01.11.2010

The Grey Market – A Shady Practice

enter site There is a very dark shadow lingering over our industry at present, a shadow that we appropriately call ‘the grey market’.

The grey market refers to the illegal practice of chartering a private aircraft without having an air operator’s certificate (AOC), the approval granted by a national aviation authority to use aircraft for commercial purposes. First and foremost, let’s make one point clear: there is no grey area about the legality of the grey market. Operating an aircraft for commercial purposes without an AOC, which includes simply leasing a jet (with crew) to a third party, is against the law. Pure and simple. Black and white.

latina sex webcams Why do I say the shadow is lingering? The grey market has existed for many years. If anything, the practice has intensified during the recession, as irresponsible pilots and operators have decided to bypass legality to offer cheaper fares than legitimate operators. Pressure on rates in a difficult economic climate increases the temptation to undercut approved operators. Cheap fares can come at a high price, though. The grey market involves risks that cannot be excused.

If someone is paying to use your aircraft, you must have an AOC. To hold an AOC, an operator must demonstrate adherence to strict standards, including (but not limited to) operational procedures, fuel policy, communications and emergency equipment, maintenance, flight crew qualifications, training and flight time limitations. I’m astonished that there are still wealthy individuals who believe the pilots or advisers telling them that ‘leasing’ an aircraft to somebody, in return for payment, is a legal way to bypass the regulations. These individuals are simply risking everything they have achieved in their careers, for the sake of a few thousand pounds! They must realise that if an accident were to take place, they would be liable for massive claims from the passenger, or indeed his or her estate. Furthermore, the reputational damage would be irreparable.

Banks should be paying attention to the grey market too, as part of their due diligence when financing an aircraft. After all, the financial ramifications of grey market operations – and more specifically accidents – are extensive and extreme. For example, any insurance policy governing an aircraft will stipulate that the aircraft be operated in accordance with the requirements of the relevant regulator. Illegal chartering is likely to void any insurance cover on the asset (as well as invalidating the passenger’s life assurance). In the case of an accident, the owner of the aircraft might therefore be named on a substantial claim for which he or she has no valid insurance coverage. More often than not, the financier will be entitled to call for repossession of the aircraft for default, under the terms of the finance documents, so any residual scrap value in the aircraft will fall to the bank.

source url Money is hardly the priority, though. In aviation, as always, the priority is safety. Operators who do not hold an AOC will not have undergone the rigorous operational safety oversight of the Civil Aviation Authority. The pilots may well have been subject to a less comprehensive training and testing regime than is required to fly public transport operations. Regulations controlling crew working hours – regulations that exist for safety reasons – may not be followed as closely by grey market operators as by law-abiding companies. The high maintenance standards required to fly aircraft commercially may not be matched by operators or private individuals without an AOC, even if the aircraft superficially appears to have been maintained perfectly.

By definition, therefore, the risk of an accident is higher in the grey market than among law-abiding, AOC-holding operators. And the trend for criminal proceedings to be brought, following an aircraft accident, is growing globally. Plaintiffs are increasingly likely to seek to attach responsibility and liability for a grey market accident to the aircraft owner or lessor. Again I make the point: if you are sufficiently wealthy to own a private jet, is it really worth risking criminal proceedings that would destroy your career and reputation, just to make a few thousand pounds (illegally)? Could you live with a fatal accident on your conscience?

Policing the grey market is no easy task but this issue needs to be taken very seriously indeed. Civil aviation authorities must cooperate among themselves, and the industry at large needs to support their efforts in every way possible. It’s time the grey market closed for good.

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