AVwebBiz - Volume 5, Number 1

January 3, 2007

By The AVweb Editorial Staff
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Double-Oh Seven: Year Of The User Fee?

Will 2007 be known as the year in which user fees were enacted to pay for FAA services? That's what the airlines want, although general aviation's alphabet soup is opposed to it. The issue is guaranteed to come to a head by Sept. 30, when existing law authorizing the FAA's programs, policies and spending on things like airport pavement and radars will come to an end. In the meantime, the new Congress -- complete with new leadership -- convenes this week with reauthorization high on its list of "must-do" tasks. All of which means you'll likely see more and more arguments for and against user fees throughout the year. For its part, the airline industry is leading the fight for them, with its major trade group, the Air Transport Association, saying it supports "a new 'cost-based' mechanism for generating revenues necessary to maintain, operate and enhance the national airspace system." Of course, aviation system users already are paying fees -- through taxes on airline tickets and aviation fuel, as examples -- to cover the government's costs. The airlines, however, merely serve as collection agents for the government, eventually passing on the ticket taxes they collect from passengers and paying next to nothing to use a government system in conducting their business. Meanwhile, general aviation, according to a 1997 study by the U.S. General Accounting Office, is responsible for about 6% of FAA's ATC costs while paying -- conveniently -- about 6% of those costs through existing taxes. But that's not all: The airlines also want more of a say in how the FAA and the ATC system are operated. According to an ATA "statement of principles," the airline industry believes in "A reformed administrative structure, providing for a direct role in governance proportional to the extent of each user category’s financial contribution to the operation, maintenance and enhancement of the national airspace system." And all of this will be coming to a head as first-of-the-year stories in the financial pages say the airline and travel industries' futures are looking up.

General aviation's alphabet soup is reacting strongly and swiftly. Just before the Christmas holidays, AOPA began airing a series of television commercials spreading the message that the existing funding mechanisms aren't broken and that the U.S. economy stands to lose far more than it could gain from levying user taxes on general aviation. AOPA also notes the "FAA claims that it now has a funding crisis, and it, along with the airlines, have argued that the FAA should be funded through user fees for ATC services and other FAA regulatory and certification requirements, rather than taxes on aviation users." Interestingly, AOPA points out that what the ATA and the airlines want would effectively eliminate Congress' role in providing FAA funding and setting its policies and priorities. That's not likely to be something the new Congress will allow. Other organizations, especially the National Business Aviation Association (NBAA), are gearing up for the fight against user fees. In a recent op-ed piece, NBAA President Ed Bolen noted that not only has FAA funding in recent years been stable, but that stability is expected to continue. Further, the FAA's revenues have actually increased since 2000 -- contrary to what the FAA may want the public to believe -- although the agency's operating costs have decreased. Whether 2007 in fact is the year that user fees are finally enacted will depend, in part, on the lobbying abilities of the airline industry and general aviation, along with the degree to which Congress buys into the FAA's pitch that its funding should be made more "businesslike." It also will depend on the kind of pressure Congress perceives from various constituent groups, like pilots and aircraft owners. Watch this space.

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FAA Issues "Operational Control" Guidance

The latest government reaction to the Feb. 2, 2005, crash of a Bombardier Challenger CL-600-1A11 at the Teterboro Airport (KTEB) in New Jersey was published last week in the form of a newly revised operations specification (OpSpec) for Part 135 charter operators. The new OpSpec, A008, was published Dec. 28, and is a direct reaction to NTSB findings that the charter flight was being conducted without proper FAA certification or compliance with FAR Part 135. The FAA said it had "become aware" of business practices calling into question "whether an air carrier has control of its operations purportedly conducted under the authority of its certificate." According to the FAA, the revised OpSpec allows it to ensure "who is responsible and who should be held accountable for the safety of any flight, whether commercial or not" by evaluating the "facts and circumstances surrounding that flight." The FAA hopes to clarify and prevent the kind of ownership and operational issues the NTSB believes precipitated the accident, in which the Challenger was operated by Platinum Jet Management LLC of Fort Lauderdale, Fla., under a management agreement with Darby Aviation, based in Muscle Shoals, Ala. As part of its reaction to the accident, which destroyed the airplane but did not result in fatalities, the FAA recently conducted a review of Part 135 operators. That review, according to the FAA, highlighted that numerous "Part 119 certificate holders conducting operations under Part 135 had been authorized to use several 'doing business as' (DBA) names, some of which were identical or substantially similar to the name of an aircraft owner and/or management company that is otherwise legally distinct from the air carrier."

