FAAÕs New Standards

July 8, 2000

FAA's New Standards

An analysis of the new Advisory Circular on Exclusive Rights, Minimum Standards

By Bobbi Thompson, Executive VP, Airport Business Solutions

July 2000

On April 7, 2000, the Federal Aviation Administration (FAA) issued its final version of the new Advisory Circular 150/5190-5 on Exclusive Rights and Minimum Standards for Commercial Aeronautical Activities. The publication of this new circular cancels AC 150/5190-2, Exclusive Rights at Airports, dated April 4, 1972, and A/C 150/5190-1A, Minimum Standards, dated December 12, 1985.

Many airport sponsors, airport management staff, and airport tenants may have misconceptions about what constitutes exclusive rights and the benefits of well-prepared minimum standards.

The following information is provided to assist operators in the process of understanding what an exclusive right is, and to assist in the development of an airport's minimum standards (Please refer to A.C. 150/5190-5 when you begin preparing your document).

While much of what is stated here is contained in the new A.C., the attempt here is to summarize the areas that may be of most concern to airport operators.

The stated purpose of the new advisory circular is to "...provide basic information pertaining to the FAA exclusive rights and minimum standards, which in part, describe the contractual grant obligations assumed by the operation of public airports."

In Section 1 of the new A.C. the FAA provides the details on exclusive rights for which compliance is mandatory for airports that have accepted federal assistance.

The statutory prohibition currently states: "A person does not have an exclusive right to use a navigation facility on which government money has been expended." An air navigation facility includes airports.

However, having a single fixed base operator (FBO) is not always considered an exclusive right. If the airport sponsor can verify that it is unreasonable costly — or impracticable — for more than one FBO to provide aeronautical services, and when the existing FBO's lease was under an agreement on September 3, 1982, and the addition of a second FBO would require a reduction in the first FBO's leased space, having a single FBO would not be considered an exclusive right.

As airport managers try to manage and maximize airport property, they should consider whether or not they would allow an existing FBO to respond to requests for proposals (RFPs) for new land leases if they have determined a need for competition. Excluding the existing FBO is not a violation of the exclusive rights prohibition.

Therefore, if you have an FBO with an existing lease and you are issuing an RFP for land to be used for a commercial aeronautical activity, you can exclude it from submitting a bid. An airport operator can also deny a prospective business operator the right to engage in an on-airport aeronautical activity for reasons of safety and efficiency. The new A.C. encourages each airport operator to work with his/her local Airports District Office (ADO) or Regional Airports Office in determining whether or not safety would be compromised by the proposed aeronautical activity.

Safety concerns are not limited to aeronautical issues — they may also include Occupational Safety and Health Administration (OSHA) standards; fire safety standards; building codes; or sanitation concerns.

Section 2 of the A.C. incorporates advice provided by FAA with respect to minimum standards. The Advisory Circular states: "The sponsor of a Federally obligated airport agrees to make the opportunity to engage in commercial aeronautical activities available to any person, firm, or corporation that meets reasonable minimum standards established by the airport sponsor. In exchange for this opportunity, a business operator agrees to comply with minimum standards developed by the airport sponsor."

The minimum standards, then, by virtue of the business operator's agreement, become mandatory. Minimum standards should be reasonable, relevant to the proposed activity, and have a goal of protecting the level and quality of services offered to the public. Once established, minimum standards should be applied objectively and uniformly to all similarly situated on-airport aeronautical activities.

Specialized aviation service operations (SASOs) should not be required to meet the same set of minimum standards as an FBO. For example, a commercial flight school would not need to lease the same amount of land or space as a full-service FBO providing multiple services.

Each airport operator should develop standards applicable to the type and class of activity being provided. (This is an excellent example of why each airport may use another airport's standard as a guideline, but an individual airport's minimum standards must be tailored and written specifically for that airport. In fact A.C. 150/5190-5 clearly states that the FAA will not endorse "fill-in-the-blank" minimum standards because of the high probability that many airport sponsors would not modify the document to the needs of their specific airports.

