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Survey Highlights Illegal Charter Activity Across Asia-Pacific – Asian Sky Quarterly 2020 Q4

Survey Highlights Illegal Charter Activity Across Asia-Pacific – Asian Sky Quarterly 2020 Q4

A joint survey between international law firm HFW and the Asian Business Aviation Association (AsBAA) found that more than 70% of respondents in Asia-Pacific have been negatively affected by illegal charter activity, with most expecting the situation to get worse due to COVID-19.

Anecdotally, illegal charter activity occurs in many Asia-Pacific countries, but the full extent of the problem has been difficult to establish. Although surveys of illegal charter activities have been conducted elsewhere, such as the one conducted in the US in 2019 by the National Air Transportation Association (NATA), the position in the Asia-Pacific region has remained opaque until now.

The detail of regulations relating to public and private flights is complicated and varies according to jurisdiction, but in general terms the basic rule is straightforward. If an aircraft is operated privately, it should not be used for commercial (public transport) flights, unless an exemption applies. Accordingly, subject to any relevant exemptions, if a passenger provides valuable consideration (whether by paying money or providing some other benefit to fly on an aircraft), that constitutes public transport and the operator needs an air operator’s certificate (AOC), or a Part 135 certificate under the US Federal Aviation Regulations. Failure to do so results in an illegal charter and may either be deliberate or inadvertent.

The survey results clearly show that illegal charter activity is a significant problem in many countries in the region, with China, Malaysia and Indonesia flagged as countries of particular concern. Almost half of the respondents believed that close to 1 in 3 charter flights across Asia-Pacific are illegal, with three quarters of respondents expecting illegal charter activity within the region to increase due to the pandemic.

With business aviation continuing to experience the severe economic impact of COVID-19, illegal charters are likely to become more widespread as aircraft owners and operators look for creative – and potentially illegal – ways to generate revenue. New customers, attracted to business aviation by its flexibility, and to mitigate COVID-related health concerns, are also vulnerable to being exploited by unscrupulous operators.

In recognition of these illegal charter issues, in December 2020 a dozen business aviation organizations from around the world formed a coalition – the Air Charter Safety Alliance – to address the problems faced by the industry. The purpose of the coalition is to raise awareness amongst customers, operators and regulators of the dangers of illegal charter, to promote the safety of legitimate operations, and to collaborate on best practices.

An important aspect of the coalition’s work will be to engage with aviation regulatory authorities. More than 90% of survey respondents felt that local aviation regulators are not doing enough to combat illegal charter operations, with the issue perhaps not being viewed as a priority due to insufficient resources. Even so, when illegal charter is the subject of regulatory scrutiny, 74% felt that the resulting punishments were ineffective and not severe enough to act as an effective deterrent.

Respondents said that there are several signs that suggest a charter is illegal, such as flights being advertised at prices far below legitimate operations, flights claiming to operate as “cost sharing”, and flights being sold as “sales demos” or “flight training”.

Significantly, 84% of respondents said that they did not report suspected illegal charter activity to the local regulator. Several barriers to reporting illegal charter were highlighted, including the potential loss of customers and other adverse effects on their own business, as well as uncertainty over how the authorities would respond. By comparison, half of US respondents to NATA’s previous survey said that they would file a report.

The clear loser when it comes to illegal charter operations are the legitimate operators who have invested significant time and money in obtaining an AOC or Part 135 certificate. Illegal charter distorts the market, as it evades the high regulatory compliance costs of legal air operations, including proper training and insurance. The position of passengers is compromised – illegal charter flights are unlikely to provide the same level of operational safety (such as more stringent pilot training and maintenance standards) offered by legitimate operators.

The survey results emphasize that illegal charter is a significant issue across the Asia-Pacific region. Given the substantial impact on legitimate operators, more should be done to tackle the problem. The welcome launch of the Air Charter Safety Alliance allows a coordinated effort and provides a powerful platform to do so. Clearly, one of the key factors which impedes the reporting of illegal charter activity is the lack of any formal reporting mechanism. Until such a mechanism is established by regulators in the Asia-Pacific region, it is likely that many more illegal charter flights will continue to operate unchecked.