Business Aviation Advisor May/June 2017 by Business Aviation Advisor Magazine

MAY / JUNE 2017

Who Audits the Auditor? Asking the Right Questions Helps to Keep You Flying Safely

Completions Satisfaction

Six Ways to Find the Right Completions Center

RISKS AND REWARDS OF FRACTIONAL SHARES LONGER FLIGHTS, SAFER FLIGHTS YOUR BEAUTIFUL TIME MACHINE IN FOR THE LONG HAUL WIDE DIVIDE ON FAA A Business Aviation Media, Inc. Publication

W W W . B I Z AVA D V I S O R . C O M

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F E AT U R E S

Who Audits the Auditor?

Asking the right questions helps to keep you flying safely by PH IL G IB SON

Completions Satisfaction

Six ways to find the right completions center

by M AT TH E W WOOLL A S TON

Longer Flights, Safer Flights

Better cost control and asset protection

by C R AIG W ILK E RSON

• Volume 4 / I s sue 3

Your Beautiful Time Machine

Five factors drive new, efficient aircraft design by D ON ALD P OINTE R

Risks and Rewards of Fractional Shares

by A M AN DA APPLEG ATE

Regular appraisal helps prevent sticker shock

In for the Long Haul

by S TE PH E N FR IE D R I C H

Address maintenance risks with a long term service agreement

D E PA R T M E N T S Publisher’s Message

Your Aviation Access at Risk

by G IL WOLIN

Washington Report

by DAVI D COLLOG AN

Wide Divide on FAA

The Business of Business Aviation The Information You Need, From Experts You Can Trust Aircraft owners and charterers now have a resource to help you make the most effective use of your investments in business aviation. Business Aviation Advisor provides the information you need, without technical jargon, on the business of owning and flying business aircraft – from operations to acquisition, to management and finance.

Business Aviation Advisor: the Business of Business Aviation

Subscribe to our digital edition at www.bizavadvisor.com/subscribe

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Ma y/Ju n e 2 017 B U S I N E S S AV I AT I O N A DV I S O R 3

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PUBLISHER’S MESSAGE ■ PUBLISHER Gil Wolin gwolin@bizavadvisor.com CRE ATIVE DIRECTOR Raymond F. Ringston rringston@bizavadvisor.com MANAGING EDITOR G.R. Shapiro gshapiro@bizavadvisor.com EDITORIAL ASSISTANT Michael B. Murphy mmurphy@bizavadvisor.com WASHINGTON EDITOR David Collogan dlcollogan@gmail.com CONTRIBUTORS Amanda Applegate Aerlex Law Group aapplegate@aerlex.com Stephen Friedrich Rolls-Royce stephen.friedrich@rolls-royce.com Phil Gibson Crosswind Consulting, LLC pgibson@amsinc.aero Donald Pointer Dassault Falcon Jet donald.pointer@falconjet.com Craig Wilkerson Gulfstream Aerospace Corp. craig.wilkerson@gulfstream.com Matthew Woollaston Jet Aviation matthew.woollaston@jetaviation.ch BUSINESS MANAGER JoAnn O’Keefe jokeefe@bizavadvisor.com BUSINESS AVIATION MEDIA , INC . PO Box 5512 • Wayland, MA 01778 Tel: (800) 655-8496 • Fax: (508) 499-2172 info@bizavadvisor.com www.bizavadvisor.com Editorial contributions should be addressed to: Business Aviation Advisor, PO Box 5512, Wayland, MA 01778, and must be accompanied by return postage. Publisher assumes no responsibility for safety of artwork, photographs, or manuscripts. Permissions: Material in this publication may not be reproduced, stored in a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording, or otherwise) without the prior written permission of the publisher. The views and opinions expressed in Business Aviation Advisor are those of the authors and advertisers, and do not necessarily reflect the policy or position of Business Aviation Media, Inc. Articles presented in this publication are for general information and educational purposes and do not constitute legal or financial advice. Postmaster: Please send address changes to: Business Aviation Media, Inc., PO Box 5512 • Wayland, MA 01778, USA ©Copyright 2017 by Business Aviation Media, Inc. All rights reserved Printed in the USA

