

lodging to the passengers affected. The

commenter stated that, absent this

requirement, the charter operator would

bear the costs involved in these

situations, and those costs would be

especially burdensome on small charter

operators. We will not retain this

requirement. The flight delay

requirements at issue here currently

apply only to U.S. charter-only direct air

carriers; they do not apply to the charter

operations of U.S. scheduled carriers or

foreign air carriers. We see no reason to

continue these 30-year old requirements

solely for one class of air carrier, when

the majority of carriers are not subject

to the rules. As we stated in the NPRM,

both direct air carriers and charter

operators have a commercial interest in

providing amenities and/or alternate

transportation for passengers when

charter flights are delayed. To the extent

that a charter operator is concerned

about the costs it may incur in dealing

with a possible flight delay, its proper

forum for dealing with that concern is

in negotiating the terms of its contract

with the direct air carrier.

Subcontracting. One commenter

urged the Department to amend its rules

to permit a ‘‘primary’’ charter operator

to contract with and be responsible to

the direct carrier for payment for a

charter flight and to subcontract seats on

the flight to other operators without the

need for the latter operators’ having

contracts with the direct air carrier.

Under this proposal, both the ‘‘primary’’

and subcontracting charter operators

would be registered with the

Department. Another commenter urged

that we also allow single entity

charterers to subcontract seats to other

single entity charterers, stating that such

a provision would be useful in cases

where a direct air carrier preferred to

contract with only one charterer.

The Public Charter operator/suboperator separate filing arrangement has

existed informally for many years 11 and

we will codify it here. However, we will

not adopt the proposal to allow single

entity charterers to subcontract seats.

The operator/sub-operator concept

entails a contract between a Public

Charter operator that sells charter flights

in its own right (either directly to the

public, through its agents, or a

combination of both) and a second

Public Charter operator that piggy-backs

its program onto the program of the

primary operator with the primary

operator retaining at least as many seats

for itself as it has subcontracted to one

or more sub-operators.12 Once the

Department has accepted the

prospectus, the second Public Charter

operator—the sub-operator—may

advertise in its own right using its own

securer and depository bank. However,

subcontracting of single entity charters

has never been permitted. Under the

single entity concept, passengers may

not directly or indirectly pay toward

their trips. Although Public Charter

operators are themselves indirect air

carriers, single entity charterers are not.

Alternatives for prospective single

entity charterers include using smaller

aircraft, special fares of part charters on

schedule flights, and split charters—

multiple charters on a single charter

flight.

Small aircraft operations. One

commenter asserted that a clarification

is needed in our rules concerning Public

Charter operations by operators of small

aircraft. It noted that proposed § 380.1

states that the Part applies to air

transportation furnished by certificated

air carriers or foreign air carriers, but

makes no mention of operations by noncertificated air taxi operators or

commuter air carriers conducting

operations under 14 CFR Part 298. It

states that §§ 380.1 and 380.2 of the

current rule provide for such operations,

and that the definition of ‘‘direct air

carrier’’ in proposed § 380.2 does

include carriers operating under Part

298. The commenter suggests that we

amend proposed § 380.1 to provide that

the Part applies to air transportation

furnished by ‘‘direct air carriers’’ which

it states will resolve any ambiguity.

We will adopt this suggestion. It was

not our intent in issuing the NPRM to

remove the current ability of air taxi

operators or commuter air carriers to

conduct Public Charters under Part 380,

and we will make the change in § 380.1

recommended by the commenter.

OMPC’s and educational institutions.

In the NPRM, we proposed to retain

rules providing for the operation of two

specialized charter types: Overseas

Military Personnel Charters (OMPC’s),

now contained in 14 CFR Part 372, and

charters conducted by educational

institutions, now contained in 14 CFR

380.17. However, we specifically

requested comments on whether these

rules are still needed. We received one

comment on each question. An OMPC

operator supported continuation of the

OMPC rules, stating that Germany, the

major market for OMPC’s, grants special

relief for OMPC operations, in light of

their role of providing low-cost

transportation for U.S. military and

civilian personnel and their families on

furlough or authorized leave from an

official station in a foreign country. We

will retain Part 372 for air carriers to

continue to provide this necessary and

humanitarian service. A direct air

carrier supported continuation of the

special provisions in Part 380 for

educational institutions, stating that the

rules have provided a benefit that

should remain available. The occasional

use of these special provisions by air

carriers assures us that there is a need

and we will adopt the proposed
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28235

language in new § 380.3(d) concerning

charters for educational institutions.

Affinity charter certifications. One

commenter expressed concern with the

provision in proposed § 212.5(f) that

would require direct air carriers

conducting affinity (pro rata) charters to

obtain, and retain for two years, a

certification by the chartering

organization that all passengers are

eligible for transportation under the

rule. The commenter argued that the

direct air carrier should not bear the

responsibility and burden of obtaining

and holding these certifications, but that

the charterer should have this

responsibility.

We will, however, adopt the provision

as proposed. We continue to believe that

the responsibility for obtaining and

retaining the necessary certification of

eligibility for an affinity charter

property rests with the direct air carrier

involved. Moreover, our proposal

represents a significant reduction in the

burden on direct air carriers and affinity

organizations, since the certification

would replace the detailed ‘‘Statement

of Supporting Information’’ now

required. Finally, should a problem

arise with an affinity charter, having the

certification in the hands of the direct

air carrier, rather than with an

organization whose identity and

location would likely be unknown to us,

would assure that we can promptly

obtain information on the charter from

that carrier.

Long-term wet leases. One commenter

recommended that we modify proposed

§§ 212.2 and 212.8(a), which would

continue the current requirement in

§§ 207.1, 207.10, 208.3, and 208.5, that

U.S. air carriers conducting wet lease

operations (that is, charters involving

the lease of aircraft and crew) on behalf

of foreign air carriers obtain prior

Department approval, in the form of a

statement of authorization, for all ‘‘longterm’’ wet leases of 60 days’ duration or

longer. The commenter proposed that

the prior approval requirement apply

only to wet leases by U.S. air carriers of

120 days or longer, stating that the

change would relieve a burden and

‘‘better reflect the realties of the

marketplace.’’

We will not adopt this suggestion.

The purpose of the prior-approval

requirement for U.S. air carrier longterm wet leases to foreign air carriers is

to enable us to assure that these

operations, which, because of their

extended duration, may represent a

significant benefit to the foreign carrier

lessee, are in the public interest. The

fact that a U.S. carrier is proposing to

conduct the wet lease is a significant

consideration, but it is not itself

sufficient to meet the public interest

test. Other public interest criteria as

listed in the rule may figure in our

decision. We believe that we need to

continue the level of scrutiny of these

types of wet lease operations that we

have been exercising, and, in the

absence of any compelling argument for

changing the current provision, we will

retain the 60-day threshold in the final

rule. We do not believe that retention of

this provision will pose a significant

burden on U.S. air carriers, as the

application process for a statement of

authorization is uncomplicated,

involving the filing of a minimal

amount of information with the

Department.

Direct Sales. The NPRM proposed that

certificated and foreign air carriers

could offer for sale and operate Public

Charter flights under Part 380 directly to

the public and need not comply with

registration requirements or the

requirements concerning financial

security arrangements. While no

comments were received on the

proposed elimination of filing

requirements for direct sales, the overall

tenor of comments submitted was to

retain the consumer protection

provisions of the rule. We have

responded to these public comments by

retaining other participant protection

elements and will do so for direct sale

customers as well. We will, therefore,

not adopt the wording of the NPRM but

will take this opportunity to rewrite the

section to eliminate confusing

directions in the old rule.

Miscellanous. Several commenters

proposed other changes to the proposed

rule, from Federal licensing of Public

Charter operators to the enactment of a

single charter type to replace affinity,

single entity, mixed, and Public

Charters. Since these matters are well

beyond the scope of this proceeding and

have not been adequately justified, we

will not address them here.

Effectiveness of the rule. The

provisions of this rule will become

effective 30 days after publication in the

Federal Register.

Conclusion

After carefully weighing the

comments provided in response to the

NPRM, we have decided to adopt the

revisions as discussed above.

Regulatory Impact

Excutive Order 12866 and DOT

Regulatory Policies and Procedures

This final rule has been evaluated in

accordance with existing policies and

procedures. Because the requirements

contained in this final rule clarify the

applicability of the multiple Air Charter

regulations to a specific segment of the

industry and reduce selected portions of

the regulatory burden on these

operators, the Department has

concluded that this final rule does mot

constitute a significant rule under either

Executive Order 12866 or DOT’s

policies and procedures.

Regulatory Flexibility Act

The Regulatory Flexibility Act of 1980

(5 U.S.C. 601 et seq. requires a review

of rules to assess their impact on small

entities. The Department certifies that

this final rule does not have a

significant economic impact on a

substantial number of small entities.

The Public Charter industry is

composed of approximately 250 charter

operators half of which are small

commercial enterprises that file for a

single flight. The only change these

operators will notice in filing a

prospectus under the new rule will be

the saving of $39 in not having to

request a waiver of the 10-day waiting

period. The Department has concluded

that there are no substantial economic

impacts for small units of government,

business, or other organizations.

Paperwork Reduction Act

This rule contains information

collection requirements that have been

submitted to the Office of Management

and Budget for approval under the

Paperwork Reduction Act (44 U.S.C.

2507 et seq.). Collection-of-information

requirements include reporting,

recordkeeping, notification, and other

similar requirements. Persons are not

required to respond to a collection of

information unless it displays a

currently valid OMB control number.

We will publish a notice in the Federal

Register prior to the effective date of

this final rule of OMB’s decision to

approve, modify, or disapprove the

information collection requirements.

The paperwork burden for the filing of

Public Charter prospectuses will not

changes as a result of this Final Rule

because the applications and

amendments must still be prepared and

submitted to the Department.

Environmental Impact

The Department has evaluated this

final rule in accordance with its

procedures for ensuring full

consideration of the potential

environmental impacts of its actions as

required by the National Environmental

Policy Act (42 U.S.C. 4321 et seq.), other

environmental statutes, Executive

Orders, and DOT Order 5610.1c. It has
28236 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

been determined that this final rule does

not have any effect on the quality of the

environment.

Federalism Implications

The Department has analyzed this

rule under the principles and criteria

contained in Executive Order 12612

(‘‘Federalism’’) and has determined that

the rule does not have a substantial

effect on the States, on the relationship

between the national government and

the States, or on the distribution of

power and responsibilities among the

various levels of government. Thus, in

accordance with Executive Order 12612,

the rule does not have sufficient

federalism implications to warrant the

preparation of a federalism assessment.

Unfunded Mandates Reform Act

This rule does not impose any

unfunded mandates on State, local, or

tribal governments as defined by the

Unfunded Mandates Reform Act of 1995

(2 U.S.C. 1532–1538).

Summary of Cost/Benefits

Our analysis of the impact of changes

made in the Public Charter rule clearly

indicates that the changes are beneficial.

Elimination of the 10-day waiting

period after filing a prospectus will save

the cost of a waiver request. We are also

deleting the requirement to file a brief

(mini) prospectus by direct air carriers

conducting foreign-originating flights

for foreign charter operators. And

finally, we are consolidating three

largely repetitive rules applicable to

direct air carriers conducting charter

flights.

In order to estimate the cost savings

to industry from not requesting a waiver

of the 10-day waiting period, we

reviewed our 1996 record of filings. We

approved nearly 800 prospectus filings

during the year, most of which included

a filing fee of $39 and an additional $39

for a waiver request. Of the total fees

received, $62,400, nearly half would be

saved under the new rule. In addition,

we received between 700 and 800

waiver requests for amendments to

Public Charter prospectuses, changing

or eliminating flights. Eliminating filing

fees for such amendments should

provide an additional cost saving to

charter operators of approximately

$50,000. Cost savings in time and effort

for those filing prospectuses under the

new rule will be minimal since the

filings and the amendments must still

be provided.

In considering the cost savings to

airlines conducting foreign originating

flights for foreign tour operators we note

that many foreign air carriers retain the

services of U.S. law firms to provide

these documents. Since most foreign air

carriers are exempt from out filing fees

because of reciprocity agreements with

the U.S., the cost savings to the air

carriers will be the expense of retaining

a law firm to produce and file

information heretofore required by

Public Charter regulations.

Finally, rewrite of the four principal

parts of the Code of Federal Regulations

that address passenger air charter

operations provides a more condensed

and useable reference for the charter

industry and for those desiring to

engage in Public Charters. Consolidating

Parts 207 and 208 into a revised Part

212 has eliminated duplicative wording

while retaining these two parts with

only an applicability statement to avoid

confusion since a number of Department

orders now in effect require adherence

to the requirements. These and other

benefits of this Final Rule which can not

be quantified such as eliminating

certain waiver requirements, allowing

charter operators to accept credit card

payments and including current

practices concerning amendments to

filings, simplifies the process for

applications and does so without

compromising consumer protection.

List of Subjects in 14 CFR Parts 207,

208, 212, 380

Air Carriers, Air Transportation,

Charter Flights, Reporting and

recordkeeping requirements, Surety

bonds.

1. Part 207 is revised to read as

follows:

PART 207—CHARTER TRIPS BY U.S.

SCHEDULED AIR CARRIERS

Sec.

