USPA News

SBA OFFICE OF ADVOCACY CALLS FOR FAA TO DROP CHARITY FLIGHT RULE

USPA member Leslie Weinstein of Boise ID is a member of the Small Business Administration’s Office of Advocacy which recently petitioned FAA Administrator Marion Blakey to drop the proposed charity flight rule as it failed to accurately account for the economic impact of the rule. USPA is indeed pleased to have a USPA member in this prestigious position.

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Office of Advocacy

April 2, 2004




The Honorable Marion C. Blakey

Administrator

Federal Aviation Administration

800 Independence Avenue, S.W.

Washington, D.C. 20591









RE: National Air Tour Safety Standards (FAA-1998-4521); 68 Fed. Reg. 60572
(October 22, 2003).







Dear Administrator Blakey:




The Office of Advocacy (Advocacy) of the U.S. Small Business Administration
(SBA) submits this comment in response to the above referenced notice of
proposed rulemaking. The proposed rule establishes national regulations for
commercial air tours conducted in certain powered aircraft. The proposed rule
eliminates an existing exemption for Part 91(1)
sightseeing flights, requires all air tours to operate in accordance with either
Part 121 or Part 135,(2) sets new pilot flight hour
requirements for certain charitable flights, and establishes several new
operational and equipment standards for existing commercial air tours.




Advocacy’s comment relays concerns expressed by small entities about the
proposed rule. As written, the proposed rule is likely to have a significant
economic impact on regulated entities, including a substantial number of small
sightseeing and air tour operators. After reviewing the proposed rule and the
accompanying initial regulatory flexibility analysis (IRFA), Advocacy recommends
that the Federal Aviation Administration (FAA) withdraw the rule until the
agency is able to obtain adequate data on the operators affected by the rule.





I. Background on the Office of Advocacy





The Office of Advocacy, created in 1976, monitors and reports on agency
compliance with the Regulatory Flexibility Act of 1980 (RFA), as amended by the
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).(3)
The RFA requires federal agencies to determine a rule’s economic impact on small
entities and consider significant regulatory alternatives that achieve the
agency’s objectives while minimizing the impact on small entities. Because it is
an independent office within the SBA, the views expressed by the Office of
Advocacy do not necessarily reflect the views of the SBA or the Administration.





On August 13, 2002, President George W. Bush signed Executive Order 13272,
requiring federal agencies to implement policies protecting small businesses
when writing new rules and regulations. Executive Order 13272 instructs Advocacy
to provide comment on draft rules to the agency that has proposed a rule, as
well as to the Office of Information and Regulatory Affairs (OIRA) of the Office
of Management and Budget.(4) Executive Order 13272 also
requires agencies to give every appropriate consideration to any comments
provided by Advocacy. Under the Executive Order, the agency must include, in any
explanation or discussion accompanying publication in the Federal Register
of a final rule, the agency’s response to any written comments submitted by
Advocacy on the proposed rule, unless the agency certifies that the public
interest is not served by doing so.(5)





II. Background on Existing Sightseeing and Air Tour Regulations





Commercial air tour operators must be certificated under the requirements of
Part 119 of Title 14 of the Code of Federal Regulations as complying with
the operational, safety and training rules outlined in either Part 121 or Part
135.




Currently, an exemption from the certification requirement is provided in
Part 119.1(e)(2) for certain nonstop sightseeing flight operators that use the
same airport for takeoff and landing and fly within a 25-mile radius. These
sightseeing flights currently operate under safety rules in Part 91 of Title 14
and are referred to as Part 91 operators.




The proposed rule would remove the exemption and require all Part 91 flights,
except certain charitable and community flights, to be certificated under Part
119 as commercial air tours. The current exemption would sunset six months after
the rule is finalized, at which time the Part 91 operators would be required to
obtain the certification.




The new rule would also impose new operational and equipment standards on
existing commercial air tour operators, referred to as Part 135 operators.





