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Air carrier operations

Operating authorisation

What procedural and documentary requirements must air carriers meet in order to operate in your jurisdiction?

US carriers must hold either a Certificate of Public Convenience and Necessity or an exemption in order to provide air transportation for compensation or hire, and must obtain an air carrier operations certificate from the Federal Aviation Administration (FAA) in order to perform flight operations. The documents required to apply for US operating authority from the US Department of Transportation are set forth in 14 CFR Part 204, and the requirements for operations certificate are set out in 14 CFR 121 or 135, depending on the scope and nature or the services being proposed.

Foreign air carriers must hold either a foreign air carrier permit or exemption in order to hold out air transportation to or from the United States, and must hold foreign air carrier operations specifications issued by the FAA. The documentary requirements for obtaining a foreign air carrier permit are set forth in 14 CFR Part 211, and for FAA operations specifications at 14 CFR Part 129.

Ownership and control

Do any nationality or other requirements or restrictions apply to ownership or control of air carriers operating in your jurisdiction?

In order to obtain and hold a certificate of public convenience and necessity, an air carrier must be a citizen of the United States. For a corporation to qualify as a US citizen it must:

  • be organised under the laws of the United States or a state, the District of Columbia, or a territory or possession of the United States;
  • have a president and at least two-thirds of the board of directors and other managing officers who are US citizens; and
  • have at least 75% of the voting interest owned or controlled by persons that are US citizens, and be under the actual control of US citizens (see 49 USC Section 40102(a) (15)). 

The Department of Transportation engages in a searching review of the management and control of US air carriers, and requires US carriers to apprise the agency of any “substantial change” and a carrier’s post-certification ownership, management or operations to ensure ongoing compliance with these requirements.

Foreign air carriers are generally authorised to serve the United States pursuant to the terms of bilateral air service agreements, or on less frequent occasions, on an extra-bilateral basis at the discretion of the Department of Transportation. Most bilateral air service agreements require that airlines seeking licensure be “substantially owned and effectively controlled” by nationals of their homeland. While the Department of Transportation requires applicants for foreign air carrier permits to provide information about their ownership and management, the department often waives the requirement for carriers from countries which maintain open skies agreements with the United States, or in other cases in which the department finds that the grant of such a waiver would “not be inimical” to US aviation interests.

Financial requirements

What financial thresholds must air carriers meet to obtain operating authorisation?

The financial thresholds to be applied are based on the carrier’s operating plan. The US Air Carrier Fitness Division reviews a new entrant carrier’s proposed business plan, and determines whether the carrier has the financial and managerial resources required to operate successfully. Generally, the regulator expects carriers to have enough cash on hand to sustain three months of operations without receiving any revenue.

The Department of Transportation does not prescribe specific financial criteria for the licensure of foreign air carriers. However, it requires that such carriers provide recent financial reports and details about their proposed operations.

Insurance coverage

What is the required level of insurance coverage for air carrier operations?

Federal law requires US and foreign direct air carriers to have certain amounts of aircraft accident liability insurance coverage to operate in interstate or foreign air transportation (see 14 CFR 205.5). Such air carriers are required to have third-party aircraft accident liability coverage of at least $300,000 for bodily injury or death, or for damage to property, for any one person in any one occurrence, with at least a total of $20 million per involved aircraft for each occurrence. However, aircraft with 60 seats or fewer or with a maximum payload capacity of 18,000 pounds. need only maintain coverage of $2 million per involved aircraft for each occurrence. Air carriers providing passenger transportation also must have accident liability insurance for bodily injury to, or death of, aircraft passengers of at least $300,000 for any one passenger and a total of $300,000 times 75% of the number of aircraft passenger seats, for the involved aircraft in each occurrence. 

US air taxi operators registered under Part 298 also must obtain third-party aircraft accident liability coverage for bodily injury to or death of persons other than passengers, with minimum limits of:

  • $75,000 for any one person in any one occurrence, and a total of $300,000 per involved aircraft for each occurrence; and
  • a limit of a least $100,000 for each occurrence for loss of or damage to property.

 

US air taxi operators carrying passengers in air transportation also must maintain aircraft accident liability insurance coverage for bodily injury to, or death of aircraft passengers, with minimum limits of $75,000 for any one passenger, and a total per involved aircraft for each occurrence of $75,000 times 75% of the number of passenger seats installed in the aircraft.

Safety requirements

What safety requirements apply to air carrier operations, including with regard to professional and technical certifications?

The FAA has comprehensive safety requirements in place, ranging from air carrier certification and  operations (14 CFR Parts 110-139), pilot and airmen training and certification (14 CFR Part 20, 61, 63, 65 and 67) and general air traffic and operating rules. The FAA also has promulgated detailed regulations concerning aircraft certification and maintenance. 

Environmental obligations

What environmental obligations apply to air carrier operations?

The Environmental Protection Agency recently issued a regulation pertaining to aircraft greenhouse gas emissions. Aviation operations in the United States are subject to many environmental regulations which range from noise to the storage of fuels. Airport operators may be subject to local as well as federal environmental requirements. The FAA’s Office of Policy, International Affairs and Environment coordinates environmental policy in the aviation sector.

Air traffic control

How are air traffic control services regulated in your jurisdiction?

The FAA operates and regulates air traffic control services within the United States.

Routes

Do any licensing requirements apply to specific routes?

US carriers typically are licensed to serve all US points, as the domestic air transport market has been deregulated. Many international routes are now governed by open skies agreements, which permit service between all points in the United States and points in the countries covered by these agreements. Route-specific licences remain in force for international routes for which entry is limited.

Are any public service obligations in place with respect to remote destinations?

     The United States has a voluntary programme called the Essential Air Service Programme (EAP) which provides financial support for carriers willing to serve certain underserved routes. The EAP is administered by the Department of Transportation.

Charter services

Do any special provisions apply to charter services?

The Department of Transportation regulations define the type of authorised charters, and specify the prior approvals required for each (see 14 CFR Part 212). With regard to passenger charters marketed to the general public, the Department of Transportation has issued regulations which govern the content of airline or charter operator and charter operator or charter participant contracts, and also has detailed regulations in place to protect the funds of charter participants (see 14 CFR Part 380).

Taxes

What taxes apply to the provision of air carrier services?

The taxes which apply depend largely on the nature of the service being provided. Domestic air transport services are subject to excise taxes, which generally do not apply to international air transport services. International services are subject to a panoply of fees and charges. Tax treaties may affect the applicability of taxes to international air transport services. Taxes and fees that might apply to air transport services include the following:

  • US excise tax (US ticket tax).
  • Travel facilities tax.
  • US federal segment fee.
  • Passenger facility charge.
  • September 11 security fee (also known as US passenger civil aviation security fee).
  • US international transportation (arrival/departure) tax.
  • US Customs user fee.
  • US animal and plant health inspection service fee.
  • US immigration and naturalisation fee.

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