207.1 Applicability.

207.2 Terms of service.

Authority: 49 U.S.C. 40101, 40102, 40109,

40113, 41101, 41102, 41103, 41301, 41504,

41702, 41708, 41712, 46101.

§ 207.1 Applicability.

This part establishes the terms,

conditions, and limitations applicable to

charter air transportation conducted by

air carriers holding certificates under 49

U.S.C. 41102 authorizing the operation

of scheduled air transportation services.

§ 207.2 Terms of service.

Charter air transportation under this

part shall be performed in accordance

with the provisions of part 212 of this

chapter.

2. Part 208 revised to read as follows:

PART 208—CHARTER TRIPS BY U.S.

CHARTER AIR CARRIERS

Sec.

208.1 Applicability.

208.2 Terms of service.

Authority: 49 U.S.C. 40101, 40102, 40109,

40113, 41101, 41102, 41103, 41301, 41504,

41702, 41708, 41712, 46101.

§ 208.1 Applicability.

This part establishes the terms,

conditions, and limitations applicable to

charter air transportation conducted by

air carriers holding certificates under 49

U.S.C. 41102 authorizing the operation

of charter air transportation services.

§ 208.2 Terms of service.

Charter air transportation under this

part shall be performed in accordance

with the provisions of Part 212 of this

chapter.

3. Part 212 is revised to read as

follows:

PART 212—CHARTER RULES FOR

U.S. AND FOREIGN DIRECT AIR

CARRIERS

Sec.

212.1 Scope.

212.2 Definitions.

212.3 General provisions.

212.4 Authorized charter types.

212.5 Operation of affinity (pro rata)

charters.

212.6 Operation of gambling junket

charters.

212.7 Direct sales.

212.8 Protection of customers’ payments.

212.9 Prior authorization requirements.

212.10 Application for statement of

authorization.

212.11 Issuance of statement of

authorization.

212.12 Waiver.

Appendix A—Certificated or Foreign Air

Carrier’s Surety Bond Under part 212 of the

Regulations of the Department of

Transportation (14 CFR Part 212)

Appendix B—Certification of Compliance

Authority: 49 U.S.C. 40101, 40102, 40109,

40113, 41101, 41103, 41504, 41702, 41708,

41712, 46101.

§ 212.1 Scope.

This part applies to all charter flights,

and all other flights carrying charter

passengers or cargo, in interstate and/or

foreign air transportation by U.S.

certificated air carriers or in foreign air

transportation by foreign air carriers. It

does not apply to any flights performed

by a commuter air carrier, air taxi

operator, or certificated air carrier

operating ‘‘small aircraft’’ under part

298 of this chapter. Nothing in this part

gives authority to operate a type or level

of service not authorized by certificate,

foreign air carrier permit, or exemption,

except that a certificated air carrier
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28237

authorized to conduct scheduled

operations may conduct charter flights,

in interstate and/or foreign air

transportation, without limitation as to

the points served.

§ 212.2 Definitions.

For the purposes of this part:

Affinity (pro rata) charter means a

charter arranged by an organization on

behalf of its membership, and which

meets the requirements of § 212.5.

Certificated air carrier means a U.S.

direct air carrier holding a certificate

issued under 49 U.S.C. 41102.

Charter flight means a flight operated

under the terms of a charter contract

between a direct air carrier and its

charterer or lessee. It does not include

scheduled interstate air transportation,

scheduled foreign air transportation, or

nonscheduled cargo foreign air

transportation, sold on an individually

ticketed or individually waybilled basis.

Charter operator means:

(1) A ‘‘Public Charter operator’’ as

defined in § 380.2 of this chapter, or

(2) An ‘‘Overseas Military Personnel

Charter operator’’ as defined in § 372.2

of this chapter.

Direct air carrier means a certificated

or foreign air carrier that directly

engages in the operation of aircraft

under a certificate, permit, or exemption

issued by the Department.

Fifth freedom charter means a charter

flight carrying traffic that originates and

terminates in countries other than the

carrier’s home country, regardless of

whether the flight operates via the home

country.

Foreign air carrier means a direct air

carrier which is not a citizen of the

United States as defined in 49 U.S.C.

40102(a) that holds a foreign air carrier

permit issued under 49 U.S.C. 41302 or

an exemption issued under 49 U.S.C.

40109 authorizing direct foreign air

transportation.

Fourth freedom charter means a

charter flight carrying traffic that

terminates in the carrier’s home country

having originated in another country.

Gambling junket charter means a

charter arranged by a casino, hotel,

cruise line, or its agents, the purpose of

which is to transport passengers to the

casino, hotel, or cruise ship where

gambling facilities are available, and

which meets the requirements of

§ 212.6.

Long-term wet lease means a wet lease

which either—

(1) Lasts more than 60 days, or

(2) Is part of a series of such leases

that amounts to a continuing

arrangement lasting more than 60 days.

Mixed charter means a charter, the

cost of which is borne partly by the

charter participants and partly by the

charterer, where all the passengers meet

the eligibility requirements for ‘‘affinity

(pro rata)’’ charters of § 212.5.

Part charter means flight carrying

both charter and scheduled passenger

traffic.

Single entity charter means a charter

the cost of which is borne by the

charterer and not by individual

passengers, directly or indirectly.

Third freedom charter means a

charter flight carrying traffic that

originates in the carrier’s home country

and terminates in another country.

Wet lease means a lease between

direct air carriers by which the lessor

provides all or part of the capacity of an

aircraft, and its crew, including

operations where the lessor is

conducting services under a blocked

space or code-sharing arrangement.

§ 212.3 General provisions.

(a) Certificated and foreign air carriers

may conduct charter flights as described

in this part, and may carry charter

passengers on scheduled flights, or

charter cargo on scheduled or

nonscheduled flights (or on the main

deck or in the belly of passenger charter

flights), subject to the requirements of

this chapter and any orders of, or

specific conditions imposed by, the

Department.

(b) Charter flights may be operated on

a round-trip or one-way basis, with no

minimum group, shipment, or contract

size.

(c) Contracts to perform charter flights

must be in writing and signed by an

authorized representative of the

certificated or foreign air carrier and the

charterer prior to the operation of the

flights involved. The written agreement

shall include:

(i) The name and address of either the

surety whose bond secures advance

charter payments received by the

carrier, or of the carrier’s depository

bank to which checks or money orders

for the advance charter payments are to

be made payable as escrow holder

pending completion of the charter trip;

and

(2) A statement that unless the

charterer files a claim with the carrier,

or, if the carrier is unavailable, with the

surety, within 60 days after the

cancellation of a charter trip with

respect to which the charterer’s advance

payments are secured by the bond, the

surety shall be released from all liability

under the bond to such charterer for

such trips.

(d) A certificated or foreign air carrier

must make a reasonable effort to verify

that any charterer with which it

contracts, and any charter it conducts,

meets the applicable requirements of

this chapter.

(e) The certificated or foreign air

carriers shall require full payment of the

total charter price, including payment

for the return portion of a round trip, or

the posting of a satisfactory bond for full

payment, prior to the commencement of

any portion of the air transportation,

provided, however, that in the case of a

passenger charter for less than the entire

of an aircraft, the carrier shall require

full payment of the total charter price,

including payment for the return

portion of a round trip, from the

charterers not less than 10 days prior to

the commencement of any portion of the

transportation, and such payment shall

not be refundable unless the charter is

canceled by the carrier or unless the

carrier accepts a substitute charterer for

one which has canceled a charter, in

which case the amount paid by the

latter shall be refunded. For the purpose

of this section, payment to the carrier’s

depository bank, as designated in the

charter contract, shall be deemed

payment to the carrier.

(f) A certificated or foreign air carrier

operating a U.S.-originating passenger

charter shall be responsible to return to

his or her point of origin any passenger

who purchased round trip

transportation on that charter and who

was transported by that carrier on his or

her outbound flight; except that this

provision shall not apply in cases where

the return transportation is to be

provided by another certificated or

foreign air carrier.

(g) A certificated or foreign air carrier

may not perform any charter flight for

which a statement of authorization is

required under § 212.9 until one has

been granted by the Department. In

addition, if a foreign air carrier is

required to obtain a statement of

authorization under paragraph (e) of

that section, neither it, not any charter

operator, or any other person shall

advertise or sell any passenger charter

services except those that have been

specifically authorized by the

Department.

(h) A certificated air carrier may not

operate charters where such operations

would result in a substantial change in

the scope of its operations within the

meaning of part 204 of this chapter.

(i) A certificated air carrier may not

limit its baggage liability for interstate

charter flights except as set forth in part

254 of this chapter.

(j) A certificated air carrier may not,

except as set forth in part 121 of the

Federal Aviation Regulations (14 CFR

part 121), limit the availability, upon

reasonable request, of air transportation

and related services to a person who
28238 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

may require help from another person in

expeditiously moving to an emergency

exit for evacuation of an aircraft.

(k) A certificated air carrier holding a

certificate to conduct only cargo

operations may not conduct passenger

charters.

(l) A certificated air carrier may not

perform any charter in interstate

commerce within the State of Alaska.

(m) A foreign air carrier may operate

charters in foreign air transportation

only to the extent authorized by its

foreign air carrier permit under 49

U.S.C. 41302 or exemption authority

under 49 U.S.C. 40109, and only to the

extent to which such operations are

consistent with the provisions of any

applicable bilateral aviation

undertaking.

§ 212.4 Authorized charter types.

Certificated and foreign air carriers

may conduct the following charter

types, subject to the provisions of this

part:

(a) Affinity (pro rata) charters.

(b) Single entity charters, including:

(1) Wet leases involving the carriage

of passengers and/or cargo, provided,

that the wet lessee holds appropriate

economic authority from the

Department to conduct the proposed

operations; and

(2) Charters pursuant to contracts

with the Department of Defense,

provided, that foreign air carriers may

conduct charters for the Department of

Defense only to the extent that such

operations are consistent with the

provisions of 49 U.S.C. 40118.

(c) Mixed charters.

(d) Gambling junket charters.

(e) Public Charters in accordance with

part 380 of this chapter (including

operations by educational institutions as

defined in that part).

(f) Overseas military personnel

charters in accordance with part 372 of

this chapter.

(g) Cargo charters.

§ 212.5 Operation of affinity (pro rata)

charters.

An affinity (pro rata) charter operated

by a certificated or foreign air carrier

must meet the following criteria:

(a) The aircraft must be chartered by

an organization, no part of whose

business is the formation of groups for

transportation or solicitation or sale of

transportation services, for the purpose

of providing air transportation to its

members and their immediate families.

(b) The charter must be organized by

the organization itself, or by a person or

company who acts not as a principal,

but as an agent for the chartering

organization or the certificated or

foreign air carrier.

(c) No solicitation, sales, or

participation may take place beyond the

bona fide members of an eligible

chartering organization, and their

immediate families (spouse, children,

and parents). All printed solicitation

materials shall contain the following

notice in boldface, 10-point or larger

type—

Some of the Federal rules that protect

against tour changes and loss of passengers’

money in publicly sold charters do not apply

to this charter flight.

(d) ‘‘Bona fide members’’ are members

of an organization who: Have not joined

the organization merely to travel on a

charter flight; and who have been

members of the chartering organization

for a minimum of six months prior to

the date of commencement of the

affected flight; provided, that the ‘‘six

month’’ rule does not apply to:

(1) Employees of a single commercial

establishment, industrial plant, or

government agency, or

(2) Students and employees of a single

school.

(e) The charter price due the direct air

carrier shall be prorated equally among

all the charter passengers, except that

children under 12 may be offered

discounted or free transportation.

(f) The certificated or foreign air

carrier shall make reasonable efforts to

assure that passengers transported meet

the eligibility requirements of this

section. The certificated or foreign air

carrier shall also obtain (no later than

the date of departure), and maintain for

two years, a certification by an

authorized representative of the

chartering organization that all

passengers are eligible for transportation

under this section.

§ 212.6 Operation of gambling junket

charters.

A gambling junket charter operated by

a certificated or foreign air carrier must

meet the following criteria:

(a) The aircraft must be chartered by

(1) A casino, hotel, or cruise line duly

licensed by the government of any state,

territory or possession of the United

States, or by a foreign government, or

(2) An agent of such a casino, or

cruise line on behalf of that casino,

hotel, or cruise line.

(b) The casino, hotel, or cruise line or

its agents, may not require a passenger

to incur any expense in taking the trip,

provided, that this provision shall not

preclude the casino, hotel, or cruise line

or its agents, from requiring prospective

passengers to pay nominal reservation

fees that are duly refundable by the

casino, hotel, or cruise line before the

flight, establish a minimum line-ofcredit at the casino, hotel, or cruise line,

bring (but not necessarily spend) a

specified minimum amount of money,

or meet other requirements that do not

place them in financial jeopardy; nor

does it preclude the casino, hotel, or

cruise line, or its agents, from offering

operational land packages for a fee.

§ 212.7 Direct sales.

(a) Certificated and foreign air carriers

may sell or offer for sale, and operate,

as principal, Public Charter flights

under part 380 of this chapter directly

to the public.