III. The FAA Did Not Comply with the Regulatory Flexibility Act





When developing a proposed rule, an agency must prepare an IRFA if it
determines that the proposal may impose a significant economic impact on a
substantial number of small entities.(6) Under Section
603 of the RFA, the IRFA must include: (1) a description of the impact of the
proposed rule on small entities; (2) the reasons the action is being considered;
(3) a succinct statement of the objectives of, and legal basis for the proposal;
(4) the estimated number and types of small entities to which the proposed rule
will apply; (5) the projected reporting, recordkeeping, and other compliance
requirements, including an estimate of the small entities subject to the
requirements and the professional skills necessary to comply; (6) all relevant
federal rules which may duplicate, overlap, or conflict with the proposed rule;
and (7) all significant alternatives that accomplish the stated objectives of
the applicable statues and minimize any significant economic impact of the
proposed rule on small entities. In preparing its IRFA, an agency may provide
either a quantifiable or numerical description of the effects of a proposed rule
or alternatives to the proposed rule, or more general descriptive statements if
quantification is not practicable or reliable.(7)




In the proposed rule, the FAA acknowledged that “virtually all of the
entities affected by the proposed amendments are small.”(8)
The FAA recognized that the proposed rule would have a significant economic
impact on a substantial number of small entities, and therefore performed an
IRFA. However, Advocacy is concerned that the IRFA is deficient in several
areas, which are discussed in detail below.







A. The FAA Does Not Adequately Explain the Reasons for the Proposed Rule







According to the FAA, the objective of the proposed rule is to “provide a
higher and uniform level of safety for commercial air tours… [and] to
significantly reduce the accident rate for those currently operating under Part
91.”(9) However, the agency does not explain the impetus
for this rulemaking. Given the numerous federal regulations governing the
commercial air tour industry (Part 135 operators), it is unclear why the FAA
initiated this rulemaking at this time. Advocacy recommends that the FAA clarify
whether higher accident rates, differences in data, or other circumstances
changed, warranting new rules. Advocacy also recommends that the FAA explain its
assertion that Part 91 accidents could be significantly reduced by requiring
those operators to be certified under Part 119. If the FAA believes that the
accident rate data for Part 91, or current Part 135, operations reveals a
significant trend that could be addressed by the measures in this proposed rule,
Advocacy recommends this be made clear to the public.







B. The FAA Appears to Have Underestimated the Number of Small Entities
Affected by the Proposal







1. Limited Data on Part 91 and Some Part 135 Operations










The agency estimated that 1,672 Part 91 operators and 453 Part 135 operators
would be affected by the rule.(10) However, operators
affected by the proposed rule informed Advocacy that the FAA’s estimates do not
accurately reflect the industry. Presently, the FAA does not collect data on
Part 91 operators. While the FAA has established systems for monitoring and
collecting data on Part 135 operators, corresponding systems do not exist for
Part 91 operators. The agency’s estimates of Part 91 operators are based on a
survey of its Flight Standards District Offices (FSDOs) and the FAA’s 1995
General Aviation and Air Taxi Activity and Avionics Survey (GAATA Survey). The
economic analysis for the rule states that the estimates “may understate the
true proportion of small operators because FSDOs are less likely to have
accurate information on Part 91 sightseeing activity.”(11)
Similarly, in a report titled “Estimates of the Sightseeing Air Tour Industry
Final Report,” (GRA report) GRA, an FAA contractor states, “Because there are
few periodic reporting or inspection requirements for Part 91 operators, the FAA
has limited contact with them. As a result, little information on their fleets,
operations or revenues is available.”(12) The GRA
report reveals no systematic means to quantify the number of Part 91 operators.
Advocacy believes the numerous assumptions in the FAA’s economic analysis
undermine the quality of the data used in the IRFA.(13)




There is also some indication that the agency does not have adequate methods
for collecting and tracking flight data for certain Part 135 flights. The
National Transportation Safety Board (NTSB) raised questions regarding the FAA’s
assertion that Special Federal Aviation Regulation 71 (SFAR 71),(14)
which governs air tours in Hawaii, caused a decrease in air tour accidents in
that state. The NTSB questioned the FAA’s claim, stating that the “Board does
not believe that there is a reliable basis for this conclusion because of the
current lack of an accurate, verifiable method of collecting and tracking flight
activity data for the specific segments of nonscheduled 14 CFR Part 135 flight
operations.”(15) The documentation supporting the rule
and statements by the NTSB suggest that the FAA is not fully aware of the number
of operators affected by the proposal.










