Best Policy Development for Plane Sharing?

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Best Policy Development for Plane Sharing:

  • emerge from random field actions,
  • by a court decision or
  • thorough conscious, careful review?

There have been and continue to be multiple aggressive attempts to create an aviation equivalency to Uber. Some have even attempted to take their argument to a US Court of Appeals to request a review to reverse the FAA’s definition of what’s prohibited as a matter of economics. These entrepreneurs pose difficult economic issues for the FAA[1] and how that agency should respond will be discussed here.

[1] One of the companies may also have to resolve with the DoT whether it is an indirect carrier, requiring certification there.

The drive for this efficient form of air transportation has spread to Europe where the Pilots’ Union dreads its competition. American companies, Rise and FlyteNow, are alleged to be spreading the Uber Flu there. Though FlyteNow has been blocked by the FAA, it and several other plane-sharing websites (see above logos, a partial representation of a Google search results) continue to offer some sort of Uber like services, each with subtle variations.

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Dr. Alfred Kahn, the father of Aviation Reregulation, commented several times during his tenure as Chair of the CAB and in his book, The Economics of Regulation, that the workings of the marketplace were collectively smarter and considerably faster than any effort to regulate the economics of industries. A little recognized fact is that the FAA exercises considerable judgment about those financial and accounting numbers in many of its statutory powers—the benefit/cost analysis for almost any major rule-making, similarly when it decides whether additional levels of safety are justified, and also as it decides which expenditure of its AIP funds should be prioritized or whether a NEPA action can be approved.

There are over 50 recent requests for interpretations by the FAA Chief Counsel on the underlying FAR which either does or does not allow a pilot to share the plane’s expenses with passengers. Clearly the Headquarters answer is an absolute NO, but the market keeps pushing.

Not so distant history involves the development of the now firmly established business called “fractional ownership.” That legal construct, which relies on the same FAR, now supports the legitimacy of a large sector of air transportation and was the stimulus of a significant sale of aircraft for these ventures.

Fractional ownership initially was the product of random field actions. FSDOs responded to the filing of aircraft ownership papers and either approved or disapproved the request with a wide range of opinions as to what was an appropriate number of owners. Eventually, the leaders in 800 Independence Ave. grabbed the emerging issue and pulled it back into the province of their sole decision.

Fortunately the parameter, which they discerned to be the right national policy, did not have severe consequences to any of the fractionals which had been approved by the field. It was equally fortuitous that the Headquarters’ decision, made several years after the fractional ownership concept was born in the field, did no harm to the future of this business.

Similarly, in the 1970s, innovators tried to create travel clubs in which members would buy a share in a vacation operation. The FAA attacked that marketing approach and eventually prevailed in a Court of Appeals.

Uber aviation is moving through several FAA reviews:

  • one sought a formal opinion that would approve its carefully constructed legal framework, but its position was rejected;
  • a second prominent proposal was rejected by the FAA and the proponents have sought judicial review; and
  • more than likely, there are several Uber-like operations which are either offering their ride service without the FAA’s knowledge or doing so with some explicit /implicit approval from some FAA Office. (See the last paragraph.)

That is a picture of impending disaster. Some companies are adhering to the FAA interpretation and are being harmed, in the near term, competitively. Another class of Uber imitators are up and running– investing on websites, advertising, supporting systems, aircraft qualification, personnel and the like. All of those dollars are at risk if, whatever final policy is reached, finds their version is prohibited. Both of these scenarios are not good.

The FAA should announce that it is considering a formal, comprehensive set of limitations which would define what the aviation Uber may or may not do. It might be wise to create an Aviation Rulemaking Committee to engage in a dialogue on the details of the set of future regulations. Such an ARC exercise would likely require time and would likely be tedious. The deliberations of such an ARC may include questions like:

  • Should there be a limit on the number of Uber passengers a single pilot can carry in fixed periods (week(s), month(s), or year) ?
  • Should there be limits on the advertising by the APP provider about the service?
  • Should the aircraft owner be required to have liability insurance?
  • One of the obvious concerns might be a pilot listing a number of flight options on the service; so should there be limits on the number of flights or points offered at one time?
  • Should the APP provider be required to include an explicit explanation of the “unregulated” nature of this service; i.e., that neither the plane nor the pilot are required to meet “commercial” standards?
  • Should the APP provider be required to review the FAA records of the pilot and the aircraft?
  • ?

However, a thorough, conscious and careful review will establish parameters which insure safety, avoid the legal “compensation or hire” scourge, be practical and be enforceable.

 

What do you think?

 

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