(b) Each certificated or foreign air

carrier operating a charter trip under

this section shall comply with all the

requirements of part 380 of this chapter,

except that:

(1) Those provisions of part 380

relating to the existence of a contract

between a charter operator and a direct

air carrier do not apply;

(2) A depository agreement shall

comply with § 380.34a (d) and (f);

(3) A security agreement shall comply

with § 380.34 (c) and (d); and

(i) If no depository agreement is used,

protect charter participant payments

(including those for ground

accommodations and services) and

assure the certificated or foreign air

carrier’s contractual and regulatory

responsibilities to charter participants

in an unlimited amount (except that the

liability of the securer with respect to

any charter participant may be limited

to the charter price paid by or on behalf

of such participant);

(ii) If used in combination with a

depository agreement, protect charter

participant payments (including those

for ground accommodations and

services) and assure the certificated or

foreign air carrier’s contractual and

regulatory responsibilities to charter

participants in the amount of at least

$10,000 times the number of flights,

except that the amount need not be

more than $200,000. The liability of the

securer with respect to any charter

participant may be limited to the charter

price paid by or on behalf of such

participant.

(c) The Department reserves the right

to limit or prohibit the operation of

direct sales Public Charters by a foreign

air carrier upon a finding that such

action is necessary in the public

interest.

§ 212.8 Protection of customers’

payments.

(a) Except as provided in paragraph

(c) of this section, no certificated air

carrier or foreign air carrier shall

perform any charter trip (other than a

cargo charter trip) originating in the

United States or any Overseas Military
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28239

1While the face amount of the bond is unlimited,

claims are limited to amounts that are paid to

carrier for U.S.-originating passenger charter flights

that carrier fails to perform or to refund.

Personnel Charter trip, as defined in

part 372 of this chapter, nor shall such

carrier accept any advance payment in

connection with any such charter trip,

unless there is on file with the

Department a copy of a currently

effective agreement made between said

carrier and a designated bank, by the

terms of which all sums payable in

advance to the carrier by charterers, in

connection with any such trip to be

performed by said carrier, shall be

deposited with and maintained by the

bank, as escrow holder, the agreement to

be subject to the following conditions:

(1) The charterer (or its agent) shall

pay the carrier either by check or money

order made payable to the depository

bank. Such check or money order and

any cash received by the carrier from a

charterer (or its agent) shall be

deposited in, or mailed to, the bank no

later than the close of the business day

following the receipt of the check or

money order or the cash, along with a

statement showing the name and

address of the charterer (or its agent);

provided, however, that where the

charter transportation to be performed

by a carrier is sold through a travel

agent, the agent may be authorized by

the carrier to deduct its commission and

remit the balance of the advance

payment to the carrier either by check

or money order made payable to the

designated bank.

(2) The bank shall pay over to the

carrier escrowed funds with respect to

a specific charter only after the carrier

has certified in writing to the bank that

such charter has been completed;

provided, however, that the bank may

be required by the terms of the

agreement to pay over to the carrier a

specified portion of such escrowed

funds, as payment for the performance

of the outbound segment of a round-trip

charter upon the carrier’s written

certification that such segment has been

so completed.

(3) Refunds to a charterer from sums

in the escrow account shall be paid

directly to such charterer its assigns.

Upon written certification from the

carrier that a charter has been canceled,

the bank shall turn over directly to the

charterer or its assigns all escrowed

sums (less any cancellation penalties as

provided in the charter contract) which

the bank holds with respect to such

canceled charter, provided however,

that in the case of a split charter

escrowed funds shall be turned over to

a charterer or its assigns only if the

carrier’s written certification of

cancellation of such charter includes a

specific representation that either the

charter has been canceled by the carrier

or, if the charter has been canceled by

the charterer, that the carrier has

accepted a substitute charterer.

(4) The bank shall maintain a separate

accounting for each charter flight.

(5) As used in this section the term

‘‘bank’’ means a bank insured by the

Federal Deposit Insurance Corporation.

(b) The escrow agreement required

under paragraph (a) of this section shall

not be effective until approved by the

Department. Claims against the escrow

may be made only with respect to the

non-performance of air transportation.

(c) The carrier may elect, in lieu of

furnishing an escrow agreement

pursuant to paragraph (a) of this section,

to furnish and file with the Department

a surety bond with guarantees to the

United States Government the

performance of all charter trips (other

than cargo charter trips) originating in

the United States and of all overseas

military personnel charter trips, as

defined in part 372 of this chapter, to be

performed, in whole or in part, by such

carrier pursuant to any contracts entered

into by such carrier. The amount of such

bond shall be unlimited.1 Claims under

the bond may be made only with respect

to the non-performance of air

transportation.

(d) The bond permitted by this section

shall be in the form set forth as the

appendix to this part. Such bond shall

be issued by a bonding or surety

company—

(1) Which is listed in Best’s Insurance

Reports (Fire and Casualty) with a

general policyholders’ rating of ‘‘A’’ or

better or

(2) Which is listed in the U.S.

Department of Treasury’s notice listing

companies holding Certificates of

Authority as acceptable sureties on

Federal bonds and as acceptable

reinsuring companies, published in the

Federal Register on or about July 1. The

bonding or surety company shall be one

legally authorized to issue bonds of that

type in the State in which there is

located the office or usual residence of

the agency designated by the carrier

under 49 U.S.C. 46103 to receive service

of notices, process and other documents

issued by or filed with the Department

of Transportation. For the purposes of

this section the term ‘‘State’’ includes

any territory or possession of the United

States, or the District of Columbia. If the

bond does not comply with the

requirements of this section, or for any

reason fails to provide satisfactory or

adequate protection for the public, the

Department will notify the certificated

or foreign air carrier by registered or

certified mail, stating the deficiencies of

the bond. Unless such deficiencies are

corrected within the time limit set forth

in the notification, no amounts payable

in advance by customers for the subject

charter trips shall be accepted by the

carrier.

(e) The bond required by this section

shall provide that unless the charterer

files a claim with the carrier, or, if the

carrier is unavailable, with the surety,

within 60 days after cancellation of a

charter trip with respect to which the

charterer’s advance payments are

secured by the bond, the surety shall be

released from all liability under the

bond to such charterer for such charter

trip. The contract between the carrier

and the charterer shall contain notice of

this provision.

§ 212.9 Prior authorization requirements.

(a) Certificated air carriers shall obtain

a statement of authorization for each

long-term wet lease to a foreign air

carrier.

(b) Foreign air carriers shall obtain a

statement of authorization for each:

(1) Fifth freedom charter flight to or

from the United States;

(2) Long-term wet lease;

(3) Charter flight for which the

Department specifically requires prior

authorization under paragraph (e) or (f)

of this section; or

(4) Part charter.

(c) The Department may issue blanket

statements of authorization to foreign air

carriers to conduct fifth freedom

charters. The standards for issuing such

blanket authorizations shall be those

stated in § 212.11. The Department may

revoke any authority granted under this

paragraph at any time without hearing.

(d) The Department may at any time,

with or without hearing, but with at

least 30 days’ notice, require a foreign

air carrier to obtain a statement of

authorization before operating any

charter flight. In deciding whether to

impose such a requirement, the

Department will consider (but not be

limited to considering) whether the

country of the carrier’s nationality:

(1) Requires prior approval for third

or fourth freedom charter flights by U.S.

air carriers;

(2) Has, over the objection of the U.S.

Government, denied rights of a U.S. air

carrier guaranteed by a bilateral

agreement; or

(3) Has otherwise impaired, limited,

or denied the operating rights of U.S. air

carriers, or engaged in unfair,

discriminatory, or restrictive practices

with respect to air transportation

services to, from, through, or over its

territory.
28240 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

(e) The Department, in the interest of

national security, may require a foreign

air carrier to provide prior notification

or to obtain a statement of authorization

before operating any charter flight over

U.S. territory.

§ 212.10 Application for statement of

authorization.

(a) Application for a statement of

authorization shall be submitted on OST

Form 4540 except that for part charters

or long-term wet leases the application

may be in letter form. An application for

a long-term wet lease shall describe the

purpose and terms of the wet lease

agreement. An original and two copies

of an application shall be submitted to

the Department of Transportation,

Office of International Aviation, U.S.

Air Carrier Licensing Division, X–44 (for

an application by a certificated air

carrier), or Foreign Air Carrier Licensing

Division, X–45 (for an application by a

foreign air carrier), 400 Seventh Street,

SW., Washington, DC 20590. Upon a

showing of good cause, the application

may be transmitted by facsimile (fax) or

telegram, or may be made by telephone,

provided, that in the case of a fax or

telephone application, the applicant

must confirm its request (by filing an

original and two copies of its

application as described above) within

three business days.

(b) A copy of each application for a

long-term wet lease shall also be served

on the Director of Flight Standards

Service (AFS–1), Federal Aviation

Administration, 800 Independence

Avenue, SW., Washington, DC 20591,

and on each certificated air carrier that

is authorized to serve the general area in

which the proposed transportation is to

be performed.

(c)(1) Applicants for statements of

authorization filed by foreign air carriers

shall include documentation to

establish the extent to which the

country of the applicant’s nationality

deals with U.S. air carriers on the basis

of reciprocity for similar flights, if such

flights are not subject to a bilateral

agreement, and

(i) The Department has not

established that the country accords

reciprocity;

(ii) The Department has found

reciprocity defective in the most recent

prior approval application involving the

country; or

(iii) Changes in reciprocity have

occurred since the most recent

Department finding for the country in

question.

(2) Applications filed by certificated

or foreign air carriers to conduct longterm wet leases shall include, for the

country of the lessee’s nationality, the

documentation specified in paragraph

(c)(1) of this section.

(d)(1) Applications shall be filed at

least 5 business days before

commencement of the proposed flight or

flights, except as specified in paragraphs

(d)(2), (d)(3), and (d)(4) of this section.

Late applications may be considered

upon a showing of good cause for the

lateness.

(2) Applications for a part charter or

for a long-term wet lease shall be filed

at least 45 calendar days before the date

of the first proposed flight.

(3) Applications specifically required

under § 212.9(d) shall be filed at least 30

calendar days before the proposed flight

or flights (10 calendar days for cargo

charters), unless otherwise specified by

the Department.

(4) Applications required by a

Department order under § 212.9(e) shall

be filed at least 14 calendar days before

the proposed flight or flights, unless

otherwise specified by the Department.

(5) Where an application is required

by more than one provision of this part

and/or order of the Department, only

one application need be filed, but it

must conform to the earliest applicable

filing deadline.

(6) The Department may require

service of applications as it deems

necessary.

(e)(1) Any part in interest may file a

memorandum supporting or opposing

an application. Three copies of each

memorandum shall be filed within 7

business days after service of the

application or before the date of the

proposed flight or flights, whichever is

earlier. Memorandums will be

considered to the extent practicable; the

Department may act on an application

without waiting for supporting or

opposing memorandums to be filed.

(2) Each memorandum shall set forth

the reasons why the application should

be granted or denied, accompanied by

whatever data, including affidavits, the

Department is requested to consider.

(3) A copy of each memorandum shall

be served on the certified or foreign air

carrier applying for approval.

(f)(1) Unless otherwise ordered by the

Department, each application and

memorandum filed in response will be

available for public inspection at the

Office of International Aviation

immediately upon filing. Notice of the

filing of all applications shall be

published in the Department’s Weekly

List of Applications Filed.

(2) Any person objecting to public

disclosure of any information in an

application or memorandum must state

the grounds for the objection in writing.

If the Department finds that disclosure

of all or part of the information would

adversely affect the objecting person,

and that the public interest does not

require disclosure, it will order that the

injurious information be withheld.

§ 212.11 Issuance of statement of

authorization.

(a) The Department will issue a

statement of authorization if it finds that

the proposed charter flight, part charter,

or wet lease meets the requirements of

this part and that it is in the public

interest. Statements of authorization

may be conditioned or limited.

(b) In determining the public interest

the Department will consider (but not be

limited to) the following factors:

(1) The extent to which the authority

sought to covered by and consistent

with bilateral agreements to which the

United States is a party.

(2) The extent to which an applicant

foreign air carrier’s home country (and,

in the case of a long-term wet lease, the

lessee’s home country) deals with U.S.

air carriers on the basis of substantial

reciprocity.

(3) Whether the applicant or its agent

has previously violated the provisions

of this part.

(4) Where the application concerns a

long-term wet lease:

(i) Whether the lessor (applicant) or

its agent or the lessee (charterer) or its

agent has previously violated the

provisions of the Department’s charter

regulations.

(ii) Whether, because of the nature of

the arrangement and the benefits

involved, the authority sought should be

the subject of a bilateral agreement.

(iii) To what extent the lessor owns

and/or controls the lessee, or is owned

and/or controlled by the lessee.

(c) The Department will submit any

denial of an authorization specifically

required of a foreign air carrier under

§ 212.9(d) to the President of the United

States at least 10 days before the

proposed departure. The denial will be

subject to stay or disapproval by the

President within 10 days after it is

submitted. A shorter period for

Presidential review may be specified by

the Department where the application

for authorization is not timely or

properly filed. Denial of a late-filed

application need not be submitted to the

President. For the purposes of this

paragraph, an application filed by a

foreign air carrier under § 212.9(d) to

conduct a cargo charter will be

considered as timely filed only if it is

filed at least 30 calendar days before the

proposed flight, notwithstanding the 10-

day filing requirement for cargo charters

in § 212.10(d)(3).

(d) The Department will publish

notice of its actions on applications for
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28241

statements of authorization in its

Weekly List of Applications Filed.

