The Transportation Department has issued a guidance letter to tour operators and others in the public charter industry, imposing new requirements in the wake of the March collapse of Direct Air.

Direct Air is the trade name for Southern Sky Air & Tours of Myrtle Beach, S.C.

The DOT said some of Direct Air’s business practices exacerbated the problems faced by consumers when the company ceased operating. According to the DOT, the company:

• contracted out its reservations process to a third party;

• signed charter contracts with charter airlines for aircraft, crew, maintenance and insurance only, while entering into separate contracts with fuel suppliers;

• issued vouchers for future travel rather than obtaining passenger consent to an operator-participant contract for a specific flight;

• accepted debit cards that did not offer the same refund protections as traditional credit cards.

Based on its experience with Direct Air, the DOT is effectively prohibiting these practices by public charter operators, effective Dec. 13.

The DOT said any charter prospectus filed after that date will have to contain certification that the charter operator will “retain direct control of all passenger reservation records,” and make them available to the air carrier in the event of a disruption, to insure that the operator and the air carrier will be able to identify and contact affected consumers.

The prospectus will also have to include a statement that the operator’s contract with the airline is all inclusive. The DOT said “fuel or ground handling ... cannot be addressed in separate contracts between the public charter operator and a third-party vendor.”

As for the Direct Air voucher program, the DOT said it will consider any similar program in the future to be “a per se violation” of the charter rules, resulting in “immediate enforcement action.”

On the matter of debit cards, the DOT said its regulations permit the acceptance of credit cards but do not specifically mention debit cards, and it reminded operators to stick with the literal terms of the rule.

The DOT said it will consider granting exemptions to tour operators to accept debit cards for public charters if receives assurances that “debit card issuers, their merchant banks and credit card/debit card processors, will provide the same chargeback protections to those using debit cards as credit card users receive under the Fair Credit Billing Act.”

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