Your Aviation Access at Risk

The commercial airlines want you back. They want you out of your business aircraft and back flying first-class – and paying full fare. So you can once again enjoy walking through congested commercial terminals, checking bags, and flying to and from only 565 of the more than 4,000 U.S. airports currently available to you in your business jet or turboprop. No surprise. First-class seats are the high-dollar contributors on commercial jets, and to be occupied by high rollers and executives unconcerned about ticket prices. So if you’re not going to return voluntarily, the airlines are going to try to force you to do so by gaining control of the U.S. airspace, via the proposed not-for-profit, federally chartered corporation which would replace the Federal Aviation Administration. That’s a major reason behind the current effort to replace the FAA and privatize the nation’s Air Traffic Control (ATC) System. President Trump has described it publicly as “ill-equipped and badly managed.” His 2018 budget proposal calls for the creation of an “independent non-governmental organization” to manage the U.S. ATC system. The current system has worked very well for all segments of aviation – commercial, general, and business – ever since Congress enacted the Federal Aviation Act of 1956, creating the FAA and the ATC system. The biggest problem of late has been Congress’ inability to approve the FAA’s annual budget. So the FAA winds up running under a continuing appropriations bill, unable to execute any of its long range NextGen programs. The White House didn’t come up with the idea to privatize the ATC all by itself. It had help from Rep. Bill Shuster (R-PA), chairman of the House Transportation & Infrastructure Committee, and from Airlines for America (A4A). This entity is a quasi-trade association comprised of commercial passenger and air cargo carriers, and several major metropolitan airport councils. The proposed ATC’s governing board would be comprised of two federal appointees; four airline representatives; one each from aerospace, the controllers union, and the pilots union; and only three General Aviation representatives. In reality, the A4A group likely would control that board. According to Open Secrets (www.opensecrets.org), “Air Transport” was the number one industry contributor to Shuster’s 2016 reelection campaign. So it’s probable that those Congressionally appointed board members would look more kindly on investing the FAA budget in the 565 commercially served airports. Your ability to fly between and among the other 3,500 conveniently located airports, in your own aircraft and on your own schedule, depends on a well-funded and impartial ATC system. To make sure that your Congressional contingent understands that, contact them here: https://www.usa.gov/elected-officials Thanks for reading – and for taking action!

Gil Wolin — Publisher gwolin@bizavadvisor.com Ma y/Ju n e 2 017 B U S I N E S S AV I AT I O N A DV I S O R 5

■ AIRCRAFT SAFETY

Who Audits the Auditor?

BY PHIL GIBSON Crosswind Consulting, LLC / pgibson@amsinc.aero

very driver on the road presumably has a license. But would you ride with just anyone at random, without asking a few questions about their driving record? And what they do to keep their driving skills sharp? The same questions should be asked regularly of your flight department, and always before using any charter service provider, via an operational audit. Your safety – and that of your passengers and crew – depend upon you being a safety leader (see “Are You Safe?” BAA, March/April 2017).

Elements of an Audit

A flight department audit – whether of your own company or of the one you hire for charter – can be defined as “a systematic process whereby an Independent Auditor or Auditing Service objectively obtains and evaluates data regarding the operational and safety functions of a specific Flight Department” (Embry-Riddle Aeronautical University’s Corporate Aviation Manager Certificate Program). Audited elements should include: flight operations, aircraft maintenance, dispatch/flight following, and overall safety effectiveness and culture. The final audit report will present these data to senior management (or other designated personnel) for review 6 B U S I N E S S AV I AT I O N A DV I S O R

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and appropriate action. The report should include any discrepancies, non-conformities, and recommendations. The standards used may vary, and most auditors are required to use a set of criteria based on “best aviation industry” practices. For example, ARGUS International, Inc. uses its proprietary “Silver,” “Gold,” and “Platinum” standards, while Wyvern Ltd. uses its “Wingman” standard. The International Business Aviation Council (IBAC) has its International Standards of Business Aircraft Operations (IS-BAO), a program similar to the acknowledged and accepted International Standards Organization’s (ISO) 9000 quality management systems. IBAC is a nonprofit accreditation agency, which requires its trained auditors to use the ISBAO code of best practices when auditing. Both ARGUS and Wyvern also are approved to audit to IS-BAO standards in addition to their own. The nonprofit Air Charter Safety Foundation (ACSF) has developed its own standards. Other auditing services and vendors, notably Aviation Management Systems (AMS) and the VanAllen Group, offer auditing services and may use IS-BAO or other similar benchmarks. An expert flight department audit, also per Embry-Riddle: ■■ Offers an unbiased perspective of a flight department, and matches the actual data collected against established operations and maintenance safety criteria. ■■ Provides the owner or other designated personnel with specific information as to how their flight department is w w w. B i z AvA d v i s o r. c o m