2. Flight Schools and Charitable Organizations










It is not clear that FAA’s estimates include flight schools or other
charitable organizations such as flight museums, an important and sizeable
segment of Part 91 operators. These entities could be significantly affected
because they conduct Part 91 sightseeing flights either as a marketing tool or
to raise funds. For example, a survey conducted by the Aircraft Owners and
Pilots Association (AOPA), indicated that of 373 responding flight schools 92%
stated that they offered sightseeing rides to the public and over 45% of the
respondents stated that they conducted more than 40 flights per year for the
purpose of sightseeing.(16) These responses represent
only a fraction of the 1,500 potentially affected flight schools in the United
States.




By not including flight schools and certain charitable organizations in its
analysis, the agency failed to capture a large number of small entities that are
likely to be affected by the proposed rule. Advocacy urges the FAA to perform
outreach to the sightseeing and air tour industry to obtain a more complete
understanding of the regulated entities. This will help the agency to more
accurately identify the number of small entities that will be affected.







C. The FAA Did Not Accurately Calculate the Economic Impacts of the
Proposed Rule on Small Entities







1. Revenue and Flight Hours Estimates










In its IRFA, the FAA states that it does not have information on the
potential impact of the proposed rule on revenues and profits.(17)
Advocacy appreciates that the agency solicited comments on this issue and we
have encouraged the regulated entities to comment on the revenue information
used by the FAA to estimate the economic impact on small entities. Despite
limited information, the FAA generated revenue data using a mix of the FSDO
survey responses, the GAATA survey, data from other sources, and a number of
assumptions about the industry. The absence of source data and transparency in
the process used to arrive at these estimates make it difficult for Advocacy or
the regulated small entities to determine whether the estimates reflect actual
revenues earned by Part 91 operators.




Advocacy is concerned, in part, because the revenue figures employed in the
IRFA rely on uncertain flight hour estimates for operators. Revenue figures are
intended to reflect the number of flight hours a Part 91 operator flies each
year as well as the average revenue per flight hour. The agency states that “89
percent of part 91 sightseeing aircraft are estimated to log fewer than 50
sightseeing hours per year.”(18) The FAA calculated the
revenues for all operators based on this 50 flight hour figure.(19)
Except for reference to the total number of flight hours in the GAATA survey,
which has incomplete coverage of Part 91 operators, the FAA provides little data
to explain the 50 flight hour average estimate for Part 91 operators.




Advocacy’s discussions with the sightseeing industry suggest that many
operators, perhaps even a majority, conduct in excess of 50 flight hours each
year. For instance, Advocacy spoke with two Part 91 operators who did not
operate near major attractions or under any special circumstances. The operators
indicated that they flew in excess of 200 hours annually despite providing Part
91 sightseeing tours on a part-time basis.(20) Further,
the AOPA surveyed 49 members providing Part 91 flights to ascertain
characteristics of their business operations, with 63% responding that they
conducted more than 50 hours of Part 91 flights annually.(21)





In summary, based on the information available to Advocacy, it is unclear
whether FAA’s average operator statistics for flight hours and revenue represent
even a small portion of the Part 91 industry. While many operators are small and
offer Part 91 sightseeing tours only part-time, many others are sophisticated
business operations that are not accurately depicted in the FAA’s analysis.
Discussions with sightseeing and air tour operators suggest that the FAA’s use
of average flight hours and average net revenues for the industry
mischaracterizes many full time operators as part-time and thus underestimates
the impact of the rule on operators. Advocacy urges the FAA to talk with the
sightseeing and air tour industry to obtain data that more accurately reflects
the variation in average number of flight hours and revenues across Part 91
sightseeing flight operators.