Interested persons may upon request

obtain copies of letters of endorsed

forms advising applicants of action

taken on their applications.

§ 212.12 Waiver.

The Department may grant a waiver of

any of the provisions of this part upon

a finding that such waiver is in the

public interest. A certificated or foreign

air carrier may request a waiver by filing

a written application with the

Department, citing the specific

provision to be waived and providing

justification for such waiver.

Appendix A—Certificated or Foreign

Air Carrier’s Surety Bond Under Part

212 of the Regulations of the

Department of Transportation (14 CFR

Part 212)

Know all persons by these presents, that

we llllllllll (Name of

certificated or foreign air carrier) of

llllllllll, (City)

llllllllll (State or Country) as

Principal (hereinafter called Principal), and

llllllllll (name of Surety) a

corporation created and existing under the

laws of the State of llllllll (State)

as Surety (hereinafter called Surety) are held

and firmly bound unto the United States of

America in an unlimited amount, as required

by 14 CFR 212.8, for which payment, well

and truly to be made, we bind ourselves and

our heirs, executors, administrators,

successors, and assigns, jointly and severally,

firmly by these presents.

Whereas the principal, a certificated air

carrier holding a certificate of public

convenience and necessity issued under 49

U.S.C. 41102, or a foreign air carrier holding

a foreign air carrier permit issued under 49

U.S.C. 41302 or an exemption issued under

49 U.S.C. 40109 authorizing that foreign air

carrier to engage in charter trips in foreign air

transportation, is subject to rules and

regulations of the Department of

Transportation relating to security for the

protection of charterers of civil aircraft and

has elected to file with the Department of

Transportation such a bond as will guarantee

to the United States Government the

performance of all charter trips (other than

cargo charter trips) originating in the United

States and of all Overseas Military Personnel

Charters, as defined in 14 CFR part 372, to

be performed, in whole or in part, by such

certificated or foreign air carrier pursuant to

contracts entered into by such carrier after

the execution date of this bond, and

Whereas this bond is written to assure

compliance by the Principal with rules and

regulations of the Department of

Transportation relating to security for the

protection of charterer of civil aircraft for

charter trips (other than cargo charters)

originating in the United States or of

Overseas Military Personnel Charter trips and

shall inure to the benefit of any and all such

charterers to whom the Principal may be held

legally liable for any of the damages herein

described.

Now, therefore, the condition of this

obligation is such that if the Principal shall

pay or cause to be paid to such charterer any

sum or sums for which the Principal may be

held legally liable by reason of the Principal’s

failure faithfully to perform, fulfill, and carry

out all contracts made by the Principal while

this bond is in effect for the performance of

charter trips (other than cargo charter trips)

originating in the United States and of

Overseas Military Personnel Charter trips,

then this obligation shall be void, otherwise

to remain in full force and effect.

The liability of the Surety shall not be

discharged by any payment or succession of

payments hereunder in any specified

amount. The surety agrees to furnish written

notice to the Department of Transportation

forthwith of all suits filed, judgments

rendered, and payments made by said Surety

under this bond.

This bond is effective the lll day of

llllllll, llll, 12:01 a.m.,

standard time at the address of the Principal

as stated herein and shall continue in force

until terminated as hereinafter provided. The

Principal or the Surety may at any time

terminate this bond by written notice to the

Department of Transportation at its office in

Washington, D.C., such termination to

become effective thirty (30) days after actual

receipt of said notice by the Department. The

Surety shall not be liable hereunder for the

payment of the damages hereinbefore

described which arise as the result of any

contracts for the performance of air

transportation services made by the Principal

after the termination of this bond becomes

effective, as herein provided, but such

termination shall not affect the liability of the

Surety hereunder for the payment of any

such damages arising as the result of

contracts for the performance of air

transportation services made by the Principal

after the termination of this bond becomes

effective. Liability of the Surety under this

bond shall in all events be limited only to a

charterer who shall within sixty (60) days

after the cancellation of a charter trip with

respect to which the charterer’s advance

payments are secured by this bond give

written notice of claim to the certificated or

foreign air carrier, or, if it is unavailable, to

the Surety, and all liability on this bond for

such charter trip shall automatically

terminate sixty (60) days after the

termination date thereof except for claims

filed within the time provided herein.

In witness whereof, the said Principal and

Surety have executed this instrument on the

lll day of llllllll, llll.

Principal

Name llllllllllllllllll

By: Signature and title llllllllll

Witness lllllllllllllllll

Surety

Name llllllllllllllllll

By: Signature and title llllllllll

Witness lllllllllllllllll

Bonding or surety company must be listed in

Best’s Insurance Reports (Fire and Casualty)

with a general policyholders’ rating of ‘‘A’’ or

better or in the Department of the Treasury

listing of companies holding certificates of

authority as acceptable sureties on Federal

bonds. In addition, the bonding or surety

company shall be one legally authorized to

issue bonds of that type in the State(s) in

which the charter flight(s) originate. Agents

must provide satisfactory proof that they

have the requisite authority to issue this

bond.

Appendix B—Certification of

Compliance

Organization Charterworthiness for Affinity

Charter Air Transportation and Eligibility of

All Prospective Passengers for Such Flights

Under Part 212 of the Regulations of the

Department of Transportation (14 CFR Part

212)

I declare under penalty of perjury under

the laws of the United States of America that

the foregoing is true and correct.

4. Part 380 is revised to read as

follows:

PART 380—PUBLIC CHARTERS

Subpart A—General Provisions

Sec.

380.1 Applicability.

380.2 Definitions.

380.3 General provisions.

380.4 Enforcement.

Subpart B—Conditions and Limitations

380.10 Public Charter requirements.

380.11 Payment to direct air carrier(s).

380.12 Cancellation by charter operator and

notice to participants.

380.13 Prohibition on sale of round trips

with open returns.

380.14 Unused space.

380.15 Substitution for charter participants.

380.17 Charters conducted by educational

institutions.

Subpart C—Requirements Applicable to

Charter Operators

380.20 Relief from the Statute.

380.21 380.23 [Reserved]

380.24 Suspension of exemption authority.

380.25 Prospectus filing and related

requirements.

380.26 Discrimination.

380.27 Methods of competition.

380.28 Charter prospectus.

380.29 Charter contract.

380.30 Solicitation materials.

380.31 General requirements for operatorparticipant contracts.

380.32 Specific requirements for operatorparticipant contracts.

380.33 Major changes in itinerary or price;

refunds.

380.33a Operator’s option plan.

380.34 Security and depository agreements.

380.34a Substitution of direct air carrier’s

security or depository agreement.

380.35 Disbursements from depository

account.

380.36 Record retention.

Subpart D—Requirements Applicable to

Direct Air Carriers

380.40 Charter not to be performed unless

in compliance with this part 380.

380.41 380.42 [Reserved]

380.43 Cancellations by direct air carriers.
28242 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

380.45 Suspension of exemption authority.

380.46 Charter trip reporting.

Subpart E—Registration of Foreign Charter

Operators

380.60 Purpose.

380.61 Operations by foreign charter

operators.

380.62 Registration applications.

380.63 Objections to registration

applications.

380.64 Department action on a registration

application.

380.65 Notification of change of operations

or ownership.

380.66 Cancellation or conditioning of the

registration.

380.67 Waiver of sovereign immunity.

Appendix A—Public Charter Operator’s

Surety Bond Under Part 380 of the

Special Regulations of the Department of

Transportation (14 CFR Part 380)

Appendix B Public Charter Surety Trust

Agreement

Authority: 49 U.S.C. 40101, 40102, 40109,

40113, 41101, 41103, 41301, 41504, 41702,

41708, 41712, 46101.

Subpart A—General Provisions

§ 380.1 Applicability.

This part applies to Public Charter air

transportation of passengers in interstate

or foreign air transportation, whether

furnished by direct air carriers or Public

Charter operators. This part also relieves

such charter operators from various

provisions of subtitle VII of Title 49 of

the United States Code (statute),

formerly Title IV of the Federal Aviation

Act of 1958, as amended, for the

purpose of enabling them to provide

Public Charters utilizing aircraft

chartered from such direct air carriers.

It also declines jurisdiction over foreign

Public Charter operators operating

foreign-originating Public Charters.

§ 380.2 Definitions.

For the purposes of this part:

Certificated air carrier means a U.S.

direct air carrier holding a certificate

issued under the statute.

Charter flight means a flight operated

under the terms of a charter contract

between a direct air carrier and its

customer. It does not include scheduled

air transportation, scheduled foreign air

transportation, or nonscheduled cargo

air transportation, sold on an

individually ticketed or individually

waybilled basis.

Direct air carrier means a certificated

or foreign air carrier, or an air taxi

operator or commuter air carrier

registered under part 298 of this

chapter, or a Canadian charter air taxi

operator registered under part 294 of

this chapter, that directly engages in the

operation of aircraft under a certificate,

permit or exemption issued by the

Department.

Educational institution means a

school that is operated as such on a

year-round basis and is empowered to

grant academic degrees or secondary

school diplomas by any government in

the United States or by a foreign

government.

Foreign air carrier means a direct air

carrier that holds a foreign air carrier

permit issued under the statute or an

exemption issued under the statute

authorizing direct foreign air

transportation.

Foreign Public Charter opertor means

an indirect air carrier which is not a

citizen of the United States as defined

in the statute, that is authorized to

engage in the formation of groups for

transportation on Public Charters in

accordance with this part.

Indirect air carrier means any person

who undertakes to engage indirectly in

air transportation operations and who

uses for such transportation the services

of a direct air carrier.

Public Charter means a one-way or

round-trip charter flight to be performed

by one or more direct air carriers that is

arranged and sponsored by a charter

operator.

Public Charter operator means a U.S.

or foreign Public Charter operator.

Security agreement means:

(1) A surety bond issued by a

company—

(i) That is listed in the Best’s

Insurance Reports (Fire and Casualty)

with a general policyholders’ rating of

‘‘A’’ or better, or

(ii) That is listed in the U.S.

Department of Treasury’s notice listing

companies holding Certificates of

Authority as acceptable sureties on

Federal bonds and as acceptable

reinsuring companies, published in the

Federal Register in the first week in

July; or

(2) A Surety trust agreement or a

letter-of-credit, issued by a Federal

Deposit Insurance Corporation-insured

financial institution, which provides

substantially equivalent protection.

Statute means Subtitle VII of Title 49

of the United States Code

(Transportation).

Sub-operator means a Public Charter

operator that has contracted for its

charter seats from a Public Charter

operator that has contracted from one or

more direct air carriers. A sub-operator

is itself an indirect air carrier, not an

agent of the Public Charter operator

from which it has obtained its seat.

U.S. Public Charter operator means an

indirect air carrier that is a citizen of the

United States as defined in 49 U.S.C.

40102(a) and that is authorized to

engage in the formation of groups for

transportation on Public Charters in

accordance with this part.

§ 380.3 General provisions.

(a) Public Charters may be operated

on a one-way or round-trip basis, with

no minimum group or contract size.

Public Charters may be sold on an aironly basis, or with mandatory or

optional land arrangements.

(b) A U.S. Public Charter operator

operating a Public Charter which

originates in a foreign country shall not

be subject to the requirements of

§§ 380.25, 380.28, 380.30 and 380.35.

(c) The Department declines to

exercise jurisdiction over a foreign

Public Charter operator which operates

a Public Charter originating in a foreign

country, but reserves the right to

exercise its jurisdiction over any foreign

Public Charter operator at any time its

finds that such action is in the public

interest.

(d)(1) An educational institution

operating a Public Charter need not

comply with the financial security

requirements of § 380.34 if each student

participant in the charter is enrolled in

a formal academic course of study

outside the United States, sponsored by

or in conjunction with that institution,

that is of at least four weeks’ duration.

(2) The spouse, children, and parents

of a student participant may accompany

the participant on a charter operated

under this section.

(e) The Department, upon application

or on its own initiative, may waive any

of the provision of this part if it finds

such action to be in the public interest.

§ 380.4 Enforcement.

In the case of any violation of the

provision of the Statute or of this part,

or any other rule, regulations, or order

issued under the Statute, the violator

may be subject to a proceeding pursuant

to the Statute before the Department or

a U.S district court, as the case may be,

to compel compliance therewith; to civil

penalties pursuant to the provisions of

the Statute, or to criminal penalties

pursuant to the provisions of the

Statute, or other lawful sanctions.

Subpart B—Conditions and Limitations

§ 380.10 Public Charter requirements.

Public Charters under this part shall

meet the following requirements:

(a)–(b) [Reserved]

(c) If the charter is on a round-trip

basis, the departing flight and returning

need not be performed by the same

direct air carrier.

(d) The air transportation portion of

the charter must be performed by direct

air carriers that hold authority under
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28243

Chapter 411 and 413 of the Statute, or

are operating under 14 CFR part 298,

except that only U.S. citizen direct air

carriers may provide air transportation

for operations in interstate air

transportation.

§ 380.11 Payment to direct air carrier(s).

Except for air taxi operators and

commuter air carriers (which are

governed by 14 CFR 298.38) and

Canadian charter air taxi operators

(which are governed by 14 CFR 294.32),

the direct air carrier(s) shall be paid in

full for the cost of the charter

transportation (for both legs, if a roundtrip charter) prior to the scheduled date

of flight departure, as provided for in

the basic charter regulations applicable

to the direct air carrier(s) under part 212

of this chapter.

