In late summer 1988- singer Bobby McFerrin had a hit single called Don't Worry- Be Happy. In that song he recounts various woes declaring: When you worry you make it double- So don't worry- be happy. I think that is good advice for the summer of 2009. Some of the economic news is encouraging- but in the next day's news we have a new- bad economic report. New aircraft sales are slim- but most manufacturers are surviving off their (rapidly ...
Summer Thoughts 2009
“Don’t worry- be happy!”
In late summer 1988- singer Bobby McFerrin had a hit single called 'Don't Worry- Be Happy.' In that song he recounts various woes declaring: 'When you worry you make it double- So don't worry- be happy.'
I think that is good advice for the summer of 2009. Some of the economic news is encouraging- but in the next day's news we have a new- bad economic report. New aircraft sales are slim- but most manufacturers are surviving off their (rapidly diminishing) backlog sales. Used aircraft sales are still hurting- with moribund being used to describe older- used aircraft selling conditions.
Operators are still under a lot of pressure to cut costs. Flight hours are down in every major sector. But- layoffs and flight department closures have quieted down. Charter seems to be doing a tiny bit better- and the big fractional companies have started seeing an upturn in interest- and even a few sales.
States are looking at ways to enhance tax collections or to eliminate exemptions. Since early May- eight states have changed- added to- or updated their tax laws directly affecting aviation (CA- GA- ID- MI- NE- NV- NY- and VT). Nel Sanders-Stubbs has been busy updating Conklin & de Decker’s State Tax Guide. Not all of the changes are bad; some exemptions for aviation were actually upheld- so there’s a reason to be happy.
Fuel costs- although they are on the rise- don't appear to be headed to new highs just yet. Be happy about that too. Conklin & de Decker is keeping abreast of fuel costs. Since March's low price point- we have seen an increase of less than 10%. Keep using those fuel discount programs- and check fuel prices and other fees before your trip. The following thoughts should also help you to be happy this summer:
MANAGE AND CONTROL YOUR COSTS
Collect your costs. Separate them into appropriate categories that you can analyze and understand. In about five years' worth of typical turbine aircraft utilization- you will spend as much money operating an aircraft as it costs to acquire it.
If you do not have these costs collected- analyzed- and understood things can easily get out of hand. Other than overhauls and refurbishments- most of the operating costs go out the door in small enough increments that we don't realize their total magnitude.
Maintenance is one of your biggest cost areas and one where you do have the most control. Evaluate how you do your repairs and overhauls. Using loaner parts while yours are repaired may be less costly than exchanging for new.
Get multiple bids for major work if at all possible. Ask questions before the work is done. For major maintenance- repairs and refurbishment- you may want to have your own people 'baby sit' the plane as they will be your best advocate. Maintain quality without adding cost.
DO YOU HAVE A STRATEGIC PLAN?
One question that can arise is- 'are we operating the best aircraft for the job?' A strategic plan addresses this question with the reasoning and justification as to why you fly the aircraft you do. It also ties into the company's mission statement. Having- and updating your strategic plan pays off in being able to better anticipate and adjust to changes without 'shooting from the hip.'
If things are quiet- dust off the last revision and update it. Meet with senior management and go over policies- future air travel needs- and other requirements. Communicate to management what you are doing to control your aviation costs.
Make sure they know how to interpret your costs correctly. Paying out for a major phase inspection or an engine overhaul may make it look like your costs are too high. Educate the CFO as to the nature of aircraft costs. That $240-000 component overhaul might have taken six year's worth of flight hours to accrue. Don't assume they realize that. Let them know you are concerned about managing costs and keep them informed as to what you are doing to minimize costs while maintaining the highest levels of safety and service.
If your costs seem too high- benchmark with a known resource. If your aircraft is aging- it may be time to look at a replacement. There is no better time than now as prices- new and used- are quite flexible. But you'd better have your strategic plan updated first.
You need to address all the concerns that management may have. Anticipating them in advance is far better than the panic that comes with the 5pm phone call from the boss.
These are not easy times- but we can all learn to be leaner and more effective so that when things improve- we are still around to enjoy them- and to be happy!
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