What is public transport?

Aoife O’Sullivan, a partner at Kennedy’s Aviation, examines the issues arising from the UK Civil Aviation Authority (CAA) document CAP 789 “Requirements and Guidance Material for Operators” which has unintended consequences for managers of aircraft flying in the UK.

On 29 March 2010, the Civil Aviation Authority (CAA) in the United Kingdom published a 350 page document entitled CAP 789 “Requirements and Guidance Material for Operators”. The paper has been published following a period of uncertainty, as to amongst other things, the interpretation of public transport within the meaning of European and local UK legislation.

What is public transport in the UK context?

Aircraft on the UK register must be operated in accordance with the provisions of the Air Navigation Order 2005 (ANO).  Pursuant to Article 6 of the ANO, a UK-registered aircraft is not permitted to fly for the purpose of public transport otherwise than under and in accordance with the terms of an air operator’s certificate (“AOC”).  The AOC is granted by the CAA and certifies that the operator is competent to ensure that the aircraft he operates for public transport are operated safely.

What about private operations carried out by AOC Holders?

The issue which has arisen on the CAA’s recent audit of certain UK AOC holders is to what extent (if at all) the operator, as an AOC-holder, is able to carry out certain private operations for clients and remain in compliance with the ANO.  For example, many operators will manage aircraft for clients which are not offered for charter – the Operator will instead typically oversee maintenance, arrange pilots and crew, insurance and fuel for the owner, usually because the owner does not have the capability to do so itself. The client is comfortable in the knowledge that his aircraft is being professionally managed by a regulated company within the auspices of a well respected regime. There is no question of any member of the public being carried on the flight for any consideration and in such cases, the CAA has accepted as a matter of general principle that such services should not constitute “valuable consideration” for the purposes of the ANO as they relate only to the management of the aircraft.

However, the CAA has previously taken the view that, if such Operator is an AOC holder, any flight operated by such operator falls within the definition of “public transport” and must be treated accordingly for regulatory purposes.  In essence, the CAA’s view has been that an AOC holder cannot operate private flights.  The CAA’s approach stems from a strict application of Article 157 of the ANO which contains the definition of “public transport”.  Article 157 defines public transport as follows:

“an aircraft in flight shall for the purposes of [the ANO] be deemed to fly for the purpose of public transport:

(a) If valuable consideration is given or promised for the carriage of passengers or cargo in the aircraft on that flight;

(b) If any passengers of cargo are carried gratuitously in the aircraft on that flight by an air transport undertaking….”

 The term “valuable consideration” has a much wider meaning than simply payment for the carriage by air; it also extends to the provision of goods and services and can therefore include certain of the operational services customarily provided by Operators to its clients, subject to certain exceptions.

It is paragraph (b) of Article 157 however which has created the difficulty in relation to flights Operators have been purporting to operate privately: a flight will be “public transport” even if passengers are carried gratuitously, if the carriage is by an “air transport undertaking”.  That term is defined in Article 155 of the ANO as “an undertaking whose business includes the undertaking of flights for the purpose of the public transport of passengers or cargo”.  Given this wide definition – which certainly would apply to most operators – any AOC holder (who by definition operates public transport flights) is almost bound to be an air transport undertaking and that is the approach which the CAA takes.  The net result is that, even where Operators operate flights for their private clients and the only financial arrangements in place relate to the management of the aircraft for the client in question, that still constitutes gratuitous carriage by an air transport undertaking and is accordingly deemed to be public transport under paragraph (b) of the Article 157 definition referred to above.

Ironically however, if the Operator in question was not the operator of the aircraft for the “private” flights under scrutiny, this would avoid the difficulty as the ANO rules relating to public/private flights, AOC’s, etc apply only to Operators.

Given that management and operational control is typically maintained by an Operator over the aircraft even when they are being flown on behalf of private clients, the CAA’s view has previously been in most cases in the sphere of business jet management, that such company will be the “operator” for ANO purposes.