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Asking the Right Questions Helps to Keep You Flying Safely

being managed, and what changes, if any, need to be made to adhere to “best industry practices” and/or regulatory requirements. ■■ Gives the flight department manager a tool to use when seeking reductions in and/or cost control of aviation insurance premiums. Regular audits normally result in an exceptional safety record and continually increase the level of safety awareness. For an owner, the independent audit helps ensure the day-today safe operation of his/her aircraft. For the charter customer, it helps ensure that the chosen charter company operates to a standard above the government-mandated minimum. Whether you charter regularly, or as supplemental lift, you should always verify the claims of every charter operator you use, for your own safety. Always check with the audit organization to confirm the operator’s rating. The November 10, 2015 crash of an HS 125-700 business jet operated by Florida-based charter company Execuflight underscores the importance of your role in maintaining a high safety level and in establishing and maintaining an external “set of eyes” in addition to all FAA oversight requirements. According to the National Transportation Safety Board’s accident report, Execuflight’s sales agent falsely indicated that the company held “ARGUS Gold” and “Wyvern Registered” ratings, and was “very top notch” and “very safe.” Neither was true. Nor was it IS-BAO registered or audited.

Truth or Consequences

The relationship between auditor and operator must be of the highest integrity, based on a strong level of trust and excellent communication. The auditor must demonstrate fair and reasonable discretion, especially when a violation or infraction of established regulations and other unsafe conditions have been detected. The experience level of an auditor is key to providing protection against bias in the audit process. How do auditors obtain this experience and training? And who audits the auditor? The largest auditing firms were founded and are operated by experienced aviation operations professionals. Each requires that the auditors it uses complete company/organization specific training as well as submit and receive approval of the auditor’s record of auditing experience, education, safety training, and background references. In addition to supervised auditing experience with the auditing firm, testing is required before the auditor is allowed to work independently. The cadre of high-quality auditors used by each auditing firm provides a high level of competency to the operator/owner/charterer. Additionally, feedback regarding the auditor is solicited from the operator undergoing audit, and any issues between the auditor and the operator/owner are mitigated and managed by the auditing firm. A random selection of auditors also is chosen for the audit firm’s program managers or Director of Operations, who observe auditors during an actual audit. For example, per IBAC’s IS-BAO standards: w w w. B i z AvA d v i s o r. c o m

“IBAC continually monitors auditor performance via several sources including organization feedback, audit reviews, and audit monitoring. To protect the integrity of the programme, IBAC reserves the right to withdraw accreditation of an auditor, via an Auditor Review Board, for any of [a number of listed] reasons.” Most auditing firms handle their respective auditor training with comparable requirements. It is always prudent to ask how its auditors are trained, what its auditor selection requirements are, and whether it requires recurrent training, either annually or biannually. This helps to ensure that the auditor not only stays current on all company and regulatory procedures, but continually improves the quality of his or her auditing services.

Is the Charter Broker/Operator Actually Audited?

Unfortunately, a broker or operator’s display of an audit firm’s rating or logo on its website is not a true indicator that it actually earned and deserves that rating. According to Joe Moeggenberg, President of ARGUS: “Some unscrupulous operators simply copy our logo and paste it on their site. We have an entire team involved in chasing them down.” So how can you be certain that the operator is in fact properly audited? Verify its claim by calling the audit firm(s) directly and ask. If a charter broker is assuming the travel arrangements for you or your company, insist that the broker provide you with specific proof of audit status before you, your passengers, or your crew step aboard the aircraft. Risk mitigation begins with you. You or your risk management manager must assume the task of determining the operator’s industry reputation, safety record, auditing status, and overall customer service level – whether the operator is a charter broker, or your very own flight department. BAA PHIL GIBSON , President of Crosswind Consulting, LLC, is an

accredited business aviation auditor and AMS Senior Consultant. An Adjunct Professor at Embry-Riddle Aeronautical University, he holds its Corporate Aviation Management Certificate, as well as an MBA.