§ 380.12 Cancellation by charter operator

and notice to participants.

(a) The charter operator may not

cancel a charter for any reason

(including insufficient participation),

except for circumstances that make it

physically impossible to perform the

charter trip, less than 10 days before the

scheduled date of departure of the

outbound trip.

(b) If the charter operator cancels 10

or more days before the scheduled date

of departure, the operator must so notify

each participant in writing within 7

days after the cancellation but in any

event not less than 10 days before the

scheduled departure date of the

outbound trip. If a charter is canceled

less than 10 days before scheduled

departure (i.e., for circumstances that

make it physically impossible to

perform the charter trip), the operator

must get the message to each participant

as soon as possible.

§ 380.13 Prohibition on sale of round trips

with open returns.

The charter operator shall not accept

any participant’s payment for return

transportation unless the participant has

specified a particular return flight.

§ 380.14 Unused space.

Noting contained in this part shall

preclude a charter operator from

utilizing any unused space on an

aircraft by it for a Public Charter for the

transportation, on a free or reduced

basis, of such charter operator’s

employees, directors, and officers, and

parents and immediate families of such

persons.

§ 380.15 Substitution for charter

participants.

Subsititues may be arranged for

charter participants at any time

preceding departure. Participants who

provide the charter operator or its sales

agent with a substitute participant, or

who are substituted for by a participant

found by the operator, shall receive a

refund of all moneys paid to the

operator, except that the operator may

reserve the right to retain an

administrative fee not to exceed $25 for

effecting the substitution.

§ 380.17 Charters conducted by

educational institutions.

(a) This section shall apply only to

charters conducted by educational

institutions for charter groups

comprised of bona fide participants in a

formal academic course of study abroad

which is of at least 4 weeks duration.

The charter group may also include a

student participant’s immediate family

(spouse, children, and parents). Except

as modified in this section, all terms

and conditions of this part applicable to

the operation of Public Charters shall

apply to charters conducted by

educational institutions.

(b) An educational institution

conducting such a charter shall submit

to the Office of Aviation Analysis,

Special Authorities Division, a

statement, signed by its president,

certifying that it meets the definition of

‘‘educational institution’’ set forth in

§ 380.2.

(c) An educational institution

conducting such a charter need not

comply with the requirements of

§§ 380.25, 380.28, 380.34, and 380.35.

Subpart C—Requirements Applicable

to Charter Operators

§ 380.20 Relief from the Statute.

(a) To the extent necessary to permit

them to organize and arrange public

charters, charter operators and foreign

charter operators are hereby relieved

from the following provisions of

Subtitle VII of Title 49 of the U.S. Code,

only if and so long as they comply with

the provisions and the conditions

imposed by this part:

(1) Chapter 411.

(2) Chapter 413.

(3) Chapter 415.

(4) Chapter 419.

(5) If foreign charter operators receive

interstate air transportation rights, any

other provision of the statute that would

otherwise prohibit them from organizing

and arranging Public Charters in

interstate air transportation.

(b) A charter operator who is a citizen

of the United States shall not be subject

to the following requirements with

respect to Public Charters that originate

in a foreign country: §§ 380.25, 380.28,

and 380.30 through 380.35.

§§ 380.21–380.23 [Reserved]

§ 380.24 Suspension of exemption

authority.

The Department reserves the power to

deny the exemption authority of any

charter operator, without hearing, if it

finds that such action is necessary in the

public interest or is otherwise necessary

in order to protect the rights of the

traveling public.

§ 380.25 Prospectus filing and related

requirements.

A charter operator may organize and

operate a Public Charter only in

accordance with this part, and subject to

the following conditions:

(a) No charter operator shall operate,

sell, receive money from any

prospective participant for, or offer to

sell or otherwise advertise a charter or

series of charters until the Office of

Aviation Analysis, Special Authorities

Division, has accepted a Public Charter

prospectus as described in § 380.28.

(b) If within 10 days after the filing

the Department notifies the charter

operator that it has rejected the

prospectus for noncompliance with this

part, the prohibitions set forth in

paragraph (a) of this section shall

continue until the Department advises

that it has accepted the prospectus.

(c) The following amendments to a

filed prospectus may be made:

(1) The addition or cancellation of any

flight;

(2) A change in any flight, date, origin

city or destination city; and

(3) A change in or addition of any

direct air carrier, securer, or depository

bank.

(d) The charter operator shall amend

the prospectus to reflect any change

described in paragraph (c) of this

section. The amendment shall be filed

in the manner and form used for the

original prospectus. It shall become

effective upon filing unless the operator

is otherwise notified.

(e) The charter operator shall notify

the depository bank (if any) and the

securer of any change described in

paragraph (c) of this section not later

than when filing a prospectus

amendment to reflect the change. If the

securer is unable to adjust the security

agreement as required by the change,

the Office of Aviation Analysis, Special

Authorities Division shall be advised of

this fact within 2 business days.

(Approved by the Office of Management and

Budget under Control Number 2106–0005).

§ 380.26 Discrimination.

No charter operator shall make, give,

or cause any undue or unreasonable

preference or advantage to any
28244 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

particular person, port, locality, or

description of traffic in air

transportation in any respect

whatsoever, or subject any particular

person, port, locality, or description of

traffic in air transportation to any unjust

discrimination or any undue or

unreasonable prejudice or disadvantage

in any respect whatsoever.

§ 380.27 Methods of competition.

No charter operator shall engage in

unfair or deceptive practices or unfair

methods of competition in air

transportation or the sale thereof.

§ 380.28 Charter prospectus.

(a) The charter prospectus shall

include an original and two copies of

the following:

(1) From the charter operator and the

direct air carrier:

(i) The proposed flight schedule,

listing the origin and destination cities,

dates, type of aircraft, number of seats,

and charter price for each flight;

(ii) The tour itinerary (if any)

including hotels (name and length of

stay at each), and other ground

accommodations and services; and

(iii) A statement that they have

entered into a charter contract that

covers the proposed flight schedule, that

the contract complies with all

applicable Department regulations, and

that a copy of the schedule has been

sent to the depository bank (if any) and

the operator’s securer. The schedule

shall be identified with a number

assigned by the charter operator that

does not duplicate any schedule

numbers assigned by the operator to

other proposed flight schedules. The

proposed flight schedule, tour itinerary

(if any), and statement shall be filed on

OST Form 4532.

(2)(i) From the charter operator and

the securer, a statement:

(A) That they have entered into a

security agreement covering the

proposed flight schedule that complies

with § 380.34, including the amount of

the coverage, the number assigned to it

by the securer, and the amount of any

outstanding claims against it, and

(B) That the securer has received a

copy of the proposed flight schedule.

The statement shall identify the

proposed flight schedule by the

schedule number assigned by the

charter operator in accordance with

paragraph (a) of this section. If there are

any outstanding claims against the

agreement, the charter operator and

securer shall also state that they have

executed a rider or amendment

increasing the coverage by the amount

of the claims, or that the securer will

separately pay any claims for which it

may be liable without impairing the

agreement or reducing the amount of its

coverage.

(ii) These statements shall be filed an

OST Form 4533.

(3) If a depository agreement is used,

a statement from the charter operator,

the direct air carrier, and the depository

bank:

(i) That they have entered into a

depository agreement covering the

proposed flight schedule that complies

with § 380.34, and

(ii) That the bank has received a copy

of the proposed flight schedule by the

schedule number assigned by the

charter operator in accordance with

paragraph (a)(1) of this section. This

statement shall be filed on OST Form

4534.

(b) Each of the statements described

in paragraph (a) of this section shall also

include the names and addresses of the

parties to it, and the originals shall be

signed by those parties.

(c) The prospectus may cover a series

of charters performed by one charter

operator if the departure of the last

charter is not more than one year after

the departure of the first.

(d) If the prospectus covers a series of

charters and the air transportation will

be performed by more than one direct

air carrier, the prospectus shall include

separate statements in accordance with

paragraphs (a)(1) and (a)(3) of this

section to cover the flights that will be

performed by each direct carrier.

(Approved by the Office of Management and

Budget under Control Number 2106–0005).

§ 380.29 Charter contract.

The charter contract between the

charter operator or foreign charter

operator and the direct air carrier shall

evidence a binding commitment on the

part of the carrier to furnish the air

transportation required for the trip or

trips covered by the contract.

§ 380.30 Solicitation materials.

(a) All solicitation materials for a

Public Charter shall include the name of

the charter operator and the name of the

direct air carrier.

(b) Any solicitation material that

states a price per passenger shall also

include one of the following:

(1) A statement referring to the

operator-participant contract for further

information about conditions applicable

to the charter; or

(2) The full text of the operatorparticipant contract.

(c) Except as set forth in § 380.33a for

operator’s option plan contracts, if the

charter prospectus names alternative

dates or cities, any solicitation material

that states a price per passenger shall

also state that the actual dates or cities

have not yet been selected, if that is the

case.

(d) Any solicitation material that

names a hotel but does not name every

hotel named in the operator-participant

contract shall also state that

substitutions may be made.

(e) In any solicitation material from a

direct air carrier, indirect air carrier, or

an agent of either, for a charter, charter

tour (i.e., a combination of air

transportation and ground

accommodations), or a charter tour

component (e.g., a hotel stay), any price

stated for such charter, tour, or

component shall be the entire price to

be paid by the participants to the air

carrier, or agent, for such charter, tour,

or component.

§ 380.31 General requirements for

operator-participant contracts.

(a) Except for telephone sales for

which payment is made by credit card

as described in paragraph (b) of this

section, the charter operator shall not

accept payment from or on behalf of a

prospective participant unless the

participant has agreed to the conditions

of the charter by signing an operatorparticipant contract as described in

§ 380.32. If a member of a group that

will travel together pays for the group,

that member may sign the contract on

behalf of the group.

(b) For telephone sales only, the

charter operator may accept payment by

credit card without the participant

having first signed an operatorparticipant contract provided that the

charter operator first advises the

customer:

(1) That he or she has the right to

receive the operator-participant contract

before making a booking;

(2) That the operator-participant

contract will be mailed to the

participant within 24 hours of accepting

payment by credit card; and

(3) That the operator-participant

contract must be signed, and the signed

portion returned to the operator, before

travel.

(4) A full refund must be made of any

amounts charged to a credit card for any

participant who cancels before the

operator-participant contract is signed.

(c) The contract form may include a

space that participants may check to

authorize the charter operator to retain

their money while attempting to make

other arrangements for them if there is

no space available on the flight or on

specific alternative flights they have

requested.

(d) If there is no space available on

the flight or specific alternative flights

requested by the participant the
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28245

1 If the credit card merchant account is separate

from the depository account, it must be used solely

as a conduit, i.e., all credit card payments toward

Public Charter trips must be immediately remitted

to the depository account in full, without holdback,

or retention of any portion of the participant’s

payment. If the depository bank is not the credit

card merchant bank, the Department must be

satisfied that there are adequate procedural

safeguards for the protection of participants’

payments.

operator shall return all the participant’s

money within 7 days after receiving it

unless the participant, in accordance

with paragraph (c) of this section, has

authorized the operator to retain the

payments while the operator attempts to

make other arrangements for the

participant. If the operator retains the

payments while attempting to make

other arrangements for the participant, it

shall notify the participant of the fact

within 7 days after receiving the

payments, but in no event later than the

departure. For the purpose of the time

periods in this paragraph, receipt of

money by a travel agent on behalf of a

charter operator will not be considered

as receipt by the operator.

(e) Except as set forth in § 380.33a for

operator’s option plan contracts, the

operator-participant contract shall not

specify alternative dates for the

outbound or return flights, or alternative

origin or destination cities for any flight

leg.

(f) The contract form shall be printed

in 7-point or larger type. The statements

required by paragraph (a), (f), (h), (l), (r),

(s), and (x) of § 380.32 shall be printed

so as to contrast with the rest of the

contract by the use of bold-faced type,

capital letters, or a type size that is at

least 50 percent larger than that used for

the rest of the contract.

(g) The contract form shall include a

space that participants may check to

indicate that they wish to be furnished

details of trip cancellation, health, and

accident insurance.

(h) The contract form shall be

designed so as to enable participants to

retain a copy of the general terms and

conditions after signing it. The specific

information supplied by participants

(such as choices of dates, cities, or other

options) need not be retainable.

§ 380.32 Specific requirements for

operator-participant contracts.