2. Business Closures










According to the FAA, approximately 700 of the 1,672 Part 91 operators
estimated by the FAA to provide sightseeing flights would choose to stop
offering such flights rather than comply with the proposed rule.(22)
The FAA defined the 700 operators as “marginal” because they are assumed to
provide ten hours or less of sightseeing flights per year. The agency determined
that the marginal operators would stop offering sightseeing services but could
remain in business by obtaining revenue through other means. According to the
FAA, sightseeing represents only a small percentage of the marginal operators’
total revenue. The FAA did not provide sufficient data in the IRFA to support
these claims. The absence of necessary data makes it difficult for Advocacy or
an affected small business to ascertain how the “marginal” characterization was
derived and whether the FAA is correct in its characterization.




Advocacy is concerned because the FAA recognizes that the rule could cause
hundreds of entities to leave the air tour business, yet the agency seems to
have taken no steps to mitigate this result. However, the sightseeing and air
tour industries contend that requiring a Part 119 certificate would cause
thousands, not hundreds of small operators to go out of business. Because the
FAA likely underestimated the number of small Part 91 operators and failed to
provide accurate data on Part 91 operations, revenues and costs, Advocacy
believes the industry’s estimate may be sound. Consequently, the actual
incidence of business closure is likely to be significantly higher than
estimated in the IRFA.










3. Economic Impact on Existing Part 135 Operators










The FAA estimates that the proposed rule will cost existing Part 135
operators about $69 million over ten years. The air tour industry asserts that
many of the Part 135 operators are small entities who will not be able to absorb
such high costs and remain in business. Additionally, a majority of the existing
Part 135 operators primarily provide air tour services in and around national
parks and are already subject to federal requirements more stringent than those
currently required under Part 135. Thus, the requirements in the proposed rule
are duplicative and will impose significant financial burdens on affected Part
135 air tour operators while not obviously improving safety. The FAA should
evaluate whether the proposed rule unduly burdens existing Part 135 operators,
given the existence of other federal regulations governing their operations.






4. Other Significant Costs Not Considered by the FAA






The FAA estimates that Part 91 operators converting to Part 135 operations
would incur approximately $150 million in expenses for the first ten years after
certification. However, the FAA did not include in its calculation costs
associated with insurance and down-time while waiting for certification.




The FAA assumes that a Part 91 operator converting to a Part 119 certificate
“would experience no difference in liability and, therefore, no difference in
insurance costs…”(23) Small operators have expressed
strong reservations about the FAA’s assumptions. Part 91 operators contend that
their insurance costs will significantly increase if they convert to Part 135
operations. In fact, some operators are worried they will not be able to obtain
insurance coverage once they convert to Part 135. The inability to obtain or
afford insurance could create a barrier to entry for small operators seeking
certification to perform Part 135 operations. The removal of the Part
119.1(e)(2) exemption, coupled with the inability to undertake Part 135
operations could leave many small operators no choice other than to exit the
industry. Advocacy recommends that the FAA speak with operators and insurance
carriers to conduct additional research before assuming insurance costs will not
change as a result of the rule.




The FAA estimates that the certification process will take about three months
to a year.(24) The Part 119.1(e)(2) exemption is slated
to expire six months after the final rule is published. Given the large number
of Part 91 operators and limited FSDO personnel, affected entities are concerned
that the exemption will expire before they receive certification. Entities will
suffer significant revenue loss if this occurs. The FAA intends to require all
Part 91 operators to obtain certification within six months. However, by its own
estimation, the process may take longer, which could result in the grounding of
many Part 91 operators. The agency should evaluate whether six months is
sufficient time for affected Part 91 operators to obtain Part 119 certification.








D. The FAA Did Not Adequately Analyze Viable Alternatives That Would
Achieve Regulatory Objectives While Minimizing the Potential Impact on
Affected Small Entities







Section 603(c) of the RFA requires a regulatory agency to include a
description of any significant alternatives to the proposed rule that minimize
the economic impacts on small entities while still accomplishing the agency’s
regulatory objectives. The adoption of significant alternatives can often
provide regulatory relief to small entities severely affected by agency
rulemakings.




