This edition of the Cozen O’Connor Aviation Regulatory Update discusses DOT’s recently issued consumer protection rules and initiatives, the GAO’s report on air traffic control reorganization, DOT’s tentative approval of antitrust immunity for the Delta Air Lines/Aeromexico alliance, the FAA’s rulemaking on airline pilot professional development, DOT’s agreement with Southwest Airlines regarding the accessibility of the carrier’s airport kiosks, the DOT Inspector General’s reports on the effects of DOT’s tarmac delay rule on airline flight cancellations and the FAA’s progress in implementing NextGen, OFAC and BIS amendments to Cuba sanctions-related regulations and export controls, and the latest DOT and FAA enforcement actions.

Department of Transportation

Regulatory

DOT Issues Consumer Protection Rules and Initiatives

DOT issued four separate consumer protection-related rulemaking initiatives affecting U.S. and foreign airlines, ticket agents, and air travel consumers, including its third final rule further strengthening airline passenger protection regulations (PP3); a final rule amending requirements for airline reporting of mishandled-baggage data and establishing new requirements for airlines to report statistics for mishandled wheelchairs and scooters used by disabled passengers and transported in aircraft cargo compartments; an Advance Notice of Proposed Rulemaking (ANPRM) requesting comments on how airlines should refund checked baggage fees when they fail to deliver passengers’ baggage in a timely manner, as required by the FAA Extension, Safety, and Security Act of 2016; and a Request for Information regarding airline distribution practices. DOT also announced plans to issue a Supplemental Notice of Proposed Rulemaking (SNPRM) on the disclosure of ancillary services fees to consumers at all points/channels of sale, including global distribution systems (GDSs), as well as plans to issue a final rule on the definition of “ticket agent,” customer service commitments by large ticket agents, and the prohibition of post-purchase price increases for ancillary services and those relating to “mistaken fares.” DOT’s PP3 final rule becomes effective on December 5, 2016 and the final rule on carrier reporting of mishandled baggage, wheelchairs and scooters becomes effective on December 2, 2016. Comments on DOT’s ANPRM on checked baggage fee refunds are due November 30, 2016, and responses to DOT’s request for information regarding airline distribution practices are due December 30, 2016.

DOT Proposes to Grant Antitrust Immunity to Delta Airlines and Aeromexico

DOT issued an order to show cause proposing to grant antitrust immunity to Delta Air Lines and Aeromexico for their alliance agreements. The carriers propose to operate a joint venture in the U.S.-Mexico market under the recently liberalized U.S.-Mexico bilateral agreement, allowing them to coordinate their network planning, pricing, and sales activities, as well as align their respective frequent flyer programs. As a condition for approval, DOT proposed that the carriers divest takeoff and landing slots to support 24 new daily transborder services from Mexico City (MEX) and six new daily transborder services from New York (JFK). DOT proposed these conditions “to prevent harm to consumers resulting from the carriers’ dominant positions” at MEX and JFK and the inability of new entrant carriers to access slots at those airports. DOT has also proposed limiting the grant of immunity to five years. Answers to the DOT order were filed on November 18, 2016, with replies to those answers due November 30, 2016.

DOT Reaches Agreement with Southwest Airlines over Availability of Accessible Airport Kiosks for Disabled Persons

DOT announced an agreement with Southwest Airlines regarding the carrier’s compliance with DOT regulations requiring airport kiosks installed after December 12, 2016 at U.S. airports that have annual enplanements of 10,000 or more passengers be accessible to disabled persons, with at least 25 percent of the kiosks in each airport location accessible by December 12, 2023. The carrier had informed DOT that it would be unable to comply with DOT’s kiosk accessibility rule and offered to institute measures to increase the availability of accessible kiosks for disabled persons beyond DOT’s requirements in exchange for DOT agreeing not to take enforcement action against Southwest for failing to install accessible kiosks between December 12, 2016 and September 30, 2017. Southwest agreed to ensure that at least 50 percent of its kiosks at U.S. airports are accessible to passengers with disabilities by September 30, 2017. In addition, Southwest agreed that all automated kiosks it installs after that date would be accessible, so that eventually 100 percent of its kiosks will be accessible to disabled persons.

DOT Tentatively Selects American Airlines to Provide Los Angeles-Beijing Service

DOT issued a show cause order tentatively selecting American Airlines to operate scheduled combination air service between Los Angeles and Beijing, China, and allocating the carrier seven weekly U.S.-China frequencies. DOT selected American over Delta Air Lines’ competing service proposal, stating that whereas Delta already provides service to Beijing from the West Coast via Seattle, American lacks a West Coast gateway for service to Beijing. American also offered more connections, proposing round-trip one-stop connecting service to Beijing from 24 U.S. points (26 in Summer), including 12 West/Mountain West cities. DOT said that adding American as a third U.S. airline competitor in the West Coast-Beijing market, in addition to United Airlines and Delta, outweighed the benefits that would be achieved through selecting Delta. DOT stated that it would require American to begin service within 90 days of the issuance of a final order in the proceeding. Objections to DOT’s tentative decision are due by November 22, 2016, with answers to those objections due by November 29, 2016.