According to the FAA, in some instances uncovered by its review, "it appeared that these parties characterized their business arrangement so an aircraft owner or management company purportedly could operate the aircraft in common carriage under the auspices of the air carrier’s certificate." For its part, the National Business Aviation Association (NBAA) reacted swiftly, sending a letter from its president, Ed Bolen, to all its member companies, noting, "Aircraft owners will need to understand and adhere to important limitations that are placed on their involvement with a charter company’s control of aircraft and crew used in Part 135 charter operations." According to NBAA, it "worked very closely with inspectors and legal counsel from FAA headquarters" during the new policy's development, believing early drafts severely impact the charter industry but without enhancing safety. In Bolen's letter, NBAA said it succeeded in removing the "particularly harmful" draft provisions in the OpSpec and will continue to work with the agency "on identifying problems" with it. The last three sentences of Bolen's letter well sums up the reasons for the NTSB's concern and for the FAA's actions: "Arguably, the tragic accidents and incidents that led FAA to scrutinize operational control were textbook examples of how not to conduct a charter business. I have heard concerns expressed about other 'bad apples' or rogue operators. Implementation of this operational control OpSpec ultimately will further enhance the safety record of the air charter industry, as every operator should be held to the same standard."

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Eclipse Delivers: Now What?

We have it on good authority that several Eclipse Aviation employees woke up Monday morning with hangover-induced headaches. But their pain had nothing to do with New Year's Eve celebrations. Instead, and as AVweb reported, the company on Sunday, Dec. 31, delivered the first customer copy of its Eclipse 500 very light jet (VLJ), sneaking in under the deadline of its end-of-2006 promise. Some eight years in the making, the first Eclipse 500 delivery was no doubt a cause for celebration, but the company's work in 2007 is just beginning -- and recent snowstorms at its Albuquerque, N.M., headquarters haven't helped a bit. The big questions are when Eclipse will deliver a second airplane, when it will obtain its production certificate from the FAA and whether it will make its projected delivery numbers in 2007. According to Eclipse, the first customer Eclipse 500 was delivered to co-owners David Crowe, a private owner, and Jet-Alliance, a shared jet ownership company in Westlake Village, Calif. While Crowe plans use his time with the jet primarily for recreation, Jet-Alliance will be using it to serve its co-ownership clients. The arrangement helps maximize Crowe's use of the airplane while keeping Jet-Alliance's overhead low. Right now, Eclipse says it has seven more aircraft, pictured above, being readied, but there is no timetable for their delivery to customers. That said, the company has every expectation it will be able to deliver them by the end of January.

As for its production certificate -- that piece of paper saying Eclipse has convinced the FAA that each and every one of its airplanes will conform to the type certificate -- it's likely the company will obtain it early this year, also. Until then, the FAA must come in and inspect each airplane to ensure conformity and, in the process, delay deliveries. It's less a matter of whether the airplanes conform than it is the company's ability to demonstrate that conformity to the FAA through paperwork and process management. All of which speak to the difficulties of transitioning from a company primarily concerned with developing products to one actually producing them. But the real challenge to Eclipse in 2007 will be to live up to its delivery projects for 2007. As AVweb reported, Eclipse President and CEO Vern Raburn said during last year's NBAA annual meeting and convention he expects his company to have built a whopping 525 copies of the Eclipse 500 by the end of 2007. But first, Eclipse will have to finish digging out from two major snowstorms that have hit the Albuquerque area since right before Christmas. Most recently, the unseasonable weather closed the airport, preventing production flight testing and further impacting schedules. Not to worry -- by June, all that snow will have melted.

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Yes, major U.S. airports are too congested, and it can be tough for general aviation flights to get in at certain times during the day, but we've never seen a non-scheduled flight hover over an airline gate, waiting on space, before departing in a huff. With some embellishment, that's basically what a group of airline employees say they saw at Chicago O'Hare International Airport's (KORD's) gate C17 on Nov. 17. The trick is that the employees report the "flight" was an unidentified flying object, or UFO. Officially, no one at United Air Lines or in the FAA control tower saw anything and there was nothing on radar. Of course, we wouldn't expect visitors from another planet to know anything about Class B airspace, or transponder requirements. While the FAA control tower at KORD did log a call from an airport worker, asking if they knew of the object, the FAA says it doesn't know anything about the event and maintains it was nothing more than a weather phenomenon of some sort. According to the employees and the Chicago Tribune, the noiseless, disc-shaped "weather phenomenon" hovered over the gate area for a few minutes and then departed -- straight up into a 1,900-foot overcast. Its departure was so rapid, witnesses say it made a hole in the clouds.

