Document ID: FAA-2009-0671-0180
Agency: faa
Document Type: Rule
Title: Safety Management Systems for Certificate Holders Operating
Posted Date: 2015-01-08T05:00Z

[Federal Register Volume 80, Number 5 (Thursday, January 8, 2015)]
[Rules and Regulations]
[Pages 1307-1328]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00143]

[[Page 1307]]

Vol. 80

Thursday,

No. 5

January 8, 2015

Part VI

Department of Transportation

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Federal Aviation Administration

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14 CFR Parts 5 and 119

Safety Management Systems for Domestic, Flag, and Supplemental 
Operations Certificate Holders; Final Rule

  Federal Register / Vol. 80 , No. 5 / Thursday, January 8, 2015 / 
Rules and Regulations  

[[Page 1308]]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Parts 5 and 119

[Docket No. FAA-2009-0671; Amendment Nos. 5-1 and 119-17]
RIN 2120-AJ86

Safety Management Systems for Domestic, Flag, and Supplemental 
Operations Certificate Holders

AGENCY: Federal Aviation Administration (FAA), Department of 
Transportation (DOT).

ACTION: Final rule.

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SUMMARY: This final rule requires each air carrier operating under 14 
CFR part 121 to develop and implement a safety management system (SMS) 
to improve the safety of its aviation-related activities. SMS is a 
comprehensive, process-oriented approach to managing safety throughout 
an organization. SMS includes an organization-wide safety policy; 
formal methods for identifying hazards, controlling, and continually 
assessing risk and safety performance; and promotion of a safety 
culture. SMS stresses not only compliance with technical standards but 
also increased emphasis on the overall safety performance of the 
organization.

DATES: This final rule becomes effective March 9, 2015.

FOR FURTHER INFORMATION CONTACT: Scott Van Buren, Chief System Engineer 
for Aviation Safety, Office of Accident Investigation and Prevention 
(AVP), Federal Aviation Administration, 800 Independence Avenue SW., 
Washington, DC 20591; telephone: (202) 494-8417; facsimile: (202) 267-
3992; email: scott.vanburen@faa.gov. For legal questions, contact Alex 
Zektser, Regulations Division, Office of the Chief Counsel, Federal 
Aviation Administration, 800 Independence Avenue SW., Washington, DC 
20591; telephone: (202) 267-3073; facsimile: (202) 267-7971; email: 
alex.zektser@faa.gov.

SUPPLEMENTARY INFORMATION:

I. Authority for This Rulemaking

    The Federal Aviation Administration's (FAA) authority to issue 
rules on aviation safety is found in Title 49 of the United States 
Code. This rulemaking is promulgated under the authority described in 
49 U.S.C. 106(f), which establishes the authority of the Administrator 
to promulgate regulations and rules and 49 U.S.C. 44701(a)(5), which 
requires the Administrator to promulgate regulations and minimum 
standards for other practices, methods, and procedures necessary for 
safety in air commerce and national security.
    In addition, the Airline Safety and Federal Aviation Administration 
Extension Act of 2010 (the Act), Public Law 111-216, sec. 215 (August 
1, 2010), required the FAA to conduct rulemaking to ``require all 14 
CFR part 121 air carriers to implement a safety management system.'' 
The Act required the FAA to issue this final rule within 24 months of 
the passing of the Act (July 30, 2012).

Table of Contents

I. Overview of the Final Rule
II. Summary of the Costs and Benefits of the Final Rule
III. Background
    A. Summary of NPRM
    B. Summary of Comments
IV. Discussion of Final Rule and Comments
    A. Scalability
    B. Scope and Definition of Hazard
    C. Protection of Information/Data From Disclosure Under Freedom 
of Information Act (FOIA)
    D. Enforcement
    E. Scope of SMS and Compliance With Administrative Procedure Act
    F. Duplicative Rulemaking
    G. Credit for Pilot Project Participants and Adoption of Third 
Party/Accredited SMS
    H. Applicability, Subpart A--Implementation Plans
    I. Subpart B, Safety Policy--Designation of a Single Accountable 
Executive and Sufficient Safety Management Personnel
    J. Subpart C, Safety Risk Management (SRM)
    K. Subpart D, Safety Assurance
    L. Subpart F, Recordkeeping and Documentation Requirements
    M. Flow-Down of Requirements
    N. FAA Capability To Manage Oversight
    O. Guidance Material
    P. Determination of Acceptable Levels of Safety
    Q. Performance Based v. Process Based Regulation
    R. Employee Reporting Systems
V. Regulatory Notices and Analyses
VI. Executive Order Determinations
VII. How To Obtain Additional Information

I. Overview of the Final Rule

    This final rule requires air carriers authorized to conduct 
operations under 14 Code of Federal Regulations (CFR) part 121 (part 
121) to develop and implement a safety management system (SMS) to 
improve the safety of their aviation-related activities. SMS includes 
an organization-wide safety policy; formal methods for identifying 
hazards, controlling, and continually assessing risk; and promotion of 
a safety culture. When systematically applied, SMS provides a set of 
decision-making tools that air carriers can use to improve safety. SMS 
improves safety by addressing underlying organizational issues that may 
result in accidents or incidents.
    This final rule is part of the FAA's efforts to continuously 
improve safety in air transportation by filling gaps through improved 
management practices. SMS's proactive emphasis on hazard identification 
and mitigation, and on communication of safety issues, will provide air 
carriers with robust tools to improve safety. Congress, in the Airline 
Safety and Federal Aviation Administration Extension Act of 2010 (Pub. 
L. 111-216, August 1, 2010), directed the FAA to issue a notice of 
proposed rulemaking within 90 days of enactment, and a final SMS rule 
by July 30, 2012. In addition, the National Transportation Safety Board 
(NTSB) has recommended the FAA pursue rulemaking to require all part 
121 operators to implement an SMS. Further, the International Civil 
Aviation Organization (ICAO), in its March 2006 amendments to Annex 6 
part I, which addresses operation of airplanes in international 
commercial air transport, established a standard for member states to 
mandate that each air carrier establish an SMS. This regulation will 
comply with the statutory requirement, fully address the NTSB 
recommendation, and harmonize U.S. requirements with ICAO standards for 
air carriers operating under part 121.
    While the commercial air carrier accident rate in the United States 
has decreased substantially over the past 10 years, the FAA has 
identified a recent trend involving hazards that were revealed during 
accident investigations. The FAA's Office of Accident Investigation and 
Prevention identified 123 accidents involving part 121 air carriers 
from fiscal year (FY) 2001 through FY 2010 for which identified causal 
factors could have been mitigated if air carriers had implemented an 
SMS to identify hazards in their operations and developed methods to 
control the risk.\1\ This type of approach allows air carriers to 
anticipate and mitigate the likely causes of potential accidents. This 
is a significant improvement over current ``reactive'' safety action 
emphasis, which focuses on discovering and mitigating the cause of an 
accident only after that accident has occurred. In order to bring about 
this change in accident mitigation, as well as the other reasons 
discussed throughout this document, the FAA is requiring part 121

[[Page 1309]]

air carriers to develop and implement an SMS.
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    \1\ Initially, the analysis identified 172 accidents, but this 
number was based on comments to the notice of proposed rulemaking. 
The accident analysis is discussed further in the Final Regulatory 
Evaluation.
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    The requirements in this rule function as follows. Air carriers 
authorized to conduct operations under part 121 must develop and 
implement an SMS within 3 years of the effective date of the final 
rule. To demonstrate that the air carrier's SMS will be fully 
implemented by the end of this three-year period, the air carrier will 
be required to submit an implementation plan within 6 months of the 
effective date of the final rule. The implementation plan should 
include any existing programs, policies or procedures the air carrier 
intends to include in its SMS, such as continuing analysis and 
surveillance systems, aspects of quality management systems, and 
employee reporting systems. This implementation plan must be approved 
by the FAA within 12 months of the effective date of the final rule.
    The air carrier's SMS must contain the following four major 
components: Safety policy, safety risk management, safety assurance, 
and safety promotion. To satisfy the safety policy component, the air 
carrier must establish a policy which, among other things, defines the 
air carrier's safety objectives and commitment toward achieving those 
objectives. The air carrier will also be required to designate an 
accountable executive who is ultimately responsible for the safety 
performance of its operations, as well as sufficient management 
personnel who will be responsible for the coordination, implementation, 
and maintenance of the SMS, as well as integration of SMS processes 
across the air carrier.
    Under safety risk management, air carriers must develop processes 
to analyze existing and potential systems and use the resulting system 
analyses to identify hazards that may impact the air carrier's aviation 
operations.\2\ Air carriers will then analyze the risk of a consequence 
arising from the hazard occurring and determine if the associated 
safety risk is acceptable. If it is not acceptable, the air carrier 
must develop risk controls for implementation.
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    \2\ Hazards may also be identified through safety assurance 
functions, as well as by analyzing a proposed change to the air 
carrier's system.
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    Through safety assurance, the air carrier will develop and 
implement processes to monitor the safety performance of its aviation 
operations. The processes must include means to monitor and audit 
operational processes, investigate incidents and accidents, and allow 
for confidential employee reporting of hazards as well as proposing 
solutions for safety improvement. The air carrier will also conduct 
evaluations regarding its safety performance to review the 
effectiveness of risk controls that are implemented as well as to 
identify any changes in the operational environment that may introduce 
new hazards.
    Under safety promotion, air carriers will be required to train 
their employees (including managers) and develop the tools to 
communicate necessary safety information. Involvement of the air 
carriers' employees is essential to the success of its SMS. The 
employees must be properly informed of their responsibilities and 
trained regarding their duties relevant to the safety performance of 
the air carrier. In addition, they must be made aware of necessary 
safety information resulting from the various SMS analyses.

II. Summary of the Costs and Benefits of the Final Rule

    This rule requires part 121 air carriers (domestic, flag, and 
supplemental operations) to establish an SMS. SMS is a tool designed to 
help air carriers effectively integrate formal risk control procedures 
into normal operational practices to improve safety for all part 121 
air carriers. It is expected that the requirements of the rule will 
help airlines to identify safety problems, and if airlines take steps 
to mitigate these problems it is estimated that the benefits from that 
mitigation could be between $205.0 and $472.3 million over 10 years 
($104.9 to $241.9 million present value at 7 percent discount rate). 
Costs of the rule's provisions (excluding any mitigation costs, which 
have not been estimated) are estimated to be $224.3 million ($135.1 
million present value at 7 percent discount rate) over 10 years.

    Estimated Costs and Benefits for All Part 121 Carriers--2014-2023
      [Millions of 2010 dollars * (discounted at 7% discount rate)]
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Costs.....................................  Rule Implementation Costs:
                                             $135.1.
                                           -----------------------------
                                            Mitigation Costs: Not
                                             quantified, estimates not
                                             included.
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Benefits from Provisions of the Rule and    $104.9-$241.9.
 any Consequent Safety Mitigation Actions
 **.
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* Table values have been rounded. Totals may not add due to rounding.
** Given the range of mitigation actions possible, it is difficult to
  quantify potential benefits. This range reflects the potential
  benefits resulting from examples of possible mitigation actions.

III. Background

A. Summary of NPRM

    On November 5, 2010, the FAA published a notice of proposed 
rulemaking (NPRM) on SMS for part 121 certificate holders (75 FR 
68224). In the NPRM, the FAA proposed to require these certificate 
holders to develop and implement an SMS to improve the safety of their 
aviation related activities. In response to several commenters' 
requests, the comment period was extended and ultimately closed on 
March 7, 2011.

B. Summary of Comments

    The FAA received 69 comment documents in response to the NPRM from 
a variety of commenters, including air carriers, aircraft designers and 
manufacturers, trade associations, emergency medical transport 
services, a non-profit safety organization, a university, and private 
citizens. Commenters included Aerospace Industries Association (AIA)/
General Aviation Manufacturers Association (GAMA), Air Charter Safety 
Foundation (ACSF), Aircraft Electronics Association (AEA), Aircraft 
Owners and Pilots Association (AOPA), Air Line Pilots Association, 
International (ALPA), Air Medical Operators Association (AMOA), Air 
Transport Association of America, Inc.\3\ (ATA), American Association 
for Justice (AAJ), Association of Air Medical Services (AAMS), 
Association of Flight Attendants (AFA), Communications Workers of 
America, AFL-CIO, Aviation Safety Council of Alaska (ASCA), Aviation 
Suppliers Association (ASA), The Boeing Company (Boeing), Bombardier 
Inc.

[[Page 1310]]

(Bombardier), Cargo Airline Association (CAA), Cessna Aircraft Company 
(Cessna), Clark County (Nevada) Department of Aviation (CCDOA), Delta 
Air Lines, Inc. (Delta), DTI Training Consortium (DTI Training), 
Experimental Aircraft Association (EAA), FedEx Express (FedEx), Futron 
Corporation (Futron), GE Aviation (GE), Gener Ibita Topacio, Hawker 
Beechcraft Corporation (Hawker Beechcraft), Helicopter Association 
International (HAI), JetBlue Airways (JetBlue), Modification and 
Replacement Parts Association (MARPA), National Air Carriers 
Association (NACA), National Air Transportation Association (NATA), 
National Transportation Safety Board (NTSB), Omni Air International 
(Omni Air), Pinnacle Airlines Corp. (Pinnacle), Regional Airline 
Association (RAA), Rockwell Collins Inc. (Rockwell Collins), Southwest 
Airlines (SWA), StandardAero, True-lock, United Parcel Service Co. 
(UPS), United Technologies Corporation (UTC), University of Southern 
California (U.S.C.), School of Engineering, the U.S. Small Business 
Administration's (SBA) Office of Advocacy, and 24 individuals.
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    \3\ As of December 1, 2011, the ATA changed its name to Airlines 
for America (A4A).
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IV. Discussion of Final Rule and Comments

    The FAA is adopting the final rule, as proposed, with minor 
modifications based on the comments discussed below. The rule requires 
part 121 certificate holders to submit a plan for implementation of SMS 
and fully implement an SMS within 3 years of the effective date of the 
final rule.

