Top 10 checklist for air charter brokers
The air charter broking industry can often be a little confused when it comes to working out the broker’s role in the chartering arrangement. In legal terms, an intermediary is an agent who arranges a contract – in this case, the charter agreement for the use of the aircraft – without being a party to this contract themselves.
However, most air charter brokers sit within the chain of contracts by entering into one contract with the operator, and another with their flying customer. This tends to blur the line considerably between broking and chartering, and brokers need to be especially aware of the risks and liabilities that this style of contracting can bring.
The following suggestions relate to what you can do to avoid this, and the other common pitfalls of air charter broking:
1. Where possible, arrange the contract directly between the operator and your flying customer. This will help you to avoid all of the liabilities and penalties that you may incur as the result of being the contractual charterer and operator of the aircraft.
2. …However, if you can’t, do ensure that the contracts between you and the operator and you and your flying customer are on a fully back-to-back basis. Check the details, and then check again.
3. Regardless of how you structure the charter contracts, do use standard terms and conditions to limit your liability so that you are only liable for losses that arise directly from your failure to use reasonable skill and care. Your standard trading terms and conditions are your first source of risk management, so ensure that they are fully incorporated into all your business activities. You can find details of how to incorporate your standard terms and conditions on ITIC’s website.
4. Try to limit and/or exclude your exposure to liabilities under contract, where you are permitted to do so. For example, did you know that English law permits you to exclude your liability for loss of profit, business interruption, loss of reputation and indirect or consequential losses?
5. Be thorough in your due diligence on the aircraft, it’s operator and the AOC that applies. No broker wants to be the one who unintentionally arranged a grey charter. Your position (and the unfair damage to your reputation) is a lot easier to remedy when it can be shown that you were diligent in your work.
6. Check the bank details to ensure that they are correct. With email frauds on the increase it is essential to check all new bank details with your client over the phone, using the main switchboard number when you make the call. Most instances of email fraud that ITIC sees could have been avoided by simply picking up the phone.
7. Get all instructions in writing. Your position is a lot easier to defend when your defences to liability are evidenced in black and white, and your file is in good order.
8. Join industry bodies and look at accreditation to boost your professional standing. Industry bodies such as BACA (The Baltic Air Charter Association) provide excellent training sessions and allow you to meet your peers and competitors in a neutral environment. They can also introduce you to accreditation agencies such as Argus International.
9. Look at buying non-owned aircraft liability insurance. This will provide cover for operational liabilities that arise from bodily injury and property damage resulting from your contractual use of aircraft that you do not own. It’s especially important if you back-to-back the charter contracts, and it fits perfectly alongside a professional indemnity (“PI”) policy.
10. Buy professional indemnity insurance. With a sufficient limit and a deductible you can afford from a specialist insurer such as ITIC. We’re your second source of risk management!