This year, Valentine’s Day will be a big day, and not just for the lovers of Champagne, Chocolates and Roses. Feb 14th, 2019 is also a big day for the private aviation industry. Air charter brokers have now been presented with a new regulation, Part 295 by the FAA and DOT.
Until this moment there has been absolutely no regulation by the FAA or DOT when it comes to air charter brokerages. Meaning, that there are no official licensing requirements, or certifications required for an individual or group of individuals to set up a company and call themselves a jet charter broker and start selling flights on private jets.
Since the barrier to entry within this sector of private aviation is so thin, the industry joke has been that you can be a broker by buying a cell phone, a laptop and a desk, set up a simple five-page website for a few hundred dollars, and work from your closet.
There is nothing wrong with working from home and there are some amazing sales/operations people in this business that do so. The real issue is that there is no licensing and regulations, so just about anyone can do it under the radar including convicted felons with major background issues in the banking and finance industries. What’s to say that these individuals are being honest and transparent about the aircraft operations, safety history, pilots’ backgrounds, or pricing that they offer. Absolutely nothing until now.
How the New Regulations affect Charter Brokers
Air Charter Brokers sell flights on private jets, turbo props, pistons, and helicopters. Pricing for a private jet charter depends on many factors such as the type/size of aircraft required, the number of passengers flying, the routing of the trip, and the flight dates. The cost to fly on a private plane can range from just a few thousand dollars on a smaller intrastate flight in a piston aircraft, to hundreds of thousands of dollars per trip for a road show on a heavy jet like the famous Gulfstream G4. Wouldn’t you expect to have some sort of guideline to make sure the sales people are acting ethically?
Real Estate agents, Insurance Agents, and Financial Planners are just some of the other brokers out there selling a product or service that can cost similar pricing points. All of these professionals are required by law to have taken courses, pass an exam, and pay for licensing and certifications; all of which protect the customers by adding in a regulatory party to make sure there is no shady business going on.
Thankfully the FAA and DOT have taken their first steps towards helping to weed out the “shady brokers”. As of February 14th, 2019, The Department of Transportation has put in to place PART 295 – Air Charter Brokers. Part 295 does not require a broker to take any courses, or become licensed or certified, but it will certainly be a great step towards providing transparency in the industry – which in the long term will benefit both the customer, and the “good brokers”.
Below are some details that we have taken and summarized from the Rules and Regulations of DOT Part 295:
- Air Charter Brokers must only sell flights to a single entity. Meaning that under this regulation it is not legal to sell seats on a Part 135 private jet, nor sell to multiple parties the concept of sharing a private jet.
- Stopping deceptive practices and unfair methods of competition – meaning it is now required on all solicitation materials including websites to conspicuously state that the broker is working as an indirect air carrier and not a direct air carrier. Brokers do not own or operate aircraft – which customers should know.
- Before contracting with a customer, brokers must now disclose:
- The corporate name, and any DBA’s of the air carrier – basically who is the company operating the plane.
- The capacity in which the broker is working. Whether the broker is working as an agent of the customer, or as an agent of the air carrier.
- If there are any pre-existing contracts between the broker and air carrier.
- The total cost of the flight, including any fees being paid to a third party.
- Whether the brokerage has liability insurance, or does not carry a policy, and if they do – the monetary limits of the policy
- If a refund is due to a customer, the refund must be made promptly.
To many reading this article, you have already worked with the Air Charter Advisors team and know that these are steps we already take with our client since the inception of our company in 2012. We have always believed that transparency is of the utmost importance. These items above may not seem like a big step – but there are many companies out there that are not currently transparent with customers, and this will certainly help to stop them.
If you have any questions about this regulation, please do not hesitate to contact us. If you would like to review the official documents issued by the Department of Transportation you can click here.