A. Scalability

    The SBA raised concerns about the scalability of this rule and its 
impact on small business entities. The SBA, along with True-lock, AEA, 
MARPA, and ASA, indicated that this rule would be too costly for small 
businesses to implement. The SBA suggested limiting the final rule to 
incident management, strategic decision-making, and notification of 
incidents to the FAA.
    The FAA has decided not to limit this rule as suggested by the SBA 
because adopting the SBA's proposal would only partially enact the 
safety assurance component and none of the other requirements that the 
FAA considers to be necessary for an effective SMS. The four parts of 
an SMS (safety policy, safety risk management, safety assurance, and 
safety promotion) work together to stress management accountability and 
decision-making based on forward looking hazard identification and 
mitigation of risks, rather than a retrospective review of conditions 
that have already caused accidents and incidents. The four components 
working together provide the tools necessary to allow strategic 
decision-making.
    However, the FAA recognizes the perceived impact that this rule may 
have on small businesses. As of January 6, 2012, there were 90 part 121 
certificate holders. The size, scope, and complexity of the operations 
of each of these certificate holders vary greatly. For example, a third 
of the part 121 certificate holders have 10 or fewer airplanes, while 
10% have more than 270 airplanes.
    Given the variance in these types of operations, the FAA designed 
these requirements to be applicable to air carriers of various sizes, 
scopes, and complexities, as well as adaptable to fit the different 
types of organizations in the air transportation system and operations 
within an individual air carrier. The FAA does not anticipate, nor 
expect, that small air carriers would require an SMS as complex as one 
for large air carriers. To further clarify this issue, the FAA has 
revised 14 CFR 5.3 in the final rule to state that the SMS must be 
appropriate to the size, scope, and complexity of the certificate 
holder's operations. As such, it is scalable to the size of a small 
entity.
    The FAA has also revised the guidance material that was published 
for comment with the NPRM. The revised guidance material provides a 
variety of examples of how to implement the SMS processes and 
procedures that an air carrier may develop based on the size, scope, 
and complexity of its operation. The examples outlined in the guidance 
material are not intended to limit an air carrier to only these methods 
of compliance. The following outlines different approaches, based on 
processes and procedures developed by air carriers participating in the 
Flight Standards Service (AFS) Voluntary SMS Pilot Project (``Pilot 
Project''), which may be adapted to fit the operational needs of an air 
carrier based on the size of its operation.\4\
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    \4\ The Pilot Project was established for operators to develop 
implementation SMS strategies and oversight interfaces necessary for 
SMS, as well as gain experience for FAA and operators regarding SMS 
implementation.
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    Larger air carriers participating in the Pilot Project typically 
use their existing divisional structures as a foundation for SMS 
management. The flight safety organization or equivalent provides a 
source of standardization, oversight, and reporting directly to a 
corporate accountable executive. Each division typically establishes a 
management review process with a committee chaired by the most senior 
manager (generally a senior vice president) in the division. This 
senior manager may be one of the management personnel that is already 
required of an air carrier conducting operations under part 121 under 
14 CFR 119.65. These committees are most often supported by a staff-
level working group that attends to day-to-day safety management 
functions, and advises the senior management committee. These working 
groups are usually made up of existing safety and quality assurance 
personnel, along with representatives from the functional areas within 
the division. They are, in turn, supported by the members of the flight 
safety organization which may also manage corporate level data 
management and analysis functions. To provide coordination and 
integration across the air carrier, most large air carriers have a 
corporate level committee made up of the division managers and 
including the most senior managers in the air carrier (e.g., Chief 
Executive Office, President, Chief Operating Officer).
    Using this framework, a large air carrier has established a team of 
sufficient management personnel responsible for the daily oversight of 
SMS and communication to the accountable executive, to ensure that 
informed decisions regarding the safety performance of the air 
carrier's operations are being made. This existing framework can be 
used to satisfy the management structure requirements in this final 
rule.
    At medium size air carriers, the decision making and information 
process flows are similar to those of larger air carriers, but the 
supporting functions are often integrated under the Director of Safety. 
These structures are similar to what are traditionally used to 
accomplish the requirements of an independent evaluation program (IEP), 
which most part 121 air carriers already have in place.\5\
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    \5\ IEP is a comprehensive program for evaluating an air 
carrier's operational systems as well as its assurance programs. It 
builds on the auditing programs of the internal audit function and 
provides management with an additional level of assurance that is 
independent of the operational sub-organizations' audits and 
reviews. IEPs provide many of the auditing and evaluation safety 
assurance processes required in the rule.
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    At small air carriers, there will likely not be the multiple tiers 
of decision making and structures that exist in larger air carriers. 
For small air carriers, convening ad hoc committees might be an 
appropriate SMS mechanism. In these cases, the Director of Safety may 
be the sole support staff available. Using the Director of Safety in 
this capacity

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would be an acceptable means of compliance with the management 
structure requirements of this final rule for a small air carrier.
    Another example of scalability stems from management's need for 
continued access to information about the air carrier's operational 
processes. Larger air carriers may, as part of safety assurance, have 
full time safety and quality auditors who conduct internal audits, or, 
particularly in smaller divisions, these audits may be performed by 
personnel from inside the divisions as collateral duties. In addition, 
automated data entry, record keeping, retrieval, and analysis are 
nearly universal at larger air carriers. Software may be developed by 
or for the air carrier, or may be selected from a variety of specialty 
safety and quality system software providers. Larger air carriers 
typically also have specialized information technology (IT) staffs that 
may be used to monitor and complete the recordkeeping requirements of 
the final rule.
    Managers of medium to small air carriers certainly need the same 
type of information to make decisions. Typically, though, the volume of 
information is smaller because the operation is smaller and not as 
complex. The frequency of the air carrier's operations may also affect 
the rate at which information must be updated and audits must be 
conducted. Medium and small air carriers often purchase uniform 
software packages sold by third parties rather than invest in custom-
built packages that require hiring in-house staffers to implement, 
design, and maintain the software. Very small air carriers may use 
basic desktop software (e.g., spreadsheet and basic database products) 
to track information. Smaller air carriers often use line personnel to 
perform audits as a collateral duty. Analysis of individual audits 
typically is performed as part of the auditing activity with trend 
analysis being done by the Director of Safety and, if available, safety 
and quality staff. Using these existing tools are acceptable means of 
compliance with the requirements of this final rule.
    Another example of the scalability of SMS can be seen in the 
employee reporting system required by this rule. The FAA anticipates 
that smaller air carriers will have to deal with significantly fewer 
reports from the employee reporting system than larger air carriers. 
Also, larger air carriers are more likely to satisfy this requirement 
through one or more aviation safety action programs' (ASAP) employee 
group applications. These systems for large employee groups might be 
more costly than the minimum requirements imposed by this rule. ASAP is 
an employee reporting system that air carriers may use to gather 
information from employees on safety compliance and performance issues. 
Approximately two-thirds of air carriers conducting operations under 
part 121 have implemented some type of ASAP program. While ASAP 
originally was limited to pilots and flight engineers, some air 
carriers have expanded the program to include their flight attendants, 
dispatchers, and mechanics; and one air carrier has an ASAP for ground 
service personnel.
    To further ensure that the SMS is scaled to fit the needs of the 
air carrier's operations, the FAA recommends each air carrier evaluate 
its existing management systems and regulatory compliance programs and 
then incorporate those systems and programs that exemplify the key 
components of SMS as appropriate. The FAA designed the final rule to 
allow for this flexibility. The FAA acknowledges that many air carriers 
already have quality management systems (QMS) and other processes 
currently in place to monitor performance of their operations. In 
addition, some current regulatory and voluntary programs, like the 
continuing analysis and surveillance system (CASS) and ASAPs, can be 
incorporated into the SMS and used to meet the safety assurance 
requirements of the final rule. Incorporating those existing systems 
that already meet the performance objectives of this rule will only 
serve to expedite an air carrier's implementation of SMS, and allow for 
a smoother transition for employees expected to participate in the air 
carrier's SMS because of their familiarity with their employers' 
existing systems.
    In addition to the flexibility incorporated in the final rule and 
the ability to leverage existing processes to meet SMS requirements, 
the FAA has offered a tool to air carriers that will facilitate SMS 
implementation and data management. It is important to note that this 
rule does not specifically require automated information technology 
systems. However, several SMS processes will require management of 
varying amounts of data, depending on the size and complexity of the 
air carrier's organization. Currently, air carriers have free access to 
the FAA's web-based application tool (WBAT) to assist in satisfying the 
data collection and management aspects of the final rule. WBAT is a 
federally developed and funded software system that may be used to 
assist the air carriers with data management.
    WBAT began as an ASAP and incident reporting tool. Its use was 
expanded to contain functions that more broadly support SMS. 
Specifically, WBAT currently has modules that support the data 
management needs of safety risk management and safety assurance 
functions (e.g., employee reporting, audits, investigations, and 
evaluations). WBAT also contains an SMS implementation plan manager 
module, which supports the air carrier's implementation of SMS by 
providing a tool to guide air carriers though a gap analysis and 
implementation planning process. The results of the gap analysis and 
implementation planning are also documented and stored in WBAT. While 
WBAT data are treated as proprietary to the air carrier, permission can 
be given to the FAA to access it and review draft plans online and 
provide feedback, greatly expediting the review and approval process. 
WBAT is currently used by approximately 64 air carriers authorized to 
conduct operations under part 121. Of those 64 carriers, 55 use WBAT to 
support their SMS implementation as part of their participation in the 
Pilot Project.
    While the FAA is not requiring air carriers to use WBAT, it is one 
option that is available and it reduces the costs of developing and 
implementing a separate platform. The FAA has made a commitment to 
continue to support WBAT for basic services as a result of the comments 
submitted to the NPRM.

B. Scope and Definition of Hazard

    ATA, AIA/GAMA, and Delta asserted that the rule was too broad and 
could be applied to areas beyond the FAA's oversight authority. To 
address this issue, the commenters suggested revising the final rule to 
limit the SMS to those areas of a certificate holder's business that 
have a direct operational impact on aviation activities.
    To address the commenters' concerns regarding the FAA's oversight 
of SMS, the FAA has incorporated the suggestions of the commenters to 
limit that oversight to the air carrier's aviation activities conducted 
under part 121. While some air carriers may narrowly tailor their SMS 
to address only these activities, the FAA acknowledges that some air 
carriers may opt to extend their SMS to other aviation related 
activities for which they hold certificates, such as 14 CFR part 145 
(part 145) repair station activities, or 14 CFR part 142 training 
center activities. Some air carriers might also extend their SMS to 
their non-aviation related activities, such as security and 
occupational safety and health issues. If an air carrier elects to do 
so, the FAA would only conduct

[[Page 1312]]

oversight of the SMS activities related to its aviation operations that 
the air carrier conducts in accordance with the provisions of part 121. 
In the final rule, the FAA has revised the regulatory text to limit the 
application of SMS only to the aviation-related activities conducted 
under the air carrier's 14 CFR part 119 (part 119) certificate.
    The FAA also limited the scope of SMS, in part, by defining hazard 
more narrowly. There were thirteen comments related to the definition 
of ``hazard.'' U.S.C. stated that the definition of hazard should be 
expansive enough to include non-operational elements (e.g., human 
resources, finance, information technology) of an organization. Twelve 
commenters (including SBA, ATA, AIA/GAMA, GE, and MARPA) suggested 
limiting the term ``hazard'' to the aviation operational environment. 
Specifically, these commenters were concerned about the scope and depth 
of expectations regarding hazard identification. They stated that the 
SMS should focus solely on conditions affecting the safety of aviation 
operations and not occupational safety or environmental protection, as 
could be inferred in the definition proposed in the NPRM. Other 
commenters asked whether certificate holders would be expected to track 
every conceivable hazard, even those instances in which exposure to the 
hazard is remote or the likelihood and/or severity of potential 
outcomes would be negligible.
    Upon review of the comments, the FAA recognizes that the scope of 
the hazard and risk analysis and control processes required of the SMS 
must be consistent with the FAA's statutory authority and the intended 
scope of the SMS. Therefore, the FAA has amended the definition of 
``hazard'' to limit it to a ``condition that could foreseeably cause or 
contribute to an aircraft accident as defined in 49 CFR 830.2.'' This 
definition more clearly limits the potential events to be considered to 
those directly related to aircraft operations and the potential 
severity of those events to aircraft accidents, which is consistent 
with the FAA's statutory authority in 49 U.S.C. 44702. The FAA 
definition, though it is tailored specifically to aviation, is 
consistent in intent and application with long standing industry system 
safety definition and practice. The revised definition also 
incorporates the NTSB's definition of ``aircraft accident,'' as 
provided under 49 CFR 830.2. According to 49 CFR 830.2, an ``aircraft 
accident'' means an occurrence associated with the operation of an 
aircraft which takes place between the time any person boards the 
aircraft with the intention of flight and all such persons have 
disembarked, and in which any person suffers death or serious injury, 
or in which the aircraft receives substantial damage.

C. Protection of Information/Data From Disclosure Under Freedom of 
Information Act (FOIA)

    AMOA, AOPA, ASA, ATA, Boeing, Bombardier, CAA, EAA, FedEx, GE, HAI, 
JetBlue, MARPA, NACA, UTC, and RAA all raised concerns that if SMS data 
is not protected from disclosure under FOIA, the FAA's oversight over 
SMS could be compromised due to a lack of data being submitted to the 
FAA. ATA and GE, while supporting the FAA's approach in the NPRM to not 
require the physical submission of any data, asserted that this is not 
adequate protection. These commenters indicated that protection of this 
data is vital to ensuring this information is shared with the FAA.
    Exposing submitted safety data to public scrutiny may have a 
chilling effect on reporting practice. ATA acknowledged that this 
information should be shared only with the FAA. JetBlue suggested the 
FAA develop a 14 CFR part 193 (part 193) protection order, extending 
the same protections to SMS data that currently exist for ASAP, the 
Flight Operational Quality Assurance Program (FOQA), the Line 
Operations Safety Audit (LOSA), etc. AAJ opposed the protection of 
information beyond existing FOIA protections because of the impact the 
protection may have on the ability to gather information during 
discovery processes.
    The FAA recognizes that protection of certain safety information is 
vital to ensuring that employees and air carriers provide sufficient 
data to the FAA to ensure effective oversight over SMS. Section 44735 
of title 49 of the United States Code, as amended by the FAA 
Modernization and Reform Act of 2012, Public Law 112-95 (Feb. 14, 
2012), specifically contemplates the protection of voluntarily 
submitted reports, data, or other information produced or collected for 
purposes of developing and implementing a safety management system 
acceptable to the Administrator. It is important to note, however, such 
protection could not be afforded to information that is required to be 
kept to satisfy compliance with other regulatory requirements, such as 
crewmember training records or maintenance service records.
    To further clarify the extent of protection that may be afforded 
under the statute, the FAA notes that any record or other documentation 
that is required to show compliance with other regulatory requirements 
would not be protected. Protection also would not extend to records 
that must be made available under the provisions of 14 CFR 119.59. 
Furthermore, any information protected under the statute is only 
protected from release by the FAA. If the information is submitted or 
released by the air carrier to another government entity, the 
protections of the statute are not binding on these other entities. Nor 
are these documents necessarily protected from discovery in civil 
litigation, although the carrier would be free to ask the court for 
whatever protections would be appropriate under the rules of the 
relevant jurisdiction.

