U.S. HOUSE BILL MAY IMPACT DISPLAY OF TICKET PRICES IN ADVERTISING
The Transparent Airfares Act of 2014, H.R. 4156, has the potential to void the U.S. Department of Transportation’s (DOT) full fare advertising rule. Passage of the bill, which has bipartisan support, is possible.
Understandably, airlines and consumer rights groups are split. Currently, DOT’s full fare advertising rule requires airlines and ticket agents to disclose the full price to be paid by the consumer in all advertisements. This approach has been widely supported by consumer groups and passengers. Air carriers, on the other hand, generally support the Transparent Airfares Act and argue the full fare advertising rule allows the government to bury tax hikes in ticket prices.
Consumer groups and passengers believe the bill would allow carriers to quote deceptively low airfares and advertise ticket prices that are between 15% and 20% lower than that which is finally paid by the consumer. Carriers, on the other hand, argue that about 20% of the advertised fare goes to the federal government and airports in the form of taxes and fees, and unfairly reflects on the price of air transportation as charged by the carrier. The bill could be voted on at any time.
PHILIPPINES GRANTED CATEGORY 1 STATUS
The Federal Aviation Administration (FAA) on April 9, 2014 announced that the Republic of the Philippines complies with International Civil Aviation Organization (ICAO) safety standards and has therefore been granted a Category 1 rating. This decision comes on the heels of a March 2014 FAA review of the Civil Aviation Authority of the Philippines.
The Philippines was downgraded to Category 2 in January 2008, a decision which meant at the time that it lacked laws or regulations necessary to oversee air carriers in accordance with minimum international standards and/or that its civil aviation authority was deficient. The return to Category 1 status means the Philippines’ civil aviation authority complies with ICAO standards and that its air carriers can add flights and service to the United States and can carry the code of U.S. carriers.
SANCTIONS RELIEF PROVIDED FOR IN THE JOINT PLAN OF ACTION (“JPOA”) BETWEEN THE P5 + 1 AND THE ISLAMIC REPUBLIC OF IRAN
On January 12, 2014, the US, United Kingdom, Germany, France, Russia, and China entered into the JPOA with Iran. While the ultimate goal of the JPOA negotiations was to agree on a long-term plan which would ensure that Iran never develops nuclear weapons, the JPOA resulted in certain concessions by the US that directly impact the aviation industry. Although most transactions involving US persons and US source goods are still prohibited by US law, the JPOA resulted in the creation of a favorable licensing policy through which OFAC is permitted to grant to certain license applicants authorization to engage in transactions specifically intended to ensure the safe operation of Iranian commercial passenger aircraft. Licenses granted pursuant to the new licensing regime will be issued by OFAC on a case-by-case basis.
Activities which may be licensed include the exportation and reexportation of: services related to the inspection of commercial aircraft and parts in Iran or a third country; services related to the repair or servicing of commercial aircraft in Iran or a third country; and goods or technology, including spare parts, to Iran or a third country. It is, however, important to remember that all transactions for which license applications are submitted must be related to the safe operation of Iranian commercial passenger aircraft and, further, that all of the foregoing activities are specifically prohibited by Iranian Transactions and Sanctions Regulations (31 C.F.R. Part 560) unless a license has been granted by OFAC. Notably, transactions with Iran Air are permitted under the new licenses which OFAC has been authorized to issue; however, all other airlines listed on OFAC’s Specially Designated Nationals and Blocked Persons List remain prohibited.
UPDATE ON UKRAINE-RELATED SANCTIONS – ADDITIONS TO THE SPECIALLY DESIGNATED NATIONALS (“SDN”) LIST
As of April 28th, the US has added additional Russian nationals and entities to the SDN list. In addition to Bank of Rossiya, which was added to the SDN list in March, the following entities were added in April: Aquanika, Avia Group LLC, Avia Group Nord LLC, CJSC Zest, INVESTCAPITALBANK, JSB SobinBank, SakhaTrans LLC, smp bank, stroygazmontazh, stroytransgaz GROUP, stroytransgaz holding, stroytransgaz llc, stroytransgaz ojsc, stroytransgaz-m llc, the limited liability investment company abros, transoil, and VOLGA GROUP.
Please note that many of the entities listed above do business under other names and some are aviation related. It is therefore important to check the current version of OFAC’s SDN list before doing business with a Russian national or entity. OFAC’s SDN List is available at the following website:
INDUSTRY WORKS WITH CBP TO REDUCE WAIT TIMES
Several groups, including Airlines for America (A4A) and Airports Council International – North America (ACI-NA), are pressuring the U.S. government to find a solution to reduce wait times at international airports. One answer to this problem is additional funding and personnel. To that end, the 2014 budget includes funding for 2,000 additional Customs and Border Protection (CBP) agents to address the problem; however, it is not confirmed whether these officers will be assigned to airports with the most critical wait times.
A second possible solution involves the use of new technology. On this front, ACI-NA is working with CBP to install self-service kiosks at select airports, which will help ease the flow of incoming passengers. These kiosks, which cost between $30,000 and $40,000 per unit, would initially allow U.S. citizens to scan their passports and in some cases receive expedited screening. The parties envision access to kiosks being expanded to Canadian citizens, then to legal permanent residents and, finally, to foreign citizens with visas to the U.S. So far, kiosks have been installed in about 10 U.S. and Canadian airports, including New York John F. Kennedy International, Seattle-Tacoma International Airport and Toronto Pearson International Airport.
In addition to kiosks ACI-NA also is working with CBP on an app that would mimic the kiosks on passengers’ smartphones. The app, once it is developed and implemented, would allow passengers to scan their passports while still onboard the aircraft or in the arrivals hall. The data would be transmitted to CBP and the passenger would be instructed either to proceed to customs or appear before an officer for secondary screening, says Cota. The app will be tested in a pilot program at a large U.S. airport in mid-2014.
