Updated Feb. 11, 2019
The Department of Transportation (DOT) published 14 Code of Federal Regulations (CFR) Part 295, Air Charter Brokers, and revising 14 CFR 298, Exemptions for Air Taxi and Commuter Air Carrier Operations. Regulating the air charter broker industry for the first time, these regulations take effect Feb. 14, 2019.
The following questions and answers were assembled by members of NBAA’s Regulatory Issues Advisory Group to help address questions from brokers and operators about the impact of the new regulations. For more information, please contact Adam Hohulin, Sentient Jet at email@example.com; Dayton Lehman Jr., Capitol Business Solutions at firstname.lastname@example.org; and Jason Maddux, Garofalo Goerlich & Hainbach PC at email@example.com.
- Questions from Air Carriers
- Questions from Air Charter Brokers
- Questions from Broker Companies that Have Card and Membership Products
Questions from Air Carriers
- As the direct air carrier working with an air charter broker how do the new regulations impact me?
- Part 295 could impact air carriers to the extent that a broker is operating in the capacity of the agent of an air carrier in arranging single entity charters, as defined in Part 295 Also, air carriers need to recognize new §§ 298.80 and 298.90, issued contemporaneously with Part 295, which impose similar disclosure requirements and prohibited practices, respectively, directly on air carriers.
- When I work with a broker today, I provide a quote for services, and – if agreed upon by the broker in a signed agreement – I maintain operational control while providing the services contracted. What changes for me as the operator?
- Part 295 could impact air carriers to the extent that a broker is operating in the capacity of the agent of an air carrier in arranging single entity charters, as defined in Part 295 Also, air carriers need to recognize new section 298.80 and 298.90, issued contemporaneously with Part 295, which impose similar disclosure requirements and prohibited practices, respectively, directly on air carriers.
- Do I have to really provide all DBAs and why?
- A longstanding fundamental policy of DOT is that it is unfair and deceptive for a customer not to know the carrier that is operating the flight, and DOT considers DBAs an essential component of that information. A similar rule applicable to ticket agents and carriers regarding scheduled flights has been in effect for about 20 years. The policy is now codified for single entity charters, as defined in Part 295.
- If the broker does not provide the charterer with the “required or upon request” disclosures, as the operator do I have any liability in the fine or client asking for a full refund?
- Not if you as the direct air carrier complied with your own disclosure obligations. While a carrier could be responsible if the broker is the carrier’s agent, it has been DOT’s practice in the past not to act against a principal for its agent’s actions where the principal has taken reasonable steps on its own part to ensure compliance with a rule. Assuming you as the direct air carrier properly provided your own disclosures, that DOT practice would seem to hold true here where there is a separate disclosure obligation on the broker even if it is acting as agent of a carrier.
- As the direct air carrier, other than aircraft contracted, price, estimate on 3rd party fees, certificate name and DBAs, do I have any other requirements to the broker?
- A direct air carrier’s requirements are those listed in § 298.80, which includes the info above (except aircraft contracted), though some disclosers are required only upon request, as well as the name/DBAs of any other direct air carrier you as a direct air carrier hire (“broker”) to operate the flight if you cannot do so, along with notice of any changes to this information within a reasonable time after learning of the changes. Also, direct air carriers should be aware of matters they cannot misrepresent to the customer as outlined in § 298.90.
- As the direct air carrier, if I am selling a retail charter on my fleet directly to the charterer, does this change my requirements in any way?
- A direct air carrier’s requirements are those listed in § 298.80(a)(4)-(5), which includes total cost and an estimate on 3rd party fees, along with notice of any changes to this information within a reasonable time after learning of the changes. Also, direct air carriers should be aware of matters they cannot misrepresent to the customer as outlined in § 298.90.
- As the direct air carrier, if I am arranging services for my retail clients or aircraft owners on a 3rd party direct air carrier, do I have to follow 14 CFR 295 because I am now an air charter broker?
- No. You need to follow the disclosure requirements of § 298.80 (which are similar to those in Part 295) and the prohibitions of § 298.90.
- If I think a broker might be misrepresenting themselves (i.e. non-compliant with Part 295) and I still accept to fly the trip, am I liable for the cost of the trip?
- DOT does have an enforcement policy where it could find a carrier that “facilitated” unlawful conduct by a broker to have itself engaged in an unfair/deceptive practice or unfair method of competition, but it depends on the facts of a particular matter.
