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Macro Managing The Aviation Function

Confirming how well your company’s aviation services are administrated is fundamental to a Board’s responsibilities. Poor administration of aviation services can have a caustic impact on the time and effectiveness of your company and its leaders- asserts Pete Agur.

Pete Agur   |   1st April 2012
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Pete Agur Pete Agur

Peter Agur Jr. is Chairman and Founder of VanAllen - a business aviation consultancy firm with...
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Macro Managing The Aviation Function
Confirming how well your company’s aviation services are administrated is fundamental to a Board’s responsibilities. Poor administration of aviation services can have a caustic impact on the time and effectiveness of your company and its leaders- asserts Pete Agur.

The litmus test for the effectiveness of aviation administration has two parts: The company’s level of competence in administering its aviation function- and the character of supplemental support provided by senior management. This article considers both.

The standard for administrative performance for your aviation function should be as high as the level set for any other business unit within the company. This objective is not easy because the rest of your company has an advantage. The managers of other units have grown up within the company and its various administrative systems (legal- risk management- human resources- finance and accounting- etc.).

Most managers of aviation services do not have such experience. They rarely benefit from an orderly progression and education that teaches them all the ins and outs common to most companies’ administrative back alleys. Consequently- your aviation manager can be at a serious disadvantage due to lack of familiarity with the administrative niceties of running a business unit.

Consider one metric that makes the point about development of Business Aviation managers: What percentage of your company’s business unit leaders has an advanced degree or a business certification (Masters- CPA- etc.)? It is probably over one-half. However- fewer than five percent of aviation managers have MBAs. To date- the National Business Aviation Association has awarded Certified Aviation Manager (CAM) designation to only about 190 aviation managers through its Professional Development Program. That is a small population to share among the over 7-000 Business Aviation departments within the US.

Substandard administrative competence by your aviation manager creates two substantial high dollar (in the millions) risks for your company:

1. The administration of the department may not be conducted effectively. Examples of elevated risk arenas include legal (unwarranted exposure to action); financial (substantial added costs or losses); and organizational (unnecessary turnover or poor succession planning).

2. The company’s core administrative systems may not be well suited to support the Business Aviation unit’s services. Opportunities to benefit from Business Aviation may be overlooked.

a. The legal and taxation issues surrounding Business Aviation are very different from those of the core business.

b. The accounting system for Business Aviation requires different policies and practices. For instance- your company may have stretched out your accounts payable to 90 days. This practice will earn you a COD rating for fuel and handling services in many parts of the world.

c. The company’s budget controls may not make the desired impact within the aviation arena. Unscheduled aircraft maintenance items can easily run into the tens of thousands of dollars per item. Additionally- during a period of austerity- asking the aviation department to tighten its belt by 10% (in parallel with the company’s cost centers) has the actual impact of asking it to make a 30% reduction in its costs because its controllable line items activity influence only about one-third of its budget. The rest of its costs are fixed overhead (depreciation- capital costs- facilities- staff- etc.) that are incurred whether the aircraft flies or not.

If the administration of your aviation department is effective- it may be because the executive to whom aviation reports (often a senior corporate officer) is personally and deeply involved. That investment of extra time by the executive may be an unintended cost to the company since it is a diversion from that executive’s primary and critical role on behalf of the corporation.

The easy way to find out if this is the case is to ask the executive how much of their time is consumed dealing with the aviation function. If it is a multiple of the time needed for his or her other responsibilities- you have a strong case for considering alternative solutions. You have three choices:

1. Put your aviation manager on a fast-track to becoming administratively competent whether it is through a mentoring program- an advanced business degree and/or professional certification.

2. Insert an administrative manager into the aviation organization. A staff administrative manager supplements the needed business expertise and elevates the executive to whom aviation reports to a much more appropriate oversight role. We still recommend your aviation manager seek an advanced degree or professional certification so that he or she may be an even more effective leader and manager.

3. Alternatively- you can accept the fact that your real aviation manager- the executive to whom aviation reports (the senior corporate officer)- is one of the highest paid aviation managers in the world. (We don’t recommend this option.)

Considering the magnitude and impact of the issues involved- it is within the pay grade of the Board to confirm how well your company’s aviation function is administered. After all- a well administered business unit routinely performs to a higher standard. This is doubly important to the Board when you consider some of the company’s most valuable assets are carried onboard the aircraft- including you.

Do you have any questions or opinions on the above topic? Get them answered/published in World Aircraft Sales Magazine. Email feedback to: [email protected]

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