D. Enforcement

    ACSF, AEA, and DTI Training raised concerns about the manner in 
which the FAA plans to enforce the requirements of the new rule and 
address issues of noncompliance identified through SMS policies and 
procedures. ACSF recommended that the FAA publish its plan for 
compliance and enforcement, and provide industry the opportunity to 
comment.
    In regard to enforcement of the provisions of 14 CFR part 5 (part 
5), the FAA acknowledges that each SMS will be uniquely designed to 
meet the needs of that air carrier's operations. Determining compliance 
with the requirements of part 5 will be dependent on the specific facts 
of each case. As such, the FAA will exercise its discretion in deciding 
to pursue enforcement of the requirements of part 5.
    The FAA also recognizes that a fundamental concept of SMS is for 
air carriers to identify and correct their own instances of 
noncompliance and invest resources and efforts to preclude their 
recurrence. This concept is not new to FAA enforcement policy. Many air 
carriers are currently addressing these issues under the voluntary 
disclosure reporting program (VDRP). When an apparent violation is 
detected through SMS processes and procedures, the FAA encourages air 
carriers to use VDRP as appropriate to disclose the violation.

E. Scope of SMS and Compliance With Administrative Procedure Act

    AOPA, ASA, MARPA, NATA, SBA, and True-Lock raised concerns that the 
FAA could use SMS to extend regulatory requirements without going 
through notice and comment rulemaking as required under the 
Administrative Procedure Act (APA), 5 U.S.C. 552. Specifically, 
concerns were

[[Page 1313]]

raised with regard to the requirement under the rule that the 
certificate holder develop risk controls for those hazards that require 
mitigation as identified under the certificate holder's safety risk 
management analysis.
    This issue is not unique to SMS. Many regulations impose 
performance requirements that may be met in different ways. For 
example, certificate holders are required under 14 CFR 121.135 to 
develop and document certain procedures, methods, and instructions to 
personnel. This provision sets forth areas that must be addressed by 
these procedures, but does not prescribe the exact procedures that must 
be incorporated into the certificate holders' manuals. This discretion 
is evident in the requirement of 14 CFR 121.135(b)(15), which requires 
the manual to include ``procedures for operating in periods of . . . 
potentially hazardous meteorological conditions.'' As the regulation 
does not establish a prescriptive, exclusive list of hazardous 
meteorological conditions for which procedures must be developed, the 
certificate holder must identify those conditions that are likely to 
impact its operation and address them appropriately in its manual. If 
these procedures are incorporated in the certificate holder's required 
manual, the certificate holder must ensure compliance with the 
procedures it develops and documents in its manuals.
    A practical outcome of the safety risk management and safety 
assurance components of SMS is that procedures developed and documented 
under 14 CFR 121.135 may need to be revised, or new procedures added, 
to mitigate risk from identified hazards. It is not the intent of this 
rulemaking to alter the existing regulatory standards or the approval 
and acceptance processes that already apply to each certificate holder.
    In some instances, the FAA may determine that a particular 
mitigation is necessary for all certificate holders based on the 
identification of a system-wide hazard. If the FAA identifies the need 
for such mitigation, the FAA would conduct rulemaking in accordance 
with the APA in order to apply the standard to all certificate holders.

F. Duplicative Rulemaking

    ACSF, EAA, and NATA raised concerns about the different set of SMS 
requirements for airports and suggested combining these two rulemaking 
actions into one to ensure consistency. ASA and MARPA asserted that the 
FAA should not create a general part 5, but rather should incorporate 
the proposed requirements into a new subpart for part 121. This would 
allow for SMS requirements to be tailored to each specific part to 
address technical issues that are unique to the regulated entities.
    As stated in the NPRM, the FAA developed the framework of the rule 
as a means of harmonizing with ICAO standards, while establishing a 
uniform standard that could be extended to apply to 14 CFR part 135 
(part 135) certificate holders, part 145 repair stations, and design 
and manufacturing entities. The uniform standard is necessary because 
some of these regulated entities may hold more than one FAA certificate 
and may need or want to create one SMS to encompass all of their 
aviation-related activities. The general standards set forth in part 5 
would permit such integration with only minor modifications. Any 
extension of the applicability of part 5 required by the FAA will be 
made through the APA notice and comment rulemaking process.
    In regard to the separate standards for airports, the FAA notes 
that both SMS rules are structured in accordance with the ICAO SMS 
framework, which is identical in Annex 6 (air operators) and Annex 14 
(airports). However, the FAA recognizes that there are inherent 
differences in the operation of an airport and an air carrier. Based on 
a review of these differences, the FAA determined that the rulemakings 
should proceed as separate projects.
    Although there may be two separate regulations addressing SMS, the 
FAA encourages air carriers and airports to communicate with one 
another when hazards are identified through their respective SMS 
procedures and processes. In that way, they can determine which SMS may 
best address the hazard. For example, if an air carrier's employee 
identifies a hazard on the movement area of the airport, the air 
carrier's employee would likely report the hazard through the air 
carrier's employee reporting system. Once reported, the FAA recommends 
that the air carrier notify the airport of the identified hazard so the 
airport is aware of the issue and can analyze the risk accordingly. In 
addition, the air carrier may also analyze the risk of the hazard and 
determine if it warrants any sort of mitigation through the revision or 
further development of the air carrier's procedures. This type of 
communication will serve to ensure that hazards, whether unique to the 
certificate holder or more systemic to the airport, are being addressed 
effectively by all parties.

G. Credit for Pilot Project Participants and Adoption of Third Party/
Accredited SMS

    ATA, Delta, NACA, and StandardAero suggested grandfathering in the 
participants in the Pilot Project, or otherwise providing credit for 
their progress in developing and implementing an SMS based on the 
framework set forth in AC 120-92A. Delta requested additional guidance 
for those certificate holders transitioning from the levels of 
validation in the Pilot Project to satisfying the requirements of part 
5. In addition, ASA and StandardAero requested that they receive credit 
for third party systems that are similar to SMS that they have 
implemented, such as QMS, IEP, or International Standard for Business 
Aircraft Operations (IS-BAO).
    The FAA developed the requirements in the NPRM based on the ICAO 
SMS framework in Annex 6 and the guidelines for developing a voluntary 
SMS described in AC 120-92A, Appendix I. Despite the attempt to 
harmonize the proposed regulatory standards with the ICAO framework and 
guidance material, there may be some differences between what the air 
carriers have done in the Pilot Project and what would be required 
under part 5 once the rule becomes effective. Rather than exempt the 
Pilot Project participants from the requirements of part 5, the FAA 
believes that these air carriers would benefit from reviewing their 
existing implementation plans, and comparing the plans with the final 
rule. If gaps are found, the carriers would update the implementation 
plans to fill the gaps identified and submit their plans to the FAA for 
approval to satisfy the requirements of 14 CFR 5.1(b).
    Some air carriers completed SMS implementation through the Pilot 
Project under the framework of AC 120-92A and their SMS has been 
validated by the FAA. To comply with the implementation plan 
requirements of 14 CFR 5.1(b), these air carriers will need to conduct 
a gap analysis of the systems currently in place under their SMS and 
the requirements of the final rule, and identify any gaps that will 
need to be addressed to bring their existing SMS into compliance with 
the requirements of the final rule. However, they may not have to 
repeat the entire gap analysis and planning process in areas where 
there are no differences between the final rule and Pilot Project 
guidance.
    In regard to the request for credit for implementation of third 
party systems, like International Air Transportation Association (IATA) 
Operational Safety Audit (IOSA), International Standards

[[Page 1314]]

Organization (ISO)-9000/AS-9100, these systems have not been subject to 
review and acceptance by the FAA. It would be inappropriate to provide 
credit or waive compliance requirements to these air carriers who have 
implemented these third party systems. These systems may include some 
elements of an SMS, but may not contain all the necessary elements.
    These third-party systems may be incorporated into an air carrier's 
SMS if the systems satisfy the requirements set forth in the final 
rule. If an air carrier plans to incorporate these other systems into 
its SMS, the air carrier should outline the incorporation of these 
systems in its implementation plan. Given these avenues for 
incorporating existing processes and procedures, the FAA has not 
revised the final rule to allow credit for Pilot Project participants, 
nor other air carriers who have implemented third-party SMS systems or 
other management tools.

H. Applicability, Subpart A--Implementation Plans

    ACSF, ATA, Bombardier, NACA, and RAA requested the timeframe for 
submission of the implementation plans be extended from 6 months to 
anywhere from 9 to 18 months. ASCA, ATA, Bombardier, FedEx, Omni Air, 
and RAA expressed concern with the FAA's ability to manage the 90 
submissions it will receive, as well as the FAA's ability to establish 
a consistent process for review and acceptance of the plans. 
Bombardier, EAA, and RAA asserted that an extension of this time is 
needed because the FAA would not be held to a timetable for accepting 
the implementation plans. FedEx suggested the FAA consider a timetable 
of three months to approve the implementation plan, or, in the 
alternative, to simply accept the plan. ASCA, Bombardier, and FedEx 
requested that the time to submit and wait for the FAA to approve an 
implementation plan should not be included in the 3-year implementation 
timeframe.
    In addition, ATA, AOPA, ASCA, and Bombardier indicated that three 
years was not adequate for carriers to develop and implement an SMS. In 
contrast, AFA, ALPA, NTSB, Omni Air, and SWA acknowledged that the 
proposed timeframes for implementation plan approval and SMS acceptance 
were reasonable.
    The FAA notes that 24 of the part 121 certificate holders 
participating in the SMS Pilot Project have submitted an SMS 
implementation plan as part of the pilot project. The typical 
implementation plans received in the pilot projects indicated that full 
implementation of SMS could be achieved within three years. None of the 
participants indicated the need for more time during development of 
their plans. Because this timeframe is consistent with the comments 
received from AFA, ALPA, NTSB, Omni Air, and SWA, as well as the 
lessons learned from other Civil Aviation Authorities (CAAs), the FAA 
has determined that three years is an adequate timeframe for 
implementation of SMS.
    However, upon review of the comments, the FAA has revised 14 CFR 
5.3 to require submission of the implementation plan for review within 
6 months of the final rule's effective date, and for approval of the 
plan no later than 12 months after the effective date of the final 
rule. As of January 11, 2012, 72 of the approximately 90 part 121 
certificate holders are participating in the Pilot Project. Of these, 
17 have completed implementation plans, which have been validated by 
the FAA. The average time for completing and receiving approval of 
these plans is approximately one year. Based on this average, the FAA 
expects that certificate holders will be able to meet this requirement. 
Certificate holders that already have a validated implementation plan 
through the Pilot Project will not be required to resubmit their 
original implementation plan for approval, but rather may submit an 
abridged analysis that identifies the areas in their existing 
implementation plans that need to be revised to comply with the new 
regulatory requirements. Many Certificate Management Teams (CMTs), 
which are the FAA field offices responsible for managing individual 
part 121 certificates, have been exposed to these implementation plans 
due to their work with the Pilot Project and, therefore, there should 
be no extended delays in reviewing and ultimately approving these 
plans. Accordingly, the FAA believes this timeframe is sufficient and 
will not cause undue burden on either the affected certificate holders 
or the FAA.
    Pinnacle disagreed with the proposal to require implementation 
plans be approved. Due to the dynamic nature of the airline industry, 
Pinnacle asserts that these plans must be routinely modified to 
accommodate changes to an airline's organization or environment. If a 
plan requires approval, an airline would not be able to proceed with a 
change to a plan until the FAA reviewed and approved each change. 
Bombardier, while not objecting to the requirement to have the plans 
approved, recommended some minimum requirements for the content and 
level of detail for the implementation plan.
    The FAA recognizes the dynamic nature of an air carrier's 
operations, and, thus, maintains that the SMS should be accepted rather 
than approved to allow the air carrier to make the necessary changes to 
address issues in its operations. However, to ensure that the SMS is 
properly developed within the required timeframe, some measure of 
additional oversight control is necessary. One of the foremost 
acknowledged sources of hazards is change in an air carrier's 
operation, and it is one of the principal reasons for special or 
expanded oversight by the FAA. The FAA, therefore, has not revised the 
requirement that the implementation plan must ultimately be approved. 
Any changes to the implementation plan and SMS will be documented and 
submitted to the FAA by the air carrier. If a modification is required, 
the FAA will provide additional guidance to the air carrier to ensure 
that the SMS remains in compliance with part 5 and is implemented 
within 3 years of the effective date of the final rule.
    ATA suggested extending the effective date of the final rule 
because the proposed 60-day period is not sufficient time to review the 
rule and understand what is required to be in the implementation plan 
before the time for submission of the implementation plan begins to 
run. In contrast, AFA, NTSB, Omni Air, and SWA stated that the 60-day 
effective date was reasonable.
    The FAA has determined that the 60-day effective date is 
appropriate. The changes to the final regulatory text are not 
significant and, again, more than 50% of the part 121 certificate 
holders already are engaged in developing and implementing an SMS. 
Therefore, the 60-day effective date is a reasonable timeframe for 
certificate holders to conduct their review of the final rule and 
initiate compliance.

