Half-Million-Dollar Penalty Tied To Direct Air’s Ceasing Service

The U.S. DOT has assessed the air carrier Sky King a $500,000 penalty for violating rules that protect passengers when their public charter flights are suddenly canceled and ordered the carrier to cease and desist from further violations. Sky King was one of several carriers operating flights for Direct Air, a charter operator also known as Myrtle Beach Direct Air & Tours, which ceased operating in March 2012. Direct Air arranged charters from a number of cities in the Midwest and Northeast to Myrtle Beach, SC, and cities in Florida.

Public charters differ from scheduled flights in that they operate only for a specific time period and are usually sold by a charter operator rather than an airline. DOT has specific rules applying to public charters, including a requirement that the charter operator have a financial security arrangement, such as a bond or letter of credit and an escrow account to protect consumers’ money if a flight is canceled. There is also a ban on canceling flights less than 10 days before departure unless it is physically impossible to operate the flight.

“Airline passengers should be able to book charter flights with the confidence that they will be returned home on time,” said U.S. Transportation Secretary Ray LaHood. “DOT will continue to protect the rights of airline consumers and take enforcement action against airlines and charter operators when those rights are violated.”

Beginning with flights departing in January 2012, Direct Air failed to transfer sufficient funds from its escrow account to Sky King prior to the operation of the charter flights. However, Sky King continued to operate the charter flights without requiring full payment of the total charter price from Direct Air, in violation of DOT rules.

On March 13, 2012, Sky King ceased all flights under the public charter program, as Direct Air owed money to Sky King for flights the carrier had completed on its behalf. Numerous passengers did not receive the service for which they paid Direct Air when Sky King cancelled the remaining flights it was scheduled to operate for Direct Air.

In assessing its fine against Sky King, the Department’s Aviation Enforcement Office found the carrier violated rules requiring that it be paid prior to operating a public charter flight and prohibiting the cancellation of public charter flights less than 10 days before their scheduled departure. In addition, Sky King failed to ensure return flights for all round-trip passengers who traveled on the carrier for the outbound leg of their trips. Carriers also are required to make a reasonable effort to ensure that the charter operator for which they are providing flights is complying with the public charter rules. The Enforcement Office noted that the late payments should have prompted Sky King to look into whether Direct Air was following the rules.

This is the fourth and largest penalty assessed by the Department related to the Direct Air program. The penalty amount will be included in DOT’s proof of claim that will be filed in Sky King’s bankruptcy case. The Department is continuing to investigate Direct Air’s shutdown.

FMI: www.regulations.gov, www.dot.gov