REDEFINING FRACTIONALS

Redefining Fractionals Chair of industry working group tells how conclusions were reached — and their far- reaching impact By Jim Christiansen, COO/Executive Vice President, TAG Aviation April 2000 As the Fractional Ownership...


Redefining Fractionals

Chair of industry working group tells how conclusions were reached — and their far- reaching impact

By Jim Christiansen, COO/Executive Vice President, TAG Aviation

April 2000

As the Fractional Ownership Aviation Rulemaking Committee (FOARC) nears completion of its project, there is considerable interest in the committee process and the recommendations that it produced. While most of the attention has been directed at fractional program managers, this process produced much deeper ramifications for our industry.

Fractional ownership has grown in popularity over the past decade and along with it the controversy over whether these programs should be governed under Part 91 or 135 of the Federal Aviation Regulations.

The programs legally utilize existing FAR structure. However, as they grew, many industry members contended that fractional programs are, in fact, more like commercial operations than Part 91 operations. Charter operators, required to conduct their flights under the more restrictive 135 regulations, felt that fractional programs had an unfair competitive advantage. Likewise, many traditional flight department personnel felt threatened by this new method of access to private aircraft, and voiced concerns about how the programs were organized.

Meanwhile, fractional providers argued that their owners were no different than any other business aircraft owners, and that they deserved to enjoy the benefits of operating their aircraft under Part 91.

The debate heated up as fractional programs grew. In October, 1999, after several aborted attempts to address the fractional aircraft ownership issue, the FAA appointed a special committee of industry members to address it. Considering the contentious nature of the issue, the committee was given a tall order.

As the FAA listened to the arguments surrounding the debate, it concluded that, while fractionals operated legally under existing regulations, they were indeed different from traditional private aircraft operations, and that their regulatory status should be examined.The FAA decided that a regulatory change was required to make them comfortable with fractional programs, and the committee's charge was to create those changes. The FAA's mandate did not include addressing commercial or market considerations. Consequently, complaints about unfair competitive advantage were not within the FAA's purview.

The FAA Administrator created the FOARC to "propose such revisions to the Federal Aviation Regulations and associated guidance material as may be appropriate with respect to fractional ownership programs." The committee consisted of 27 members, supported by legal counsel and various experts. Repre-sentatives of FAA, DOT, and foreign aviation authorities also participated.

At the last minute, literally as I was boarding the aircraft on my way to Washington for the first meeting of the committee, I was informed that I had been appointed chairman.

The process the committee followed was straight forward. After laying the groundwork for how committee business was to be conducted, each committee member was provided an opportunity to present his or her views on the subject. While this was, at times, a strained process due to the emotions surrounding the issue, it laid the foundation for fruitful discussions. Time was also set aside for the public to address the committee and present their points of view.

The committee quickly agreed on one important point. Regardless of any given member's point of view, if the committee were not successful in creating a regulatory solution for this complex issue, the FAA would create a solution. This resulted in total agreement that it was highly unlikely that the industry would like the FAA's solution. So, we agreed that we had a unique opportunity to develop a viable solution that we all could live with. Once we came to that realization, the process, though arduous, actually worked fairly smoothly.

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