Contracts between charter operators

and charter participants shall state:

(a) The name and complete mailing

address of the charter operator;

(b) The name of the direct air carrier,

the dollar amounts of that carrier’s

liability limitations for participant’s

baggage, the type and capacity of the

aircraft to be used for the flight, and the

conditions governing aircraft-equipment

substitutions;

(c) The dates of the outbound and

return flights;

(d) The origin and destination cities of

each flight leg;

(e) The amount and schedule of

payments;

(f) If a depository agreement as

provided in § 380.34(b) is used: That all

checks, money orders, and credit card

drafts must be made payable to the

escrow account at the depository bank

(identifying bank) 1 or, when the charter

is sold to the participant by a retail

travel agent, checks and money orders

may be made payable to the agent, who

must in turn make his check payable to

the escrow account at the depository

bank;

(g) The tour itinerary, if any,

including the name and location of the

hotels, length of stay at each, and other

ground accommodations and services

that are part of the tour;

(h) That the charter operator may not

cancel the charter less than 10 days

before the scheduled departure date,

except for circumstances that make it

physically impossible to perform the

charter tip;

(i) That if a charter is canceled 10 or

more days before the scheduled

departure date, the operator will notify

the participant in writing within 7 days

after the cancellation, but in any event

at least 10 days before the scheduled

departure;

(j) That is a charter is canceled less

than 10 days before departure (i.e., for

circumstances that make it physically

impossible to perform the charter trip),

the operator will get the message to the

participant as soon as possible;

(k) That if the charter is canceled, a

refund will be made to the participant

within 14 days after the cancellation;

(l) The right to refunds if the

participant changes plans is limited;

(m) The right to refunds if the

participant changes plans, including

(1) The right to a full refund, for sales

made by credit card, until an operatorparticipant contract is signed; and

(2) That any participant who wishes

to cancel will receive a full refund (less

any applicable administrative fee, not to

exceed $25) upon providing a substitute

participant to the charter operator or its

sales agent, or upon being substituted

for by a participant found by the charter

operator;

(n) The procedure for obtaining the

refunds described in paragraph (m) of

this section, including that they will be

made within 14 days after the

cancellation or substitution;

(o) The meaning of ‘‘major change’’, as

set forth in § 380.33(a);

(p) That if the charter operator knows

of a major change 10 or more days

before scheduled departure, the operator

will notify the participant of the change

within 7 days after first knowing of it,

but in any event at least 10 days before

scheduled departure;

(q) That is the operator first knows of

a major change less than 10 days before

scheduled departure, the operator will

get the message to the participant as

soon as possible;

(r) That within 7 days after receiving

a pre-departure notification of a major

change but in no event later than

departure, the participant may cancel,

and that a full refund will be made to

the participant within 14 days after

canceling;

(s) That upon a post-departure

notification of a major change, the

participant may reject the substituted

hotel or the changed date, origin, or

destination of a flight leg and be sent,

within 14 days after the return date

named in the contract, a refund of the

portion of his payment allocable to the

hotel accommodations or air

transportation not provided;

(t) That the participants rights and

remedies set forth in the contract,

including the procedures for major

changes, shall be in addition to any

other rights or remedies available under

applicable law, although the operator

may condition a refund on the

participant’s waiver of additional

remedies;

(u) That trip cancellation, health, and

accident insurance is available and that

the operator will furnish details of the

insurance to participants who check the

space provided for this purpose on the

contract form;

(v) The name and address of the

surety company or bank issuing the

security agreement; and that unless the

charter participant files a claim with the

charter operator or, if he is unavailable,

with the securer, within 60 days after

termination of the charter, the securer

shall be released from all liability under

the security agreement to that

participant. Termination means the date

of arrival (or in the case of a canceled

charter, the intended date or arrival) of

the return flight. If there is no return

flight in a participant’s itinerary,

termination means the date or intended

date of departure of the last flight in the

participant’s itinerary;

(w) For international flights only:

That additional restrictions may be

imposed on the flight by the foreign

government involved, and that if

landing rights are denied by a foreign

government the flight will be canceled

with a full refund to the participant.
28246 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

2See also n.1, supra.

This statement need not be included in

the contract if—

(1) The prospectus includes a

certification by the charter operator and

the direct air carrier that landing rights

have been obtained from all the foreign

governments involved, and

(2) All the foreign governments

involved have adopted country-of-origin

rules for charterworthiness;

(x) That the charter operator is the

principal and is responsible to the

participants for all services and

accommodations offered in connection

with the charter. However, the contract

may expressly provide that the charter

operator, unless negligent, is not

responsible for personal injury or

property damage caused by any direct

air carrier, hotel or other supplier of

services in connection with the charter.

§ 380.33 Major changes in itinerary or

price; refunds.

(a) For the purposes of this section,

‘‘major change’’ means any of the

following:

(1) A change in the departure or

return date shown in the operatorparticipant contract, (or, if the contract

states alternative dates, the date

designated to the participant by the

charter operator in accordance with

§ 380.33a(b)), unless the change results

from a flight delay. In any event,

however, a date change that the operator

knows of more than 2 days before the

scheduled flight date, and any delay of

more than 48 hours, will be considered

a major change.

(2) A change in the origin or

destination city shown in the operatorparticipant contract for any flight leg

(or, if the contract states alternative

cities, the city designated to the

participant by the operator in

accordance with § 380.33a(b)), unless

the change affects only the order in

which cities named in a tour package

are visited.

(3) A substitution of any hotel that is

not named in the operator-participant

contract; and

(4) A price increase to the participant

that occurs 10 or more days before

departure and results in an aggregate

price increase of more than 10 percent.

(b) The charter operator shall not

increase the price to any participant less

than 10 days before departure.

(c) The charter operator shall notify

all participants of major changes, as

required by the operator-participant

contracts. This notification shall include

the participants’ rights to refunds

required to be described in the operatorparticipant contract. The operator shall,

if applicable, also notify the participants

that the acceptance of a refund

constitutes a waiver of their legal rights.

(d) Except as otherwise specified,

notifications and refunds required by

this part are considered made at the

time they are mailed or sent by an

equivalent method.

(e) The charter operator shall make all

refunds required to be described in the

operator-participant contract within the

time limits set forth in paragraphs (k),

(n), (r), and (s) of § 380.32, as applicable.

§ 380.33a Operator’s option plan.

(a) For the purposes of this part, an

operator’s option plan contract that

states alternative dates for the outbound

or return flights, or alternative origin or

destination cities for any flight leg.

(b) Operator’s option plan contracts

shall state, in addition to the

information required by § 380.32, that

the selection of the actual dates or cities,

as applicable, is at the charter operator’s

option and will not entitle the

participant to a refund, and that the

operator will notify the participant of

the actual dates or cities at least 10 days

before the earliest of any alternative

dates for the outbound flight.

(c) Contract forms for all operator’s

option plan contracts shall be labeled

‘‘OPERATOR’S OPTION PLAN’’ in

bold-faced capital letters at least 1⁄4 inch

high. The statement required by

paragraph (b) of this section and the

statement of alternative dates

(§ 380.32(c)) or alternative cities

(§ 380.32(d)), as applicable, shall be

printed so as to contrast with the rest of

the contract, as set forth in § 380.31(f).

(d) Any solicitation material that

states a price per passenger for an

operator’s option plan contract shall

clearly and conspicuously—

(1) Identify that price as being for the

operator’s option plan,

(2) Name all the possible dates or

cities, as applicable, and

(3) State that the selection of the

actual dates or cities is at the charter

operator’s option.

(e) Charter operators and their agents

shall not misrepresent to prospective

participants, orally, in solicitation

materials, or otherwise, the probability

that any particular city or date will be

selected from among the alternatives

named in an operator’s option plan

contract.

(f) The charter operator shall notify all

participants with operator’s option plan

contracts of the actual dates or cities, as

applicable, as required by contracts.

§ 380.34 Security and depository

agreements.

(a) Except as provided in paragraph

(b) of this section, the charter operator

or foreign charter operator shall furnish

a security agreement in an amount for

not less than the charter price for the air

transportation, if only air transportation

is involved, or, if the charter involves

land accommodations in addition to air

transportation, a security agreement in

one of the following amounts dependent

upon the length of the charter or series

of charters:

(1) For a charter or series of charters

of 14 days or less, security in an amount

of not less than the charter price for the

air transportation to be furnished in

connection with such charter or series

of charters;

(2) For a charter or series of charters

of more than 14 days but less than 28

days security in an amount of not less

than twice the charter price; and

(3) For a charter or series of charters

of 28 days or more, security in an

amount of not less than three times the

charter price: Provided, however, That

the liability of the securer to any charter

participant shall not exceed amounts

paid by that participant to the charter

operator with respect to the charter.

(b) The direct air carrier and the

charter operator or foreign charter

operator may elect, in lieu of furnishing

a security agreement as provided under

paragraph (a) of this section, to comply

with the requirements of paragraphs

(b)(1) and (b)(2) of this section, as

follows:

(1) The charter operator shall furnish

a security agreement in an amount of at

least $10,000 times the number of

flights, except that the amount need not

be more than $200,000. The liability of

the securer to any charter participant

shall not exceed the amount paid by the

participant to the charter operator for

that charter.

(2) The direct air carrier and charter

operator or foreign charter operator shall

enter into an agreement with a

designated bank, the terms of which

shall provide that all payments by

charter participants paid to charter

operators or foreign charter operators

and their retail travel agents shall be

deposited with and maintained by the

bank subject to the following

conditions:

(i) On sales made to charter

participants by charter operators or

foreign charter operators the participant

shall pay by check, money order, or

credit card draft payable to the bank; 2

on sales made to charter participants by

retail travel agents, the retail travel

agent may deduct his commission and

remit the balance to the designated bank

by check, money order, or electronic

transfer: Provided, That the travel agent
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28247

3 ‘‘Holdback’’ is an amount in excess of usual

commissions that a credit card merchant bank

sometimes retains to cover potential charge-backs or

other charges.

agrees in writing with the charter

operator or foreign charter operator that

if the charter is canceled the travel agent

shall remit to the bank the full amount

of the commission previously deducted

or received within 10 days after receipt

of notification of cancellation of the

charter; except for the credit card

company’s usual commission (not to

exceed 3 percent), the charter operator

shall not permit any portion of a charter

participant’s payments by credit cared

to be ‘‘held back’’ by the credit card

merchant bank; 3

(ii) The bank shall pay the direct air

carrier the charter price for the

transportation not earlier than 60 days

(including day of departure) prior to the

scheduled day of departure of the

originating or returning flight, upon

certification of the departure date by the

air carrier: Provided, That, in the case of

a round trip charter contract to be

performed by one carrier, the total

round trip charter price shall be paid to

the carrier not earlier than 60 days prior

to the scheduled day of departure of the

originating flight;

(iii) The bank shall reimburse the

charter operator or foreign charter

operator for refunds made by the latter

to the charter participant upon written

notification from the charter operator or

foreign charter operator;

(iv) If the charter operator, foreign

charter operator or the direct air carrier

notifies the bank that a charter has been

canceled, the bank shall make

applicable refunds directly to the

charter participants;

(v) After the charter price has been

paid in full to the direct air carrier, the

bank shall pay funds from the account

directly to the hotels, sightseeing

enterprises, or other persons or

companies furnishing ground

accommodations and services, if any, in

connection with the charter or series of

charters upon presentation to the bank

of vendors’ bills and upon certification

by the charter operator or foreign charter

operator of the amounts payable for

such ground accommodations and

services and the person or companies to

whom payment is to be made: Provided,

however, That the total amounts paid by

the bank pursuant to paragraphs (b)(2)

(ii) and (v) of this section shall not

exceed either the total cost of the air

transportation, or 80 percent of the total

deposits received by the bank less any

refunds made to charter participants

pursuant to paragraphs (b)(2) (ii) and

(iv) of this section, whichever is greater;

(vi) As used in this section, the term

‘‘bank’’ means a bank insured by the

Federal Deposit Insurance Corporation;

(vii) The bank shall maintain a

separate accounting for each charter

group;

(viii) Notwithstanding any other

provisions of this section, the amount of

total cash deposits required to be

maintained in the depository account of

the bank may be reduced by one or both

of the following: The amount of the

security agreement in the form

prescribed in this section in excess of

the minimum coverage required by

paragraph (b)(1) of this section; an

escrow with the designated bank of

Federal, State, or municipal bonds or

other securities, consisting of

certificates of deposit issued by banks

having a stated policy of redeeming

such certificates before maturity at the

request of the holder (subject only to

such interest penalties or other

conditions as may be required by law),

or negotiable securities which are

publicly traded on a securities

exchange, all such securities to be made

payable to the escrow account:

Provided, That such other securities

shall be substituted in an amount no

greater than 80 percent of the total

market value of the escrow account at

the time of such substitution: And

provided, further, That should the

market value of such other securities

subsequently decrease, from time to

time, then additional cash or securities

qualified for investment hereunder shall

promptly be added to the escrow

account, in an amount equal to the

amount of such decreased value; and

(ix) Except as provided in paragraph

(b)(2)(i), (iii), (iv), (v), and (viii) of this

section, the bank shall not pay out any

funds from the account prior to 2

banking days after completion of each

charter, when the balance in the account

shall be paid the charter operator or

foreign charter operator, upon

certification of the completion date by

the direct air carrier: Provided, however,

That if the Charter involves air

transportation only and the bank has

paid the direct air carrier(s) the charter

price for the originating flight, and the

returning flight if any, and has paid all

refunds due to participants, as provided

in paragraph (b)(2)(ii) and (iii),

respectively, of this section, then the

bank may pay the balance in the

account to the charter operator upon

certification by the direct air carrier

performing the originating flight that

such flight has in fact departed.

(c)(1) The security agreement required

under paragraphs (a) and (b) of this

section shall insure the financial

responsibility of the charter operator or

foreign charter operator and the

supplying of the transportation and all

other accommodations, services, and

facilities in accordance with the

contract between the charter operator or

foreign charter operator and the charter

participants.

