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OCR for page 43
44 Passenger Air Service Development Techniques Source: Image courtesy of Eclipse Aviation Figure 3.13. VLJ aircraft. more than 60 community airports across Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, and South Carolina. In late September, however, DayJet notified FAA that it planned to halt its air taxi operations for economic reasons. Former American Airlines CEO Robert Crandall, who planned to launch a charter operation called Pogo using the Eclipse, has also decided to ground those plans. What are the key relevant Explanatory example of U.S.DOT's ability regulatory issues? to revoke a carrier's certificate The Airline Deregulation Act phased out federal control Boston-Maine Airways Corp. (BMAC) began flying over airline pricing and routes in 1978, but the federal gov- in 2001 with a fleet of seven 19-seat Jetstream 3100 ernment continues to maintain some regulatory control aircraft. BMAC conducted business as "Pan Am over the industry, particularly in terms of economic licens- Clipper Connection" and flew scheduled passenger ing and safety. Describing these federal responsibilities thor- service between various small cities. At various oughly would require volumes. For example, airport rates times, BMAC served Portsmouth, New Hampshire; and charges are governed by a large body of federal laws, Bedford, Massachusetts; Cumberland, Maryland; regulations, agreements, and court decisions. Moreover, Tunica, Mississippi; and Trenton, New Jersey; those policies are changing frequently. (As an example, the among other locations. FAA proposed a policy that would allow operators of con- In April 2008, acting under its authority to ensure gested airports to use landing fees to provide incentives to that air carriers are "fit, willing, and able" to pro- airlines to operate at less congested times or to use alternative vide service, U.S.DOT revoked BMAC's operating airports.) This guidebook does not offer definitive guidance certificate. U.S.DOT concluded the carrier did not on what may or may not be permissible under all situations. possess the (1) financial wherewithal to continue or Questions about whether specific policies or charges are con- expand its operations without posing an undue risk sistent with FAA guidance should be referred to an attorney. to consumers and their funds, (2) managerial com- A few permissible policies and charges are highlighted in the petency to oversee its current and proposed opera- following paragraphs. tions, and (3) proper regard for laws and regula- The U.S.DOT regulates who may operate commercial tions concerning safety standards and acceptable airlines in the United States. To provide interstate or foreign consumer relations practices. passenger and/or cargo service, carriers must obtain a "cer- tificate of public convenience and necessity" from the Office

OCR for page 43
Understanding the Context for Air Service Development 45 of the Secretary of Transportation. U.S.DOT may grant "economic" authority for a carrier to operate only after Safety rule that affected small community finding that it is "fit, willing, and able" to do so. Recently, service directly not all airlines have been able to meet that "economic fit- ness" test. One significant change in safety requirements that influenced small communities was the adoption of Applicants must then obtain a separate "safety" or "air- the Commuter Safety Initiative (or "Commuter worthiness" certificate from FAA before the carrier is Rule") in 1995. This rule set a single level of safety allowed to operate. FAA's regulatory policy is premised on for all travelers by applying the stricter standards an "obligation of the air carrier to maintain the highest pos- of major airlines (Federal Aviation Regulations, sible degree of safety." Before it will issue an operating cer- Part 121) to commuter airlines that had scheduled tificate, FAA must be satisfied that an air carrier is capable passenger operations and/or used aircraft seating of operating safely and complies with applicable regulations 10 to 30 passengers or propelled by turbojets. and standards. These stricter standards imposed new requirements The FAA exercises other safety responsibilities: (1) veri- on commuter air carriers relating to airplane per- fies that an air carrier continues to meet regulatory require- formance and flight crew training and qualifica- ments by conducting periodic reviews and (2) continually tions such that small carriers' operating costs validates the operational safety performance of air carriers. increased. This cost hampered the ability of It does so through regular inspections. FAA can revoke the regional airlines to use small aircraft--especially operating certificate of airlines that do not meet safety 19-seat turboprops--in many markets. Now, air- requirements. craft that size is seldom used except in markets that are federally subsidized through the Essential Air In addition to its safety responsibilities, FAA oversees Service program. many aspects of airport operations, such as how airports can use their revenue. In a vast oversimplification, airports can use revenues generated by the airport only for capital or operating costs of the airport. Those operating costs include promotional costs. Federal policy generally holds that airport Federal policy gen- operators can use airport revenues to finance the promotion or marketing of the airport and/or the introduction of new air service, and to encourage competition at the airport. Airport opera- erally allows airport tors can also use airport revenues for "cooperative airport-airline advertising." Airport opera- operators to use tors can use airport revenues to pay a portion of other advertising and promotional activities, airport revenues to but only if the airport is referenced in the materials. finance ASD activi- Airports' incentive programs must be consistent with various legislative and regulatory requirements. There are several, but they notably include: ties and encourage 49 USC 41713, which broadly prohibits any public organization from enacting laws, rules, or competition at the regulations that affect the price, route, or service of an air carrier; airport. 49 USC 47107, which requires the following with respect to incentives: The airport be available for public use on reasonable conditions and without unjust discrimi- nation, and Air carriers making similar use of the airport will be subject to substantially comparable charges [emphasis added]; and 49 USC 47133, which generally prohibits the use of revenues generated from an airport from being used for anything except the capital or operating cost of the airport. Airports must follow particular grant assurances. Under the three that come into play most often with incentive programs, airport operators and/or sponsors agree generally to abide by the following: Economic non-discrimination: to make the airport available as an airport for public use on rea- sonable terms and without unjust discrimination to all types, kinds, and classes of aeronautical