I. Subpart B, Safety Policy--Designation of a Single Accountable 
Executive and Sufficient Safety Management Personnel

a. Single Accountable Executive
    Bombardier raised concerns that proposed 14 CFR 5.25 does not 
permit any flexibility for the certificate holder to delegate tasks to 
more than one executive or other management representatives as 
appropriate, based on the size and complexity of the organization. ATA 
recommended further clarifying the role of the accountable executive, 
and removing the requirement that the accountable executive be 
responsible for implementation of the SMS. ATA, NACA, and RAA asserted 
that this

[[Page 1315]]

responsibility is better suited for the safety management 
representative. ALPA supported the designation of a single, accountable 
executive. Cessna and Futron recommended that the authority to make 
operational decisions and the authority to allocate resources should be 
better defined for the accountable executive, or otherwise removed from 
this paragraph. Futron asserted that the accountable executive should 
be outside of the normal safety chain and directly involved in the 
operational chain.
    As proposed, 14 CFR 5.25 defines both the accountable executive and 
the management personnel. The accountable executive must be a single, 
identifiable person having final authority and responsibility for the 
safety performance of the air carrier. This ensures that executive 
management is integrally involved in the oversight of the air carrier's 
safety performance. The FAA has not revised this requirement in the 
final rule.
    To address the commenters' concerns about the accountable 
executive's responsibilities, the FAA has clarified the criteria and 
responsibilities set forth in 14 CFR 5.25. As prescribed, the 
accountable executive needs to be able to organize, direct, and control 
the air carrier's activities, as well as allocate resources to make 
safety controls effective. The accountable executive must also develop 
the documented safety policy proposed under 14 CFR 5.21, communicate 
the policy throughout the air carrier, and regularly review the safety 
policy and safety performance of the air carrier. The accountable 
executive must review safety information to assess the overall 
performance of the air carrier and make necessary changes.
b. Management Representative
    Delta suggested that the involvement of a part 119 management 
position in the efficient working of an SMS must suffice as a required 
resource for the implementation of the SMS. Other commenters questioned 
the need to require only one management representative and suggested 
revising the rule to allow for the certificate holder to determine how 
to structure a management team responsible for monitoring the daily 
operation of the SMS.
    Part 119 identifies various management personnel needed for an air 
carrier to function and maintain a certificate. The FAA does not 
believe it is necessary to restrict part 121 air carriers from using 
only the Director of Safety or another part 119 management personnel 
position to perform the duties specified in 14 CFR 5.25(c). The 
requirement to have a designated management representative was intended 
to ensure coordinated and consistent implementation of a fully 
integrated SMS throughout the air carrier's aviation related 
activities, as well as to provide adequate support for continued 
operation and maintenance of the SMS.
    Upon review of the comments, it appears that either one person, or 
a combination of personnel, could perform the function of the 
management representative as proposed in the NPRM. The FAA does not 
expect that the accountable executive will always perform every day-to-
day activity that the function of the management representative 
requires. As air carrier operations are diverse, one method of managing 
implementation and continued operation of an SMS cannot be exclusively 
defined. To do so may stifle innovation and creativity. Although a 
single management representative, designated by and reporting directly 
to the accountable executive, is conceptually the most direct means of 
establishing a point of responsibility for an integrated system, this 
does not represent the only means. Depending upon the size and 
complexity of the air carrier, the functions of the management 
representative or personnel may range between being a collateral duty 
of the accountable executive, to a team of representatives working 
under the guidance and coordination of a team leader who is responsible 
for the effectiveness of the team. Accordingly, the FAA has revised 14 
CFR 5.25(c) to allow the air carrier to designate sufficient management 
personnel responsible for the coordination and implementation of the 
SMS.
    Whatever structure is implemented by the air carrier, 14 CFR 
5.25(c)(4) requires that these personnel regularly report to the 
accountable executive. Personnel designated to perform this function 
must be in positions in the organization of sufficient independence to 
have direct access to the accountable executive to report on the safety 
performance of the operation and recommend any necessary improvements.
c. Role of Line Employees
    AFA raised concerns that the line employees are not defined as 
having a key role in the decision-making process and that they are 
merely a reporting mechanism for the SMS. AFA asserted that these 
employees should also have input into the decision- making process.
    For an SMS to be effective, input and active participation is 
essential from all levels of employees in an air carrier. Many air 
carriers have different decision-making processes, some of which 
include line employees. Roles that employees play within that air 
carrier's SMS must be identified and documented in the safety policy as 
described in 14 CFR 5.21. If line employees are identified to 
participate in safety boards, working groups or audit review teams, 
they must be trained to actively support the safety policy of the 
accountable executive as well as comply with all established 
organizational safety initiatives. Another aspect of SMS that requires 
line employee participation is the employee reporting system. The 
participation of line employees is critical in developing improvements 
in functions that directly impact their job tasks.

J. Subpart C, Safety Risk Management (SRM)

    AIG, ASA, ATA, Boeing, GAMA, MARPA, Pinnacle, and RAA recognized 
the importance of SRM, but requested clarification regarding when the 
SRM processes and procedures are triggered and what constitutes a 
``system.'' The commenters also suggested reorganizing 14 CFR 5.51, 
5.53, and 5.55, to emphasize hazard identification and to eliminate 
system analysis.
    The FAA has revised the regulatory text to clarify how safety 
analyses must be used under safety risk management. With regards to 
this rule, the term ``system'' is used to describe the operational 
components used to deliver aviation-related services. Systems may 
include hardware, software, people, procedures, resources, or functions 
directly related to the delivery of air transportation services. For 
example, a system would include, among others: The aircraft, the 
crewmembers, crew training, crewmember duty time tracking programs, 
dispatch functions, maintenance of the aircraft, fueling, servicing, 
and flight operations. The term ``system'' does not include those 
people, procedures, resources, hardware, and software that are not 
directly related to the delivery of air transportation services (e.g., 
advertising, building maintenance, payroll). The FAA's use of the term 
``system,'' in this rulemaking, is consistent with long-standing use of 
the term within the industry.
    As part of the SRM process, air carriers need to consider the 
operational environment directly related to the delivery of air 
transportation services. The operational environment that should be 
considered includes not only

[[Page 1316]]

the physical environment (e.g., terrain, weather, geographic location) 
but also any constraints on the air carrier's actions due to business 
needs and other laws or regulations that may affect the air carrier's 
air transportation services.
    Regarding when SRM would be triggered, 14 CFR 5.51 (Applicability.) 
requires that the SRM process be applied under the following 
conditions: Planning for and implementation of new systems; revision of 
existing systems; development of operational procedures; or 
identification of hazards or ineffective risk controls through the 
safety assurance processes in subpart D of part 5. Some examples of 
these triggers are outlined below.
    Changes to an air carrier's operation could include addition of new 
routes, opening or closing of line stations, adding or changing 
contractual arrangements for services, additions of new fleets or major 
modifications of existing fleets, addition of different types of 
operations such as extended-range operational performance standards 
operations, or a change in the software for operational systems such as 
flight planning and dispatch. Any of these additions or changes would 
trigger the use of the SRM process.
    A further trigger for SRM would be cases when the safety assurance 
processes reveal hazards that have not been addressed or instances when 
the procedures that have been specified fail to control risk. For 
example, an air carrier might discover through employee reporting or 
internal auditing that procedures for loading data into the airplane 
flight management computer are confusing. This would result in action 
such as the air carrier modifying the procedures themselves or the 
training and checking process in use. In another example, an analysis 
of internal audits could reveal that a maintenance tracking and control 
program failed to identify required inspections, resulting in some of 
them being missed or overdue. In this case, the air carrier may decide 
that the program itself is defective and must be reengineered, again, 
requiring the application of SRM. These are just some examples of 
systems and triggers for the SRM processes of subpart C of the final 
rule.
    RAA suggested that 14 CFR 5.53(c) include the requirement to track 
hazards. This practice would prevent hazards from being identified and 
recorded without further action. The FAA has reviewed this suggestion 
and determined that the purpose of the suggested revision is already 
met under the final rule. Subpart C, SRM, and Subpart D, Safety 
Assurance, work together such that identified hazards must be tracked 
in addition to being identified. Thus, the FAA has not adopted this 
suggested revision in the final rule.

K. Subpart D, Safety Assurance

    AIG, ASA, ATA, Boeing, Cessna, GAMA, MARPA, Rockwell Collins, and 
U.S.C. agreed on the importance of safety assurance practices, but 
recommended the FAA clarify the applicability of safety assurance and 
the definition of ``system'' to mirror the definition of ``system'' for 
SRM. Boeing also suggested revising 14 CFR 5.71 and 5.73 to limit the 
scope of the SMS to the aviation-related activities of the company. In 
addition, Boeing, GAMA, MARPA, and Rockwell Collins recommended 
replacing the term ``operation'' with ``system'' because operation 
implies the activities of an air carrier, and would require 
modification if these provisions were extended to other types of 
operators in future rulemakings.
    AIA/GAMA, Boeing, Cessna, and Rockwell Collins all questioned using 
the terms ``continuous'' and ``periodic'' in 14 CFR 5.71. The 
commenters asserted that the terms are ambiguous and do not establish a 
frequency for adequate monitoring. For example, one commenter stated 
that the continuous monitoring requirement could imply monitoring the 
system 24 hours a day, which could be burdensome.
    Because different systems will require different monitoring 
processes, the FAA has removed the terms continuous and periodic from 
14 CFR 5.71. Additional clarification of the monitoring requirements is 
also provided in the advisory material associated with this final rule. 
In regards to the suggestion to define the term system for safety 
assurance, the FAA has determined that such a definition would not be 
necessary in the regulatory text because the list in 14 CFR 5.71(a) 
provides the scope of safety assurance activities. Further, as stated 
in section J, the term ``system'' is used to describe the operational 
components used to deliver aviation-related services. Systems may 
include hardware, software, people, procedures, resources, and 
functions directly related to the delivery of air transportation 
services. The systems addressed by this rule do not include those 
elements that are not directly related to the delivery of air 
transportation services.

L. Subpart F, Recordkeeping and Documentation Requirements

    AIA/GAMA, Boeing, Bombardier, Omni Air, and Rockwell Collins 
asserted that the record keeping and documentation requirements for SMS 
are too prescriptive and onerous. ATA and Delta advocated the retention 
requirement be scalable and flexible according to the certificate 
holder's policy and that outputs of the SMS should be retained for as 
long as deemed necessary by the air carrier. EAA questioned the 
operational reason for mandating the retention of SMS records beyond 
existing industry standards and requirements. NATA requested 
clarification on the types of documents that must be maintained under 
the proposed standards.
    Bombardier and Boeing suggested revising recordkeeping provisions 
in 14 CFR 5.97 to require certificate holders to maintain these records 
for 5 years. AIA/GAMA also supported a 5-year retention requirement for 
outputs of SRM processes. NACA acknowledged that the recordkeeping 
requirements were acceptable as proposed.
    Neither the proposed rule text nor the preamble implies that an air 
carrier would have to undergo a complicated and expensive revamping of 
its organization to accommodate document and record retention 
requirements. The required records can be kept electronically or in 
paper format. For SRM outputs, the timeline associated with the 
retention of the documents must be scalable to the air carrier's 
operation. The outputs of SRM processes should be kept for as long as 
they remain relevant to the air carrier's operation to allow the air 
carrier to evaluate whether the controls put in place under SRM are 
effective and needed. Once the action that triggers the development of 
the control is no longer present in the air carrier's operation, the 
air carrier may determine that the records no longer need to be kept. 
Thus, it is important that the air carrier exercise discretion to 
determine how long SRM output records are kept.
    Similarly, this rule requires a certificate holder to retain 
records of SMS-required training that is administered to the 
accountable executive, members of the certificate holder's management, 
and other employees for as long as the individual who received the 
training is employed by the certificate holder. Once the individual who 
received the training is no longer employed by the certificate holder, 
there is no longer a need for the certificate holder to retain these 
records.
    The recordkeeping requirements associated with the safety 
assurance's processes and procedures serve a different purpose. The 
goal of safety assurance is to collect historical data on an operating 
system for analysis. The air carrier needs to have sufficient

[[Page 1317]]

historical data to review. The 5-year period proposed in the NPRM is 
reasonable and will provide the air carrier with adequate records to 
conduct analysis. The FAA has determined that the proposed 
recordkeeping retention requirements are appropriate and has retained 
the requirements in the final rule.

M. Flow-Down of Requirements

    ALPA asserted that an air carrier must exercise some oversight of 
those entities providing services to them and that the proposed rule 
would naturally have some flow down effect. ALPA asserted there should 
be a requirement to develop and document an avenue for the reporting of 
hazards from subcontractor field employees to the air carrier. This may 
include establishing a liaison that would communicate necessary safety 
information to the subcontractor and take corrective action as 
necessary.
    RAA stated that, even though the FAA will not expand these existing 
requirements to entities other than certificate holders authorized to 
conduct operations under part 121, it can be expected that air carrier 
SMS programs will produce positive trickledown benefits to the 
operational safety of contractors. Under this scenario, air carriers 
will provide safety-enhancing guidance and oversight (at some level) to 
relevant elements of their contract service providers operations, and 
contractors will share information with the air carriers on the risks 
or safety trends that the contractors may from time to time identify.
    Bombardier stated that it is expected that SMS regulated entities 
will determine what aspects of the SMS need to be passed on to non-
regulated suppliers and pass those requirements along through business 
requirements. Inevitably, this will then result in additional burden on 
the regulated entities to provide support and increased oversight to 
ensure compliance of these suppliers, contractors and sub-contractors 
with these SMS related requirements. The SMS rule should be carefully 
constructed to allow those part 121 or 135 carriers to accept their 
part 145 certificated suppliers' SMS without deviation. Otherwise, 
inconsistent requirements will be passed on from different operators.
    ASA and MARPA stated it is normal in the industry for air carriers 
and other certificate holders to flow-down their requirements to their 
suppliers, even without a regulatory requirement. For example, many 
certificate holders may decide to use their suppliers as data sources 
for their SMS (e.g., reports of identified hazards). There is nothing 
in the regulation that prevents the FAA from stating that once the 
flow-down is in the manual, the supplier becomes part of the SMS system 
and thus becomes subject to SMS oversight. They recommended that the 
rule specify that a company may rely on its business partners as data 
sources for its SMS, but even if it does so, this act alone would not 
impose SMS regulations (or FAA SMS oversight) on the business partner.
    NACA agreed, asserting that it is not necessary to require 
contractors or subcontractors to develop an SMS at this time. They 
should be permitted to let data flow into a part 121 carrier's program 
when handling their aircraft. This would add valuable information to 
SMS and produce a more comprehensive program.
    AOPA strongly disagreed with the FAA's assessment and believed the 
FAA has greatly underestimated the trickle down implications for 
contractors and subcontractors of regulated certificate holders. The 
more functions a certificate holder contracts out, such as fueling, 
deicing, and pilot training, the more critical it is that the 
certificate holder include its contractors in its SMS process. Although 
the FAA is not seeking regulation of these contracted entities, AOPA 
asserted that FAA should not discount the potential effects of this 
proposed regulation on these entities. AOPA is concerned that this 
ripple effect would become even more apparent when the FAA expands the 
requirements of 14 CFR part 5 to encompass part 135 certificate 
holders.
    Delta Air Lines did not see a significant impact or flow down 
effect of the development of SMS and its implications on vendors and 
contractors providing services to the operator. The comprehensive 
implementation in all levels of the organization has allowed the 
vendors and contractors to be assessed under the safety assurance 
component of its SMS and findings and observations are mitigated under 
a risk-based system documented and tracked according to the SMS 
requirements and SRM techniques.
    Boeing said that the product/service provider should be allowed to 
determine the level of integration based on business needs and 
operational efficiency, without incurring undue compliance burden.
    The SMS requirements of the rule are intended to be applied to 
individual air carriers. This rule does not require the air carrier to 
require SMSs on the part of contractors, code-share partners, or other 
business affiliates. This rule permits the use of contractors as a data 
source, but will not mandate this requirement. Associated policy and 
advisory documents will not specify or imply these requirements as 
conditions of acceptance. An air carrier may include SMS in its 
negotiated business arrangements, consistent with the common practice 
in industry where air carriers require registration under such programs 
as AS 9100, IOSA, and Coordinating Agency for Supplier Evaluation 
(C.A.S.E.) audits. Contractual requirements for arrangements do not 
relieve the air carrier from its responsibilities under this rule.

