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Air carrier Sky King has been fined $500,000 for violating rules protecting passengers when their public charter flights are cancelled suddenly. The airline was also ordered to cease and desist from all further violations of public charter rules. This penalty is the fourth and the largest penalty assessed by the U.S. Department of Transportation (DOT) related to the direct air program.

Sky King is one of several carriers that operated flights for Direct Air, which was a charter operator also known as Myrtle Beach Direct Air & Tours.  Before it ceased operating in March 2012, Direct Air arranged charters from cities in the Midwest and Northeast to Myrtle Beach, SC and a number of cities in Florida.

Public charters are different from schedule flights because they operate only for a very specific time and are usually sold by a charter operator rather than the airline itself. There are very specific rules in place by the DOT that apply to public charters, which includes a requirement that the operator has a financial security arrangement and escrow account in place to protect consumers' money if the flight is cancelled. Operators are also banned from canceling flights less than ten days before departure, unless of course it becomes physically impossible or unsafe to operate the flight.

Problems began with flights in January 2012. Direct Air failed to transfer necessary funds from escrow account to Sky King prior to the operation of these charter flights. Sky King, however, continued to operate the flights without requiring full payment from Direct Air, a violation of rules.

Thus, when Sky King ceased flights under the public charter program on March 13, 2012, Direct Air still owed money to Sky King for flights the carrier completed on his behalf. As such, numerous passengers did not receive the service for which they paid Direct Air as Sky King cancelled all remaining flights it was scheduled to operate. In addition, Sky King failed to ensure return flights for round-trip passengers who had already traveled on the carrier for the outbound leg of their trips. These carriers must make a reasonable effort to ensure the charter operator for which they are providing flights is complying with the rules. The late and insufficient payments should have prompted Sky King to look into whether Direct Air was following the rules. Because they didn't, consumers ended up shortchanged.  If they had looked into Direct Air, Sky King would have stopped flights immediately instead of operating on an 'IOU note' that wasn't good.

The Department of Transportation is continuing to investigate the shutdown of Direct Air and will take further action is necessary to protect consumers.