In the proposed rule, the FAA analyzed three possible alternatives. The
agency did not choose any of the listed alternatives because it asserted the
safety objectives of the rule would not be met if any of the alternatives were
adopted. Advocacy understands that the FAA desires to improve the safety of air
tours to protect the flying public. However, to comply with the RFA, the FAA
must describe significant alternatives that minimize the economic impacts on
small entities. Significant alternatives should meet the objectives of the rule,
in this case, improving safety and minimizing the economic impact on small
entities. If the agency is unable to identify regulatory alternatives that meet
these criteria, it should conduct outreach to interested groups or solicit
comment on the issue.





IV. Conclusion and Recommendations





Due to weaknesses in the data used for the IRFA, Advocacy recommends that the
FAA carefully review the comments provided and withdraw the rule to give further
consideration to the concerns raised by Advocacy and others commenting on the
proposed rule and IRFA. Advocacy encourages the agency to conduct additional
research and outreach to identify affected small entities, determine the
potential economic impacts of the rule, and identify less burdensome
alternatives. If after evaluating the new data, the FAA determines a rule is
warranted, the agency could then re-propose the rule with a revised IRFA that
reflects the impacts on small entities and analyzes less burdensome
alternatives. Advocacy offers the following alternatives for consideration by
the FAA to address their objectives while minimizing the regulatory burden on
affected small entities.










1. The FAA should consider retaining the Part 119.1 (e)(2) exemption and
adding Part 91 data requirements.










Many operators suggested that the FAA retain the Part 119.1 (e)(2) exemption
and leave sightseeing flights under Part 91. Rather than converting Part 91
flights, the agency could amend the rule to include certain data reporting
elements. For example, the agency could require Part 91 operators to report
insurance coverage to the local FSDO. This would alleviate the financial burden
of certification under Part 119 while still providing necessary information to
the FAA about Part 91 flights.










2. The agency should assess whether regional rulemakings are more
appropriate than national standards.










As pointed out by the Office of Information and Regulatory Affairs (OIRA) in
its post review letter, the data included in the FAA’s regulatory evaluation
indicates that about half of the air tour fatalities were based in Alaska during
1993-2000. Given these statistics, the FAA should review its data to determine
whether regional rules are more appropriate than a national regulation. The
existence of Special Federal Aviation Regulation 71 in Hawaii and Special
Federal Aviation Regulation 50-2 at the Grand Canyon National Park underscore
the effectiveness of regional regulations.










3. Advocacy recommends that the FAA withdraw the proposed rule and
convene either an Aviation Rulemaking Committee (ARC) or an Aviation Rule
Advisory Committee (ARAC).










Small entities suggested that an ARC or ARAC would be a more appropriate
method of developing national standards for the sightseeing and air tour
industries. This alternative would allow the industry to participate more fully
in the development of a rule that affects their businesses. It would also allow
the FAA the opportunity to evaluate a variety of alternatives with the benefit
of industry input and experience.










4. The FAA should consider delaying the expiration of the Part 119.1
(e)(2) exemption.










Advocacy encourages the FAA to delay the expiration date of the Part
119.1(e)(2) exemption, if it continues with this rulemaking. This would allow
Part 91 operators to continue conducting sightseeing flights and maintain
revenues while they seek Part 119 certification. This will alleviate potential
revenue losses and give small operators additional time to complete the
certification process.










5. Advocacy suggests that the agency separate the Part 91 helicopter
accident rates and Part 91 airplane accident rates.










Advocacy agrees with OIRA’s recommendation that the FAA revise the IRFA to
differentiate between the helicopter and airplane accident data. A review of the
FAA data suggests that combining the Part 91 helicopter accident rates with part
91 airplane accident rates skews the accident percentage for all Part 91
flights. According to FAA’s statistics, Part 91 helicopter flights have a higher
accident rate than Part 91 airplanes. Advocacy encourages the FAA to analyze the
data to determine whether separate requirements for helicopters and airplanes
are appropriate.