(2) The security agreement may be

either:

(i) A surety bond in the form set forth

as appendix A to this part;

(ii) A surety trust agreement in the

form set forth as appendix B to this part;

or

(iii) An arrangement with a bank (for

instance, a standby letter of credit) that

provides protection of charter

participants’ funds equivalent to or

greater than that provided by the Bond

in appendix A. An arrangement that

furnishes a lesser degree of protection

than would be provided under the bond

shall be invalid to that extent, and

instead the bank, the charter operator or

foreign charter operator, and the charter

participants shall have the same rights

and liabilities as provided under a bond

in the form of appendix A. If the

arrangement does not give as much

protection as a bond against the risk of

the charter operator’s bankruptcy, the

bank shall be liable in the event of

bankruptcy to the same extent as if it

had entered into a bond.

(3) Any agreement under paragraph

(c)(2)(iii) of this section shall include a

statement that, in the event that the

other provisions of the agreement do not

provide protection to charter

participants comparable to that

provided under a bond in the form of

appendix A, the bank shall assume, for

the benefit of the charter participants,

all the liabilities it would have if it

entered into the bond.

(4) The security agreement shall be

effective on or before the date the

charter prospectus is filed with the

Department.

(5) The security agreement shall be

specifically identified by the issuing

securer with a numbering system so that

the Department can identify the security

agreement with the specific charter or

charters to which it relates. These data

may be set forth in an addendum

attached to the security agreement,

which addendum must be signed by the

charter operator or foreign charter

operator and the securer.

(6) When security is provided by a

surety bond, such bond shall be issued

by a bonding or surety company that is

listed in Best’s Insurance Reports (Fire

and Casualty) with a general

policyholders’ rating of ‘‘A’’ or better.

The bonding or surety company shall be

one legally authorized to issue bonds of

that type in the State in which the
28248 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

charter originates. For purposes of this

section the term ‘‘State’’ includes any

territory or possession of the United

States, or the District of Columbia.

(7) When security is provided by a

security agreement other than a bond,

the agreement shall be issued by a

national bank complying with the

provisions of 12 CFR 7.7010(a), or by a

State bank complying with applicable

State laws that give authority to issue

such agreements, and all such banks

must be insured by the Federal Deposit

Insurance Corporation.

(d) The security agreement required

by this section shall provide that unless

the charter participant files a claim with

the charter operator or foreign charter

operator, or, if it is unavailable, with the

securer, within 60 days after

termination of the charter, the securer

shall be released from all liability under

the security agreement to such charter

participant. Terminations means the

date of arrival (or in the case of a

canceled charter, the intended date of

arrival) of the return flight. If there is no

return flight in a participant’s itinerary,

termination means the date or intended

date of departure of the last flight in the

participant’s itinerary.

§ 380.34a Substitution of direct air

carrier’s security or depository agreement.

(a) A direct air carrier may substitute

its own security agreement and/or

depository arrangements, as specified in

this section, for those required of the

charter operator under § 380.34, but

only for charter trips in which all the air

transportation is provided by one direct

air carrier. Charter operators are relieved

from § 380.34 to the extent that the

direct carrier substitutes its own

arrangements.

(b) The direct air carrier may

substitute its security agreement for all

of the arrangements required of the

charter operator under § 380.34 (a) or

(b). Alternatively, it may substitute its

depository agreement for the depository

agreement required of the charter

operator under § 380.34(b)(2). If the

direct carrier substitutes its depository

agreement, it may also obtain and

substitute a security agreement for the

one otherwise required of the charter

operator under § 380.34(b)(1). If the

direct carrier substitutes its depository

agreement only, the charter operator

must supply the security agreement

required under § 380.34(b)(1).

(c) If the direct carrier substitutes a

security agreement for all the charter

operator’s requirements under § 380.34,

the charter operator shall include in the

charter prospectus, in place of the

information in § 380.28(a)(2) regarding

the charter operator’s security

agreement:

(1) A statement by the direct air

carrier on OST Form 4535 that it will

take responsibility for all charter

participant payments (including those

for ground accommodations and

services) and for the fulfillment of all

the charter operator’s contractual and

regulatory obligations to the charter

participants.

(2) A statement from the direct air

carrier and its securer (under § 212.12 of

this chapter), OST Form 4533, that they

have entered into a security agreement

assuring the direct air carrier’s

responsibilities to charter participants

under this section in an unlimited

amount (except that the liability of the

securer with respect to any charter

participant may be limited to the charter

price paid by or on behalf of such

participant), and that the securer has

received a copy of the proposed flight

schedule identified by the schedule

number assigned by the charter operator

under this part.

(d) A substitute depository agreement

under this section shall be signed by the

direct air carrier, the charter operator,

and the depository bank, and shall

provide, in addition to existing

requirements under § 212.8 of this

chapter, that:

(1) Payments by or on behalf of

charter participants shall be allocated to

the flight accounts matching the

participant’s itinerary in the following

way: Each account shall have allocated

to it the charter cost of the participant’s

air transportation on that flight. The

portion of each payment not intended

for air transportation services shall be

allocated to the account for the return

flight in the participant’s itinerary. If

there is only one flight in the itinerary,

the entire payment shall be allocated to

that account.

(2) The bank shall pay funds from a

flight account directly to the hotels,

sightseeing enterprises, or other persons

or companies furnishing ground

accommodations and services, if any, in

connection with the charter flight, upon

presentation to the bank of vendor’s

bills and upon certification by the

person who contracted for the ground

accommodations or services of the

amounts payable and the persons or

companies to whom payment is to be

made, except that no disbursement shall

be made that would reduce the balance

in the account below the charter cost of

the flight.

(3) On sales made to participants by

a person other than a retail travel agent,

the participant shall pay by check,

money order, or credit card draft

payable to the bank. On sales made to

participants by a retail travel agent,

payments shall be made in the same

manner unless the agent deducts its

commission and remits the balance to

the bank by check, money order, or

electronic transfer. The agent may

deduct its commission only if it agrees

in writing with its principal (the charter

operator or direct air carrier, as

applicable) that, if the charter is

canceled, the agent shall remit to the

bank the full amount of the commission

previously deducted or received within

10 days after receipt of notification of

the cancellation. The depository bank

shall pay refunds directly to

participants according to the terms of

the operator-participant contract and the

terms of this part.

(e) If the direct carrier substitutes a

security agreement in addition to

substituting a depository agreement, the

charter prospectus information must

include all the information required by

paragraphs (c) and (d) of this section,

except for the amount of the security

agreement. That agreement shall be in

an amount of at least $10,000 times the

number of flights, except that the

amount need not be more than

$200,000.

(f) A copy of the depository agreement

under paragraph (d) of this section shall

be filed with the Department, and it

shall not be effective until approved by

the Department.

(g) A copy of the security agreement

under paragraph (c) or paragraph (e) of

this section shall be filed with the

Department. It shall insure the financial

responsibility of the direct air carrier for

supplying the transportation and all

other accommodations, services, and

facilities in accordance with the

contracts between the charter operator

and the charter participants. Such

security agreement shall meet all the

other requirements of § 380.34 (c) and

(d).

§ 380.35 Disbursements from depository

account.

No charter operator or direct air

carrier shall cause its agents or the

depository bank to make disbursements

or payments from deposits except in

accordance with the provisions of this

part.

§ 380.36 Record retention.

Every charter operator conducting a

charter pursuant to this part shall

comply with the applicable recordretention provisions of part 249 of this

chapter.
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28249

Subpart D—Requirements Applicable

to Direct Air Carriers

§ 380.40 Charter not to be performed

unless in compliance with this part 380.

(a) For all Public Charters other than

foreign-originating charters organized by

foreign charter operators: A direct air

carrier shall not perform air

transportation in connection with such

a charter unless it has made a

reasonable effort to verify that all

provisions of this part have been

complied with and that the charter

operator’s authority under this part has

not been suspended by the Department.

(b) For foreign-originating Public

Charters organized by foreign charter

operators: A direct air carrier shall not

perform air transportation in connection

with such a charter unless—

(1) The charter is conducted in

accordance with subpart B of this part

and

(2) The charter operator conforms to

all requirements of this part that are

applicable to charter operators within

the Department’s jurisdiction, other

than §§ 380.25, 380.28, 380.30 through

380.36, and 380.50.

§§ 380.41–380.42 [Reserved]

§ 380.43 Cancellations by direct air

carriers.

The direct air carrier shall not cancel

any charter under this part less than 10

days before the scheduled departure

date, except for circumstances that make

it physically impossible to perform the

charter trip.

§ 380.45 Suspension of exemption

authority.

The Department reserves the power to

suspend the exemption authority of any

air carrier, without hearing, if it finds

that such action is necessary in order to

protect the rights of the traveling public.

§ 380.46 Charter trip reporting.

The direct air carrier shall promptly

notify the Office of Aviation Analysis,

Special Authorities Division, regarding

any charters covered by a prospectus

filed under § 380.28 that are later

canceled.

Subpart E—Registration of Foreign

Charter Operators

§ 380.60 Purpose.

This subpart establishes registration

procedures for foreign charter operators

intending to engage in the formation of

groups for transportation on Public

Charters that originate in the United

States.

§ 380.61 Operation by foreign charter

operators.

(a) Each foreign charter operator shall

be registered under this subpart and file

a prospectus under § 380.25 before

organizing groups for transportation on

Public Charters that originate in the

United States.

(b) Each foreign charter registered

under this subpart shall comply with

the other provisions of this part directed

to charter operators.

§ 380.62 Registration applications.

(a) To be registered under this

subpart, a foreign charter operator shall

file two copies of an application for

registration with the Office of Aviation

Analysis, Special Authorities Division.

The Department will list the names and

nationalities of all persons applying for

registration in its Weekly Summary of

Filings.

(b) The application shall be made on

OST Form 4530, which can be obtained

from the Office of Aviation Analysis,

Special Authorities Division.

(c) The applicant shall clearly

indicate in its application for

registration whether it requests

authority to engage in foreign and/or

interstate air transportation.

§ 380.63 Objections to registration

applications.

Any person objecting to the

registration application of a foreign

charter operator or to a proposed change

in the name or ownership of that

operator shall file an objection with the

Office of Aviation Analysis, Special

Authorities Division, within 28 days

after the Department receives the

properly completed registration

application.

§ 380.64 Department action on a

registration application.

(a) After a registration is received, one

of the following actions will be taken.

(1) The application will be approved

by the stamping of the effective date of

registration on OST Form 4530 and

returning the duplicate copy of the form

to the operator;

(2) Additional information will be

requested for the applicant;

(3) The applicant will be notified that

its application will require further

analysis or procedures, or is being

referred to the Department for formal

action;

(4)The registration application will be

rejected if it does not comply with the

filing requirements of this subpart;

(5) The application will be approved

subject to such terms, conditions, or

limitations as may be required by the

public interest; or

(6) The registration application will

be rejected for reasons relating to the

failure of effective reciprocity or if the

Department finds that it would be in the

public interest to do so.

(b) One of the actions described in

paragraph (a) of this section will

normally be taken within 60 days after

the registration application is received.

The Department will also consider

requests for faster action that include a

full explanation of the need for

expedited action.

§ 308.65 Notification of change of

operations or ownership.

(a) Not later than 30 days before any

change in its name or address or before

a temporary or permanent cessation of

operations, each foreign charter operator

registered under this subpart shall

notify the Office of Aviation Analysis,

Special Authorities Division, of the

change by resubmitting OST Form 4530.

(b) A foreign charter operator

registered under this subpart shall apply

for an amendment to that registration

not later than 30 days after either of the

following events:

(1) A person listed on its existing

registration as owning or holding

beneficial interest in at least 10 percent

of the operator or of the operator’s stock

reduces its holding to below 10 percent;

(2) A person not listed on the existing

registration as owning or holding

beneficial interest in at least 10 percent

of the operator or of the operator’s stock

becomes an owner or holder of 10

percent or more of the company or of its

stock.

(c) An application for an amendment

shall be made by resubmitting OST

Form 4530. The existing registration

shall remain valid pending Department

action on the amendment.

§ 380.66 Cancellation or conditioning of

the registration.

The registration of a foreign charter

operator may be canceled or subjected

to additional terms, conditions, or

limitations if any of the following occur:

(a) The operator files a written notice

with the Department that it is

discontinuing its charter operations;

(b) A substantial ownership interest is

acquired by persons who are not

citizens of the same country as the

registrant; or

(c) The Department finds, after notice

and an opportunity for responses, that it

is in the public interest to do so. In

making this finding, the Department

will consider whether effective

reciprocity exists between the United

States and the government of the foreign

charter operator.
28250 Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations

1These data may be supplied in addendum

attached to the bond.

§ 380.67 Waiver of sovereign immunity.

By accepting an approved registration

form under this subpart, an operator

waives any right it may have to assert

any defense of sovereign immunity from

suit in any proceeding against it, in any

court or other tribunal of the United

States, that is based upon a claim arising

out of operations by the operator under

this part.

Appendix A—Public Charter Operator’s

Surety Bond Under Part 380 of the

Special Regulations of the Department

of Transportation (14 CFR Part 380)

Know all men by these presents, that we

llllllllll (name of charter

operator) of llllllllll, (city)

llllllllll (state or country) as

Principal (hereinafter called Principal),

andllllllllll (name of surety) a

corporation created and existing under the

laws of the State of llllllllll

(State) as Surety (hereinafter called Surety)

are held and firmly bound unto the United

States of America in the sum of

$llllllllll (see § 380.34(f) of Part

380) for which payment, well and truly to be

made, we bind ourselves and our heirs,

executors, administrators, successors, and

assigns, jointly and severally, firmly by these

presents.