In Section 2d (1 thru 7) of the A.C., the FAA provides suggestions of items to consider when developing minimum standards. Certainly one of the more difficult issues faced in the development of minimum standards is to prepare the document to meet the conditions on the airport today — and for the standards to be applicable and reasonable to future airport commercial tenants.

Section 3 contains guidance on the development of minimum standards. A series of questions are provided to help airport sponsors identify and address some of the various activities typically offered to the public by commercial aeronautical service providers. Additionally, this section helps an airport sponsor with questions on personnel requirements, airport and passenger services, airport upkeep and maintenance, flight training activities, aircraft charter and air taxi, aircraft engine/accessory repair and maintenance, skydiving, and ultralight vehicles.

As an airport's standards are developed, many additional questions will need to be asked. This is one of the reasons it's important to involve all commercial aeronautical service providers at some point during the development process. One of the more difficult tasks is to write the standards in a fair, reasonable, worthwhile, and enforceable manner.

While an airport is in the process of developing new minimum standards, it should consider and plan on the best procedure for implementing the standards. Should they become part of each lease? Are they provided with RFPs? Should each tenant sign that he/she has received and accepted the airports minimum standards? How will the standards be enforced with existing tenants? And, what will be the process for updating the document?

The enforcement process is found in Section 4 of the A.C. The contractual nature of the Airport Compliance Program is a result of language in the Airports and Airway Improvement Act of 1982, as amended, 49 U.S.C. Section 47101, et. seq., and the airport sponsor's agreement to comply with assurances contained in the grant assurances in exchange for federal airport development assistance.

Under the Airport Compliance Program, any person who believes an airport sponsor is in noncompliance with an assurance may register a complaint with the ADO office. If the ADO confirms the complaint allegations and the airport sponsor fails to become compliant, the individual may file a formal compliant under 14 CFR Part 16. A determination against the sponsor by the FAA can result in the withholding of current grant fund payments or denial of future grants.

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Minimum Standards are a very effective tool for dealing with property related issues, tenant concerns and problems, and avoiding the appearance of providing exclusive rights. However, like many other management documents this document is only valuable if the time and energy was invested in the preparation.

FAA Terms and Definitions
FAA, airport operators, and airport users may use many of the same terms; however, the definitions can sometimes be misunderstood. Following are FAA's definitions for key terms used in this and other Advisory Circulars.

•Aeronautical Activity. Any activity that involves, makes possible, or is required for the operation of an aircraft, or which contributes to or is required for the safety of such operations.
• Exclusive Right. 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.
• Minimum Stan-dards. The qualifications or criteria, which may be established by an airport owner as the minimum requirements that must be met by businesses engaged in on-airport aeronautical activities for the right to conduct those activities.
• Proprietary Ex-clusive. The owner of a public-use airport (public or private owner) may elect to provide any or all of the aeronautical services needed by the public at the airport. In fact, the statutory prohibition against exclusive rights does not apply to these owners and they may exercise but not grant the exclusive right to conduct any aeronautical activity.

However, the sponsor that elects to engage in a proprietary right exclusive must use its own employees and resources to carry out its venture. An independent commercial enterprise that has been designated as agent of the owner may not exercise nor be granted an exclusive right.
• Specialized aviation service operation (SASO). An aeronautical business that offers a single or limited service. Examples of these specialized services may include aircraft flying clubs; flight training; airframe and powerplant repair/maintenance; aircraft charter; air taxi or air ambulance; aircraft sales, avionics; instrument or propeller services; or, other specialized commercial flight support business.
• B.T.

A Minimum Standards Checklist
While an airport is in the process of developing new minimum standards, it should consider and plan on the best procedure for implementing the standards.
à Should they become part of each lease?
à Are they provided with RFPs?
à Should each tenant sign that he/she has received and accepted the airports minimum standards? à How will the standards be enforced with existing tenants?
à What will be the process for updating the document?
• B.T.

About the Author
Bobbi Thompson serves as executive vice president of Atlanta-based Airport Business Solutions and manager of the firm's Florida office. Bobbi has spent 30 years in the aviation industry and her tenure has included airport management, FBO ownership/management, world record pilot, and director positions with several aviation organizations. She can be reached at 941-573-9647.