- If I have a verbal or contractual agreement with the air charter broker for a “rebate program,” “kickback,” or “margin split” do they have to disclose this if requested by the charterer?
- These would appear to be the sort of factors “that may have a bearing” on selection of you by the broker, which would require disclosure. Importantly, DOT’s rule does not require disclosure of the particulars of any such arrangement, only that the broker disclose the fact that it has a business relationship with you, the carrier. Note a similar provision in 298.80 requires direct air carriers to disclosure the existence of business relationships that might have a bearing on their selection of another carrier to operate a flight on their behalf.
- Can I allow a broker to put their marketing materials on my aircraft?
- Yes, so long as your name is displayed prominently and clearly on the aircraft as well and consumers are not otherwise misled into thinking the broker is the operator of the aircraft.
Questions from Air Charter Brokers
- As the air charter broker, we understand what “agent for the client” means, but what is an “indirect air carrier” and how is that different than an agent?
- A Part 295 indirect air carrier is the principal in the transaction with a customer, which permits it to have one contract with a direct air carrier for the charter flight and a separate contract with the customer for the charter. Previously, a broker could only arrange air transportation as the agent of the customer, where it signed a single contract with the direct air carrier on behalf of its customer, or as the agent of the direct air carrier, where it signed a single contract with the customer on behalf of the direct air carrier.
- As the broker, if I’m selling a retail client a specific trip on a specific aircraft, this DOT requirement is saying prior to the client signing the contract I have to tell them who I am contracting through – thus potentially allowing them to go directly to the operator I found? How is this considered fair?
- Another way to look at this is to ask a broker: Are all carriers the same? Obviously “no,” which is why you may have favorites or at least those carriers that you refuse to do business with. There may be various reasons why a customer may not want to fly on a particular carrier, from safety concerns, to unkempt aircraft, to simply having had a bad experience in the past. A longstanding fundamental policy of DOT is that it is unfair and deceptive for a customer not to know who the carrier is that is operating his/her flight, and DOT considers DBAs an essential component of that information. A similar rule applicable to ticket agents and carriers regarding scheduled flights has been in effect for about 20 years. DOT considers the public interest in extending this policy to charter flights to outweigh other concerns and , so that policy is now codified for single entity charters.
- Is there still no broker registry I have to sign up for?
- There is no government-sponsored registry, although DOT indicated that private entities may wish to establish one.
- What are the minimum disclosure requirements for a broker to provide the charterer? Are there other disclosure requirements?
- The minimum disclosure requirements for the broker are:
- The capacity in which I am acting as the broker
- The name and D/B/As of the operator
- If the broker carries any insurance
Other disclosures must be made upon request:
- If acting as customer’s agent, any relationship with the carrier/operator that has a bearing on selection of the carrier to operate the flight
- The total cost of the charter, including taxes and fees (need not be itemized)
- any fees the customer must pay directly to third parties (e.g., fuel, landing, hanger, etc.).
Note: You must advise the customer of any changes to the required disclosures within a reasonable time of their taking place. Also, And brokers should be aware of matters you cannot misrepresent to the customer as outlined in § 295.50(b).
- Do the operators know they must provide all DBAs now? If they don’t, am I as the broker liable for the full refund, or is the operator?
- Brokers should make operators aware that brokers are responsible for providing this information to their customers and should, at a minimum, ensure you request it from the operator. In addition, you may wish to seek the information independently, such as through an aviation database. Whether you might be responsible for any inaccurate or incomplete DBA information will likely depend on the circumstances of each case, whether you made reasonable efforts to obtain the information and pass along what you learned to your customer, including whether you were misled in any way by the operator.
- If using a foreign operator, do we still have the same requirements?
- Yes. However, brokers should be mindful they may only hold out, sell, or otherwise arrange single entity charter air transportation the direct air carrier is authorized in its own right to hold out, sell, or operate.
- Is double brokering illegal, specifically if the charterer gets the required disclosures and no deceptive messaging was used (i.e. you fully disclosed to the client you used another broker)?
