In 2013, The Department of Transportation (DOT) proposed new regulatory enhancements intended to improve consumer protections in the air charter industry. Although many of these proposed changes applied to air carriers, it became known as the “broker rule”. Why? It was the first concerted effort by the private air charter industry and regulators to come up with some common-sense regulation that would prohibit bad actors from harming consumers of private air charter services. Five years later (regulatory wheels turn really, really, slowly) the DOT has released a final rule, commonly referred to as the broker rule.
What Does the DOT’s New Rule Mean for Consumers and Air Charter Brokers?
While a considerable portion of the new regulation relates to commuter and air taxi operators, this blog is focused on air charter brokers that arrange air charter flights for their customers. If you are looking to charter a plane for a large group, or even charter a business jet, you will benefit from knowing what the new rule requires and how it may affect your private jet charter buying decisions. So, let’s go to work on making you a better private jet charter consumer!
Does it Change How Air Charter Brokers do Business?
The short answer is no for the established and most reputable players in the air charter brokerage industry, as virtually all the new rule’s requirements are being met simply as a matter of best practices and good business. The new rule does create a new class of ‘indirect air carrier’ for air charter brokers. Indirect air carrier status will enable air charter brokers to provide air transportation in their own right for single entity groups, giving air charter brokers and private aviation consumers more flexibility in how they work together. Before this new rule, an air charter broker was required to act as the agent for the air carrier or the charterer.
Much of the new regulatory “stuff” takes what are by and large just good business practices for brokers and turns them into regulation. In fact, Air Planning was part of a core group of air charter brokers that encouraged the DOT to come up with regulations that would prevent consumers from being harmed by bad actors that were in the market to book a private jet deal, but less excited about ethical behavior, much less regulation.
Such as? True story time: A small number of air charter brokers were fond of making up air charter pricing for customers. Once they hooked the deal, they would then go out to the market and try to find a hungry airline or business jet operator to cover the made up and lower-than-market air charter pricing, often knowingly contracting for departure times that were nowhere near what the customer signed up for, and on an aircraft type that was significantly different than what was proposed. Instead of getting high-quality Airline A, low quality Airline B would be showing up, and by showing up we mean 8-10 hours later than scheduled, if at all. This was bad for consumers, charter airlines and air charter brokers.
What Practices Are Now Prohibited?
14 CFR Subpart D, Section 295.50DOT enumerates eleven unfair or deceptive practices or unfair methods of competition that brokers are prohibited from engaging in:
(1) Misrepresentations that may induce members of the public to reasonably believe that the air charter broker is a direct air carrier or direct foreign air carrier when that is not the case.
(2) Misrepresentations as to the quality or kind of service or type of aircraft.
(3) Misrepresentations as to the time of departure or arrival, points served, route to be flown, stops to be made, or total trip-time from point of departure to destination.
(4) Misrepresentations as to the qualifications of pilots or safety record or certification of pilots, aircraft, or air carriers.
(5) Misrepresentations that passengers are directly insured when they are not so insured. For example, where the only insurance in force is that protecting the direct air carrier or air charter broker in event of liability.
(6) Misrepresentations as to fares or charges for air transportation or services in connection therewith.
(7) Misrepresentations as to membership in or involvement with an organization that audits air charter brokers, direct air carriers, or direct foreign air carriers, or that the air charter broker or any direct carriers to be used for a particular flight meets a standard set by an auditing organization.
(8) Representing that a contract for a specified direct air carrier, direct foreign air carrier, aircraft, flight, or time has been arranged without a binding commitment with a direct air carrier or direct foreign air carrier for the furnishing of such transportation as represented.
(9) Selling or contracting for air transportation while knowing or having reason to know or believe that such air transportation cannot be legally performed by the direct air carrier or foreign direct air carrier that is to perform the air transportation.
(10) Misrepresentations as to the requirements that must be met by charterers to qualify for charter flights.
(11) Using or displaying or permitting or suffering to be used or displayed the name, trade name, slogan or any abbreviation thereof, of the air charter broker in advertisements, on or in places of business, or on or in aircraft or any other place in connection with the name of an air carrier or foreign air carrier or with services in connection with air transportation, in such manner that it may mislead or confuse potential consumers with respect to the status of the air charter broker.
By spelling out the prohibited activities, DOT will have an easier time to take enforcement action against crooked players. Rather than spending their limited resources wrangling with a company’s legal counsel as to whether their client’s activity is illegal, the case becomes largely academic when that activity is already categorized as prohibited via the new rule.
For any reputable private aviation broker, the eleven prohibitions are nothing new, and have always been a part of how they do business. The new rule is welcome news given that it supports business models that are underpinned by ethical practices.
Required Disclosures
Let’s say you want to arrange a private jet for a large group and you want to hire an air charter broker. Under the new rule, certain pieces of information must be disclosed to you by the broker, to which we say “Hooray!” Three disclosures are required before entering into a contract with a broker. They include the broker disclosing the identity of the air carrier performing the flights, the capacity in which the air charter broker is acting (agent for carrier, client or as an indirect air carrier), and the amount (or absence of) liability insurance that the broker carries. Make sure you have these three disclosures before you grab your pen to sign any agreements.
There are three other disclosures that your air charter broker is only required to disclose upon request. Having said that, most reputable companies provide this information without being asked. The first disclosure is to advise clients about any business relationship that exists with the air carrier that might have a bearing on the broker’s recommendation of that particular operator. The second disclosure is the total cost of the air transportation paid by the charterer (to avoid hidden or undisclosed fees). The third and last disclosure is the existence of any third-party fees such as landing fees that the charterer is responsible for paying directly.
Just Tell Me What It All Means!
The new rule will make it more difficult for air carriers and air charter brokers that look askance of the rules to harm consumers. It will also make it much more difficult for a company to claim that they didn’t know what they were doing was illegal, thus making enforcement much easier. We can’t say it any better than the DOT does in their final rule document. “In fact, the Department believes that codifying certain actions as unfair or deceptive will lower the amount of enforcement action necessary, as all air charter brokers will be fully aware of what behavior is prohibited. In turn, this will level the playing field for those air charter brokers that do not misrepresent themselves or any part of their services.” This is good for consumers and good for the industry. So the next time you are looking to charter a jet for a large group or a business jet for a company trip, rest assured that DOT has your back, and so do we!