N. FAA Capability To Manage Oversight

    AIA/GAMA, AOPA, Hawker Beechcraft, JetBlue, Omni Air, and RAA 
asserted it is essential that the FAA develop and deploy appropriate 
training and guidance material for the inspector workforce involved in 
SMS assessment and oversight. Hawker Beechcraft and Omni Air questioned 
whether the FAA would be able to handle the significant surge in plan 
submissions as the deadline nears.
    FedEx suggested that the FAA consider a process by which 
differences in interpretation, applicability, and direction between a 
carrier and the FAA approval authority can be elevated within the FAA 
for resolution.
    Clear and comprehensive guidance documents have been developed and 
will be provided to the Aviation Safety Inspectors (ASIs) prior to this 
rule's effective date to ensure standardization. The SMS Program Office 
is also available as subject matter experts to assist the field office 
inspectors. Training is also currently underway for part 121 ASIs. This 
training includes the principles and precepts of SMS. Additional 
training is being designed to enhance the ASI's knowledge and ability 
to assess the compliance of an air carrier's SMS with part 5.
    Air carriers also will be able to use the Consistency and 
Standardization Initiative \6\ to appeal decisions related to the 
review of their SMS. The FAA will consider a process by which 
differences in interpretation, applicability, and direction between an 
air carrier and the FAA approval authority can be elevated to the 
applicable FAA office for resolution.
---------------------------------------------------------------------------

    \6\ For more information regarding the Consistency and 
Standardization Initiative please refer to: http://www.faa.gov/about/office_org/headquarters_offices/avs/consistency_standardization/.
---------------------------------------------------------------------------

O. Guidance Material

    ACSF, AOPA, Boeing, GE, Hawker Beechcraft, and NATA suggested 
rescinding draft FAA Order 8900xx and reissuing simplified guidance 
material

[[Page 1318]]

because the draft order is too prescriptive. The commenters were 
concerned that the guidance material and orders significantly expands 
the regulatory requirements in proposed part 5. Commenters noted that 
the draft order contained material that was too academic and should be 
revised for clarity.
    Upon review of the comments, the FAA has revised the guidance 
material to ensure that there is a clear delineation between regulatory 
requirements and other information.\7\ The FAA has also revised the 
draft guidance for inspectors to provide instruction on various methods 
that may be employed to satisfy the requirements of this rule.
---------------------------------------------------------------------------

    \7\ The FAA acknowledges that Advisory Circular 120-92 is not 
binding.
---------------------------------------------------------------------------

P. Determination of Acceptable Levels of Safety

    AEA, AOPA, ASCA, and ATA asked for a definition of acceptable level 
of safety. They expressed concern that lacking a clear definition of 
this term would leave the industry and the FAA in a position where 
inspectors would be defining what constitutes an acceptable level of 
safety. This would lead to inconsistent application across the 
industry. The SBA also asserted that the FAA should conduct a gap 
analysis of its regulations and fill any holes to establish 
standardized acceptable levels of safety through the regulations that 
can be uniformly applied throughout the industry.
    The term ``acceptable level of safety'' is only used in the 
preamble of the NPRM and is only mentioned when referencing ICAO 
standards/framework and an NTSB recommendation. In determining the 
safety performance measurement for the air carrier's operation, each 
air carrier should use the regulatory minimums set forth in Chapter I, 
Title I, of 14 CFR as the baseline.

Q. Performance Based v. Process Based Regulation

    ASA and MARPA stated that the proposed part 5 was a process-based 
rule. In contrast, AIA/GAMA and Bombardier stated that the proposal was 
a performance-based rule. All of these commenters expressed a strong 
desire to avoid a prescriptive-based rule because of the dynamic nature 
of air carrier operations. They were also concerned that a performance-
based rule could lead to wide variances in interpretation as to what is 
acceptable for an SMS.
    The ARC, ATA, and GE expressed a strong desire for a rule that 
closely matched the ICAO framework to allow for increased acceptance of 
an air carrier's SMS by foreign civil aviation authorities. They 
stressed the need to balance prescription with the need for adequate 
description and flexibility to develop multiple solutions in the 
interest of increased innovation. They stated that the proposed 
requirements met all of these needs.
    Changing the regulatory text to a pure performance-based rule would 
deviate from the ICAO SMS requirements. This increases the risk that 
the FAA's SMS rules would fail to meet the requirements of other 
sovereign nations, and thus jeopardize the ability of U.S. air carriers 
to operate in countries where compliance with these standards is 
enforced. This final rule specifies a basic set of processes to form a 
framework for the SMS, but does not specify particular methods for 
implementing these processes. This provides a balance between 
standardization and a robust SMS structure while allowing considerable 
flexibility for how an individual air carrier chooses to establish its 
SMS.

R. Employee Reporting Systems

    Proposed 14 CFR 5.21(a)(4) states there must be an employee 
reporting system, and that the reporting system must be confidential as 
per 14 CFR 5.71(a)(7). AFA, ALPA, RAA, and SWA were concerned that 
unless an explicit restriction is imposed to prevent abuse, disclosures 
of safety improvement opportunities, concerns, or issues submitted by 
any employee may be used against the reporting employee in a 
disciplinary manner. They suggested that the employee reporting system 
be non-punitive.
    The confidential reporting system in 14 CFR 5.71(a)(7) is a conduit 
for employees to raise safety issues without fear of reprisal. There is 
a distinction in a non-punitive reporting system and the requirement in 
14 CFR 5.21(a)(5) to require the certificate holder to establish a 
policy that defines unacceptable employee behaviors. There are some 
instances where disciplinary action is warranted (e.g., the behavior 
indicates a willful disregard to comply with company procedures or 
regulations) and 14 CFR part 5 recognizes this fact. Therefore, the 
rule requires a certificate holder to establish a confidential employee 
reporting system and define unacceptable behaviors. This allows the 
confidential gathering of safety information from employees while 
maintaining the certificate holder's freedom to address unacceptable 
behavior.

V. Regulatory Notices and Analyses

A. Regulatory Evaluation

    Changes to Federal regulations must undergo several economic 
analyses. First, Executive Order 12866 and Executive Order 13563 
directs that each Federal agency shall propose or adopt a regulation 
only upon a reasoned determination that the benefits of the intended 
regulation justify its costs. Second, the Regulatory Flexibility Act of 
1980 (Pub. L. 96-354) requires agencies to analyze the economic impact 
of regulatory changes on small entities. Third, the Trade Agreements 
Act (Pub. L. 96-39) prohibits agencies from setting standards that 
create unnecessary obstacles to the foreign commerce of the United 
States. In developing U.S. standards, this Trade Act requires agencies 
to consider international standards and, where appropriate, that they 
be the basis of U.S. standards. Fourth, the Unfunded Mandates Reform 
Act of 1995 (Pub. L. 104-4) requires agencies to prepare a written 
assessment of the costs, benefits, and other effects of proposed or 
final rules that include a Federal mandate likely to result in the 
expenditure by State, local, or tribal governments, in the aggregate, 
or by the private sector, of $100 million or more annually (adjusted 
for inflation with base year of 1995). This portion of the preamble 
summarizes the FAA's analysis of the economic impacts of this final 
rule. We suggest readers seeking greater detail read the full 
regulatory evaluation, a copy of which we have placed in the docket for 
this rulemaking.
    In conducting these analyses, FAA has determined that this final 
rule: (1) Has benefits that justify its costs, (2) is not an 
economically ``significant regulatory action'' as defined in section 
3(f) of Executive Order 12866, (3) is ``significant'' as defined in 
DOT's Regulatory Policies and Procedures; (4) will not have a 
significant economic impact on a substantial number of small entities; 
(5) will not create unnecessary obstacles to the foreign commerce of 
the United States; and (6) will not impose an unfunded mandate on 
state, local, or tribal governments, or on the private sector by 
exceeding the threshold identified above. These analyses are summarized 
below.
i. Total Benefits and Costs of This Rule
    This rule requires Part 121 operators (domestic, flag, and 
supplemental operations) to establish an SMS. It is expected that the 
requirements of the rule will help airlines to identify safety 
problems, and if airlines take steps to mitigate these problems it is 
estimated

[[Page 1319]]

that the benefits from that mitigation could be between $205.0 and 
$472.3 million over 10 years ($104.9 to $241.9 million present value at 
7 percent discount rate). Costs of the rule's provisions (excluding any 
mitigation costs, which have not been estimated) are estimated to be 
$224.3 million ($135.1 million present value at 7 percent discount 
rate) over 10 years.

    Estimated Costs and Benefits for All Part 121 Carriers--2014-2023
      [Millions of 2010 Dollars * (Discounted at 7% Discount Rate)]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Costs.....................................  Rule Implementation Costs:
                                             $135.1.
                                           -----------------------------
                                            Mitigation Costs: Not
                                             quantified, estimates not
                                             included.
------------------------------------------------------------------------
Benefits from Provisions of the Rule and    $104.9-$241.9.
 any Consequent Safety Mitigation Actions
 **.
------------------------------------------------------------------------
* Table values have been rounded. Totals may not add due to rounding.
** Given the range of mitigation actions possible, it is difficult to
  quantify potential benefits. This range reflects the potential
  benefits resulting from examples of possible mitigation actions.

ii. Who is potentially affected by this rule?
    All Part 121 Operators
iii. Assumptions
     All costs and benefits are presented in 2010 dollars.
     All costs and benefits are estimated over a 10-year period 
from 2014 through 2023.
     Benefits of SMS implementation would begin to accrue in 
2017.
     Costs to air carriers would begin to accrue in 2014.
     The present value discount rate is 7 percent.
     The Value of Statistical Life = $8.9 million in 2010$.
iv. Benefits of This Rule
    The benefits of this final rule consist of the value of averted 
fatalities, casualties, aircraft damage, accident investigation costs, 
and reduced employee compensation claims. These benefits are a result 
of identifying safety issues, spotting trends, implementing necessary 
safety mitigations, and communicating findings before they result in a 
near-miss, incident, or accident. Over the 10-year period of analysis, 
it is estimated that the benefits from averted accidents, reduced 
employee compensation claims, and safety mitigations could range 
between $205.0 and $472.3 million ($104.9 to $241.9 million present 
value at 7 percent discount rate).
v. Costs of This Rule
    Each air carrier will be required to develop an SMS that includes 
the four SMS components: Safety Policy, Safety Risk Management, Safety 
Assurance, and Safety Promotion. To support each component, the FAA 
projects that the compliance cost of this rule will come from the 
initial development and documentation of the carriers' SMS, 
implementation and continuous operating costs to include the 
modification or purchasing of new equipment/software, additional staff 
and promotional materials, and training. Costs increase with the size 
of the carrier and the type of operations that they provide. However, 
medium and large operators have existing quality management systems 
which will lower their estimated compliance costs. Costs of the rule's 
provisions (excluding any mitigation costs, which have not been 
estimated) are estimated to be $224.3 million ($135.1 million present 
value at 7 percent discount rate) over 10 years.

B. Regulatory Flexibility Determination

    The Regulatory Flexibility Act of 1980 (Pub. L. 96-354) (RFA) 
establishes ``as a principle of regulatory issuance that agencies shall 
endeavor, consistent with the objectives of the rule and of applicable 
statutes, to fit regulatory and informational requirements to the scale 
of the businesses, organizations, and governmental jurisdictions 
subject to regulation. To achieve this principle, agencies are required 
to solicit and consider flexible regulatory proposals and to explain 
the rationale for their actions to assure that such proposals are given 
serious consideration.'' The RFA covers a wide-range of small entities, 
including small businesses, not-for-profit organizations, and small 
governmental jurisdictions.
    Agencies must perform a review to determine whether a rule will 
have a significant economic impact on a substantial number of small 
entities. If the agency determines that it will, the agency must 
prepare a regulatory flexibility analysis as described in the RFA. 
Section 603 of the Act requires agencies to prepare and make available 
for public comment an initial regulatory flexibility analysis (IRFA) 
describing the impact of proposed rules on small entities.
    As required by Section 603(a) of the RFA, we prepared and published 
an initial regulatory flexibility analysis (IRFA) as part of the NPRM 
for this rule (75 FR 68240, November 5, 2010). As a result of that 
analysis we determined this rule would have a significant impact on a 
substantial number of small entities for the following reasons: We 
estimated that 64 operators were small entities. Even though the 
proposed rule responds to the PL 111-216 Congressional requirement, we 
structured the requirement such that small entities could meet the 
requirements with lower costs than a larger firm.
    Section 604 of the RFA also requires an agency to publish a final 
regulatory flexibility analysis (FRFA) in the Federal Register when 
issuing a final rule. Section 604(a) requires that each FRFA contain:
     A statement of the need for, and objectives of, the rule;
     a statement of the significant issues raised by the public 
comments in response to the initial regulatory flexibility analysis, a 
statement of the assessment of the agency of such issues, and a 
statement of any changes made in the proposed rule as a result of such 
comments;
     the response of the agency to any comments filed by the 
Chief Counsel for Advocacy of the Small Business Administration in 
response to the proposed rule, and a detailed statement of any change 
made to the proposed rule in the final rule as a result of the 
comments;
     a description of and an estimate of the number of small 
entities to which the rule will apply or an explanation of why no such 
estimate is available;
     a description of the projected reporting, recordkeeping 
and other compliance requirements of the rule, including an estimate of 
the classes of small entities which will be subject to the requirement 
and the type of professional skills necessary for preparation of the 
report or record; and,

