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Wednesday, July 1, 2015

Legal Perspective

Guard Your Operational Control

Arthur J. Negrette
Operational control. Ask five aviation managers (be they chief pilots, operations directors or business owners) and you will get 10 different definitions of the term within the context of flight operations.

Though the concept of operational control has been embedded in the FARs for decades, the FAA’s recent interest in it can be traced to high-profile investigations. One set involved Platinum Jet Management and Darby Aviation, and the other involved AMI Air Charter and TAG Aviation USA. Each serves as a lesson to executives and managers to guard operational control as they would a company credit card or other high-value item.

The Platinum and Darby cases demonstrate the government’s aggressive pursuit of criminal action against executives and managers, and its vigorous administrative enforcement tactics against certificate holders. It was triggered by the Feb 5, 2005, crash of a Bombardier Challenger at New Jersey’s Teterboro Airport. The two pilots, cabin attendant and eight passengers survived the jet’s impact with an off-airport building and the post-impact fire. But, in addition to the normal NTSB and FAA accident investigations, the crash triggered a criminal investigation by the U.S. Transportation Department’s inspector general (IG) and the U.S. Justice Department.

The IG investigators found the two companies had “charter management” agreements to place Platinum’s aircraft on Darby’s Part 135 certificate in return for monthly fees of several thousand dollars, according to IG documents. Platinum lacked authority to market and operate its aircraft for third-party charters, the documents said, but “in practice, Darby permitted Platinum to perform these functions for itself independently.”

The IG investigators found that “the accident flight, which was purportedly under Darby‘s operational control, was conducted without Darby’s knowledge” for a customer that had hired Platinum “under the reasonable expectation of receiving the protections afforded consumers traveling on duly licensed air carriers.”

Darby asserted to the IG that it had unintentionally facilitated “unlawful conduct,” according to the IG. Further, it noted, Darby argued that Platinum’s aircraft had been added to its certificate with approval of the local FSDO. Based on initial contacts with that office, Darby “believed that it had taken the necessary and reasonable steps to ensure that Platinum would not be considered to be engaged in unauthorized operations.”

Nevertheless, the IG found Darby had enabled such operations by Platinum.

In November 2010, Platinum’s president/CEO and a vice president were convicted of federal criminal charges related to the crash and operational control investigation. They were later sentenced to 30 and 18 months in prison, respectively. Platinum subsequently went out of business.

Darby was subjected to years of FAA special inspections and enforcement actions, including suspension of its Part 135 certificate.

The second example, involving AMI and TAG, illustrates the magnitude of monetary fines that the FAA can impose for operational control violations. In 2007, the FAA began looking into AMI’s operations as a large Part 135 operator. It focused on the daily operational, business and managerial relationships between AMI and TAG, a subsidiary of the Swiss company TAG Aviation Holding. On Oct. 4, 2007, the FAA suspended AMI’s Part 135 certificate. Eight days later, it issued an emergency revocation of that certificate.

The emergency order of revocation alleged numerous FAR violations. But the FAA’s overriding concern was whether AMI had surrendered operational control to TAG “over thousands of passenger-carrying flights” by causing or allowing TAG and other “charter ally” companies to exercise such control. The FAA alleged that TAG and other aircraft owners exercised operational control through numerous actions, including by initiating and scheduling charter flights, selecting and releasing aircraft for them, and canceling, delaying, re-routing or diverting flights.

Undeterred by the fact that TAG lacked an FAA certificate, the agency imposed the largest civil penalty to that time: a $10 million fine. TAG Aviation USA and its Swiss parent agreed in November 2007 to pay the fine, settling the operational control charges. Neither company admitted wrongdoing in the agreement.

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