Document ID: DOT-OST-2008-0063-0002
Agency: dot
Document Type: Rule
Title: Provision of Entire Aircraft With Crew to a U.S. Certificated Air Carrier by a Foreign Air Carrier
Posted Date: 2008-02-29T05:00Z

[Federal Register: February 29, 2008 (Volume 73, Number 41)]
[Rules and Regulations]               
[Page 10986-10987]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29fe08-8]                         

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Chapter I

Office of the Secretary

14 CFR Chapter II

[Docket DOT-OST-2008-0063]

 
Provision of Entire Aircraft With Crew to a U.S. Certificated Air 
Carrier by a Foreign Air Carrier

AGENCY: Department of Transportation, Office of the Secretary; 
Department of Transportation, Federal Aviation Administration.

ACTION: Regulatory guidance.

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SUMMARY: This Notice sets forth the conditions under which a foreign 
air carrier may make an arrangement with a U.S. air carrier for a 
flight or series of flights, to be conducted with the foreign air 
carrier's aircraft and crew, for that U.S. certificated air carrier's-
authorized services in foreign air transportation. This Notice also 
describes the regulatory steps involved for seeking Department approval 
for such an operation.

FOR FURTHER INFORMATION CONTACT: Richard Clarke, Federal Aviation 
Administration, Air Carrier Operations Branch, AFS-220, (202) 493-5581, 
or George Wellington, Department of Transportation, Office of 
International Aviation, X-40, (202) 366-2391.

SUPPLEMENTARY INFORMATION: Discussion: The Office of the Secretary of 
Transportation (OST) and the Department's Federal Aviation 
Administration (FAA) have identified the circumstances under which a 
foreign air carrier may provide a U.S. certificated air carrier with an 
entire aircraft with crew without contravening the FAA's regulations 
that generally prohibit a foreign air carrier from wet leasing aircraft 
(i.e., providing legal possession of a specific aircraft (in its 
entirety) and at least one crewmember) to a U.S. certificated air 
carrier. Such transactions may occur, consistent with FAA and OST 
regulations,\1\ where it is clear that (i) operational control of the 
flight or flights involved would rest solely with the foreign air 
carrier and not with the U.S. certificated air carrier; (ii) legal and 
actual possession of the aircraft at all times would remain with the 
foreign air carrier; and (iii) OST determines, in conjunction with FAA, 
that such operations would otherwise be in the public interest, as more 
fully described below. Under those circumstances, the FAA has 
determined \2\ that such transactions are not leases subject to the 
foreign wet lease prohibition in Sec.  119.53(b), regardless of whether 
the parties to the transaction characterize the arrangement as a wet 
lease.
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    \1\ See 14 CFR 121.153(c), Sec.  135.25(d), Sec.  119.53(b), and 
Sec.  212.4(b)(1) and Sec.  212.9(b)(2). The cited sections of the 
FAA's regulations (parts 121, 135 and 119) generally prohibit a 
foreign air carrier from wet leasing aircraft to a U.S. certificated 
air carrier. Part 212 of the Department's Economic Regulations 
provides for the wet leasing of aircraft without regard to the 
identity of the wet lessor, and do not explicitly prohibit wet lease 
operations by a foreign air carrier on behalf of a U.S. carrier.
    \2\ On May 18, 2004, the Chief Counsel of the FAA issued an 
opinion that certain arrangements characterized as wet leases by the 
parties to the transaction were not true leases, because legal and 
actual possession of the subject aircraft never transferred from one 
party to the other. In addition, the FAA concluded that, where a 
foreign air carrier (identified as the lessor under such 
arrangements) retained operational control of the aircraft, the 
transaction was not subject to the wet lease prohibition of Sec.  
119.53(b). We have placed a copy of the FAA opinion in the Docket 
referenced above, and have also attached a copy to the service copy 
of this Notice.
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    To conduct an operation in this manner, the foreign air carrier 
involved would need to apply to the Department for a statement of 
authorization under 14 CFR part 212 of the Department's regulations. 
Section 212.9 requires prior Department approval for operations 
involving the provision of aircraft and crew by a foreign air carrier 
to another air carrier where the operations involved are in a fifth 
freedom market for the foreign air carrier, and for any such operations 
of 60 days or longer duration. Section 212.9(d) also provides that the 
Department may, at its discretion and upon at least 30 days' notice, 
require a statement of authorization for these kinds of operations in 
other cases (e.g., where they are for less than 60 days' duration). 
Given our need to make the operational control and public interest 
determinations described above, we will, in accordance with the 
provisions of Sec.  212.9(d), and effective 30 days from the date of 
this Notice, require that foreign air carriers desiring to conduct the 
operations described in this Notice obtain a statement of authorization 
before conducting any such services.\3\
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    \3\ We have in other instances required foreign air carriers to 
seek statements of authorization under Sec.  212.9(d) for various 
operations under that rule. See, for example, Orders 98-4-2 and 91-
5-25.

