Thursday, November 8, 2007

General Aviation Tsunami

On October 4th the FAA first suspended and eight days later revoked AMI Jet Charter’s air carrier certificate. Immediately a shock wave of tsunami proportions was felt in every sector of the general aviation industry. Until AMI Jet Charter was acquired by TAG Aviation USA in 1996, this company was known as Aviation Methods, a highly successful and highly regarded aircraft management company and charter operator.

Aviation Methods was founded by Roger McMullin and Jake Cartwright 30 years ago. One of the major customers of Aviation Methods was TAG Aviation USA, owned by TAG Aviation S.A., a Geneva-based holding company founded by Akram Ojjeh (1923-1991) and his sons, Mansour and Aziz.

Because of a law that prohibits a non-US entity from owning controlling interest in a U.S. air carrier (a company operating under FAA part 121 or part 134), TAG Aviation USA purchased only 49% of Aviation Methods. Fifty-one percent remained owned by two US citizens. All of Aviation Methods aircraft became management clients of TAG Aviation USA.

One of the reasons for the certificate revocation was the FAA's allegation that TAG, not AMI, was exercising operational control of flights, which would mean it was, in the words of the FAA, "under active control of foreign interests".

The Department of Transportation oversees the ownership issue of all air carriers operating within the United States. The DOT enforces an arcane law (49 U.S.C. § 41101), passed in the 1930s, that prohibits control of any U.S. air carrier by a foreign entity. In today’s global economy this law makes no sense and should be repealed. In September of 2005 the DOT issued an exemption to this law for air carriers providing “assistance in the carriage of freight and people affected by Hurricane Katrina”. Sam Skinner, who was Secretary of Transportation from 1989 to 1991, proposed repealing this law in the interest of bringing more capital into the U.S. airline market. Jeff Shane, Under Secretary of Transportation for Policy, and others have long been advocates of repealing or amending this law, but all such proposals have run into a buzz saw of special interest opposition on Capitol Hill.

At the recent Aviation Business Roundtable meeting I sat across from Mary Peters, the current DOT Secretary. I wanted to point out to her that the largest aviation service companies in the GA industry are 100% foreign owned. Directly on her left was the CEO of BBA Aviation, a British owned company and the parent of Signature Flight Support. Three chairs down on her left was Jet Aviation, owned by a German investment company. At the adjoining table was Landmark Aviation, owned by Dubai Aerospace. Not in the room was the largest (70 bases) FBO in U.S., Atlantic Aviation, owned by the Australian financial power house Macquarie Bank.

So where’s the beef and what harm is there in having foreign ownership of business jet charter companies? Mrs. Peters, or anyone else, please explain this to me.

Footnote:
In researching this article I consulted with my cousin Langhorne Bond. Langhorne’s father worked for Pan American World Airlines. In the 1930s and 40s he set up and operated China National Aviation Corporation which Pam Am controlled. You can read the whole story in “Wings for an Embattled China”. I also found an article, “30th Anniversary: TAG and Bombardier”. Much of this story was related by Bill Juvonen who along with Jim Taylor, Dave Hurley, and Barry Smith helped launch the Bombardier (then Canadair) Challenger. Today Bill Juvonen is a part of The Aviation Group.