U.S. SUPREME COURT APPROVES DROP OF DISRUPTIVE FREQUENT FLIER
The U.S. Supreme Court unanimously decided earlier this month in Northwest, Inc. v. Ginsberg that airlines have sole discretion to drop people from their frequent flier programs. The case arose out of the decision by Northwest Air Lines to terminate the WorldPerks frequent flier membership of Rabbi Binyomin Ginsberg shortly before its merger with Delta. Northwest argued the termination was based on “abuse” (i.e., Ginsberg had a history of complaining to the airline and seeking compensation), but Ginsberg claimed that Northwest acted because of the merger. The U.S. Court of Appeals for the Ninth Circuit held that Ginsberg’s complaint was not preempted by the Airline Deregulation Act of 1978 (the “ADA”), and the U.S. Supreme Court granted certiorari.
While the case involved Northwest’s frequent flier program, its ramifications extend far beyond the WorldPerks program and involved the larger issue of preemption under the ADA. The question being argued by the parties involved the extent to which the ADA preempts a claim that an airline violated an implied covenant of good faith and fair dealing based upon state law.
The Court’s holding addressed three separate issues. First, it noted that state law is preempted if it adds to the parties’ agreement but not if it only enforces the agreement. Second, the Court noted in some cases the implied covenant simply holds parties to their agreement, but in others it goes farther, to implement “community standards of decency, fairness, or reasonableness.” Finally, the Court held that the implied covenant is preempted whenever it implements broader community standards, but not when it simply holds parties to their agreement in fact. As applied to Ginsberg’s situation, the Court concluded that Ginsberg’s claim was preempted under the ADA.
In overturning the Ninth Circuit’s decision, Justice Samuel Alito wrote that travelers have protection from being mistreated because they can sue for breach of contract, just not for any covenants implied by participating in a loyalty program. In addition, Alito highlighted in the 18-page decision that the ADA is “based on the view that best interests of airline passengers are most effectively promoted . . . by allowing the free market to operate” and that customers “can avoid an airline with a poor reputation and possibly enroll in a more favorable rival program.” He also noted that “the Department of Transportation has the authority to investigate complaints about frequent flyer programs.”
EXTENSION REQUESTED TO EXTEND COMMENT PERIOD ON PROPOSED RULEMAKING FOR DRUG/ALCOHOL TESTING
As previously reported, in March 2014 the FAA released an Advanced Notice of Proposed Rulemaking (ANPRM) requesting guidance regarding drug and alcohol testing at FAA-certified foreign repair stations. The ANPRM included more than 40 questions on a wide variety of issues. The final rule on drug and alcohol testing is a Congressional mandate and will cover certain employees at FAA-certified foreign repair stations that work on U.S. registered aircraft.
Since the release of the ANPRM, IATA, Lufthansa, A4A, and the Aeronautical Repair Station Association have all requested an extension of 120 days to provide comments beyond the current May 16, 2014 deadline. The request for extension filed by IATA and Lufthansa explains that the issues are complex and require a detailed analysis of the numerous topics that are covered by the ANPRM. A4A also requested that the FAA host a public meeting or webinar to answer questions. We will keep you updated on this issue as events warrant.
The following fines have recently been issued by DOT:
Sky King, Inc. – $100,000
Sky King, Inc. was fined $100,000 for violating 49 U.S.C. § 41708 and 14 C.F.R. Part 241. The carrier failed to file its required Air Carrier Financial Reports for all four quarters of 2013, despite numerous requests by the Bureau of Transportation Statistics. Sky King filed for Chapter 11 bankruptcy in February 2014 and is working with a Trustee to find a buyer so that it will be able to quickly commence operations and timely file the required reports.
Skyscanner Limited – $40,000
Skyscanner a ticket agent, was fined $40,000 for violating the Department’s codeshare and baggage disclosure rules, 14 C.F.R. § 257.5(d), 14 C.F.R. § 399.85(b) and 49 U.S.C. § 41712. An investigation by DOT’s Enforcement Office revealed that Skyscanner failed to fully disclose on its website certain codeshare arrangements when it advertised flights that were operated by a regional carrier on behalf of a major carrier. The agent did not disclose the corporate names of the transporting carriers and as a result, consumers were unable to determine the identity of the airline that would be operating their flight. The investigation also revealed that Skyscanner failed to prominently disclose on its website certain additional fees for baggage.
British Airways PLC – $225,000
British Airways PLC was fined $225,000 for violating the Department’s tarmac delay rules, 14 C.F.R. Part 259 and 49 U.S.C. § 41712, on two separate flights. The first violation occurred on November 7, 2012. On that date a BA flight traveling from Newark Liberty International Airport (EWR) to London Heathrow Airport (LHR) was delayed on the tarmac at EWR for 5 hours and 34 minutes. The second violation occurred on November 15, 2012, and involved BA flight 214, which was traveling from Boston Logan Airport (BOS) to LHR. The flight, which was scheduled to depart at 9:00 p.m., ultimately pushed away from the gate at 9:34 p.m. due to a late arriving aircraft. At approximately 10:00 p.m. the aircraft returned to the gate due to a mechanical issue and the doors were opened. The aircraft remained at the gate until 2:00 a.m. when the passengers deplaned. An investigation by the Department’s Enforcement Office found that British Airways did not announce to the passengers that an opportunity to deplane existed while the aircraft was at the gate with the doors opened.
This Eckert Seamans Aviation Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice. If you have any questions, please contact Evelyn Sahr (email@example.com, 202-659-6622) or Drew Derco (firstname.lastname@example.org, 202-659-6665).