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Industry Issues

A gray area

04 December 2013

Illegal flights
The tyranny of illegal flights remains one of general aviation’s greatest challenges. Business Airport International investigates the steps being taken to tackle the problem


The business of illegal – or ‘gray market’ – chartering of aircraft is an area of great uncertainty and unknowable numbers, where late-night flying is often the norm. Most general aviation bodies choose to play it down. The European Business Aviation Association (EBAA) estimates that 6-8% of all business flights operated within the continent are conducted without the requisite Air Operator Certificate (AOC). The British Business and General Aviation Association (BBGA) believes that as much as 13% of traffic coming into Europe is illegal. Others hint at far greater numbers, but cannot substantiate.


“The difficulty is that unless they are revealed, it is almost impossible to prove that someone is operating illegally,” says Marc Bailey, CEO of the BBGA. “If you look at certain states of origin and examine their registrations, they are primarily ‘private’ flights, yet when they turn up they are still here to do business.”


One area that is more upfront than most is the young but burgeoning Middle Eastern market. Ali Al Naqbi, founding chairman of the Middle East Business Aviation Association (MEBAA), believes that “most charter operations here are run illegally”.


Definitions and drivers


The definition of an illegal flight is not always straightforward and therein lies part of the problem. Aside from the absence of an AOC granting commercial license (or Part 135 in the USA), an illegal flight may be one whereby an operator enters a country with the correct permit, but flies to another where a bilateral agreement is not in place.


Reasons for unlawful operations include unscrupulous owners looking to undercut established AOC-holding operators, ill-informed customers attracted by lower prices, indifferent aircraft owners hoping to make a fast buck during tough economic times, simple ignorance, and even favors for friends.


“Some people don’t fully understand the rules associated with charging for flights and charging passengers who may be flying aboard your aircraft,” says Doug Carr, vice president of operations for the National Business Aviation Association (NBAA). “This is where we see most of our illegal charter activity, as opposed to people advertising their jets without proper authority from the Federal Aviation Association (FAA).”


Whatever the reason, the impact on the industry’s bottom line is massive. In Europe, a conservative estimate puts the cost of illegal charter activity at around £2.5 billion (US$4 billion) per year in lost revenue for AOC-registered charter companies. The reality may be far higher.


“The gray market is like a disease,” says Naqbi. “Those with an AOC have invested capital and have infrastructure in place. Meanwhile, a simple broker makes money by sitting on the phone at home and taking margin from companies who put in the effort.”


Economics and safety


Concerns surrounding illegal operations can be divided into two areas: economics and safety. Economics drives the industry forward, but safety is its watchword. Taking off without the correct permits on a jet not required to meet the standards of its commercial counterparts flies in the face of all that the industry holds dear.


“Illegal operations give business aviation a bad name,” says the BBGA’s Bailey. “This becomes clear when things go wrong. An analogy can be made with bargain hunting on the internet. As long as everything goes smoothly – for instance going online to buy the best television – all is fine. But if there are problems, the ramifications can be more
significant.”


“Those who travel on illegal ‘private’ flights often do so in an effort to secure the cheapest price,” says Paul Cremer, commercial manager at Gama Aviation. “They need to look at the bigger picture.”


AOCs are issued for a reason: as proof the aircraft is capable of commercial travel. To get and maintain the right to operate commercially requires maintenance and investment. A private operation requires less oversight, less organizational structure, and fewer safety management systems. Crews supporting individuals who choose to charter illegal flights are doing so with less legislation protecting them, and can be subject to more human factors and pressure to operate. Meanwhile, those flying with an AOC are being monitored by the relevant CAA. Consequently standards are regularly checked.


“Those flying without an AOC undercut legitimate chartering,” says Belarmino Gonçalves Paradela, senior manager, economics and operational activities at the EBAA. “Their cost structure is lower because they don’t have to fulfill the same safety requirements and in addition, they can fly to and from airports where, due to the runway factor limitation, you cannot operate commercially. It doesn’t necessarily mean they are unsafe, but you are moving down the risk curve. If you are prepared to make one step, then you are likely prepared to make next one.”