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[[Page 10987]]

    In acting on a request by a foreign air carrier for a statement of 
authorization under part 212, OST must find that the operation meets 
the requirements of that rule and is in the public interest.\4\ The 
applicant foreign air carrier must demonstrate that its proposed 
arrangement with the U.S. air carrier for the foreign carrier to 
conduct a flight or series of flights with the foreign air carrier's 
aircraft and crew in foreign air transportation for an authorized U.S. 
carrier meets these standards. In particular, one way in which the 
public interest standard of part 212 could be met would be for the 
foreign air carrier to show that (1) operational control of the flight 
or flights rests with it and not with the U.S. certificated air 
carrier; (2) legal and actual possession of the aircraft at all times 
will remain with the foreign air carrier; (3) the country that issued 
its air operator certificate (AOC) has been rated as Category 1 under 
the FAA's International Aviation Safety Assessment program; \5\ and (4) 
the U.S. certificated air carrier involved has assessed the level of 
safety of the service to be provided by the foreign air carrier 
involved and has found it to be satisfactory.
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    \4\ See 14 CFR Sec.  212.11(a).
    \5\ Because the foreign air carrier will retain operational 
control, the regulatory oversight of the operation remains with the 
civil aviation authority that issued an AOC to the foreign air 
carrier.
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    The foreign air carrier may provide information on operational 
control by submitting, with its application for a statement of 
authorization, a copy of the agreement for the aircraft with crew that 
it has entered into with the U.S. certificated air carrier. In making a 
determination on operational control, the FAA will consider the terms 
of that agreement and all other relevant factors to ensure that the 
foreign air carrier will exercise authority over initiating, conducting 
or terminating a flight conducted under the agreement. Likewise, in 
determining whether the foreign air carrier retains actual and legal 
possession of the aircraft, the FAA will consider all relevant factors, 
including the foreign air carrier's right to substitute other aircraft 
for the aircraft identified in the agreement, or its right to use the 
aircraft identified in the agreement for its own purposes when the 
aircraft is not needed by the U.S. air carrier.
    The U.S. certificated air carrier involved in the arrangement may 
demonstrate its assessment of the safety of the service by conducting a 
safety audit of the foreign air carrier under an FAA-approved safety 
audit program, comparable to the audits that U.S. carriers now perform 
under the OST/FAA Code-Share Safety Program. The FAA would review the 
safety audit along with the agreement for the aircraft with crew and 
provide the Department with the results of that review.\6\
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    \6\ See ``Code-share Safety Program Guidelines,'' revised 
December 21, 2006, at http://www.faa.gov/other--visit/aviation--
industry/international--aviation/. We would expect that an audit for 
operations described in this Notice would meet all the standards and 
criteria set forth in these guidelines.
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    Because these applications are handled on a case-by-case basis, 
applicants may, of course, endeavor to show that the foreign air 
carrier is in operational control and that the operation is in the 
public interest by providing information and evidence other than that 
outlined above, but the burden of making that showing is on the 
applicants.
    To summarize applicable regulations, one way that a foreign air 
carrier may demonstrate a public interest basis under which it could 
make an arrangement (which may be characterized by the parties as a wet 
lease) to conduct a flight or series of flights with the foreign 
carrier's aircraft and crew for a U.S. carrier authorized to perform 
the relevant foreign air transportation is to show that:

--The foreign air carrier involved holds a foreign air carrier permit 
or exemption authority from OST to conduct charter operations;
--The country that issued the foreign air carrier's AOC is rated as 
Category 1 under the FAA's International Aviation Safety Assessment 
program;
--The operations to be conducted represent foreign air transportation 
and not prohibited cabotage, in accordance with 49 U.S.C. 41703;
--The foreign air carrier files an application for a statement of 
authorization for any such operation proposed;
--The foreign air carrier demonstrates that it will be in operational 
control of the proposed operation, for example, by providing with its 
application, for review by the FAA, copies of the agreement for the 
aircraft with crew, that it has entered into with the U.S. certificated 
air carrier;
--The foreign air carrier demonstrates that it will retain legal and 
actual possession of the aircraft;
--The foreign air carrier provides evidence that the U.S. certificated 
air carrier involved has conducted a safety audit of the foreign 
carrier, consistent with an FAA-approved safety audit program, and has 
submitted a report of that audit to the FAA for review;
--The FAA notifies OST that it has determined that operational control 
of the proposed flights rest with the foreign air carrier applicant, 
that the oversight of the operation will remain with the country that 
issued the foreign air carrier's AOC, and that the safety audit meets 
the standards of the U.S. certificated air carrier's safety audit 
program; and
--OST determines that the proposed operations meet the requirements of 
14 CFR part 212 and are in the public interest, and grants the 
statement of authorization requested by the foreign air carrier.

    We will publish this Notice in the Federal Register, and will serve 
this Notice on all U.S. certificated air carriers and all foreign air 
carriers holding OST authority.

    Dated: February 15, 2008.
Michael W. Reynolds,
Acting Assistant Secretary for Aviation and International Affairs, 
Department of Transportation.
Nicholas A. Sabatini,
Associate Administrator for Aviation Safety, Federal Aviation 
Administration.
 [FR Doc. E8-3470 Filed 2-28-08; 8:45 am]

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