It is sometimes difficult to determine whether a federally funded airport with a single FBO has granted an Exclusive Right in violation of Federal Grant Assurance 23.
The purpose of this article is to help identify whether a single FBO airport is an Exclusive Right, or simply a situation where there is an allowable Proprietary Exclusive Right or a situation where there is legitimately no qualified competition.
An Exclusive Right
Federal Grant Assurance 23 implements 49 U.S.C. §40103(e) and 49 U.S.C §47107(a)(4) and prohibits an airport sponsor from entering into any Exclusive Rights agreements. Specifically it provides that a federally obligated airport:
- Will permit no exclusive right for the use of the airport by any person providing, or intending to provide, aeronautical services to the public ... and that it will terminate any exclusive right to conduct an aeronautical activity now existing at such an airport before the grant of any assistance under Title 49, United States Code.
The FAA defines an Exclusive Right as follows:
- A power, privilege, or other right excluding or debarring another from enjoying or exercising a like power, privilege, or right. An exclusive right can be conferred either by express agreement, by the imposition of unreasonable standards or requirements, or by any other means. Such a right conferred on one or more parties, but excluding others from enjoying or exercising a similar right or rights, would be an exclusive right.
According to FAA policy, “The intent of the prohibition on exclusive rights is to promote fair competition at federally-obligated, public use airports for the benefit of aeronautical users.
“... any unreasonable requirement or standard that is applied in an unjustly discriminatory manner may constitute a constructive grant of an exclusive right.”
So can there be a single FBO airport without an Exclusive Right?
A single FBO can exist without an impermissible Exclusive Right in two circumstances: (1) when there is a Proprietary Exclusive Right; and (2) when there is no qualified competition.
A Proprietary Exclusive Right
The owner of a public use airport may elect to provide any or all of the aeronautical services needed by the public at the airport. This is known as a Proprietary Exclusive Right. FAA uses the term owner and airport sponsor interchangeably and defines those terms as follows:
“A person or agency who has the legal authority to act on behalf of the airport. Unless the airport is owned and operated by a private entity, the airport sponsor is generally a public agency that owns and/or operates the airport. Here, the Naples Airport Authority is the sponsor of the airport for federal grant purposes.
Jet 1 Center, Inc. v. Naples Airport Authority, FAA Docket No. Docket No. 16-04-03 (January 4, 2005) (Director determined that an airport authority operating the airport pursuant to 99-year lease with the City of Naples was an appropriate exercise of the proprietary Exclusive Right).
An owner, may not exercise a Proprietary Exclusive Right through a management contract. “If the airport sponsor opts to provide an aeronautical service exclusively, it must use its own employees and resources.” FAA Order 5190.6B (“Airport Compliance Manual”) at Section 8.9. It is a violation of Grant Assurance 23 for an airport sponsor to designate an independent commercial enterprise to exclusively provide FBO services, even as an agent for the airport sponsor. See AC 150/5190-6 at Appendix 1, 1.1(k).
An airport owner or sponsor can elect to exercise its right to a proprietary Exclusive Right at any time. See Jet 1 Center, Inc. v. Naples Airport Authority, FAA Docket No. Docket No. 16-04-03 (January 4, 2005) (“An airport sponsor or owner does not lose its ability to invoke a proprietary exclusive right on its airport regardless of previous arrangements. So long as the airport owner or sponsor is not violating any of its grant obligations by doing so, it may invoke its proprietary exclusive right at any time.”
Paul A. Lange founded and leads the Law Offices of Paul A. Lange, LLC, with offices in CT and NY.
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