DOT Inspector General’s Report Finds No Continuing Effects of the Tarmac Delay Rule on Airline Cancellations and Delays

DOT’s Office of the Inspector General (OIG) issued a report finding that although DOT’s tarmac delay rule increased airline cancellation rates during the first three years following its implementation (May 2010–April 2013), the rule did not increase cancellation rates from May 2013 through December 2014, which was the end of the OIG’s period of analysis. The report said that the rule has reduced tarmac delays, but did not appear to change gate delays. The OIG’s investigation and report were mandated by Congress under the Federal Aviation Administration Modernization and Reform Act of 2012, which directed OIG to assess the impact of the tarmac delay rule on airlines’ decisions to delay or cancel flights.

DOT Announces Members of New National Advisory Committee on Travel and Tourism Infrastructure

DOT announced the members of the new National Advisory Committee on Travel and Tourism Infrastructure, which will advise DOT on priorities and funding needs relating to the U.S. intermodal transportation network to facilitate travel and tourism. Members have been appointed to serve a two‑year term, and include stakeholders from the travel and tourism industry; travel and tourism-related associations; travel, tourism, and destination marketing organizations; the travel and tourism-related workforce; state tourism offices; state departments of transportation; regional and metropolitan planning organizations; local governments; organizations with expertise in intermodal connectivity for travel and tourism; and entities having expertise in public-private partnerships.

DOT/FAA Ban Samsung Galaxy Note7 Devices on U.S. Flights

DOT and the FAA issued an emergency order prohibiting airlines from allowing Samsung Galaxy Note7 devices onboard aircraft, including as cargo, and passengers from carrying such devices onboard aircraft on their person, in carry-on baggage, or in checked baggage. The order requires passengers who inadvertently bring a Samsung Galaxy Note7 device onto an aircraft to immediately power off the device, not use or charge the device while onboard, protect the device from accidental activation, including disabling any features that may turn on the device, such as alarm clocks, and keep the device on their person and not in the overhead compartment, seatback pocket, nor in any carry-on baggage, for the duration of their flight. Airlines are required to alert passengers to the prohibition immediately prior to boarding, and deny boarding to any passenger in possession of these devices unless and until the passenger divests themselves and their baggage of the device. The Emergency Order became effective on October 15, 2016.

Enforcement

DOT Assesses Civil Penalties Against Qatar Airways for Alleged Flights in FAA-Prohibited Airspace and Violation of DOT Codeshare Approval Conditions

DOT issued a consent order imposing $185,000 in civil penalties against Qatar Airways for allegedly operating flights displaying a U.S. carrier’s designator code over conflict zones subject to FAA flight prohibitions. DOT’s investigation found that in late 2014 and early 2015, certain Qatar Airways flights displaying American Airlines’ code operated in “foreign flight information regions” while FAA flight prohibitions were in effect. By displaying American’s code on flights in airspace subject to FAA flight prohibitions, DOT stated that Qatar Airways violated the conditions of its codeshare statement of authorization, which prohibit the carrier from displaying the code of a U.S. carrier on a flight over an area in which the FAA has issued a flight prohibition. In response, Qatar Airways contended that the flights at issue occurred before its Advanced Flight Watch System, which tracks its flights, became operational. The carrier said that upon notification by DOT of the alleged violations, it immediately took the steps necessary to ensure that all FAA NOTAMs on flight prohibitions are fully integrated into its flight tracking and management processes and systems. DOT ordered Qatar Airways to pay $92,500 within 30 days, with the remaining $92,500 only due and payable if, within one year, the carrier commits similar violations or fails to abide by the order’s cease and desist or penalty payment provisions.

DOT Assesses $20,000 in Civil Penalties Against Philippine Airlines for Alleged Tarmac Delay Reporting Violations

DOT issued a consent order assessing $20,000 in civil penalties against Philippine Airlines for allegedly filing erroneous tarmac delay data with DOT. DOT alleged that the carrier initially reported a tarmac delay of 270 minutes in its original tarmac delay report filing, but subsequently provided data showing that the reported tarmac delay lasted 300 minutes, and later changed its report to show the tarmac delay in question lasted no more than 200 minutes. DOT asserted that Philippine Airlines’ failure to submit accurate data “wasted valuable Department resources” by forcing DOT’s Enforcement Office to investigate and resulted in the publication of inaccurate tarmac delay data, which then had to be revised. The carrier was ordered to pay $10,000 within 30 days from the date of the issuance of the consent order, with the remaining $10,000 due and payable if, within one year of the service date of the order, Philippine Airlines violates the order’s cease and desist or payment provisions.

Federal Aviation Administration

Regulatory

DOT Office of the Inspector General Issues Report Critical of FAA’s NextGen Implementation

DOT’s Office of the Inspector General (OIG) published an audit report criticizing the FAA’s implementation of the Next Generation Air Transportation System (NextGen). The report states that the FAA continues to use a “segmented approach” for NextGen implementation that, while reducing risks in the near future, obscures how much each NextGen program will ultimately cost and when planned capabilities/benefits will be delivered and when programs will be completed. The report cautioned that the benefits of NextGen “remain uncertain for improving the flow of air traffic and reducing [FAA] operating costs.” OIG stated that most of the FAA’s “transformational programs” will not transform how air traffic is managed in the National Airspace System, at least until 2020. The report recommends that the FAA develop and implement agency-wide guidance to provide for a “uniform approach” to manage the multiple, complex, and interrelated programs needed to achieve NextGen capabilities, but according to the OIG, the FAA has rejected this recommendation.

