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Three Tips For Managing A Down-Cycle

Putting as much certainty into uncertain times as possible.

The aviation news is full of economic uncertainty. At the recent NBAA Annual Meeting & Convention we talked to a number of aircraft brokers- dealers- bankers- operators- and vendors. While much of the official PR was that we'd ride this out with minimal disruption- talking to those in the trenches shows a lot more doubt.

Flying hours are down- aircraft sales phones are quieter- and most folks have a ‘let’s wait and see’ attitude. One manufacturer's representative stated- 'Orders are not deliveries so we'll see who shows up at closing with a check.' In general- it looks like a 12 to 18 month down-cycle- the severity of which is unknown. Here are three tips to help ride out the storm.

TIP NUMBER 1:
You have to have a plan. No plan can address all possible outcomes- but you should have a very solid aircraft needs analysis with a justification of what aircraft you need and how much they cost. The plan may need updating so now is as good a time as ever to review your plan to make sure it addresses the air transportation 'needs' and has a factual justification for what aircraft you have- and how they are owned and operated.

We've worked with clients evaluating whether they have the correct aircraft for the mission- looked at acquiring newer- more cost efficient models- and provided the neutral analysis to back up their data. As was mentioned last month- if your operation may need an aircraft- there are a lot more options today than six months ago. But- it has to fit into a well crafted plan.

TIP NUMBER 2:
You need to have a thorough understanding of your costs. You need to collect and understand your operating costs. What are the major cost drivers of your aircraft? Are they fuel? Maintenance? Salaries?

Do you have a charge-back system in place- and is it based on a full cost allocation- a variable cost allocation- or some other number? What are your variable costs?

You should consider how costs change with a change in utilization. If your budget were reduced by 10% for next year- how many flying hours need to be cut? What other costs can be managed better to minimize the impact on your operation of a budget cut?

Do you have a system in place to collect- allocate and report on your aviation costs? Three cost categories that are updated quarterly will not help you effectively manage your costs - you need to know more.

TIP NUMBER 3:
Don't be afraid to ask for help. John Donne penned 'No Man Is An Island.' You can't possibly have all the answers. But there are resources to help you. We've worked with small and large operators to set up systems to collect and report on their operating costs. We've gone through (too many) banker's boxes of receipts in setting them up with the data- and then helped them analyze just what the numbers mean.

Your in-house accounting folks can help with the reporting. Ask your own pilots- maintenance team and dispatchers for ideas. It’s better to plan than to worry. Whatever happens- you can- and will get through it.

AND TODAY’S BONUS TIP…
Don't believe all the forecasts. No one got the recent turn of events correct- so when those same folks revise their predictions- keep that in mind. They are educated guesses- but guesses is the important term. Be cautious and stay informed.

David Wyndham is an owner of Conklin & de Decker. The mission of Conklin & de Decker is to furnish the general aviation industry with objective and impartial information in the form of professionally developed and supported products and services- enabling its clients to make more informed decisions when dealing with the purchase and operation of aircraft. With over 1-800 clients in 90 countries around the world- Conklin & de Decker combines aviation experience with proven business practices.

More information from www.conklindd.com; Tel: +1 508 255 5975


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