Corners may be cut on maintenance and training, and inexperienced flight crews may be used. Pilots flying bona fide commercial operations have strict duty time limits to prevent fatigue. This is not so in the gray market. Should a tragic incident occur, it reflects badly on the industry as a whole – the fact that it was undertaken illegally is inevitably lost by the media. All the more reason to continuously challenge those in breach of the rules.


Then there is the matter of insurance. An illegal operation means that, should an incident or accident occur, the coverage of those on board is likely to be invalidated – including life insurance.


“Would underwriters support a case if the worst did happen?” asks Bailey. “It’s not black and white, but based on the feedback we have received, there is a good chance that none of those involved would be covered, from the passengers and crew, right down to those on the ground. By going on an illegal charter operation, you are completely exposed. It’s just not worth it.”


Tackling the problem 


Confronting this issue is akin to fighting the war on terror; the foe is nebulous, and hard to identify or quantify. This is why the battle is being fought on many fronts and by a multitude of organizations across the business aviation world, both by highlighting the dangers (education) and penalizing those involved (legality).


Since 2010, the EBAA has made safety its primary concern. Its high-profile 2011 campaign of bombarding passengers, brokers, and operators with the pamphlet Is My Flight Legal? Your Rights as a Business Aircraft Charter Passenger has been a qualified success. It has developed a Voluntary Declaration for EBAA members, which has helped make people take the issue more seriously. It has also met with civil aviation authorities from different nations in an attempt to raise awareness. Possibly as a result, both France and Italy have seen ‘big wins’ of late, which may deter those considering entering these countries illegally.


“Too many act with a feeling of impunity and invincibility,” says the EBAA’s Paradela. “This is precisely what we are trying to address.”


Avinode, a world leader in buying and selling air charter, is looking to create a ‘white list’ or database of all AOCs that are current and legal, together with their associated insurance information. By this means, brokers will be able to verify the status of
operations. The BBGA, under the guidance of Marc Bailey, is establishing an illegal charter task force using “multiple agencies rather than the more traditional approach”.


Meanwhile, in North America the FAA continues to meet operators and airports, carrying out ramp checks, and staying in touch with operations.


“The FAA set up a hotline so people in the field or other operators can report suspicious illegal activity,” says the NBAA’s Carr. “We have also released some guidelines for both charter operators and passengers, helping them to verify whether they are in fact doing business with a certified operator.”


If this seems like a scattergun approach to the challenge, then this is more a reflection of the complex nature of the problem, rather than a criticism of those confronting it. At the moment, it is a case of assault on all sides in the hope that some of it sticks.


“We are currently campaigning to raise the awareness of exactly what is an illegal flight,” says Naqbi of the MEBAA. “We are doing this by organizing conferences, arranging training, writing in the media, and establishing resources online. By flying illegally you might get less than the market price, but you are jeopardizing your life, and safety cannot be guaranteed.”


If illegal flights continue to flourish, the entire industry is poorer for it. The reduction of costs by ignoring certain critical standards of safety and legality is highly unsatisfactory and must continue to be addressed in a joined-up fashion involving all professional bodies. If the problem is not lessened or contained, it may result in legal operators leaving the market or joining the scam.


“The message we need to give the industry is that a price comparison makes sound business sense, but only within the legitimate market,” concludes Bailey. “Otherwise there is a poor risk/reward ratio.” 


Advice for the customer


The message is clear: the passenger must take personal responsibility. From the very earliest stage, it is imperative you check for an AOC to ensure a legal operation.


“Be up-front with your broker,” insists Marc Bailey of the BBGA. “Take responsibility. Say ‘you are offering me two options and the second one is £50,000 (US$79,000) less. Can you confirm this operator has an AOC?’. If you are not prepared to ask those questions you will be carrying on down a slippery slope and are equally guilty in the process. Before you know it you may even be briefed by the operator to answer questions in the event of someone coming on board the flight.”


Seek out a copy of the European Business Aviation Association’s brochure Is My Flight Legal? either online or at your local brokers. Inside you will find a list of everything you should expect from your operator as a matter of course. If you have questions regarding flight plan, safety, or crew qualifications, simply ask. If the answers are not satisfactory, move on.


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