But the FAA says it won't be investigating the event -- nothing to see here, folks, move along. "Our theory on this is that it was a weather phenomenon," FAA spokeswoman Elizabeth Isham Cory told the Tribune. "That night was a perfect atmospheric condition in terms of low (cloud) ceiling and a lot of airport lights. When the lights shine up into the clouds, sometimes you can see funny things." There's a small problem with Ms. Cory's explanation, though: The event took place at about 4:30 p.m. local time, during daylight. Several people, including pilots and mechanics, saw the, umm, phenomenon, according to the Tribune, and all have ruled out it as being an airplane, helicopter, weather balloon, other type of aircraft or even swamp gas. Unsurprisingly, the airliner workers interviewed by the Tribune spoke to the newspaper on conditions of anonymity. In addition to Cory, only one other person went on the record: "To fly 7 million light years to O'Hare and then have to turn around and go home because your gate was occupied is simply unacceptable," O'Hare controller and union official Craig Burzych was quoted as saying.

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More Raytheon Details Emerge

Additional details on the Raytheon Company's sale of its Raytheon Aircraft Company (RAC) subsidiary -- including the Beechcraft and Hawker business aircraft lines -- to a new company formed by GS Capital Partners, an affiliate of Goldman Sachs, and Onex Partners began to emerge over the holidays. First announced on Dec. 21, the $3.3 billion deal -- which remains subject to various government oversight and approvals -- will not include Raytheon's fractional operation, Flight Options, or Raytheon Airline Aviation Services (RAAS), but does include the Raytheon Aircraft Services FBO network. The new company's name will be Hawker Beechcraft. The details on the sale are not expected to be complete until sometime during the first half of 2007, according to Raytheon, which also said its net proceeds will be somewhere in the neighborhood of $2.5 billion.

According to published reports quoting Onex managing director Nigel Wright, the new owners do not have plans to relocate existing aircraft production, there are no plans to move production of any of RAC's aircraft lines and RAC's existing management will remain. In addition, a separate three-year agreement between Raytheon and Hawker Beechcraft will be put into place to help ensure a seamless transition period and continue operations as they have been.

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Papers, Please

For as long as we can remember, the only documentation needed by a U.S. citizen returning home from Canada, Mexico, the Bahamas or certain other locations by air was a driver's license and a birth certificate. No more. Beginning Jan. 23, 2007, all U.S. citizens -- including children -- need a current passport, even if you're arriving via private aircraft. That's according to a federal law enacted in 2004, as implemented by the departments of State and Homeland Security’s Western Hemisphere Travel Initiative. Some exclusions do apply, and individuals traveling between the mainland and U.S. territories are exempt. Of course, all of this -- including new passports with embedded chips -- are part of the nation's continuing anti-terrorism efforts.

The new requirement's deadline was announced in November, and apparently will be implemented despite attempts by various organizations, including AOPA, to seek a delay. For what it's worth, as early as Jan. 1, 2008, all U.S. citizens traveling by land or sea may also need a passport instead of the customary documents. Citizens obtaining a new passport may or may not receive one of the new documents with an embedded chip. Rollout of the new passport began last year in some locations but, for the time being, not all new passports will contain the chip.

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Ohio-Based Terrorists Beware!

This should be easy enough: If you live in Ohio and need to register an aircraft with the state, you must certify you're not a terrorist and do not provide material assistance to a group the U.S. Department of State considers a terror organization. That's according to a law passed in 2006 and effective for anyone seeking certain state-issued licenses, which applies to citizens and companies who own an Ohio-based aircraft and must register it with the state. For aircraft owners, compliance with the state's 2007 aircraft registration requirement involves completing a five-page form and answering such questions as, "Are you a member of an organization on the U.S. Department of State Terrorist Exclusion List? " Helpful hint: The correct answer is "no."

No, we are not making this up. The state says its form "was created to provide the state with an additional tool to deter and prosecute acts of terrorism within Ohio," and to ensure aircraft owners within the state are not terrorists. If you answer "yes" to any related question on the state's Declaration of Material Assistance form the state helpfully notes it "shall serve as a disclosure that material assistance ... has been provided." Any failure to correctly answer the questions is a felony. Not included among the questions is, "Are you now or have you ever been a terrorist?" Also not included in the disclosure requirement are motor vehicle owners, boaters, commercial driver license holders or anyone who wants to rent a Ryder truck.

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AVwebBiz is an every-other-week summary of the latest business aviation news, articles, products, features, and events featured on AVweb, the internet's aviation magazine and news service.

Today's issue was written by Joseph E. (Jeb) Burnside (bio).

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Shiny side up, okay?