One suggested solution to ensure regulatory compliance is to move the private operations outside of the entity which holds the AOC so that all private flights are undertaken by or through a separate entity.  The consequence of such a restructuring is that private flights are no longer undertaken by an air transport undertaking and therefore will not be deemed to be public transport pursuant to Article 157.

The Consequential Effect 

The (surely unintended) consequential effect of this interpretation of the ANO is that by moving the privately operated aircraft in to a separately managed entity, the operation of the aircraft moves from a highly regulated professionally run AOC Holder to a company set up solely for the purposes of managing private aircraft, with little to no regulatory oversight. An AOC Holder is required to have in place accountable managers who take personal responsibility for the safe operation of the aircraft. It must carry minimum levels of insurance cover and must be able to financially support itself as a going concern over a certain period. Why on earth would a regulatory body so concerned with safety consider this a sensible result?

Why does the CAA care?

Different rules apply in terms of flight time limitations on pilots when an aircraft is being operated privately as opposed to a very heavily regulated public or commercial flight. The pilots are bound to more restrictive rest times than those pilots flying privately. The CAA, understandably, wants to ensure that these rules are not abused by pilots flying public and then private and availing of the differing rules to ensure maximum flight time with little rest.

Foreign Operators and compliance with the ANO

The difficulty for UK operators (and indeed foreign operators wanting to fly privately in UK airspace) is that the interpretation of “public transport” under the ANO is subtly different to the definition contained in EASA and indeed other international regulations.

Operators need guidance from the CAA as to what exactly constitutes public transport so that they can ensure compliance with both international and local legislation.  

Recently we were asked to advise on a potential breach of Article 138 of the Air Navigation Order 2005 arising out of a flight by a foreign registered aircraft. The aircraft was owned by a US Corporation certified by the FAA to conduct flights for hire under Part 135 of the FAR.  When foreign operators operate flights for reward pursuant to Part 135 from the UK they are obliged to obtain a permit under Article 138 of the ANO. On board were two corporate guests of the operators. Under the FAA rules, the flight was an owner’s private corporate use flight under FAR 91.501. The guests paid only the direct operating costs (fuel, oil and airport expenses) of moving the aircraft to the UK.  Under FAA rules, such ‘expenses only’ flights are not FAR 135 ‘reward or hire’ flights.

Article 138 (Restriction on carriage for valuable consideration in aircraft registered elsewhere than in the United Kingdom) of the ANO provides as follows:

138. -(1) An aircraft registered in a Contracting State other than the United Kingdom, or in a foreign country, shall not take on board or discharge any passengers or cargo in the United Kingdom where valuable consideration is given or promised in respect of the carriage of such persons or cargo unless-

it does so with the permission of the Secretary of State granted under this article to the operator or the charterer of the aircraft or to the Government of the country in which the aircraft is registered, and in accordance with any conditions to which such permission may be subject; or

it is exercising traffic rights permitted by virtue of Council Regulation 2408/92 on access for Community air carriers to intra-Community air routes (as that Regulation has effect in accordance with the EEA Agreement as amended by the Decision of the EEA Joint Committee No. 7/94 of 21st March 1994).

(2) Without prejudice to article 93 or to paragraph (1), any breach by a person to whom a permission has been granted under this article of any condition to which that permission was subject shall constitute a contravention of this article.

The key question was whether the direct operating costs paid by the two passengers constituted “valuable consideration” or not within the meaning of the ANO. The phrase “for valuable consideration” comes from the English law of contract and can be given a wide interpretation by the UK courts. The Court does not inquire into the adequacy of consideration or whether a profit is made. Even a nominal benefit is sufficient to constitute “valuable consideration”. In the context of carriage by air. For example, flights carried out on a pure costs share basis have been held to be ‘carriage for reward’ –  Corner v Clayton [1976]. Under the Finance Act 1994 “reward” in relation to a flight is defined as “any form of consideration”. A court is therefore highly likely to look at the ‘reward’ cases for guidance on whether a flight is for valuable consideration under the ANO or not. A Court could conclude that an expenses only flight (without any profit element at all) is a flight for valuable consideration.