[[Page 1320]]

     a description of the steps the agency has taken to 
minimize the significant economic impact on small entities consistent 
with the stated objectives of applicable statutes, including a 
statement of the factual, policy, and legal reasons for selecting the 
alternative adopted in the final rule and why each one of the other 
significant alternatives to the rule considered by the agency which 
affect the impact on small entities was rejected.
A Statement of the Need for, and Objectives of, the Rule
    The objective of Safety Management Systems (SMS) is to proactively 
manage safety, to identify potential hazards, to determine risk, and to 
implement measures that mitigate the risk. The FAA envisions operators 
being able to use all of the components of SMS to enhance a carrier's 
ability to identify safety issues and spot trends before they result in 
a near-miss, incident, or accident. For this reason, the FAA is 
requiring carriers to develop and implement an SMS.
A Statement of the Significant Issues Raised by the Public Comments in 
Response to the Initial Regulatory Flexibility Analysis, a Statement of 
the Assessment of the Agency of Such Issues, and a Statement of any 
Changes Made in the Proposed Rule as a Result of Such Comments
    AEA commented that the FAA failed to analyze alternatives and 
stated that small carriers do not have enough incidents to make SMS 
cost-beneficial. The FAA maintains that SMS is congressionally mandated 
and we did look at two alternatives. For the final rule we discussed: 
(1) Extending the timeframe for development of SMS implementation 
plans; and (2) extending the timeframe for implementation of SMS. 
However, as stated above, the FAA ultimately determined that delaying 
the implementation of SMS delays the safety benefits and this delay in 
benefits is not offset by the small, delayed compliance cost. Upon a 
review of these costs, the FAA determined the compliance costs are not 
a significant economic impact.
The Response of the Agency to any Comments Filed by the Chief Counsel 
for Advocacy of the Small Business Administration in Response to the 
Proposed Rule, and a Detailed Statement of any Change Made to the 
Proposed Rule in the Final Rule as a Result of the Comments
    The Small Business Administration (SBA) commented that an SMS would 
be burdensome for a small carrier, plus SMS may be more suitable for 
larger carriers because it aids in reducing silos which many not be an 
issue because of size for many smaller carriers. The FAA maintains the 
program is flexible and there are several existing programs that small 
carriers can leverage to make SMS less expensive. For example, many 
small and medium sized carriers reported that they would use the Web-
Based Application Tool (WBAT), which is an FAA sponsored tool, to 
report and house their data. In addition, carriers that are currently 
pursuing an SMS reported benefits similar to their larger counterparts.
A Description of and an Estimate of the Number of Small Entities To 
Which the Rule Will Apply or an Explanation of why no Such Estimate is 
Available
    Under the North American Industry Classification System (NAICS) 
codes 481111 and 481112, for scheduled air transportation, small 
entities would be all part 121 carriers with less than 1,500 employees. 
The FAA estimates that there are approximately 90 part 121 operators 
and 60 of these operators meet the definition of a small entity; 
therefore the FAA believes that there are a substantial number of small 
entities impacted by this rule.
A Description of the Projected Reporting, Recordkeeping and Other 
Compliance Requirements of the Rule, Including an Estimate of the 
Classes of Small Entities Which Will be Subject to the Requirement and 
the Type of Professional Skills Necessary for Preparation of the Report 
or Record
    An SMS is a formalized approach to managing safety by developing an 
organization-wide safety policy, developing formal methods of 
identifying hazards, analyzing and mitigating risk, developing methods 
for ensuring continuous safety improvement, and creating organization-
wide safety promotion strategies. Each air carrier would be required to 
develop an SMS that includes the four SMS components: Safety Policy, 
Safety Risk Management, Safety Assurance, and Safety Promotion. To 
support each component, the FAA projects that the compliance cost of 
this rule would come from the initial development and documentation of 
their SMS, implementation and continuous operating costs to include the 
modification or purchasing of new equipment/software, additional staff 
and promotional materials, and training. Costs increase as the size of 
the carrier increases. However, carriers have the ability to use 
existing programs such as an Aviation Safety Action Programs (ASAP) or 
the Web-Based Application Tool (WBAT) to meet these requirements.
    The FAA estimated the average annual compliance cost during the 
first three years the rule is in effect for the 60 carriers identified 
as small entities and compared these costs to calendar year 2011 
operating revenues (the most current data available).\8\ The compliance 
cost for small entities was then averaged for three groups based on 
carrier fleet size (small, medium, and large). Carriers with a fleet of 
9 or less aircraft are in the ``small'' group; carriers with between 10 
and 47 aircraft are in the ``medium'' group; and carriers with a fleet 
size greater than 47 aircraft are in the ``large'' group.
---------------------------------------------------------------------------

    \8\ U.S. Department of Transportation Form 41 (Schedule P1.1, 
and P1.2), and Form 298-C (Schedule F1). For carriers not reporting 
a full year of CY 2011 operating revenues, the most recent four 
consecutive quarters of data was used.
---------------------------------------------------------------------------

    Each of the 29 carriers in the ``small'' group fits the criteria of 
a small entity. The compliance cost for this group of carriers will 
average $164,500 per year. For the 26 small entities in the ``medium'' 
group, the compliance cost will average $206,400 per year. The 
compliance cost for the five carriers identified as small entities in 
the ``large'' group will average $408,000 per year. Each carrier's 
compliance cost will vary from the averages presented here due to 
carrier size (in terms of employee headcount), and the extent to which 
a carrier already has an ASAP or other safety program already in place.
    Of the 60 carriers classified as small entities, 54 reported 
operating revenues on Form 41. For these 54 reporting carriers, annual 
compliance costs during the first three years the rule is in effect 
were less than two percent of their calendar year 2011 operating 
revenues. A determination for the six remaining small entities was not 
possible because financial data was not publicly available.
A Description of the Steps the Agency Has Taken To Minimize the 
Significant Economic Impact on Small Entities Consistent With the 
Stated Objectives of Applicable Statutes, Including a Statement of the 
Factual, Policy, and Legal Reasons for Selecting the Alternative 
Adopted in the Final Rule and Why Each One of the Other Significant 
Alternatives to the Rule Considered by the Agency Which Affect the 
Impact on Small Entities Was Rejected
    To relieve the burden of this rule on small entities, the FAA 
considered extending the timeframe for

[[Page 1321]]

development of SMS implementation plans. In making this determination, 
the FAA considered longer and shorter terms. However, it settled on one 
year based on information from the SMS Pilot Project, which showed that 
an average of one year was sufficient to develop and approve an 
implementation plan.\9\ As part of its analysis, the FAA noted that 
pilot project participants ultimately had differing levels of SMS 
implementation. However, because all pilot project participants had 
initially developed (and received FAA validation on) an implementation 
plan that provided for full SMS implementation, the FAA was able to use 
this data to estimate how long it would take a certificate holder to 
develop such a plan and get the plan approved by the FAA.
---------------------------------------------------------------------------

    \9\ MITRE Corporation conducted a study of the pilot project 
participants and concluded that it took, on average, approximately 
one year for pilot project participants to complete implementation 
plans.
---------------------------------------------------------------------------

    The FAA also considered extending the timeframe for implementation 
of SMS. However, the FAA ultimately concluded that three years for full 
implementation of SMS is appropriate. In making this determination, the 
FAA considered longer and shorter terms. Based on information from the 
SMS Pilot Project, as well as lessons learned from other Civil Aviation 
Authorities (CAAs), which showed that three years was an appropriate 
timeframe for implementation of an SMS, the FAA decided that three 
years was the best interval to allow carriers to prepare and begin 
implementation.\10\ With regard to both of these alternatives, the 
timelines chosen for implementation plans and final implementation of 
SMS are mitigated for small entities to the extent that SMS plans and 
programs must be appropriate to the size, scope, and complexity of the 
certificate holder's operations, and are therefore scalable to the size 
of the small entity.
---------------------------------------------------------------------------

    \10\ While many pilot project participants are not small 
carriers, the large and mid-size carriers that make up a large 
portion of the pilot project participants had to build an SMS from 
the ground up. The typical implementation plan received from these 
carriers showed that they would be able to fully implement an SMS 
within three years. Because SMS is scalable, a small carrier's SMS 
will be less complex than a large or mid-size carrier's SMS. 
Accordingly, the FAA does not expect small carriers to need more 
time to implement an SMS than the large and mid-size carriers that 
were part of the pilot project.
---------------------------------------------------------------------------

    In conclusion, while the FAA found this rule will affect a 
substantial number of small entities, we found annual compliance cost 
was less than two percent of annual revenue for the firms with public 
data. As the compliance cost is less than two percent of annual 
revenue, the FAA concludes there will not be a significant economic 
impact. Therefore, as the FAA Administrator, I certify this rule will 
not have a significant economic impact on a substantial number of small 
entities.

D. International Trade Impact Assessment

    The Trade Agreements Act of 1979 (Pub. L. 96-39), as amended by the 
Uruguay Round Agreements Act (Pub. L. 103-465), prohibits Federal 
agencies from establishing standards or engaging in related activities 
that create unnecessary obstacles to the foreign commerce of the United 
States. Pursuant to these Acts, the establishment of standards is not 
considered an unnecessary obstacle to the foreign commerce of the 
United States, so long as the standard has a legitimate domestic 
objective, such the protection of safety, and does not operate in a 
manner that excludes imports that meet this objective. The statute also 
requires consideration of international standards and, where 
appropriate, that they be the basis for U.S. standards. The FAA has 
assessed the potential effect of this final rule and determined that it 
uses ICAO international standards as its basis and therefore is in 
compliance with the Trade Agreements Act.

E. Unfunded Mandates Assessment

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4) requires each Federal agency to prepare a written statement 
assessing the effects of any Federal mandate in a proposed or final 
agency rule that may result in an expenditure of $100 million or more 
(in 1995 dollars) in any one year by State, local, and tribal 
governments, in the aggregate, or by the private sector; such a mandate 
is deemed to be a ``significant regulatory action.'' The FAA currently 
uses an inflation-adjusted value of $143.1 million in lieu of $100 
million. This final rule does not contain such a mandate; therefore, 
the requirements of Title II of the Act do not apply.

F. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) requires 
that the FAA consider the impact of paperwork and other information 
collection burdens imposed on the public. According to the 1995 
amendments to the Paperwork Reduction Act (5 CFR 1320.8(b)(2)(vi)), an 
agency may not collect or sponsor the collection of information, nor 
may it impose an information collection requirement unless it displays 
a currently valid Office of Management and Budget (OMB) control number.
    This final rule will impose new information collection 
requirements. The estimated burden of those requirements is discussed 
below. As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 
3507(d)), the FAA has submitted these information collection 
requirements to OMB for its review. Notice of OMB approval for this 
information collection will be published in a future Federal Register 
document.
    Under this final rule, each certificate holder operating under part 
121 will develop an SMS, tailored to its unique operating environment, 
comprised of the four key components: Safety policy, safety risk 
management, safety assurance, and safety promotion. Collection and 
analysis of safety data is an essential part each carrier's SMS. The 
FAA has identified the following areas that will create information 
collection burdens under this final rule: Development and 
implementation of the SMS; implementation plan and documentation; 
recordkeeping requirements associated with the safety policy, safety 
risk management and safety assurance processes; training records, and 
communication records. In addition, based on comments received to the 
proposed rule, the FAA has also identified information collection 
burdens associated with expanding existing programs that may be used to 
satisfy the requirements of the final rule. For all information 
required to be submitted, documented, or collected under this final 
rule, the FAA does not specify how, or in what media, the documents and 
records must be maintained relative to the requirements of the final 
rule. Air carriers are encouraged to use existing mechanisms and 
systems to minimize the burden of the final rule. These burdens are 
outlined below. The cost estimates associated with these burdens are 
based on comments from the ARC, information from the SMS pilot program 
participants, and comments received in response to the NPRM.
i. Expansion of Existing Programs
    The FAA has strongly encouraged air carriers to use existing 
programs, such as the Aviation Safety Action Program (ASAP), and the 
Internal Evaluation Program (IEP), to satisfy some of the requirements 
for the safety assurance component of SMS. The FAA expects that the 59 
air carriers with existing ASAP programs will expand their programs to 
cover those employees currently not covered, to satisfy the employee 
reporting system requirement of the final rule. For the 31 remaining 
air carriers, the FAA expects that these carriers will use the employee 
reporting

[[Page 1322]]

tools in the Web-Based Application Tool (WBAT), which is a federally 
developed and funded software system that can be used, for example, to 
develop an implementation plan, document hazards, and create an 
employee reporting system. Because this is a federally funded system, 
the FAA estimated a minimal burden for those 31 carriers using WBAT. 
The information collection costs for air carriers expanding existing 
programs to comply with this rule are as follows.
---------------------------------------------------------------------------

    \11\ http://www.faa.gov/about/initiatives/asap (August 23, 
2011).
    \12\ ATA response to NPRM ``Request for Comments'' (Docket No. 
FAA-2009-061), Figure 3, page 35.
    \13\ Ibid.
---------------------------------------------------------------------------

a. Estimate Annual Cost of Expanding Existing Programs

59.....................................  Part 121 Carriers with an ASAP
                                          for one or more employee
                                          groups \11\
1......................................  Full Time Employee (FTE) = 2000
                                          hours per year
2......................................  FTEs per additional ASAP @ 0.2
                                          FTE each \12\ = 800 hours per
                                          ASAP
 
3......................................  Pilot ASAPs
14.....................................  Mechanic and Engineering (M&E)
                                          ASAPs
18.....................................  Dispatcher ASAPs
+ 32...................................  Flight Attendant (FA) ASAPs
------------------------------------------------------------------------
67.....................................  Total Employee Group ASAPs
 
$2,000.................................  Hardware/software,
                                          administration, and meeting
                                          logistics per group \13\
x 67...................................  Total Employee Group ASAPs
------------------------------------------------------------------------
    $134,000...........................  Material Cost per Year
 

------------------------------------------------------------------------
          Employee group              Annual salary      Hourly salary
------------------------------------------------------------------------
Airline pilots/copilots/flight               $151,248           $75.6239
 engineers salary: \14\...........
Maintenance staff salary: \15\....             73,606            36.8031
Dispatchers salary: \16\..........             70,250            35.1249
Flight attendants salary: \17\....             54,290            27.1452
------------------------------------------------------------------------

------------------------------------------------------------------------
 
------------------------------------------------------------------------
3 Pilot ASAPs * 800 hours:..............  2,400 hours.
14 M&E ASAPs * 800 hours:...............  11,200 hours.
18 Dispatcher ASAPs * 800 hours:........  14,400 hours.
+ 32 FA ASAPs * 800 hours:..............  25,600 hours.
                                         -------------------------------
    Total Labor Hours per Year..........  53,600 hours.
------------------------------------------------------------------------

------------------------------------------------------------------------
                                     Hours * labor rate      In 000's
------------------------------------------------------------------------
3 Pilot ASAPs.....................  2,400 hr * $75.6239.        $181.497
14 M&E ASAPs......................  11,200 hr * 36.8031.         412.195
18 Dispatcher ASAPs...............  14,400 hr * 35.1249.         505.798
+ 32 FA ASAPs.....................  25,600 hr * 27.1452.         694.917
------------------------------------------------------------------------
    Total Labor Cost per Year...........................       1,794.408
+ Total Material Cost per Year..........................         134.000
------------------------------------------------------------------------
        Total Cost per Year for Expanding Existing             1,928.408
         Programs.
------------------------------------------------------------------------

b. Estimated Implementation Cost of Expanding of Existing Programs

    The FAA assumes that the 59 carriers expand these programs over 3 
years. A third of the expansion will be completed in year one, two-
thirds of the program will be completed in year two, and the program 
will be fully operational by the third year.
---------------------------------------------------------------------------

    \14\ http://www.bls.gov/oes/current/naics3_481000.htm, http://www.bls.gov/news.release/pdf/ecec.pdf, BLS reports in Table A. 
Relative importance of employer costs for employee compensation, 
June 2011 that additional employer compensation per employee is 
roughly 31% of an employee's salary
    \15\ Ibid.
    \16\ Ibid.
    \17\ Ibid.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Year 1.........................  53,600 hours * 33.3%...        17,848.8
Year 2.........................  53,600 hours * 66.6%...        35,697.6
+ Year 3.......................  53,600 hours * 100.0%..        53,600.0
 
