Aircraft Management - ‘Professionally Managed’ versus ‘Just Managing’
The company executive responsible for tending to the new business jet initially felt a sense of pride from the confidence shown by his partners. He knew volumes more about aviation and flying than the other five combined.
Dave Higdon is a highly respected, NBAA Gold Wing award-winning aviation journalist who has... Read More
His knowledge grew out of a few flying lessons taken in his youth – although he never started a ground school, never took the written exam, and stopped flying before he could fly solo. Still, that approximately 12 hours of dual flying sufficed to convince his associates that he alone knew enough about aviation to manage the ownership and operating issues of the company jet.
The company's accountancy firm had a grip on the financial and tax implication, so there were no issues there. He hadn't exactly stepped forward as much as the others had stepped back – including the two partners most supportive of the decision to buy the pre-owned, 1990s-era light jet in the first place. A single-pilot eligible aircraft, the partners hinted that their “experienced” colleague might find it timely and convenient to train to fly the firm's plane himself.
At about the same time the airplane-overseer worked to understand the vagaries of operating the jet under Part 91; having a pilot on-staff for that purpose; managing upcoming maintenance; and complying with recent airworthiness directives, the firm's “aviation authority” got hit by his own aviation deficiencies. Everything had looked so much simpler at the time of purchase: Buy the airplane, employ someone who could fly it as part of the job, and fly forth into success!
Simple? It might have been if that’s all that there was to it. Except it wasn’t… Crew hiring; training and qualifying; meeting insurance requirements; finding a suitable maintenance “home” for the jet; and something else… those “third-party revenue” opportunities that the broker had spoken of. All added to the complexity of the equation.
None of the partners seemed interested in starting a second entity to own and operate the airplane and meet the Part 135 requirements for offering charter flying. So outside 135, how does a company realize those possibilities? The company's use plan, predicated on flying just 250 hours annually, left a window to fly the airplane another 250 while staying within the window of normal business aircraft flying averages.
It was at this point that our business manager charged with overseeing his company's newly purchased pre-owned jet first heard about companies that manage what he was finding unmanageable.
Some months after enlisting his company's airplane with a Management company, he offered this insight to anyone who has to share their work time with their main job and serving as a de facto aircraft-operations provider: “Find a management company to take the airplane off your hands so you can do the jobs you bought the airplane to achieve.
With the appropriate balance of in-house and outside use, a management firm may even make that airplane a money maker in its own right. Instead of being viewed as a cost – which can vary wildly from company to company – aircraft management is more regularly viewed as an alternative to the costs of directly managing the aircraft. That means the costs are often offset by the benefits of the management program – and by freeing a company executive from time not productive for the company's primary line of business.
But as with so much of Business Aviation, the decision to go with a management company, and the expectations of the benefits should be the focus of the company's process of shopping and selecting a firm to manage its aircraft.
Expertise, Time, Trouble free
Aircraft management companies exist in many varieties, scattered across a broad swath of locations. They vary in their approach, clientele, base location and aircraft selection. But they all serve a fundamental mission with common traits: To manage a client's aircraft to afford them maximum availability of their own plane, while keeping the airplane busy enough – via charter - to help it earn its salt.
Ultimately, the management company does just what the name implies: It manages the aircraft for the owner. It takes care of supplying crew – cockpit and cabin – and depending on the agreement with the client, not only operating the aircraft for the owner but flying it in revenue-generating operations for third-party clients.
Aircraft owners may decide to tap the expertise of a management company after acquiring the aircraft, or after a change in the owner-company's needs and use patterns. Many management companies offer what are commonly called “turnkey management solutions” that might start before the aircraft owner purchases the aircraft – or as far back as before a company selects and acquires the aircraft.
In place of paying several vendors and crew, the company with the managed aircraft pays one bill that covers everything. And when placing the managed aircraft on the management company's charter certificate is an option, the benefits can range from simple cost reductions to outright profitability from the aircraft's third-party use. How much, of course, will vary, depending on the hours the jet is made available, the size of the aircraft and the market.
A Personal Touch?
No two mission requirements from one company to another will be exactly the same when it comes to ownership of a business aircraft. So the need for flexible, customizable programs to suit an individual client’s need is an absolute necessary where aircraft management is concerned.
As an example, the team at Meridian Air Charter (www.meridian.aero), based at Teterborough, New Jersey, but with several satellite offices dotted around the United States, emphasizes the individuality of its aircraft management clientele, and actively works to customize programs to meet those individual owners' needs. Working to understand what the owner wants from the management relationship, whether to offset ownership costs through charter revenue, to support the client's own flight department or to simply improve utilization of both aircraft and staff, Meridian places emphasis on the importance of understanding how to structure the program to fit the client's needs.
You will need to enter discussions with an aircraft management company with a thorough idea of your company’s mission requirements not only now, but two or three years into the future, and you should continually monitor for changes in these to ensure the arrangement you enter into today with a management company remains a snug fit for your corporation.
One benefit that can filter directly down to the aircraft owner through a larger managed fleet, such as Meridian Air Center and Oakland, California-based Kaiser Air have, comes in the form of lower costs like fuel, aircraft insurance, maintenance and training. The management company is in a good position to leverage its buying power to help save management clients on those costs.
KaiserAir (www.kaiserair.com), as an example, highlights that its managed fleet benefits from volume discounts at Santa Rosa Jet Center, while visits to remote destinations benefit from fleet fuel discounts negotiated by Kaiser's in-house Fuel Manager, helping reduce the costs of all managed flights.
As do most management operations, Kaiser Air's aircraft-management clients enjoy the option of adding their aircraft to Kaiser's own Part 135 certificate, providing further opportunities for that charter department to aid management clients with reducing total ownership and use costs, as well as the potential value of some additional tax benefits from the aircraft.
Naturally, if you’re going to place the company’s prized multi-million dollar business tool with a management company, you’re going to want to ensure it is in safe hands. You should focus plenty of your questions when selecting the right company to manage your aircraft on identifying that you are happy with their safety credentials.
ARGUS Platinum Ratings don't come easily or in great numbers, which is what makes companies such as TWC Aviation (www.twcaviation.com) - based out of San Jose, California - stand out. The Platinum rating is safety auditor ARGUS’ highest level of safety rating, and is awarded only to those operators who have demonstrated successful implementation of industry-best safety practices relative to their operations and maintenance.
Such recognition certainly brings extra value and peace of mind to operators who turn to companies that are accredited with such standards of safety to manage their aviation assets. TWC’s comprehensive safety and security program is a significant factor for many executives, both domestically and internationally.
The Bottom Line
Not everyone wants to share their aircraft, even when it means reducing the costs of owning the aircraft. But almost universally, aircraft-management clients recognize and appreciate the value inherent in handing off their aircraft to experts who are better equipped to manage crew training, insurance, maintenance and flying the company plane.
The decision to restrict aircraft use exclusively to the owner company may not maximize the financial aspects in the real-time, but just being able to show it has been professionally managed, crewed and maintained can bring residual benefits when the time comes to sell.
Aircraft management also hues to the same benefit inherent in owning and using Business Aviation to begin with: It maximizes the time for business available to company executives. “To do otherwise”, one management company representative offered, “means making someone at the owning company spend time as inefficiently as airline passengers waiting to clear security.”
And that benefit alone drives the near-universal expectation that opportunities will only continue to grow for professionally structured aircraft management businesses.