Fred Haap is an IS-BAO accredited auditor and past Chairman of NBAA. During his distinguished career in aviation, Mr. Haap also spent nearly 30 years as a corporate aviation department manager & pilot, logging... Read More
Fred Haap and Jack Olcott continue their series on Flight Department formation noting that Flight Department Business Plans must instill confidence that an investment in Business Aviation will be well managed. Here’s why…
Success of the Flight Department relates closely to its structure, the framework within which all aspects of routine management of Business Aviation transportation are addressed. The list of areas to be considered is broad, including:
• What aircraft will be obtained?
• How it will be used?
• What personnel will be employed?
• How will the department communicate with the Federal Aviation Administration?
• What will be the budgeting process?
• How will flights be scheduled?
• What will be the measures of Flight Department efficiency and productivity? And
• How will routine actions be documented and annual reviews conducted?
Step one is describing the relationship between the Flight Department and the corporation, focusing on Business Aviation being a productive business unit within the overall structure of the corporation.
Day-to-day management resides with the Flight Department Manager (FDM), reporting to the corporation’s top management in accordance with existing protocols for other business units. The Business Plan must leave no doubt that implementation will be well managed by the FDM and aligned with the company’s overall organization.
Your survey of company needs—the subject of AvBuyer’s third installment of this Creating a Flight Department series (August 2015)—identified aircraft that would serve the corporation. Other articles within AvBuyer’s library of past issues address the process of finding a suitable product on the new or pre-owned market. Having selected the aircraft that fits best with the competing challenges of trips to be flown, finances available for acquisition and operation, and launch date for offering Business Aviation services, the next task is describing how that asset will be routinely managed.
Several options are available, ranging from whole aircraft ownership, joint ownership, time sharing, and fractional ownership, to various leasing structures and management schemes. Each form of Business Aviation has its positive and negative characteristics. Each presents its own management challenges. It is a credit to the Business Aviation community, however, that such a spectrum of transportation delivery systems is available.
Having selected the means of operation that best serves the Mission of the Flight Department in its service to the corporation, the means for managing the aviation assets should be presented convincingly to the party (or parties) who have authority to authorize creation of the Flight Department.
Managing the Entire Structure
While an aircraft is an essential element within the Flight Department structure, personnel needed to operate and maintain the selected equipment also is critical, obviously. The aviation community is relatively small, thereby facilitating word-of-mouth searches for qualified professionals. Furthermore, specialty firms offering access to available personnel are readily available. Thus finding candidates to staff the proposed Flight Department should not be difficult.
Basic aspects of personnel management, such as clearly stated job descriptions, are addressed in the department’s Operation Manual (AvBuyer September 2015). The fundamental issue is how personnel will be managed day–in and day-out. How the Flight Department Manager handles that challenge adds to the credibility of the department’s Business Plan and therefore must be described.
Most Flight Departments are structured around one aircraft and a minimal staff consisting of a Chief Pilot/Aviation Department Manager, a co-captain and a part-time co-pilot. Maintenance may be handled by a Chief of Maintenance/Lead Mechanic supported by contract services provided by an outside vendor. Scheduling often is done by support staff located at the airport, working in concert with the administrative assistant of the owner or CEO.
Approximately two-thirds of NBAA Member companies operate one aircraft and have a staff of five or fewer people.
Regardless of department or staff size, however, there must be a structure in place for positioning Flight Department personnel within the corporation as a whole and an established process for managing them.
Included within day-to-day management is ongoing liaison with the local FAA Flight Standards District Office (FSDO). It is essential to develop from the onset good avenues of communications with the FAA specialists assigned to track the Flight Department, well before the company needs their support in issuing Letters of Authorization or (heaven forbid) there is any form of enforcement action.
Describing how the Flight Department Manager addresses such communications with the FAA adds assurance that the company’s investment in Business Aviation will be handled properly.
Budgets and Cost Accounting
Top management places considerable attention on numbers, especially when money is concerned. Thus within the Management Section of the Business Plan, the FDM needs to present a clear description of how budgets will be established and managed, including when annual budgets will be presented, who will approve them, and how sources and uses of funds will be documented.
The process to be followed must be described, and company resources available to the Flight Department (such as liaison with accounting personnel at headquarters, use of accounting software and application of existing tracking systems designed to assist top management in governance) should be identified.
Furthermore, tracking expenses must be ongoing. Just as pilots maintain ongoing positional awareness, FDMs need to maintain financial awareness of the department’s health. Only the management tools previously developed and in place are available when a crisis arises. The time to establish friends and access to specialists at Headquarters is before the need arises.
Describing a departmental structure that facilities ongoing integration with other corporate business units such as Accounting is essential.
Flight Departments exist to move people and priority items. In a world of unlimited resources, everyone and everything in need of movement by company aircraft would be accommodated. But resources are always limited, thus the Flight Department Manager always deals with that reality. A credible business plan addresses the ever-present departmental challenge of scheduling, typically by establishing a system of passenger priority.
Who can authorize a trip is specified, a means for resolving competing trip requests is established, a procedure for scheduling is set (typically through the office of the CEO or company travel department, or possibly through direct communication with the Flight Department), and a means for documenting trip outcomes is defined.
It is essential to incorporate a means for recording the outcome of each trip in the company aircraft, possibly following the concept presented by David Wyndham in his October 2015 article on Value and Efficiency here .
A Flight Department delivers value by moving the right person to the right place at the right time. Such value should be documented for each flight, thereby accounting for the benefits the corporation receives from its investment in Business Aviation.
Measures of Aircraft Availability
The time the aircraft should be available to fly compared with the time it is out-of-service (unavailable) due to repairs, inspections, servicing, etc. is grist for the FDM's mill. The terms ‘in-commission’ and ‘out-of-commission’ are frequently used in the industry to reflect the aircraft’s status. Some aviation operations, however, use ‘aircraft availability’ to denote in-commission status and ‘dispatch reliability’ to denote an in-commission aircraft that fails to launch due to an anomaly discovered (typically by the flight crew during start-up) after the aircraft has been deemed available by the Lead Mechanic.
These terms provide metrics for measuring the Flight Department's efficiency.
The FDM must consider the variables that can impact the data such as unscheduled component failures, discrepancies found during inspections, delays due to parts shortage, etc. Such metrics should be obtained and tracked as a basic aspect of departmental day-in-day-out management (see ‘Cost Accounting for Business Aviation’ by David Wyndham (page 64) in this issue of AvBuyer).
The basic purpose of a Flight Department Business Plan is two-fold:
1. Convincing the person (the entrepreneur or CEO) or the Board of Directors that Business Aviation addresses unique transportation needs of the corporation, thereby generating productivity and value for shareholders and stakeholders that could not be otherwise obtained; and
2. Providing a high level of certainty that a company Flight Department operating the firm’s business aircraft will be well managed.
Articulating how the Flight Department will be structured and managed is essential to achieving that credibility.