Air Transport In 43 Jurisdictions Worldwide

United States

General

1 Which bodies regulate aviation in your country, under what basic laws?

Aviation in the US is regulated primarily by the US Department of Transportation (DoT) and the Federal Aviation Administration (FAA) pursuant to title 14 of the Code of Federal Regulations (FARs), 49 USC (Transportation Code), and the corresponding regulations.

Regulation of aviation operations

2 How is air transport regulated in terms of safety?

The FAA regulates safety of commercial and private air transport. Screening passengers and ensuring onboard security is the responsibility of the Department of Homeland Security's Transportation Security Administration. The National Transportation Safety Board (NTSB) conducts non-criminal aircraft accident investigations.

3 What safety regulation is provided for air operations that do not constitute public or commercial transport, and how is the distinction made?

The FARs, at 14 CFR section 1.1, define a commercial operator as:

A person who, for compensation or hire, engages in the carriage by aircraft in air commerce of persons or property [...]W]here it is doubtful that an operator is for 'compensation or hire', the test applied is whether the carriage by air is merely incidental to the person's other business or is, in itself a major enterprise for profit.

An air carrier means 'a person who undertakes directly by lease, or other arrangement, to engage in air transportation'. The operations of US air carriers and commercial operators are regulated by parts 119, 121 and 135 of the FARs. All other private operations are regulated under part 91 of the FARs. Large private operations are also regulated under part 125 of the FARs.

4 Is access to the market for the provision of air transport services regulated, and if so how?

Yes. Applicants seeking air carrier operating authority must acquire a certificate of public convenience and necessity, granted from the DoT under chapter 411 of the Transportation Code and part 201 of the FARs. For certain smaller operations, an exemption application may be filed pursuant to part 298 of the FARs. Application for a certificate of public convenience and necessity must be made in writing and verified, and the carrier must demonstrate that it is 'fit, willing and able' to provide the proposed operations and comply with the rules and regulations. The applicant must have the managerial skills and technical ability to provide the service; it must have access to financial resources to begin operations without posing undue risk to consumers; it must also show a willingness and ability to comply with applicable regulations. If the applicant certifies fitness, and the DoT learns of any special issues, the application is handled with a 'show cause order'. The certificate specifies the terminal and intermediate points between which the air carrier is authorised to engage in transportation. The operating authority is not effective until the applicant has been certified by the FAA to conduct operations under the relevant category and it has obtained adequate liability insurance. See Paul Dempsey and Laurence Gesell, Air Commerce and the Law (2004), 226–231 (Air Commerce).

If seeking an exemption, the applicant may file an application pursuant to part 298 of the FARs, which establishes a class of air carriers known as 'air taxi operators', and provides certain exemptions to the economic regulations of the Transportation Code. An air taxi operator does not generally use large aircraft, does not hold a certificate of public convenience and necessity, has liability insurance, and has registered with the DoT as an air taxi operator.

5 What requirements apply in the areas of financial fitness and nationality of ownership regarding control of air carriers?

Financial fitness

To acquire a certificate of public convenience and necessity, an applicant must demonstrate financial fitness. The DoT has not identified specific financial fitness criteria. For a new applicant, however, the DoT imposes a 90-day 'zero revenue test'. This test requires proof of available funding to cover pre-operating costs plus a working capital reserve adequate to fund projected expenses for three months of flight operations without revenue. See, for example, Application of Sunbird Airways Inc, DoT Order 94-6-30 (1994). Filing for bankruptcy is grounds for enhanced scrutiny by the DoT.

Nationality of ownership and control

The DoT requires that an applicant for a certificate of public convenience and necessity be a citizen of the United States. The president and two-thirds of the board of directors and other managing officers of the corporation must be US citizens and 75 per cent of the voting interest in the corporation must be owned or controlled by US citizens (see FARs part 204.2(c)(3)). The DoT has interpreted this requirement to mean that US citizens must also be in actual control of the carrier and must have control of at least 51 per cent of non-voting equity and 75 per cent of voting equity. See, for example, DHL Airways Inc, Docket No. OST-2002-13089-549 Recommended Decision of ALJ, pp35–38; Air Commerce at 232. Foreign entities may control up to 25 per cent of the stock and no more than 49 per cent of the combined stock and debt. Furthermore, the air transport agreement executed by the United States and the European Union in 2007 provides that an EU national's ownership of more than 50 per cent of a US carrier will not be deemed itself to constitute actual control of the US carrier and each situation is to be considered case by case.

6 What procedures are there to obtain licences or other rights to operate particular routes?

Subpart E of part 121 of the FARs prescribes rules for obtaining approval for routes by certificate holders conducting domestic or flag operations. The certificate holder must show it can conduct satisfactorily scheduled operations between each regular, provisional and refuelling airport over that route and that the services and facilities are available and adequate.

International routes are governed by the relevant bilateral or multilateral aviation treaties. In line with these treaties, the DoT issues international routes in competitive proceedings, and the president approves them in light of foreign policy and national defence considerations (Air Commerce at 233). Some of the factors the DoT considers in making this determination are market structure, route integration, fare and service proposals, incumbency, and the rapidity with which the applicant could enter the market.

There are requirements that affect, and limitations on, the number of flights airlines may operate out of certain high-density airports (see question 21).

7 What procedures are there for hearing or deciding contested applications for licences or other rights to operate particular routes?

Part 302 of the FARs establishes procedures for the conduct of all aviation economic proceedings before the DoT. This includes, among other things, US air carrier certificate procedures, foreign air carrier permit licensing and certificate cases involving international rates. Administrative law judges recommend or make initial decisions that are subject to approval by the relevant DoT decision-maker, which is generally the assistant secretary for aviation and international affairs. The secretary of transportation may exercise the authority of the assistant secretary if the secretary believes a decision involves an important question of national transportation policy (see FARs part 302.18(c)).

8 Is there a declared policy on airline access or competition, and if so what is it?

Like other US industries, the airline industry is subject to US federal antitrust law, which is intended to preserve competition and open markets. Thus, as a general matter, the strong US policy of protecting and maintaining open, competitive markets applies to aviation.

In addition to the application of basic antitrust principles, the DoT has authority over airlines operating in the US. It is also authorised to apply antitrust-type policies and principles in its regulatory role to ensure that airlines operate in the public interest.

9 What requirements must a foreign air carrier satisfy in order to operate to or from your country?

The DoT must grant economic authority to a foreign air carrier navigating foreign aircraft in order to operate flights in the United States. Under section 41301 of the Transportation Code, the DoT may award a foreign air carrier permit. Alternatively, the DoT may grant an exemption from this permit requirement pursuant to section 40109 of the Transportation Code.

Part 211.20 of the FARs establishes the specific details an applicant must provide to obtain a foreign air carrier permit or exemption. The applicant must fully comply with the requirements of this regulation, and the DoT may require an applicant to provide additional information as necessary. The air transportation proposed must either be covered by an air transport agreement between the United States and the applicant's home country or available in the home country on the basis of reciprocity or comity. Once an application is filed, the applicant must serve a copy of the completed application to US carriers that serve the applicant's home country.

The DoT further publishes public notice of all applications so that any interested party may comment. Although opposition to an application will not be cause for the DoT to deny the application, the DoT will consider such opposition in rendering its decision.

An applicant will obtain a foreign air carrier permit or exemption if granting such will serve the public interest. The DoT sets forth a number of factors it evaluates in determining whether the value of an applicant's service to, and within, the US serves the public interest. These include whether there is an effective aviation security agreement in place between the US and the home country and whether the FAA has identified any...