On Final: Restricted access
For some, flying around the world in a private jet sounds like a dream come true. There’s a real sense of freedom in being able to leave on a moment’s notice and make detours along the way at your heart’s desire.
July 7, 2011 By Krista Bulmer J.D.
For some, flying around the world in a private jet sounds like a dream come true. There’s a real sense of freedom in being able to leave on a moment’s notice and make detours along the way at your heart’s desire. But before getting swept away by the romance, you need to be keenly aware of cabotage restrictions that put limitations on your freedom to operate in jurisdictions outside of Canada.
Cabotage is the right given to a foreign carrier to provide air services within another country. Under Article 7 of the Chicago Convention, a contracting state can refuse permission to foreign aircraft to take “passengers, mail or cargo carried for remuneration or hire” from point to point within that state’s territory. Contracting states also cannot grant the exclusive right to any other state or airline to provide air services for remuneration or hire within its own territory.
So, how does any of this apply to private or corporate aircraft? Cabotage restrictions normally apply to both commercial and private operators where it may be construed that there has been the provision of air services for “remuneration or hire.” Unfortunately for pilots-in-command, the rules and regulations relating to cabotage vary from country to country, as does the interpretation of what it means to provide air services “for remuneration or hire.”
Air Canada got into hot water with the U.S. Department of Transportation in 2009 after charter flights carrying sports teams were found to have been offside U.S. cabotage restrictions. Specifically, Air Canada had violated the restrictions because the aircraft that had been hired were transporting sports teams from point to point within the U.S. before returning to Canada.
This particular dispute was settled at the political level, but small air operators and private pilots do not have the political heft of a large national airline and will need to be vigilant when flying their Canadian aircraft across borders. Violations of cabotage restrictions could be disastrous for a small operator due to potentially large fines and the impounding of the aircraft.
So, what exactly is considered to be a violation in the U.S.? Consider the following scenario. A private jet carrying senior management of a Canadian corporation flies to Teterboro Airport in New Jersey, picks up senior management of the U.S. subsidiary, continues on to Miami, then returns their U.S. team to New York before returning to Canada. Under the U.S. Code of Federal Regulations, “foreign civil aircraft that are not engaged in commercial air operations into, out of, or within the U.S may be operated in the U.S. and may carry non-revenue traffic to, from or between points in the U.S.” Therefore, as long as the passengers between New York and Miami are travelling on a private aircraft without remuneration, the flight has not violated the regulations. However, using that same example, if the aircraft had been a charter flight hired for the trip to Miami, the carriage of passengers between New York and Miami is prohibited.
In the European Union (EU) the financial impact of a cabotage violation is staggering and pilots could be liable to pay up to 20 per cent of the cost of the aircraft as the VAT or import tax duty. The regulations state that a non-EU-registered aircraft in “private use,” or “use other than commercial,” may enter the EU for a period of up to six months without being liable for VAT or import duty tax. “Commercial use” is defined as “the transport of persons or of goods for remuneration or in the framework of an economic activity of an enterprise.” This is a much broader definition than exists in Canada and may result in corporate aircraft being caught under this definition. The consequences are no less harsh for corporate jets being operated within the EU and pilots need to be cautious about transporting EU residents from point to point within the EU.
For any trip outside of Canada, it is crucial that the operator obtain advice from a lawyer qualified to practise aviation law in that jurisdiction and for the pilot-in-command to contact the appropriate regulatory authority well in advance of departure to ensure the flight does not violate the foreign country’s cabotage restrictions.
This is for information purposes only and is not to be construed as actual legal advice nor take the place of legal counsel. You should not act or abstain from acting based upon such information without first consulting a legal professional.
Krista Bulmer is a lawyer practising aviation law, business law and civil litigation with the law firm, Willson Lewis LLP in Toronto. Willson Lewis LLP offers the services of experienced legal counsel in civil litigation, employment law, equine law and family law.