        Total Labor Hours for 3  .......................       107,146.4
         Years.
------------------------------------------------------------------------

------------------------------------------------------------------------
                                                             In 000's
------------------------------------------------------------------------
Year 1.........................  $1,928.408 * 33.3%.....       $ 642.160
Year 2.........................  $1,928.408 * 66.6%.....       1,284.320

[[Page 1323]]

 
+ Year 3.......................  $1,928.408 * 100.0%....       1,928.408
 
    Total Cost for 3 Years.....  .......................       3,854.888
------------------------------------------------------------------------

c. Estimated Total Costs of Expanding Existing Programs
    Implementation Cost: 107,146.4 labor hours and $3.9 million over 3 
years.
    Average Annual Cost: 35,715.5 labor hours and $1.28 million per 
year.
ii. Implementation Plan, SMS Documentation and Implementation
    All 90 certificate holders will be required to develop and submit 
an implementation plan. The implementation plan will guide the 
certificate holder's implementation of SMS, as well as provide the 
basis for FAA's oversight during the development and implementation 
phases. The SMS implementation plan is the only document or data that 
the certificate holder must submit to the FAA. It is a one-time 
submission due six months after the effective date of the final rule.
    All 90 certificate holders must also develop and maintain 
documentation that describes the safety policy for the certificate 
holder. The safety policy must address, among other things, the 
certificate holder's safety objectives, statements about the necessary 
resources for the implementation of the SMS, a safety reporting policy 
that defines requirements for employee reporting of safety hazards or 
issues, and an emergency response plan.
    In addition to the safety policy, all 90 certificate holders are 
required under this rule to develop and maintain documentation of SMS 
processes and procedures, including safety risk management processes 
and safety assurance processes. Given that these processes and 
procedures will depend on the size and scope of each air carrier's 
operation, the amount of documentation will vary greatly amongst these 
certificate holders.
a. Estimated Cost of Implementation Plan and SMS Documentation
---------------------------------------------------------------------------

    \18\ Bureau of Labor Statistics, http://www.bls.gov/oes/current/oes152031.htm.
    \19\ Initial Regulatory Evaluation Voluntary Program 
Participant's Survey.

One Full Time Employee (FTE):.....  2,000 hours/yr
Research Analyst Salary: \18\.....  $92,958/yr or $46.479/hr
Material Documentation Cost (3      Small $24,000
 years): \19\.
                                    Medium 95,000
                                    Large 337,500
 

------------------------------------------------------------------------
                                                               Hours
------------------------------------------------------------------------
30 Large Carriers * 4,256 hrs/yr of labor per carrier:..         127,680
31 Medium Carriers * 2,732 hrs/yr of labor per carrier:.          84,692
+ 29 Small Carriers * 3,045 hrs/yr of labor per carrier:          88,305
                                                         ---------------
    Total Labor Hours per Year for 90 Carriers..........         300,677
        Total Labor Hours for 90 Carriers over 3 Years..         902,031
------------------------------------------------------------------------

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Total Labor Hours per Year..............................         300,677
x Research Analyst Hourly Wage..........................         $46.479
                                                         ---------------
    Total Labor Cost/Per Year for 90 Carriers...........     $13,975,166
        Total Initial Labor Cost for 90 Carriers over 3       41,925,498
         Years..........................................
------------------------------------------------------------------------

------------------------------------------------------------------------
 
------------------------------------------------------------------------
30 Large Carriers * $337,500 material cost over three        $10,125,000
 years:.................................................
31 Medium Carriers * $95,000 material cost over three          2,945,000
 years:.................................................
29 Small Carriers * $24,000 material cost over three             696,000
 years:.................................................
                                                         ---------------
    90 Carriers Initial Material Cost Over 3 Years......      13,766,000
------------------------------------------------------------------------

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Initial Labor Cost for 90 Carriers over 3 Years.........      41,925,498
x Initial Material Cost for 90 Carriers over 3 Years....      13,766,000
                                                         ---------------
    Initial Cost Burden Over Years 1-3..................      55,691,498
------------------------------------------------------------------------

b. Estimated Annual Cost of SMS Documentation

    In comments to the NPRM, ATA estimates that small carriers will 
spend $10,000 a year, medium sized carriers will spend $15,000, and 
large carriers will spend $30,000 on SMS manual revision.

         30  Large Carriers * $30,000/yr per carrier....       $ 900,000
         31  Medium Carriers * $15,000/yr per carrier...         465,000

[[Page 1324]]

 
       + 29  Small Carriers * $10,000/yr per carrier....         290,000
            ------------------------------------------------------------
             Document Update Costs per Year for Years 4-      $1,655,000
              10........................................
 

iii. SMS Recordkeeping Requirements
    This rule requires air carriers to record outputs from their safety 
risk management (SRM) processes, safety assurance (SA) processes, 
safety communications and SMS training. Records of outputs for SRM 
processes must be maintained for as long as the outputs remain relevant 
to the certificate holder's operation. Outputs of safety assurance 
processes must be maintained for 5 years. Training records must be kept 
for as long as the individual is employed by the certificate holder and 
all SMS communication records under Sec.  5.93 must be kept for 24 
months. The scope and breadth of these recordkeeping requirements will 
depend on the size and complexity of the certificate holder's 
operation. To mitigate these burdens, the FAA has not specified how, or 
in what media, these records must be maintained, and has also 
encouraged the use of existing mechanisms. For example, the FAA has 
estimated the burden of maintaining employee SMS training records to be 
minimal since 121 certificate holders are already required to maintain 
training records.
    Based on this information, the FAA maintains that only one 
additional employee will be required for carriers with several existing 
safety programs, 2 full time employees for large and medium carriers 
with few pre-existing programs, and a part-time employee for small 
carriers. The FAA also maintains that there will be minimal additional 
material costs and training record costs since all part 121 certificate 
holders already maintain training records. Operating costs will begin 
after the development, documentation, and implementation of an SMS.
a. Estimated Annual Cost of SMS Recordkeeping Requirements:
90 Operators
One Full Time Employee (FTE) = 2000 hours per year
Research Analyst Salary \20\ = $92,958 per year = $46.479 per hour
---------------------------------------------------------------------------

    \20\ Bureau of Labor Statistics, http://www.bls.gov/oes/current/oes152031.htm.
    \21\ Initial Regulatory Evaluation Voluntary Program 
Participant's Survey.

------------------------------------------------------------------------
                                                               Hours
------------------------------------------------------------------------
59 Large/Medium Carriers * 1 FTE * 2,000 hours..........         118,000
9 Large/Medium Carriers * 2 FTE * 2,000 hours...........          36,000
+ 22 Small Carriers * 0.5 FTE * 2,000 hours.............          22,000
------------------------------------------------------------------------
    Total Recordkeeping Hours per Year for 90 carriers           176,000
     (Years 4-10).......................................
------------------------------------------------------------------------

------------------------------------------------------------------------
 
------------------------------------------------------------------------
 Total Recordkeeping Hours per Year for 90 carriers.....         176,000
x Hourly Wage--Research Analyst.........................         $46.479
                                                         ---------------
    Total Recordkeeping Cost per Year for 90 Carriers         $8,180,304
     (Years 4-10).......................................
------------------------------------------------------------------------

------------------------------------------------------------------------
 
------------------------------------------------------------------------
 Promotional material per year per carrier \21\.........            $833
x 90 Carriers...........................................              90
                                                         ---------------
     Total Promotional Material Cost per Year for 90             $74,970
     Carriers (Years 4-10)..............................
------------------------------------------------------------------------

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Total Recordkeeping Cost per Year for 90 Carriers (Years      $8,180,304
 4-10)..................................................
+ Total Promo Material Cost per Year for 90 Carriers             $74,970
 (Years 4-10)...........................................
                                                         ---------------
    Total Annual Cost (Years 4-10)......................      $8,255,274
------------------------------------------------------------------------

b. Estimated Total Annual Cost of SMS Recordkeeping Requirements

    176,000 labor hours and $8.3 million per year (Years 4-10).

iv. Estimated Costs to the Federal Government

    This rule requires air carriers to implement an SMS acceptable to 
the Administrator within 3 years of the effective date of the final 
rule. The FAA offers a federally developed and funded software system, 
WBAT, which serves a variety of functions in addition to aiding 
carriers with their ASAPs and SMS. The FAA estimates at most that it 
costs $2.6 million per year to maintain WBAT.
v. Summary of Total Burden
a. Implementation Cost

Years 1-3.....................  Develop, Implement,          $55,691,498
                                 Document SMS-Initial
                                 Cost Burden.
+ Years 1-3...................  Cost to Expand                 3,854,888
                                 Existing Programs.
                               -----------------------------------------
    Years 1-3.................  Total Implementation          59,546,386
                                 Cost.
 

b. Annual Cost

+ Years 1-10..................  Federal Govt Cost--          $ 2,600,000
                                 WBAT.
                               -----------------------------------------
 

Years 4-10....................  Staffing and                  $8,255,274
                                 Promotional Material.

[[Page 1325]]

 
Years 4-10....................  ASAPs................          1,928,408
+ Years 4-10..................  SMS Manual Updates...          1,655,000
                               -----------------------------------------
    Years 4-10................  Total Cost Per Year..         11,838,682
 

Years 1-10....................  $ 2,600,000 * 10             $26,000,000
                                 years.
Years 4-10....................  $11,838,682 * 7 years         82,870,774
 

G. International Compatibility

    In keeping with U.S. obligations under the Convention on 
International Civil Aviation, it is FAA policy to conform to 
International Civil Aviation Organization (ICAO) Standards and 
Recommended Practices to the maximum extent practicable. The FAA has 
reviewed the corresponding ICAO Standards and Recommended Practices and 
has identified the following differences with these proposed 
regulations. Amendment 30 to Annex 6 part I Section 3.2 Safety 
Management, Paragraph 3.3.6 effective 1 January, 2009 requires that a 
Flight Data Analysis Program be in the SMS standard. The FAA will file 
a difference with ICAO.
    ICAO Annex 6 part I includes a provision that part 121 air carriers 
operating airplanes having a maximum gross takeoff weight in excess of 
27,000 kg (approximately 59,400 lbs.). ``. . . shall establish and 
maintain a flight data analysis programme as part of its safety 
management system.'' Flight Data Analysis Program (FDAP) is a general 
term encompassing a number of means by which routine flight operations 
data may be acquired, recorded, analyzed, and shared. Flight 
Operational Quality Assurance (FOQA) is one such program. FOQA is a 
formal voluntary program which has been implemented by 41 air carriers 
conducting operations under part 121. FOQA specifications include 
installation of extensive flight data recording systems which 
facilitate rapid transfer of recorded data, de-identification of that 
data, and agreements between pilot organizations and the air carriers 
which define how this information may be used.
    The part 121 fleet is diverse in terms of size, complexity, and 
age, as well as the size of the air carriers that operate them. Many of 
the older aircraft would require extensive modifications to adapt them 
to the technical requirements of a FOQA program. The investment and 
expense of implementing and maintaining such a system exceeds the 
financial capability of many smaller air carriers. There are a number 
of ways to meet the requirements of an FDAP. Therefore, the FAA will 
not require FOQA in this rule.

H. Environmental Analysis

    FAA Order 1050.1E identifies FAA actions that are categorically 
excluded from preparation of an environmental assessment or 
environmental impact statement under the National Environmental Policy 
Act in the absence of extraordinary circumstances. The FAA has 
determined this rulemaking action qualifies for the categorical 
exclusion identified in Chapter 3, paragraph 312d and involves no 
extraordinary circumstances.

I. Regulations Affecting Intrastate Aviation in Alaska

    Section 1205 of the FAA Reauthorization Act of 1996 (110 Stat. 
3213) requires the FAA, when modifying its regulations in a manner 
affecting intrastate aviation in Alaska, to consider the extent to 
which Alaska is not served by transportation modes other than aviation, 
and to establish appropriate regulatory distinctions. In the NPRM, the 
FAA requested comments on whether the proposed rule should apply 
differently to intrastate operations in Alaska. The agency did not 
receive any comments, and has determined, based on the administrative 
record of this rulemaking, that there is no need to make any regulatory 
distinctions applicable to intrastate aviation in Alaska.

VI. Executive Order Determinations

A. Executive Order 13132, Federalism

    The FAA has analyzed this final rule under the principles and 
criteria of Executive Order 13132, Federalism. The agency determined 
that this action will not have a substantial direct effect on the 
States, or the relationship between the Federal Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, and, therefore, does not have Federalism 
implications.

B. Executive Order 13211, Regulations That Significantly Affect Energy 
Supply, Distribution, or Use

    The FAA analyzed this final rule under Executive Order 13211, 
Actions Concerning Regulations that Significantly Affect Energy Supply, 
Distribution, or Use (May 18, 2001). The agency has determined that it 
is not a ``significant energy action'' under the executive order and it 
is not likely to have a significant adverse effect on the supply, 
distribution, or use of energy.

VII. How To Obtain Additional Information

A. Rulemaking Documents

    An electronic copy of a rulemaking document may be obtained by 
using the Internet--
    1. Search the Federal eRulemaking Portal (http://www.regulations.gov);
    2. Visit the FAA's Regulations and Policies Web page at http://www.faa.gov/regulations_policies/ or
    3. Access the Government Printing Office's Web page at http://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR.
    Copies may also be obtained by sending a request (identified by 
notice, amendment, or docket number of this rulemaking) to the Federal 
Aviation Administration, Office of Rulemaking, ARM-1, 800 Independence 
Avenue SW., Washington, DC 20591, or by calling (202) 267-9680.

B. Comments Submitted to the Docket

    Comments received may be viewed by going to http://www.regulations.gov and following the online instructions to search the 
docket number for this action. Anyone is able to search the electronic 
form of all comments received into any of the FAA's dockets by the name 
of the individual submitting the comment (or signing the comment, if 
submitted on behalf of an association, business, labor union, etc.).

C. Small Business Regulatory Enforcement Fairness Act

    The Small Business Regulatory Enforcement Fairness Act (SBREFA) of 
1996 requires FAA to comply with small entity requests for information 
or advice about compliance with statutes and regulations within its 
jurisdiction. A small entity with questions regarding this document, 
may contact its local FAA official, or the person listed under the FOR 
FURTHER INFORMATION CONTACT heading at the beginning of the preamble. 
To find out more about SBREFA on the Internet, visit http://www.faa.gov/regulations_policies/rulemaking/sbre_act/.

List of Subjects

14 CFR Part 5

    Air carriers, Aircraft, Airmen, Aviation safety, Reporting and 
recordkeeping requirements, Safety, Transportation.

