Setting Standards

March 8, 1999

Setting Standards

Defining and creating safety guidelines for fractional ownership are helping to cool a regulation debate

BY Monica L. Rausch, Associate Editor

March 1999

While fractional ownership programs continue to be a catalyst of growth, they continue to spark debate among charter operators, corporate flight deparments, and others regarding how they should be regulated.

Do fractional ownership programs fall under FAR Part 91 for corporate operators or FAR Part 135 for charters? Are program managers managing the aircraft for the owners, or are they doing more than that? Who is in operational control — the ownership program managers or the fractional owners?

Although around since 1986, the programs really matured in the past few years, attracting the attention of investors such as Warren Buffet, who spent $3 billion at the 1998 National Business Aviation Association's (NBAA) convention on aircraft for his newest investment, Executive Jet Aviation. It stands to reason that an industry presence of this magnitude could not go unnoticed by FAA.

"The indication was that the FAA (was) starting to look more intensely at fractional ownership ... even though it has been regulated under Part 91 since 1986. They were just doing a reality check," says Pete West, senior VP for government and public affairs at NBAA.

Building on FAR Part 91
In September, 1998, FAA requested input from NBAA on the safety aspects of fractional ownership. One month later, the association sent Administrator Jane Garvey a letter stating that NBAA supported regulating the programs under FAR Part 91 but would draw up more stringent safety standards for fractionals that both owners and program managers would have to meet if they wanted to be members of NBAA.

In creating these standards for fractional ownership programs and owners, NBAA contacted two other associations for input: the General Aviation Manufacturers Association (GAMA) and the National Air Transportation Association (NATA), which were also in turmoil on the topic of regulating fractional ownership.

The standards the associations produced, entitled "Safety Guidelines and Responsibilities for Fractional Aircraft Owners and Fractional Aircraft Program Managers," use Part 91 as their basis and include definitions of operational control, dry-lease aircraft exchange, and fractional program management services — some of the grey areas in the regulation debate.

Limits or recommendations are given for program managers on such items as flight, duty, and rest time; training; flight crew experience; and minimum approach standards. The guidelines set procedures for filing and investigating concerns by owners on whether a fractional program is in regulatory compliance.

"What we have done is provided this to the FAA, saying, ’This is our analysis of it, our understanding of it. This is what we believe will strengthen, through a peer-oriented approach, the already existing excellent safety record and safety culture for business aviation, including fractional ownership activity,'" says West. "There's no need to change Part 91, but we're going to use Part 91 as the foundation."

In the interests of safety
Before creating the standard, NBAA had already supported the status quo of regulating fractional ownership programs under Part 91. Along with a copy of his letter to Garvey, Tom Myers, chairman of NBAA, sent a letter of his own to all members, explaining the background behind NBAA's posture.

"The NBAA Board of Directors and Staff are very much aware of Members' sensitivity, concern, and passionate dissatisfaction with certain market issues that have resulted from the emergence of the fractional alternative," wrote Myers.

"The Board viewed Parts 91 and 135 of the Federal Aviation Regulations as highly proven and successful by any measure. We had serious concerns that the potential risk in opening them for amendment far outweighed any possible benefit to the business aviation community. The Board considers the flexibility inherent in Part be vital to the success of traditional flight departments. This flexibility must be ... retained."

Myers notes that approximately 15 flight departments were closed and replaced by participation in fractional ownership programs. However, in coming up with the standards for fractional ownership programs and owners, marketing issues were put aside, and safety was in the forefront, says West.

As of January 11, NBAA amended its laws to make adherence to the guidelines a condition for membership.

"This begs the question, what does the FAA do next, or what happens next?" says West.

"What we're going to do next is insure compliance by our members, insure acceptance of these guidelines and responsibilities which are a requirement for membership, and continue the educational process by developing a safety culture educational campaign this spring."

NATA's position
According to vice president Andrew Cebula, NATA "is committed to an industry standard" defining fractional ownership and fractional ownership programs and regulating them under FAR Part 91, but the question comes down to how FAA plans to enforce that standard. The NBAA approach is to set the standard as a basis for its membership, but that doesn't give FAA a method for enforcing the standard, says Cebula.

"We feel that the guidelines and the direction to the FAA need to be a little stronger," says Cebula, "and what we send to the FAA is certainly going to do that ... Our direction to the FAA is going to be for them to put as much teeth into implementing the guidelines as they can.

"Our vision on that guideline (is) that the FAA would use it to determine whether a fractional ownership company was in a safe harbor ... if you are operating under that industry standard, then the FAA will consider it kind of a safe harbor, and you will be covered by Part 91, and if you are not operating under that industry standard, then the agency is going to look more closely at your operations, really with an eye towards whether or not you should be regulated under (Part) 135."

The guidelines themselves, drawn up by NBAA, were approved by NATA with one amendment: NATA would like to remove a provision that places duty limit times on mechanics in fractional ownership programs.

Finding the best position to take on this issue was not easy for the association. NATA surveyed its members last year to find out where they stood, says Cebula. "A slight majority of our members felt that fractional(s) should be under 135, but when you start then looking at whether NATA as an organization should take that viewpoint, it really becomes more of a 50-50 split within our membership."

He says the real issues of concern were how to go about regulating the programs under Part 135 and what impact would that have on aircraft management.

"The one thing that our board wanted to make very clear is that the industry standard has to have teeth in it, so that it is sufficiently defining the parameters of fractional ownership, of fractional ownership programs," adds Cebula.