[Federal Register Volume 77, Number 224 (Tuesday, November 20, 2012)]
[Notices]
[Pages 69692-69693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28060]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary


Guidance on Review and Approval of Public Charter Prospectuses

AGENCY: Office of the Secretary, Department of Transportation.

ACTION: Guidance on Review and Approval of Public Charter Prospectuses.

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SUMMARY: The Department is publishing the following notice on new 
policies affecting the review and approval of public charter filings 
under 14 CFR Part 380 and related changes in the Department's 
enforcement policies.

FOR FURTHER INFORMATION CONTACT: Nicholas Lowry, Attorney, Office of 
Aviation Enforcement and Proceedings (C-70), 1200 New Jersey Ave. SE., 
Washington, DC 20590, (202) 366-9349.
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
Washington, DC

Guidance on Review and Approval of Public Charter Prospectuses

Notice

    The abrupt cessation of service by the public charter operator, 
Southern Sky Air & Tours, LLC d/b/a Direct Air, in March 2012, and its 
subsequent bankruptcy, resulted in the cancellation of numerous charter 
flights and disrupted the travel plans of thousands of consumers. In 
light of the Direct Air collapse, the Office of International 
Aviation's Special Authorities Division, in conjunction with the Office 
of Aviation Enforcement and Proceedings (Enforcement Office), has 
revised its policies regarding the review and approval of public 
charter prospectuses filed under 14 CFR Part 380 and the related 
enforcement policy.
    A number of practices followed by Direct Air may have exacerbated 
consumer harm. Among these were Direct Air's contracting out of its 
reservations process to a third party, and its entry into direct air 
carrier contracts that were apparently limited to providing aircraft, 
crew, maintenance and insurance (ACMI). The public charter operator 
separately contracted on its own behalf directly with fuel suppliers 
and perhaps ground handlers. In addition, the charter operator 
collected consumer funds, accepting debit as well as credit card 
payments, through a voucher program in which consumers paid in advance 
for flights without selecting specific travel dates and without 
entering into the formal operator-participant contracts required by 
Part 380.
    In the future, pursuant to the public interest responsibilities we 
have under 14 CFR 380.24, we will no longer approve public charter 
prospectus filings that do not, as part of the filings, contain:
    (1) A statement, in addition to that required under section 
380.28(a)(1)(iii), confirming that the contracts between the public 
charter operator and the direct air carriers include the full cost of 
the direct air service; that is, contracts between the tour operator 
and the direct air carriers must be all-inclusive and cannot be ACMI 
(i.e., fuel or ground handling cannot be addressed in separate 
contracts between the public charter operator and a third-party 
vendor); and
    (2) A statement that the public charter operator will retain direct 
control of all passenger reservation records and will share those 
records with the direct air carrier to ensure that, in the event of a 
major disruption in the program as occurred with Direct Air, the direct 
air carrier would be able to identify and contact tour participants 
regarding returning flights, and to ensure that the charter operator 
can fulfill its obligation to provide appropriate cancellation notices 
to those with reservations more than 10 days in the future; if a public 
charter operator contracts with a third-party for reservations service, 
a duplicate, current copy of all reservations records must be 
accessible to the tour operator at all times.
    In addition, to ensure that consumers not paying in cash receive 
the protections of the Fair Credit Billing Act (15 U.S.C. 1601 et 
seq.), public charter operators may accept payment, as the explicit 
language of section 380.31 currently provides, only by credit card, but 
not by debit card.\1\ The Department will consider exemptions to this 
requirement provided it can be assured that debit card issuers, their 
merchant

[[Page 69693]]

banks and credit card/debit card processors, will provide the same 
chargeback protections to those using debit cards as credit card users 
receive under the Fair Credit Billing Act.
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    \1\ In a future rulemaking, the Department may address the use 
of debit cards in purchasing charter air transportation.
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    Finally, as a matter of enforcement policy, the Enforcement Office 
will consider any voucher program such as that offered by Direct Air a 
per se violation of 14 CFR Part 380, and if that office discovers such 
a program it will pursue immediate enforcement action. A voucher 
program that accepts consumer funds without the consumer entering into 
a contract with specific flight dates is not the equivalent of the 
operator-participant contract required under Part 380 and does not 
provide protection of consumer funds under the escrow provisions of 
section 380.34.
    This revised policy regarding approval of charter prospectuses will 
take effect 30 days from the date of this notice. Prospectuses filed 
after that date will not be accepted without the supplemental 
statements, outlined above. The Enforcement Office intends to undertake 
enforcement action, where appropriate, if it obtains evidence of 
violations of commitments made in those statements, or of the 
acceptance of debit purchases, or of sales initiatives such as the 
voucher program described above. Questions regarding this notice may be 
addressed to the Office of Aviation Enforcement and Proceedings (C-70), 
1200 New Jersey Avenue SE., Washington, DC 20590.
    An electronic version of this document is available at http://www.regulations.gov

     Dated: November 13, 2012.
Paul L. Gretch,
Director, Office of International Aviation.

Samuel Podberesky,
Assistant General Counsel for Aviation Enforcement and Proceedings.
[FR Doc. 2012-28060 Filed 11-19-12; 8:45 am]
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