The Operational Control Issue

DALLAS — In January, the U.S. Department of Transportation released an advance notice of proposed rulemaking to address concerns it has related to transparency of ownership and operational control of aircraft used under FAR Part 135. The initiative gained momentum following a National Transportation Safety Board recommendation after a 2004 Challenger crash in Montrose, CO and a subsequent Challenger overrun at Teterboro, NJ in 2005. Michael Grossman, owner of passenger and cargo firms based in Akron, OH, has been integrally involved in industry activities related to anticipated rules changes for charter firms. He says the current operational control debate isn’t about making new rules, it’s about enforcing and implementing what’s already in place.

Grossman began hauling cargo 23 years ago and moved into passenger charter after 9/11, due to the decline in the U.S. auto industry and to the increase in charter activity. He has been actively involved in the charter committee of the National Air Transportation Association and today sits on its Board of Directors. He has also been a participant in the industry rulemaking advisory committee which has been considering recommendations for Part 135 regulation for some three years.

He operates cargo and passenger charter today under parent company Castle Aviation, and operates a fixed base operation, Castle Airport Services, at the Akron-Canton Regional Airport.

He sat with AIRPORT BUSINESS during February meetings here for NATA to discuss the debate over operational control and other Part 135 charter issues. Here’s an edited transcript ...

AIRPORT BUSINESS: How much has adding passenger charter impacted your business?

Grossman: That is our biggest growth area today. We’ve put more planes into service. After 9/11 it was only eight percent of our overall dollars; today it’s significantly more.

We have not added any more cargo airplanes. In fact, we’ve taken the Grand Caravan that we lease and have started doing passenger charter with it because we’ve had a request. I had three airplanes in 2001 that did passenger charter; today I have six — two Aerostars; the Grand Caravan; a Cheyenne II; a C-J; and a Beechjet 400A. The cargo fleet has five dedicated Caravans and one dedicated Aerostar in freight, and the Grand Caravan goes both ways.

AB: Regarding the issue of operational control, didn’t the industry already have this discussion back in the late 1980s?

Grossman: Yes. But in the late ‘80s there weren’t many brokers. Today, we have thousands of brokers. Actually, as an operator, when I have a customer but don’t have an airplane then what do I do? I put on my broker hat and I find my customer the airplane he needs. So, I do the same thing, and it’s up to me to tell the customer who is the operator of the airplane. I can’t tell the customer that it’s my airplane. That’s what they’re trying to stop.
AB: Broad brush, do you see this as something that even needs discussing? Or is genuinely a serious issue?

Grossman: I’m going to say ‘yes’, it’s a serious issue. Should it be? I’m going to tell you ‘no’.

It shouldn’t be a serious issue because the rules and regulations have been in place. We’re not getting any new regulation here; we’re getting operations specifications, which is clarifying the regulations. It has two causes: operators haven’t been doing it right; and the FAA has not been enforcing it right.

So, we had a couple of plane accidents and this operational control issue surfaced; the broker issue came to light. All of a sudden people in Washington are screaming we have to do something. Well, this is their answer.

Basically what they’re doing is tightening the belts. They have some very strong ground rules. The ops specs are coming out and they’re giving us 60 days to comply with them. It’s somewhat unprecedented, because we’re supposed to be complying with them already.

AB: And what will you have 60 days to put in place?

Grossman: It’s for the operators who have not been doing it right. For example, if you have a lease, the big thing is operational control — that the owner of the aircraft cannot have any kind of say-so or operational control of the charter operator. So, basically, it gives you 60 days to redo the leases, to reflect that the operational control issue is addressed.

AB: Is it the face of the company to the public that’s the key issue here?

Grossman: The one thing that I’ve heard over the past several months is that they want to see charter operaters do business somewhat like the airlines do it. Get on an airline today and fly on one of the regional partners, you have Continental Express operated by Express Jet. Basically, the DOT and FAA are saying the same thing here. If ABC Brokering Company is chartering with Castle Aviation today, what they want is that when those people get aboard my Castle Aviation airplane that they know it’s a Castle Aviation airplane. It’s not an ABC Brokering airplane. That’s what happened at Teterboro. Those people were on an airplane and didn’t even know who the operator was.

AB: It almost sounds too simple.

Grossman: I went to an operational control seminar put on by NATA in Newark just to go listen and see what everybody had to say. The bottom line is, yeah, it’s pretty simple. The FAA wants to make sure that the operator has operational control, even if the plane that they are operating on the charter that day is owned by another company and has that company’s pilots on. There has to be an agreement in place, now, that those pilots understand that when they’re flying a charter they answer to the operator.

There has to be an agency agreement which basically spells out, when you’re flying a charter this is who you answer to and the rules you are abiding by. FAA has bought off on that. During this time, the owner of the airplane can’t tell the operator what to do.

Under FAA regulations, the owner is the person in operational control only when he’s on board the aircraft. You can make an agreement that says the operator has operational control at all times – even if the owner is on board.

The only thing that cannot transfer is maintenance. Once an airplane is on a charter certificate, it has to be maintained to Part 135 standards – all the time. That is one thing that the operator is in control of all the time and has to know.

What they’re saying is, you have a lease agreement on the airplane and then you have a management agreement. All the details need to be spelled out in the management agreement.

AB: Regarding your comment that part of the problem has been FAA enforcement, what exactly do you mean?

Grossman: FAA’s problem was they weren’t enforcing the rules. The rules have been there. We’re not changing any regulation here.

The thing is, it shouldn’t be going on. I’ve never been one to hide information from customers; I don’t feel it’s the right way to do business. Yet, some brokers are afraid of losing business; maybe they don’t have the relationship with their customers like they should.