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Law360 (December 8, 2020, 3:54 PM EST) --
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| David Endersbee |
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| Barbara Marrin |
However, the COVID-19 crisis has created an increased demand for premium travel that may, as discussed below, require foreign airlines to further invest in U.S. regulatory approvals, as demand may easily outstrip the number of permitted flights. Foreign airlines using Part 375 — both those considering U.S. service and those already operating here — should carefully assess their anticipated demand, to determine whether the limited number of flights authorized under Part 375 will suffice.
Many of the same U.S. regulatory operating requirements apply to both the foreign airline operator of a Boeing 747 and to the operator of a Dassault 7X — which is to say these requirements do not necessarily scale down to match the scope of a foreign airline's operations.
However, the DOT regulations codified in Part 375 allow limited commercial air operations by foreign airlines to and from the U.S.[2] Part 375 serves as a sort of limited exception to the general requirement that a foreign airline hold DOT economic authority, in the form of either an exemption or foreign air carrier permit, to operate to the U.S., as well as an exception to Federal Aviation Administration operations specifications.
Part 375 contemplates "occasional planeload charters" by operators to or from the U.S. on a single-entity charter basis — which is ideal for business jet operators typically chartering the entire aircraft. Part 375 does not permit common carriage operations, such as — in the example the DOT uses in its guidance — a tour operator marketing to the general public, or a foreign airline selling transportation on a per seat basis. Such operations would, legally speaking, convert an operator into a foreign air carrier, because the carrier would be engaging in "foreign air transportation."[3]
As drafted, Part 375 provides that an operator may conduct no more than six flights per calendar year, and the DOT formerly required individual applications for a foreign aircraft permit on a flight-by-flight basis — a tedious and time-consuming ministerial process which resulted in lost charter opportunities for foreign air carriers dealing with last-minute or time-sensitive customers.
However, following the U.S.-EU Open Skies Agreement in 2007, the DOT in 2008 adopted a much more liberalized and simplified policy. In summary, upon receipt of a special authorization pursuant to Part 375, foreign air carriers may operate up to 12 flights per calendar year or other 12-month period. Obtaining a special authorization is a straightforward process, and applicants need only provide the DOT with basic background information — including, but not limited to, the applicant's name and address, a description of the aircraft, a statement concerning reciprocity by the applicant's homeland, and some basic documentation.
Holders of a special authorization may operate most flights[4] with no advance notice to the DOT or other prior approval. Instead, the foreign air carrier need only provide notice to the DOT within five business days after a flight for routings covered by the applicable bilateral.
For example, an EU-based carrier could operate:
A flight on another routing — i.e., a seventh freedom flight operating solely between third countries, with no traffic stop in the foreign air carrier's homeland — requires at least three business days' advance notice to provide the DOT with an opportunity to deny permission to operate if the agency finds the public interest requires it — e.g., a flight to or from a nation with which the U.S. does not have good aeropolitical relations, and/or which has demonstrated, by a lack of reciprocity, that similar operations by U.S. carriers would likely be denied. The DOT will waive this three-day notice requirement for good cause shown.(a) between any point or points behind any Member State and via intermediate points, to any point or points in the United States and beyond, (b) between any point or points in the United States and any point or points in any member of the European Common Aviation Area, or (c) for all-cargo operations only, between any point or points in the United States and any other point or points.[5]
While Part 375 has served business jet operators well, the COVID-19 crisis has upended the premium travel market. As the crisis shows no sign of abating in the near term — and, indeed, is worsening — high-net-worth and executive clientele now frequently seek private charter opportunities for health and safety reasons.
This means that operators that in past years conducted limited operations — and thus comfortably operated within the confines of Part 375's 12-flight limit — may now exhaust their flight allocation due to sudden demand. The DOT has not permitted more than 12 flights under Part 375, and has shown no inclination to increase the flight allocation, notwithstanding the COVID-19 crisis.
Thus, foreign air carriers operating under Part 375 may find themselves effectively barred from opportunities to adequately serve the U.S. market. A Biden administration is unlikely to change the 12-flight limit, which has been in place for 12 years, and represents a balance between facilitating occasional charters and operating without direct FAA oversight.
To avoid such an outcome, operators utilizing Part 375, or considering it, should carefully assess their market, plans and anticipated growth, and determine whether 12 flights a year will suffice. In this uncertain environment, the most prudent course of action for foreign airlines may be to pursue a Part 375 special authorization concurrently or successively with economic authority from DOT and operations specifications from FAA — i.e., permissions for a limited number of noncommon carriage operations on an interim basis.
Current Part 375 special authorization holders are well-advised to determine whether their projected demand will outstrip their available flight allocation, in which case an investment in DOT and FAA authority would likely be merited. It is critical to note that significant time should be budgeted to obtain such authorities — on the order of months — due to COVID-19-related delays at both agencies.
Foreign airlines — particularly business jet operators — have an excellent mechanism to enter the U.S. market through Part 375's low barrier to entry. Part 375 does, however, have its limitations, so airlines must determine the best course of action for the scope of the carrier's intended operations.
David Endersbee is a member and Barbara Marrin is a senior associate at KMA Zuckert LLC.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] Part 375 implements (among other statutes) 49 U.S.C. § 41703 ("Navigation of foreign civil aircraft"), which provides authority for civil aircraft (as distinguished from foreign military aircraft) to navigate in the U.S. under certain conditions and as authorized by U.S. the Secretary of Transportation (i.e., Part 375) and to provide air commerce. "Foreign air commerce," as relevant here, means "the transportation of passengers or property by aircraft for compensation, the transportation of mail by aircraft, or the operation of aircraft in furthering a business or vocation, between a place in the United States and a place outside the United States when any part of the transportation or operation is by aircraft."
[2] This discussion focuses on passenger charter operations. Part 375 also governs the operation of foreign civil aircraft such as crop dusters, aerial surveyors, mapping operations and so forth. See definition of "commercial air operations" in 14 C.F.R. §375.1.
[3] "Foreign air transportation" is defined by 49 U.S.C. § 40102(23) as "the transportation of passengers or property by aircraft as a common carrier for compensation, or the transportation of mail by aircraft, between a place in the United States and a place outside the United States when any part of the transportation is by aircraft." An exemption or foreign air carrier permit issued pursuant to 49 U.S.C. § 40109 or § 41301, respectively, authorizes foreign air carriers to engage in common carriage. Part 129 of FAA's regulations requires operations specifications for foreign air carriers engaged in common carriage. 14 CFR § 129.5(a). In contrast, Part 375 does not permit common carriage, but rather contemplates (for passenger operations) occasional single-entity charters. 14 CFR § 375.40. In Part 375 DOT explains that Part 375 is designed to carry out, inter alia, the obligations of Article 5 of the Convention on International Civil Aviation (also known as the "Chicago Convention") December 1944,(1994) 15 U.N.T.S. 295. Article 5 (Part of Chapter II, "Flight over territory of contracting states") provides for the "right of non-scheduled flight."
[4] Assuming, of course, that most of the flights begin or end in the foreign air carrier's homeland (or an EU country, for a foreign air carrier of an EU member state).
[5] Unfortunately, U.K.-based carriers holding authority to operate between the EU and the U.S. on an unrestricted basis will soon lose that right, as the newly-signed air service agreement between the U.S. and the U.K. reverts to a standard open skies agreement, converting what were once effectively third and fourth freedom operations into seventh freedom operations. See https://www.transportation.gov/briefing-room/united-states-and-united-kingdom-sign-new-open-skies-agreement (accessed Nov. 23, 2020).
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