As written, the proposed rule could cause a substantial number of small
operators to exit the commercial air tour industry and impose significant cost
burdens on existing air tour operators and others seeking Part 119
certification. However, because of data inadequacies, the full extent of the
economic impacts is uncertain. In future rulemakings, if the FAA lacks
information about the industry to be regulated, Advocacy suggests the agency
issue an advanced notice of proposed rulemaking (ANPRM). An ANPRM that solicits
information from interested parties will help the agency to gather the data
essential to developing a more informed rule.




Advocacy encourages the FAA to review the comments provided and withdraw the
rule to conduct further outreach with interested parties. To comply with the RFA,
a more complete analysis of viable alternatives and the potential economic
impacts on small entities is necessary.




Thank you for your consideration of these issues. Should you have any
questions or require additional information, please contact me or Carrol Barnes
of my staff at (202) 205-6890.




Sincerely,




Thomas M. Sullivan

Chief Counsel for Advocacy




Carrol L. Barnes

Assistant Chief Counsel for Advocacy




Charles Maresca

Assistant Chief Counsel for Advocacy




Cc: Dr. John D. Graham, Administrator, Office of Information and Regulatory
Affairs,

Office of Management and Budget




ENDNOTES





1. Throughout this comment letter Part 91 will refer to
sightseeing flights.




2. Throughout this comment letter Part 135 will refer to
commercial air tours.




3. Pub. L. No. 96-354, 94 Stat. 1164 (1980), (codified as
amended at 5 U.S.C. §§ 601-612).




4. E.O. 13272, at § 2(c), 67 Fed. Reg. at 53,461.




5. Id. at § 3(c), 67 Fed. Reg. at 53,461.




6. 5 U.S.C. § 603(a).




7. 5 U.S.C. § 603 and 5 U.S.C. § 607.




8. 68 Fed. Reg. 60584 (October 22, 2003).




9. Id.




10. Id.




11. Office of Aviation Policy and Plans, Federal Aviation
Administration, Preliminary Regulatory Evaluation, Initial Regulatory
Flexibility Analysis, and Trade Impact Assessment, page 66 (2002).




12. GRA, Inc., Estimates of the Sightseeing Air Tour
Industry Final Report, page 4 (1998).




13. A Guide for Government Agencies: How to Comply with
the Regulatory Flexibility Act, Chapter 2, available on Advocacy’s website,
<http://www.sba.gov/advo/laws/rfaguide.pdf>.




14. 14 C.F.R. § 91 (2003). Special Federal Aviation
Regulation No. 71.




15. Comments of the National Transportation Safety Board, to
the Notice of Proposed Rulemaking in Dkt. No. FAA-1998-4521, at 1 (Jan. 22,
2004).




16. Aircraft Owners and Pilots Association. Air Tour NPRM
Flight School Online Survey, February 2004. See,
http://www.aopa.org/survey/survey.cfm?id=101.





17. 68 Fed. Reg. 60585




18. Office of Aviation Policy and Plans, Federal Aviation
Administration, Preliminary Regulatory Evaluation, Initial Regulatory
Flexibility Analysis, and Trade Impact Assessment, page11 (2002).




19. FAA designates a portion of the operators as “marginal,”
defined as flying 10 or fewer hours annually. The marginal group’s revenues are
estimated separately in the IRFA based on the 10 flight hour assumption largely
because the FAA assumes that these operators will exit the industry due to the
high costs of Part 119 certification.




20. February 6, 2004 meeting with air tour industry
representatives at the Office of Advocacy.




21. Aircraft Owners and Pilots Association. Air Tour NPRM
Air Tour Operators Online Survey, February 2004. See,
http://www.aopa.org/survey/survey.cfm?id=99.




22. 68 Fed. Reg. 60585.




23. Office of Aviation Policy and Plans, Federal Aviation
Administration, Preliminary Regulatory Evaluation, Initial Regulatory
Flexibility Analysis, and Trade Impact Assessment, pp. 18-19 (2002).




24. Id. at 14.





 







Posted by Jan at April 9, 2004 05:42 PM