Whereas Principal intends to become a

Public Charter operator pursuant to the

provisions of part 380 of the Department’s

Special Regulations and other rules and

regulations of the Department relating to

insurance or other security for the protection

of charter participants, and has elected to file

with the Department of Transportation such

a bond as will insure financial responsibility

with respect to all moneys received from

charter participants for services in

connection with a Public Charter to be

operated subject to Part 380 of the

Department’s Special Regulations in

accordance with contracts, agreements, or

arrangements therefor, and

Whereas this bond is written to assure

compliance by Principal as an authorized

charter operator with Part 380 of the

Department’s Special Regulations, and other

rules and regulations of the Department

relating to insurance and other security for

the protection of charter participants, and

shall inure to the benefit of any and all

charter participants to whom Principal may

be held legally liable for any damages herein

described.

Now, therefor, the condition of this

obligation is such that if Principal shall pay

or cause to be paid to charter participants any

sum or sums for which Principal may be held

legally liable by reason of Principal’s failure

faithfully to perform, fulfill and carry out all

contracts, agreements, and arrangements

made by Principal while this bond is in effect

with respect to the receipt of moneys from

charter participants, and proper

disbursement thereof pursuant to and in

accordance with the provisions of Part 380 of

the Department’s Special Regulations, then

this obligation shall be void, otherwise to

remain in full force and effect.

The liability of Surety with respect to any

charter participant shall not exceed the

charter price paid by or on behalf of such

participant.

The liability of Surety shall not be

discharged by any payment or succession of

payments hereunder, unless and until such

payment or payments shall amount in the

aggregate to the penalty of the bond, but in

no event shall Surety’s obligation hereunder

exceed the amount of said penalty.

Surety agrees to furnish written notice to

the Office of Aviation Analysis, Department

of Transportation, forthwith of all suits or

claims filed and judgments rendered, and

payments made by Surety under this bond.

The bond shall cover the following

charters:1

Surety company’s bond No. llllllll

Date of flight departure llllllllll

Place of flight departure lllllllll

This bond is effective on the lll day of

llll, 12:01 a.m., standard time at the

address of Principal as stated herein and as

hereinafter provided. Principal or Surety may

at any time terminate this bond by written

notice to: ‘‘Special Authorities Division (P–

57), Office of Aviation Analysis, U.S.

Department of Transportation, Washington,

DC 20590,’’ such termination to become

effective thirty (30) days after the actual

receipt of said notice by the Department.

Surety shall not be liable hereunder for the

payment of any damages hereinbefore

described which arise as a result of any

contracts, agreements, undertakings, or

arrangements for the supplying of

transportation and other services made by

Principal after the termination of this bond

as herein provided, but such termination

shall not affect the liability of the bond

hereunder for the payment of any damages

arising as a result of contracts, agreements, or

arrangements for the supplying of

transportation and other services made by

Principal prior to the date that such

termination becomes effective. Liability of

Surety under this bond shall in all events be

limited only to a charter participant or

charter participants who shall within sixty

(60) days after the termination of the

particular charter described herein give

written notice of claim to the charter operator

or, if it is unavailable, to Surety, and all

liability on this bond shall automatically

terminate sixty (60) days after the

termination date of each particular charter

covered by this bond except for claims made

in the time provided herein.

In witness whereof, the said Principal and

Surety have executed this instrument on the

lll day of llllllll, llll.

Principal

Name llllllllllllllllll

By: Signature and title

Surety

Name llllllllllllllllll

By: Signature and title llllllllll

Only corporations may qualify to act as

surety and they must meet the requirements

set forth in § 380.34(c)(6) of Part 380.

Appendix B—Public Charter Surety

Trust Agreement

This Trust Agreement is entered into

between llllllllll (charter

operator) incorporated under the law of

llllllllll with the principal

place of business being llllllllll

(hereinafter referred to as the Operator), and

llllllllll (Bank) with its

principal place of business being

llllllllll (hereinafter referred to

as the ‘‘Trustee’’), for the purpose of creating

a trust to become effective as of the lll

day of llllllll, llll, which

trust shall continue until terminated as

hereinafter provided.

The Operator intends to become a Public

Charter operator pursuant to the provisions

of Part 380 of the Department’s Special

Regulations and other rules and regulations

of the Department relating to insurance or

other security for the protection of charter

participants, and has elected to file with the

Department of Transportation such a Surety

Trust Agreements as will insure financial

responsibility with respect to all moneys

received from charter participants for

services in connection with a Public Charter

to be operated subject to Part 380 of the

Department’s Special Regulations in

accordance with contracts, agreements, or

arrangements therefor.

This Surety Trust Agreement is written to

assure compliance by the Operator with the

provisions of Part 380 of the Department’s

Special Regulations and other rules and

regulations of the Department relating to

insurance or other security for the protection

of charter participants.

It shall inure to the benefit of any and all

charter participants to whom the Operator

may be held legally liable for any of the

damages herein described.

It is mutually agreed by and between the

operator and Trustee that the Trustee shall

manage the corpus of the trust and carry out

the purposes of the trust as hereinafter set

forth during the term of the trust for the

benefit of charter participants (who are

hereinafter referred to as ‘‘Beneficiaries.’’)

Beneficiaries of the trust created by this

Agreement shall be limited to those charter

participants who meet the following

requirements:

1. Those for whom Operator or Operator’s

agent has received payment toward

participation in one or more charters

operated by or proposed to be operated by

Operator.

2. Who have legal claim or claims for

money damages against the Operator by

reason of the Operators’ failure faithfully to

perform, fulfill, and carry out all contracts,

agreements, and arrangements made by the

Operator while this trust is in respect to the

receipt of moneys and proper disbursement

thereof pursuant to Part 380 of the

Department’s Special Regulations; and

3. Who have given notice of such claim or

claims in accordance with this Trust

Agreement, but who have not been paid by

the Operator.

The Operator shall convey to the Trustee

legal title to the trust corpus, which has a

value of $llllllll by the time of the

execution of this Agreement.
Federal Register / Vol. 63, No. 99 / Friday, May 22, 1998 /Rules and Regulations 28251

Trustee shall assume the responsibilities of

the Trustee over the said trust corpus and

shall distribute from the trust corpus to any

and all Beneficiaries to whom the Operator,

in its capacity as a Public Charter operator,

may be held legally liable by reason of the

Operator’s failure faithfully to perform,

fulfill, and carry out all contracts,

agreements, and arrangements made by the

Operator, while this trust is in effect with

respect to the receipt of moneys and proper

disbursement thereof pursuant to Part 380 of

the Department’s Special Regulations in

connection with said charters, such damages

as will discharge such liability while this

trust is in effect; Provided, however, That the

liability of the trust to any Beneficiary shall

not exceed the charter price (as defined in

Part 380 of the Department’s Special

Regulations) paid by or on behalf on any

such Beneficiary; Provided, further, That

there shall be on obligation of the trust to any

Beneficiary if the Operator shall pay or cause

to be paid to any Beneficiary any sum or

sums for which the Operator may be held

legally liable by reasons of its failure

faithfully to perform, fulfill, and carry out all

contracts, agreements, and arrangements

made by the Operator in its capacity as

charter operator while this trust is in effect

with respect to the receipt of moneys and

proper disbursement thereof pursuant to Part

380 of the Department’s Special Regulations;

And provided still further, That the liability

of the trust as administered by the Trustee

shall not be discharged by any payment or

succession of payments hereunder, unless

and until such payment or payments, shall

amount in the aggregate to

$llllllll. Notwithstanding

anything herein to the contrary, in no event

shall the obligation of the trust or the Trustee

hereunder exceed the aggregate amount of

$llllllll.

The Trustee agrees to furnish written

notice to the Office of Aviation Analysis,

Department of Transportation, forthwith of

all suits of claims filed and judgments

rendered (of which it has knowledge), and of

payments made by the Trustee under the

terms of this trust.

The Trust shall not be liable hereunder for

the payment of any damages hereinbefore

described which arise as a result of any

contracts, agreements, undertakings, or

arrangements for the supplying of

transportation and other services made by the

Operator after the termination of this trust as

herein provided, but such termination shall

not affect the liability of the trust hereunder

for the payment of any damages arising as a

result of contracts, agreements, or

arrangements for the supplying of

transportation and other services made by the

Operator prior to the date that such

termination becomes effective.

Liability of the trust shall in all events be

limited only to a Beneficiary or Beneficiaries

who shall within sixty days after the

termination of the particular charter give

written notice of claim to the Operator or, if

it is unavailable, to the Trustee, and all

liability of the trust with respect to

participants in a charter shall automatically

terminate sixty days after the termination

date of each particular charter covered by

this trust except for claims filed in the time

provided herein. Sixty-one days after the

completion of the last charter covered by this

Trust Agreement, the trust shall

automatically terminate except for claims of

any Beneficiary or Beneficiaries previously

made in accordance with this Agreement still

pending on and after said sixty-first day. To

the extent of such claims, the trust shall

continue until those claims are discharged,

dismissed, dropped, or otherwise terminated;

the remainder of the trust corpus shall be

conveyed forthwith to the Operator. After all

remaining claims which are covered by this

Trust Agreement pending on and after the

said sixty-first day have been discharged,

dismissed, dropped, or otherwise terminated,

the Trustee shall convey forthwith the

remainder of the trust corpus, if any, to the

Operator.

Either the Operator or Trustee may at any

time terminate this trust by written notice to:

‘‘Special Authorities Division (P–57), Office

of Aviation Analysis, U.S. Department of

Transportation, Washington, DC 20590,’’

such termination to become effective thirty

days after the actual receipt of said notice by

the Department.

In the event of any controversy or claim

arising hereunder, the Trustee shall not be

required to determine same or take any other

action with respect thereto, but may await

the settlement of such controversy or claim

by final appropriate legal proceedings, and in

such event shall not be liable for interest or

damages of any kind.

Any Successor to the Trustee by merger,

consolidation, or otherwise, shall succeed to

this trusteeship and shall have the powers

and obligations set forth in this Agreement.

The trust created under this Agreement

shall be operated and administered under the

laws of the State of llllllll.

IN WITNESS WHEREOF, the Operator and

Trustee have executed this instrument on the

lll day of llllllll, llll.

Trustee

Name llllllllllllllllll

By: Signature and title

Charter Operator

Name llllllllllllllllll

By: Signature and title

Issued in Washington, DC, on May 8, 1998.

Charles A. Hunnicutt,

Assistant Secretary For Aviation and

International Affairs.

[FR Doc. 98–12980 Filed 5–21–98; 8:45 am]

BILLING CODE 4910–62–M

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Part 82

[FRL–6015–3]

Protection of Stratospheric Ozone

AGENCY: Environmental Protection

Agency.

ACTION: Notice of acceptability.

SUMMARY: This document expands the

list of acceptable substitutes for ozonedepleting substances (ODS) under the

U.S. Environmental Protection Agency’s

(EPA) Significant New Alternatives

Policy (SNAP) program.

EFFECTIVE DATE: May 22, 1998.

ADDRESSES: Information relevant to this

document is contained in Air Docket A–

91–42, U.S. Environmental Agency,

Office of Air and Radiation Docket and

Information Center, Room M–1500, 401

M Street, SW, Washington, DC 20460.

Telephone: (202) 260–7548. The docket

may be inspected between 8:00 a.m. and

5:30 p.m. weekdays. As provided in 40

CFR Part 2, a reasonable fee may be

charged for photocopying.

FOR FURTHER INFORMATION CONTACT:

William Monroe at (202) 564–9161 or

fax (202) 565–2093, U.S. EPA,

Stratospheric Protection Division, 401

M Street, S.W., Mail Code 6205J,

Washington, D.C. 20460; EPA

Stratospheric Ozone Protection Hotline

at (800) 296–1996; EPA World Wide

Web Site (http://www.epa.gov/ozone/

title6/snap).

SUPPLEMENTARY INFORMATION:

I. Section 612 Program

A. Statutory Requirements

B. Regulatory History

II. Listing of Acceptable Substitutes

A. Aerosols

III. Additional Information

Appendix A—Summary of Acceptable

Decisions

I. Section 612 Program

A. Statutory Requirements

Section 612 of the Clean Air Act

authorizes EPA to develop a program for

evaluating alternatives to ozonedepleting substances. EPA refers to this

program as the Significant New

Alternatives Policy (SNAP) program.

The major provisions of section 612 are:

• Rulemaking—Section 612(c)

requires EPA to promulgate rules

making it unlawful to replace any class

I (chlorofluorocarbon, halon, carbon

tetrachloride, methyl chloroform,

methyl bromide, and

hydrobromofluorocarbon) or class II

(hydrochlorofluorocarbon) substance

with any substitute that the

Administrator determines may present

adverse effects to human health or the

environment where the Administrator

has identified an alternative that (1)

reduces the overall risk to human health

and the environment, and (2) is

currently or potentially available.

• Listing of Unacceptable/Acceptable

Substitutes—Section 612(c) also

requires EPA to publish a list of the

substitutes unacceptable for specific

uses. EPA must publish a corresponding