The dilemma for foreign operators (and in this case a US Operator) is that if the flight had originated in the US, it would have fallen outside the FAR Part 135 “compensation or hire” rule. It would appear that the UK rules are more restrictive than their FAA equivalents. As for penalties of a contravention of the ANO, Article 148 (6), provides that if any person contravenes any provision … he shall be guilty of an offence and liable on summary conviction to a fine not exceeding the statutory maximum and on conviction on indictment to a fine or imprisonment for a term not exceeding two years or both. Not to be taken lightly then.

International issues

The issue with public transport is an international one, not just limited to the UK. In Europe in 2003 the European Aviation Safety Agency (EASA) assumed responsibility for Airworthiness matters, which had previously resided within National Aviation Authorities. EASA regulations and requirements have the strength of EU law and are intended to ensure a ‘level playing field’ throughout the Union. EU-OPS prescribes the requirements applicable to the operation of any civil aeroplane for the purpose of commercial air transportation by any operator whose principle place of business is in a European Community Member State.

The prime purpose of the ANO in the UK is safety and UK standards are regarded as some of the highest in the world. Three basic safety principles are:

• No aircraft may be operated in such a way that, even if an engine fails, third parties on the ground are put at risk.
• If there are fare paying passengers on board an aircraft, the operator is required to ensure that certain mandatory safety standards are met to ensure that risk of injury to passengers is minimised.
• In the case of private flights, the CAA ensures that minimum standards in respect of pilot training and licensing, helicopter construction and maintenance are met.

The AOC is similar to the FAA Part 135 certificate in that they are granted only after a rigorous application process, which require operators, among other things, to develop comprehensive operating, training and maintenance manuals that would govern their charter operations. In addition, AOC Holders and Part 135 Operators are required to exercise exclusive operational control and must retain full control over all aspects of the flight.

In the UK, the operating and maintenance standards of each AOC Holder are monitored regularly by Flight Operations Inspectors and Surveyors assigned by the Safety Regulation Group of the CAA. Stringent standards must be adhered to and comprehensive records kept on a wide range of requirements including: operational procedures, fuel policy, flight preparation and passenger briefing, communications and emergency equipment, maintenance system, technical records, flight crew qualifications and training and flight time limitations. Consequently a flight in an aircraft operated by an AOC Holder should be safe and well-regulated. Strict rules govern the minimum qualifications and standards of training for pilots employed by AOC Holders. Frequent checks are carried out by the CAA. The holder of a private pilot’s licence is not legally permitted to receive any remuneration for carrying either passengers or freight.

Conclusion

The overriding concern of regulators worldwide is to ensure the safe operation of aircraft on its registry, particularly where the public are concerned. Any operator not meeting the exacting standards of the regulators can be subjected to sanction. In many cases, investigations are initiated by third parties – for instance in the UK, the CAA has investigated specific complaints made by Air Operator’s Certificate (AOC) holders who are concerned that their considerable investment in complying with the relevant safety requirements is being compromised by illegal operators. A public relations campaign has been undertaken to raise the profile of the AOC with the industry and the travelling public. The Business Aviation Safety Partnership (BASP) was set up between the SRG, NATS & Industry with a view to reducing the involvement of business jet aircraft in safety significant events. Particular focus has been given to illegal operation of business aircraft. A leaflet entitled “Is my flight legal? – A Guide to the Air Operator’s Certificate” has been prepared and a copy can be found via www.caa.co.uk/aocholders. The UK DfT is also stepping up ramp checks on the sector.

The real shame however is that CAP 789 could have been a guiding light for Operators, both locally and registered with foreign registries in assisting with a sensible understanding of what is public transport and explaining the differences between public and private flight. Instead CAP 789 suggests that anyone in any doubt as to the interpretation of “public transport” and whether the flight may be made by an operator without an AOC should seek legal advice. Marvellous news for us lawyers but really this industry needs clear guidance and operators need to be able to operate within sensible frameworks, designed with safety in mind.

A version of this article also appeared in Bart International.