Wild-west charter airline market faces federal crackdown

William J. McGee
Yahoo News
A Calgary-based charter airline is looking to expand into the public market.
A Calgary-based charter airline is looking to expand into the public market.

The compulsion to search for the cheapest airfare has led some Americans to the charter flight market, where savings can be as much as 50 percent over some airline routes, but also where years of regulatory neglect have left behind a risky landscape for travelers.

The majority of people who book public charter flights use third-party charter brokers, tour operators or travel agents, both online and offline. Charters can be marketed directly to passengers as well, and the deals can be tempting. For instance, there's Air Sunshine, which offers round-trip fares between Puerto Rico and the U.S. Virgin Islands for as little as $250.

But there’s compelling evidence that consumers need protection in the charter market, particularly since many passengers may not know whether or not they're booking a charter flight and may not understand that there are key differences between the rules established for charters and for scheduled airline flights.

Charter carriers are particularly susceptible to sudden bankruptcies, and unlike some scheduled airline tickets, charter reservations are never honored by other operators. The risk derives in part from the public charter concept: each passenger is paying for the cost of the trip, and if bookings fall short, the flight can be scrapped — or worse, the company can go under. During 2013, for example, the Department of Transportation recorded 196 consumer complaints against tour operators, most of those concerning charters. Since 2011, in fact, the DOT has levied nearly $1 million in fines against charter operators for violating regulations. Among other key offenses:

  • Capital Airways was fined $175,000 for operating and marketing charter flights without the necessary authority.
  • Swift Air was fined $100,000 for canceling a public charter flight minutes before departure time.
  • Aviation Advantage was fined $150,000 for a range of infractions, including advertising without listing the operator or airline, selling tickets without DOT authority, and contracting flight services with an unlicensed operator.

Sometimes the circumstances are comically dire: The tale of Comtel Air made worldwide headlines in 2011 when passengers on a flight from India to Britain were asked for roughly $200 each to continue their journey — after the flight was airborne.

The U.S. Department of Transportation has decided it’s time for a crackdown. It has proposed new regulations that would require charter brokers to disclose more information to customers, such as identifying the name of the air carrier, type of airplane and total cost of the charter. Department of Transportation Secretary Anthony Foxx explained: “We will insist on transparency from air charter brokers, just as we do from major commercial airlines and public charter companies.”

The household names in aviation, such as American, Delta and United, operate charters all the time for sporting events, political campaigns and other ad hoc occasions. But the largest U.S. charter airlines may not be as familiar: names such as Omni Air International and Miami Air International are among the heavyweights, though in this market, U.S. charter operators carried about 5.4 million passengers in 2013, compared to 743.1 million passengers served by all domestic carriers.

Consumer groups and others have supported the idea of new regulations. However, the driving factor for the DOT’s proposals came from the National Transportation Safety Board, which, as far back as 2006, said confusion about subcontractors and “DBAs” — companies the Federal Aviation Administration allows to operate on a “doing business as” basis — could create problems, since there are already significant differences in how charter operations are regulated, operated and sold. The onus for understanding the issues falls on the passenger.

Consider that in March 2012 a charter operator doing business as Direct Air suddenly stopped flying, stranding passengers without refunds. In response, the DOT revised certain policies, requiring, for instance, that operators who arrange charter flights retain passenger reservation records and share them with the air carriers operating those flights in case of a shutdown. The DOT also began requiring payments via credit cards to ensure refundability under the Fair Credit Billing Act if the services are not provided.

What’s more, if the operator cancels the flight, the passenger probably will have little recourse, and if the passenger decides not to go, the booking will probably be nonrefundable. The only good news is that, unlike with scheduled airlines, a second party may be able to use your ticket — for a fee, of course. Other factors to beware of are lengthier check-in deadlines, since passengers often must arrive three hours prior to departure, and murkier baggage-handling policies.

One consumer protection site offers the following legal advice: “Charter airlines can be legitimate, but they can also be extremely unreliable. … Many charter airlines have literally gone out of business overnight, leaving passengers stranded, and many charter airlines play fast and loose with the rules, so really do your homework before booking a flight on a charter airline.”

Even the National Business Aviation Association, an industry trade group, acknowledges the need for consumers to do their homework when it comes to charters: “You must become an educated air charter consumer. A general understanding of what questions to ask and what answers to expect will assist you in your effort to choose a safe and reputable charter operator — one that will provide the aircraft and service level you require and deserve.”

But the best advice is provided by the DOT itself, which provides explicit warnings in an online guide called Plane Talk: Public Charter Flights. Among the bits of cautionary advice offered there:

  • The fare you book may not be the fare you pay. Be aware that your final price can increase by up to 10 percent.
  • A public charter can be canceled for any reason up to 10 days before departure. As the DOT states: “This is a risk you take in return for a low fare.”
  • Lengthy delays are “not uncommon,” so you need a cushion when planning your itinerary. In fact, a charter flight can be delayed up to 48 hours before you’re given the right to cancel without penalty.
  • A charter reservation doesn’t guarantee connections. The DOT warns: “If you miss [a connecting flight] for any reason, you're probably out of luck.”

The charter market does have its upsides. Some charter airlines provide good service as well as low fares. But it’s difficult for the average consumer to shop among such unfamiliar brands. The DOT offers a continually updated “List of Public Charters” online, but in very small print. Price is not the only reason charters have maintained their appeal with the public. There are no connecting flights or stopovers at hub airports, and you’re not likely to be bumped. Another big selling point is that such flights often operate out of secondary airport terminals, thereby avoiding the hassles of parking and TSA screening; charter operator Ultimate Air advertises “no intrusive security scans.”

Nevertheless, industry experts aren’t optimistic about the future of this sector. The International Air Transport Association says the market share of charters is eroding. And according to Boeing’s latest 20-year forecast, charter airlines “will be challenged to compete” with scheduled low-cost carriers, and charters will comprise just 2 percent of global commercial aviation by 2032.

William J. McGee, the lone consumer advocate on the DOT’s Future of Aviation Advisory Committee, is the author of "Attention All Passengers."