FAA Proposes New Rules Governing Airline Pilot “Professional Development”

The FAA issued a notice of proposed rulemaking to improve the “professional development” of domestic, flag and supplemental U.S. air carrier pilots. The NPRM would require carriers conducting such operations to: 1) provide new-hire pilots with “operations familiarization” to become familiar with carrier procedures before serving as a flight crew member; 2) revise pilot upgrade curriculum; 3) provide “leadership and command and mentoring training” for all pilots in command; and 4) establish and maintain Pilot Professional Development Committees to develop, administer, and oversee formal pilot mentoring programs. The proposed rule would also make certain changes to requirements for flight simulation training devices and second in command pilot training and checking. The NPRM was issued as a result of NTSB and FAA concerns that inadequate leadership in the flight deck, pilots’ unprofessional behavior, and pilots’ failure to comply with the “sterile flight deck rule” were factors in multiple accidents and incidents, including Pinnacle Airlines flight 3701 (October 14, 2004) and Colgan Air Flight 3407 (February 12, 2009). Comments on the NPRM are due January 5, 2017.

Enforcement

FAA Proposes Civil Penalties Against Amazon.com for Alleged Hazmat Violations

The FAA issued a release proposing to assess $78,000 in civil penalties against Amazon.com for allegedly violating the Hazardous Materials Regulations by offering FedEx an undeclared shipment containing a flammable liquid for air transportation from Ruskin, Florida, to Algonquin, Illinois. The FAA contends that the shipment of two 14-ounce bottles of ethanol-based Clubman Jeris Hair Tonic was not properly packaged, marked and labeled as containing hazardous material. The FAA also said that Amazon.com did not provide shipping papers indicating the amount, type and hazardous nature of the material and did not provide required emergency response information with the shipment.

Office of Foreign Assets Control/Bureau of Industry and Security

OFAC/BIS Further Amend Cuba Sanctions Regulations and Export Controls

The Treasury Department’s Office of Foreign Assets Control and the Department of Commerce’s Bureau of Industry and Security issued final rules amending the agencies’ Cuba sanctions-related regulations. The primary aviation-related changes in OFAC’s final rule allow “persons subject to U.S. jurisdiction” to provide Cuba and Cuban nationals with services that ensure “safety in civil aviation and the safe operation of commercial aircraft.” OFAC’s final rule also removes the $400 monetary value limit ($100 limit for alcohol or tobacco products) on Cuban merchandise that “persons subject to U.S. jurisdiction” may bring back to the U.S. as accompanied baggage for their personal use, which means that the standard U.S. limits on duty and tax exemptions for merchandise imported as accompanied baggage and for personal use will apply to U.S.-Cuba travel. In addition, OFAC now authorizes persons subject to U.S. jurisdiction to make remittances to third-country nationals for travel by third-country nationals to, from, and within Cuba, provided that such travel would be authorized by a general license if the traveler were a person subject to U.S. jurisdiction. OFAC’s rules also allow providers of “authorized travel or carrier services” to customers traveling under an OFAC specific license to collect and retain either a copy of the traveler’s specific license or the traveler’s specific license number. BIS’s final rule allows cargo onboard aircraft to transit Cuba when that cargo is bound for destinations other than Cuba (air cargo transiting Cuba via aircraft on temporary sojourn will be eligible for the “License Exception Aircraft, Vessels and Spacecraft (AVS)” (§ 740.15 of the EAR)). These final rules became effective on October 17, 2016.

Government Accountability Office

GAO Publishes Report Identifying “Key Issues” Involved in Restructuring U.S. Air Traffic Control

The Government Accountability Office (GAO) published a report outlining certain “key issues” that need to be considered during efforts by Congress to remove air traffic control (ATC) from the FAA. The GAO report states that roles and responsibilities would need to be defined in any new ATC organization to ensure the success both of the ATC entity and of the FAA’s remaining safety oversight activities while ensuring workforce protections. The report also asserts that funding for any new ATC entity would be dependent on the type of organizational structure adopted (e.g., public or private ownership), but cited certain stakeholders’ preference for a user-fee system. If such a user fee-based system were to be adopted, the level of fees would need to be determined, and the impact of those fees on general aviation and cargo carriers would need to be considered. The GAO stated that the valuation of ATC assets, as well as the transfer of and payment for such assets, would also need to be taken into consideration, as well as the funding of pension and other liabilities. The report also contends that it would take many years to develop a consensus on ATC reorganization legislation, and to negotiate, plan, and implement a transition to a new ATC entity. The report also provides an overview of lessons learned from the ATC transition experiences of other countries, including the United Kingdom, Canada, and New Zealand.