- The definition of “air charter broker” in the NPRM was “a person or entity that holds out, sells, or undertakes to arrange planeload, single entity passenger charter air transportation, other than as an employee or bona fide agent of an air carrier or a charterer, using a direct air carrier, or using another provider of air transportation.” (Emphasis added.) DOT removed the highlighted language from this definition in the Final Rule. DOT staff confirmed the intent of that change was to keep from authorizing back-to-back (or double) brokering when both brokers act as indirect air carriers. This also would prevent a broker, when acting as an indirect air carrier, from also contracting with a public charter operator. However, DOT staff confirmed that Part 295 authorizes double brokering, when one or both brokers act as agent either for the charterer or direct air carrier.
- Do you even have to disclose if you used another broker?
- Nothing in Part 295 deals directly with this situation, but certain disclosure requirements in the rule could be interpreted to require disclosure of the existence of the second broker. In this regard, a broker must disclose the capacity in which a broker is acting, and the existence or absence of liability insurance held by a broker. Since DOT considers these disclosures to be significant consumer protection requirements, these rules would appear to require the second broker to be named. In addition, even without this interpretation of Part 295, DOT could consider the failure to disclose the existence of a second broker to be an unfair/deceptive practice or unfair method of competition as a general matter.
- Can a broker sell a direct air carrier’s empty legs or their own one-way trips to another broker as long as they disclose the mandatory requirement to that broker?
- Yes, provided at least one broker is acting as an agent. See answer to Is double brokering illegal? above.
- If I get an unexpected bill from the operator, can I pass it onto the client after the flight if it was not communicated in advance (e.g. aircraft cleaning due to client, de-icing, wi-fi charges, etc.)?
- This is both a Part 295 issue and a contract issue. DOT’s rule requires disclosure of such fees “upon request.” If the customer asked about such fees and you failed to disclose the possibility such fees could be imposed, and they are not otherwise in your contract with the customer, the customer has a reasonable argument that they should not be responsible, although this may depend on the nature of the fee. To be safe, you should always try to cover in your contract any fees that might possibly be the responsibility of the customer.
- If I pre-purchase hours or guarantee an operator hours for a set rate, do I have to disclose this agreement upon request as the existence of a corporate or business relationship?
- These could be the sort of factors “that may have a bearing” on selection of a particular carrier by a broker, which would require disclosure. Importantly, DOT’s rule does not require disclosure of the particulars of any such arrangement, only that a broker disclose the fact that it has a business relationship with the carrier.
- Is there any form of communication not allowed or recommended? For example, could verbal disclosures lead to disputes?
- DOT stated that written confirmation of compliance with its disclosure requirements is not required. However, brokers may wish to establish a means of confirmation through written records for their own protection, whether as part of their contract form, checking of boxes on a website or otherwise.
Questions from Broker Companies that Have Card and Membership Products
- A client agrees contractually to a set rate for an aircraft category, not a specific aircraft. So there is no quote – based on “reasonable time.” Can we give the client the required information when we give them their aircraft assignment prior to departure?
- Both the broker (Part 295) and operator (Part 298) rules specifically require certain information be disclosed “before entering into a contract for a specific flight or series of flights…” See 295.24(a) and 298.80(a). Arguably a contract for a set rate/aircraft category is not a contract for a specific flight. However, the closer to departure time the information is provided, the more problems it could create if the customer does not want to accept the flight.
- Can a client opt out and not want to see this information?
- In the preamble to the Part 298 changes, in the discussion of the decision to harmonize the disclosures being required of Part 135 carriers with those required of brokers in Part 295, DOT states “The Department disagrees with NBAA’s suggestion that the rule indicate that parties may agree in writing to forgo certain disclosures because allowing parties to contract away these protections would severely limit the benefits of the rule.” 83 FR 46867.
- If, through technology, you make all the required and upon request disclosures available for the charterer to “pull on their own” (i.e. run a report any time), would you still need to directly notify them of anything?
- Although DOT does not cover this directly in Part 295, it seems customers would need to be told when this information is available and also must be told, if changes occur, that they may review the updated information.
- In a program, if you disclose upfront in the contract your agent status and insurance, do you have to do it again on every single flight?
- It appears information can be handled up front in a “main” agreement and other disclosures can be made on a flight-by-flight basis.
- As a broker, Part 295 allows me to put my name on the aircraft. However, is there any guidance on size/location for the operator’s name verse the broker’s name? Is it correct that if the broker name is on the aircraft the operators name must be as well?
- There is no specific size/location guidance, only that if a broker’s name/logo is on an aircraft the operator’s name must also be displayed on the aircraft “prominently and clearly” and consumers must not otherwise be misled into thinking the broker is the operator of the aircraft.