[[Page 1326]]

14 CFR Part 119

    Administrative practice and procedure, Air carriers, Aircraft, 
Aviation safety, Charter flights, Reporting and recordkeeping 
requirements.

The Amendment

    In consideration of the foregoing, and under the authority of 49 
U.S.C. 106(f) and 44701(a)(5), the Federal Aviation amends chapter I of 
title 14, Code of Federal Regulations, as follows:

0
1. The heading for subchapter A is revised to read as follows:

Subchapter A--Definitions and General Requirements

0
2. Add part 5 to subchapter A to read as follows:

PART 5--SAFETY MANAGEMENT SYSTEMS

Subpart A--General
Sec.
5.1 Applicability.
5.3 General requirements.
5.5 Definitions.
Subpart B--Safety Policy
5.21 Safety policy.
5.23 Safety accountability and authority.
5.25 Designation and responsibilities of required safety management 
personnel.
5.27 Coordination of emergency response planning.
Subpart C--Safety Risk Management
5.51 Applicability.
5.53 System analysis and hazard identification.
5.55 Safety risk assessment and control.
Subpart D--Safety Assurance
5.71 Safety performance monitoring and measurement.
5.73 Safety performance assessment.
5.75 Continuous improvement.
Subpart E--Safety Promotion
5.91 Competencies and training.
5.93 Safety communication.
Subpart F--SMS Documentation and Recordkeeping
5.95 SMS documentation.
5.97 SMS records.

    Authority:  Pub. L. 111-216, sec. 215 (Aug. 1, 2010); 49 U.S.C. 
106(f), 106(g), 40101, 40113, 40119, 41706, 44101, 44701-44702, 
44705, 44709-44711, 44713, 44716-44717, 44722, 46105.

Subpart A--General

Sec.  5.1  Applicability.

    (a) A certificate holder under part 119 of this chapter authorized 
to conduct operations in accordance with the requirements of part 121 
of this chapter must have a Safety Management System that meets the 
requirements of this part and is acceptable to the Administrator by 
January 8, 2018.
    (b) A certificate holder must submit an implementation plan to the 
FAA Administrator for review no later than September 9, 2015. The 
implementation plan must be approved no later than March 9, 2016.
    (c) The implementation plan may include any of the certificate 
holder's existing programs, policies, or procedures that it intends to 
use to meet the requirements of this part, including components of an 
existing SMS.

Sec.  5.3  General requirements.

    (a) Any certificate holder required to have a Safety Management 
System under this part must submit the Safety Management System to the 
Administrator for acceptance. The SMS must be appropriate to the size, 
scope, and complexity of the certificate holder's operation and include 
at least the following components:
    (1) Safety policy in accordance with the requirements of subpart B 
of this part;
    (2) Safety risk management in accordance with the requirements of 
subpart C of this part;
    (3) Safety assurance in accordance with the requirements of subpart 
D of this part; and
    (4) Safety promotion in accordance with the requirements of subpart 
E of this part.
    (b) The Safety Management System must be maintained in accordance 
with the recordkeeping requirements in subpart F of this part.
    (c) The Safety Management System must ensure compliance with the 
relevant regulatory standards in chapter I of Title 14 of the Code of 
Federal Regulations.

Sec.  5.5  Definitions.

    Hazard means a condition that could foreseeably cause or contribute 
to an aircraft accident as defined in 49 CFR 830.2.
    Risk means the composite of predicted severity and likelihood of 
the potential effect of a hazard.
    Risk control means a means to reduce or eliminate the effects of 
hazards.
    Safety assurance means processes within the SMS that function 
systematically to ensure the performance and effectiveness of safety 
risk controls and that the organization meets or exceeds its safety 
objectives through the collection, analysis, and assessment of 
information.
    Safety Management System (SMS) means the formal, top-down, 
organization-wide approach to managing safety risk and assuring the 
effectiveness of safety risk controls. It includes systematic 
procedures, practices, and policies for the management of safety risk.
    Safety objective means a measurable goal or desirable outcome 
related to safety.
    Safety performance means realized or actual safety accomplishment 
relative to the organization's safety objectives.
    Safety policy means the certificate holder's documented commitment 
to safety, which defines its safety objectives and the accountabilities 
and responsibilities of its employees in regards to safety.
    Safety promotion means a combination of training and communication 
of safety information to support the implementation and operation of an 
SMS in an organization.
    Safety Risk Management means a process within the SMS composed of 
describing the system, identifying the hazards, and analyzing, 
assessing and controlling risk.

Subpart B--Safety Policy

Sec.  5.21  Safety policy.

    (a) The certificate holder must have a safety policy that includes 
at least the following:
    (1) The safety objectives of the certificate holder.
    (2) A commitment of the certificate holder to fulfill the 
organization's safety objectives.
    (3) A clear statement about the provision of the necessary 
resources for the implementation of the SMS.
    (4) A safety reporting policy that defines requirements for 
employee reporting of safety hazards or issues.
    (5) A policy that defines unacceptable behavior and conditions for 
disciplinary action.
    (6) An emergency response plan that provides for the safe 
transition from normal to emergency operations in accordance with the 
requirements of Sec.  5.27.
    (b) The safety policy must be signed by the accountable executive 
described in Sec.  5.25.
    (c) The safety policy must be documented and communicated 
throughout the certificate holder's organization.
    (d) The safety policy must be regularly reviewed by the accountable 
executive to ensure it remains relevant and appropriate to the 
certificate holder.

Sec.  5.23  Safety accountability and authority.

    (a) The certificate holder must define accountability for safety 
within the organization's safety policy for the following individuals:

[[Page 1327]]

    (1) Accountable executive, as described in Sec.  5.25.
    (2) All members of management in regard to developing, 
implementing, and maintaining SMS processes within their area of 
responsibility, including, but not limited to:
    (i) Hazard identification and safety risk assessment.
    (ii) Assuring the effectiveness of safety risk controls.
    (iii) Promoting safety as required in subpart E of this part.
    (iv) Advising the accountable executive on the performance of the 
SMS and on any need for improvement.
    (3) Employees relative to the certificate holder's safety 
performance.
    (b) The certificate holder must identify the levels of management 
with the authority to make decisions regarding safety risk acceptance.

Sec.  5.25  Designation and responsibilities of required safety 
management personnel.

    (a) Designation of the accountable executive. The certificate 
holder must identify an accountable executive who, irrespective of 
other functions, satisfies the following:
    (1) Is the final authority over operations authorized to be 
conducted under the certificate holder's certificate(s).
    (2) Controls the financial resources required for the operations to 
be conducted under the certificate holder's certificate(s).
    (3) Controls the human resources required for the operations 
authorized to be conducted under the certificate holder's 
certificate(s).
    (4) Retains ultimate responsibility for the safety performance of 
the operations conducted under the certificate holder's certificate.
    (b) Responsibilities of the accountable executive. The accountable 
executive must accomplish the following:
    (1) Ensure that the SMS is properly implemented and performing in 
all areas of the certificate holder's organization.
    (2) Develop and sign the safety policy of the certificate holder.
    (3) Communicate the safety policy throughout the certificate 
holder's organization.
    (4) Regularly review the certificate holder's safety policy to 
ensure it remains relevant and appropriate to the certificate holder.
    (5) Regularly review the safety performance of the certificate 
holder's organization and direct actions necessary to address 
substandard safety performance in accordance with Sec.  5.75.
    (c) Designation of management personnel. The accountable executive 
must designate sufficient management personnel who, on behalf of the 
accountable executive, are responsible for the following:
    (1) Coordinate implementation, maintenance, and integration of the 
SMS throughout the certificate holder's organization.
    (2) Facilitate hazard identification and safety risk analysis.
    (3) Monitor the effectiveness of safety risk controls.
    (4) Ensure safety promotion throughout the certificate holder's 
organization as required in subpart E of this part.
    (5) Regularly report to the accountable executive on the 
performance of the SMS and on any need for improvement.

Sec.  5.27  Coordination of emergency response planning.

    Where emergency response procedures are necessary, the certificate 
holder must develop and the accountable executive must approve as part 
of the safety policy, an emergency response plan that addresses at 
least the following:
    (a) Delegation of emergency authority throughout the certificate 
holder's organization;
    (b) Assignment of employee responsibilities during the emergency; 
and
    (c) Coordination of the certificate holder's emergency response 
plans with the emergency response plans of other organizations it must 
interface with during the provision of its services.

Subpart C--Safety Risk Management

Sec.  5.51  Applicability.

    A certificate holder must apply safety risk management to the 
following:
    (a) Implementation of new systems.
    (b) Revision of existing systems.
    (c) Development of operational procedures.
    (d) Identification of hazards or ineffective risk controls through 
the safety assurance processes in subpart D of this part.

Sec.  5.53  System analysis and hazard identification.

    (a) When applying safety risk management, the certificate holder 
must analyze the systems identified in Sec.  5.51. Those system 
analyses must be used to identify hazards under paragraph (c) of this 
section, and in developing and implementing risk controls related to 
the system under Sec.  5.55(c).
    (b) In conducting the system analysis, the following information 
must be considered:
    (1) Function and purpose of the system.
    (2) The system's operating environment.
    (3) An outline of the system's processes and procedures.
    (4) The personnel, equipment, and facilities necessary for 
operation of the system.
    (c) The certificate holder must develop and maintain processes to 
identify hazards within the context of the system analysis.

Sec.  5.55  Safety risk assessment and control.

    (a) The certificate holder must develop and maintain processes to 
analyze safety risk associated with the hazards identified in Sec.  
5.53(c).
    (b) The certificate holder must define a process for conducting 
risk assessment that allows for the determination of acceptable safety 
risk.
    (c) The certificate holder must develop and maintain processes to 
develop safety risk controls that are necessary as a result of the 
safety risk assessment process under paragraph (b) of this section.
    (d) The certificate holder must evaluate whether the risk will be 
acceptable with the proposed safety risk control applied, before the 
safety risk control is implemented.

Subpart D--Safety Assurance

Sec.  5.71  Safety performance monitoring and measurement.

    (a) The certificate holder must develop and maintain processes and 
systems to acquire data with respect to its operations, products, and 
services to monitor the safety performance of the organization. These 
processes and systems must include, at a minimum, the following:
    (1) Monitoring of operational processes.
    (2) Monitoring of the operational environment to detect changes.
    (3) Auditing of operational processes and systems.
    (4) Evaluations of the SMS and operational processes and systems.
    (5) Investigations of incidents and accidents.
    (6) Investigations of reports regarding potential non-compliance 
with regulatory standards or other safety risk controls established by 
the certificate holder through the safety risk management process 
established in subpart B of this part.
    (7) A confidential employee reporting system in which employees can 
report hazards, issues, concerns, occurrences, incidents, as well as 
propose solutions and safety improvements.
    (b) The certificate holder must develop and maintain processes that

[[Page 1328]]

analyze the data acquired through the processes and systems identified 
under paragraph (a) of this section and any other relevant data with 
respect to its operations, products, and services.

Sec.  5.73  Safety performance assessment.

    (a) The certificate holder must conduct assessments of its safety 
performance against its safety objectives, which include reviews by the 
accountable executive, to:
    (1) Ensure compliance with the safety risk controls established by 
the certificate holder.
    (2) Evaluate the performance of the SMS.
    (3) Evaluate the effectiveness of the safety risk controls 
established under Sec.  5.55(c) and identify any ineffective controls.
    (4) Identify changes in the operational environment that may 
introduce new hazards.
    (5) Identify new hazards.
    (b) Upon completion of the assessment, if ineffective controls or 
new hazards are identified under paragraphs (a)(2) through (5) of this 
section, the certificate holder must use the safety risk management 
process described in subpart C of this part.

Sec.  5.75  Continuous improvement.

    The certificate holder must establish and implement processes to 
correct safety performance deficiencies identified in the assessments 
conducted under Sec.  5.73.

Subpart E--Safety Promotion

Sec.  5.91  Competencies and training.

    The certificate holder must provide training to each individual 
identified in Sec.  5.23 to ensure the individuals attain and maintain 
the competencies necessary to perform their duties relevant to the 
operation and performance of the SMS.

Sec.  5.93  Safety communication.

    The certificate holder must develop and maintain means for 
communicating safety information that, at a minimum:
    (a) Ensures that employees are aware of the SMS policies, 
processes, and tools that are relevant to their responsibilities.
    (b) Conveys hazard information relevant to the employee's 
responsibilities.
    (c) Explains why safety actions have been taken.
    (d) Explains why safety procedures are introduced or changed.

Subpart F--SMS Documentation and Recordkeeping

Sec.  5.95  SMS documentation.

    The certificate holder must develop and maintain SMS documentation 
that describes the certificate holder's:
    (a) Safety policy.
    (b) SMS processes and procedures.

Sec.  5.97  SMS records.

    (a) The certificate holder must maintain records of outputs of 
safety risk management processes as described in subpart C of this 
part. Such records must be retained for as long as the control remains 
relevant to the operation.
    (b) The certificate holder must maintain records of outputs of 
safety assurance processes as described in subpart D of this part. Such 
records must be retained for a minimum of 5 years.
    (c) The certificate holder must maintain a record of all training 
provided under Sec.  5.91 for each individual. Such records must be 
retained for as long as the individual is employed by the certificate 
holder.
    (d) The certificate holder must retain records of all 
communications provided under Sec.  5.93 for a minimum of 24 
consecutive calendar months.

PART 119--CERTIFICATION: AIR CARRIERS AND COMMERCIAL OPERATORS

0
3. The authority citation for part 119 is revised to read as follows:

    Authority: Pub. L. 111-216, sec. 215 (August 1, 2010); 49 U.S.C. 
106(f), 106(g), 1153, 40101, 40102, 40103, 40113, 44105, 44106, 
44111, 44701-44717, 44722, 44901, 44903, 44904, 44906, 44912, 44914, 
44936, 44938, 46103, 46105.

0
4. Add Sec.  119.8 to read as follows:

Sec.  119.8  Safety Management Systems.

    (a) Certificate holders authorized to conduct operations under part 
121 of this chapter must have a safety management system that meets the 
requirements of part 5 of this chapter and is acceptable to the 
Administrator by March 9, 2018.
    (b) A person applying to the Administrator for an air carrier 
certificate or operating certificate to conduct operations under part 
121 of this chapter after March 9, 2015, must demonstrate, as part of 
the application process under Sec.  119.35, that it has an SMS that 
meets the standards set forth in part 5 of this chapter and is 
acceptable to the Administrator.

    Issued in Washington, DC, under the authority provided by 49 
U.S.C. 106(f), 44701(a)(5) and Sec. 215 of Pub. L. 111-216, 124 
Stat. 2350 (49 U.S.C. 44701 note) on January 5, 2015.
Michael P. Huerta,
Administrator.
[FR Doc. 2015-00143 Filed 1-7-15; 8:45 am]
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