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■ AIRCRAFT SALES & ACQUISITIONS

Completions Satisfaction Six Ways to Find the Right Completions Center BY MATTHEW WOOLLASTON Jet Aviation / matthew.woollaston@jetaviation.ch

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On-site experience – While in-house experience is very useful, having all departments on-site helps to maintain consistent quality and efficiency across the entire project, enabling a focus on constant improvement at all levels within the organization. It also offers you greater privacy and security. A commitment to fine craftsmanship and continuous innovation – As aircraft become ever-more sophisticated, the methods used to complete them must evolve. For example, veneers can be hand-cut and shaped to achieve the finest detail and quality, and finished using a state-of-the-art, UV varnishing process that dramatically reduces drying time. Or you may request targeted sound-proofing that provides remarkable improvements in ambient noise reduction inside the aircraft, while reducing weight and thus improving performance. A clear communications process – In the interests of efficiency and experience, look for a completions center that offers you one key contact and transparent internal communication. This system will help keep the entire team — and you — in the loop at all times. Innovation also is a factor, providing advantages like remote-access 3D visualization of your aircraft during every step of the completion, giving you greater control over the process wherever you are in the world. BAA

MAT THEW WOOLL ASTON joined Jet Aviation in March

2014 as director of Completion Sales and Market Development. Since 2015, he has been Vice President Completions Sales and Marketing, overseeing global sales activities for the Completions business.

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JE T AVIATION

With ever-more complex aircraft available to you, the process of fitting out an aircraft cabin is also more complex. The intricacies of the product and process mean that you – the prospective buyer – need a strong support team in place. But who exactly can you turn to for advice? Engaging the services of an experienced completions center can help. A skilled completions center will work with you to be sure you have a thorough understanding of how to optimize design and configuration, and how to integrate your choices within a complex regulatory environment. Typically, an aircraft owner will acquire an aircraft, commission a designer, and then contact a completions center. However, retaining a completions center earlier in the process can be a great advantage. Without an understanding of the process, customers may make decisions about the configuration or options of their new (“green”) aircraft before delivery. A competent completions center will advise on which options work best for specific individual design and weight considerations, giving you greater flexibility when it comes to finalizing, and implementing, an interior. Completions is a complex business. When choosing a completions center, look for these six factors to help your aircraft meet your passenger comfort and functionality requirements: A strong background in VVIP completions – You acquired your large cabin or bizliner aircraft to accomplish demanding, longer-range missions, often with flight times in excess of 10 hours, requiring an effective workspace and rest area, as well as top rate communications. That kind of complex installation requires extensive experience and expertise. Long-standing relationships with Original Equipment Manufacturers (OEMs) – Understanding the airframe is essential to a smooth and efficient process, particularly with new generation composite aircraft. The completions center you choose should have on-the-ground experience and/or significant research and development regarding the exact make and model of aircraft you are purchasing. This will ensure that the center understands how to implement your aircraft’s interior without time-consuming and costly modifications to the composite structure. An in-house design studio – The studio either can provide you with initial concepts for several interiors, or it can work with an external designer to ascertain that your preferred design works within the increasingly complex regulations of the aviation industry.

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■ AIRCRAFT SAFETY

Longer Flights, Safer Flights Better Cost Control and Asset Protection BY CRAIG WILKERSON Gulfstream Aerospace Corp. / craig.wilkerson@gulfstream.com

10 B U S I N E S S AV I AT I O N A DV I S O R

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reduce the risk of an accident, it incorporates a biomathematical model of the factors that cause fatigue, and also acts as an automated schedule watchdog that sets flags when the crew exceeds fatigue limits. The tool simulates the underlying physiological system that causes degradations or breakdowns in cognitive performance, and generates estimates of an individual’s performance degradation caused by his/her level of fatigue. The primary application of the model is to aid operator scheduling by using work schedule information to estimate fatigue and cognitive effectiveness. The tool can be used to examine specific schedules to determine vulnerabilities, select optimal schedules, and plan naps and recovery sleep strategies. Dispatch planners and managers are thereby able to “see and avoid” risk through incisive application of countermeasures to help flight crews maintain or at least proximate their normal circadian rhythms. For example, changing a departure time by two hours can result in a significant improvement of the crew’s predicted performance on landing many hours later. It also may be used to provide more operational flexibility, such as to align a departure time for peak pilot performance during the critical phase of approach and landing at their destination. Biomathematical fatigue analysis, coupled with properly located cabin crew rest areas, offers tremendous potential for increasing safety and for improving operational flexibility for long-haul Part 91 flights. BAA CR AIG WILKERSON has been a sales demonstration pilot

for Gulfstream Aerospace Corp. in Savannah, Georgia, since 2001. During his career, he has flown the G650, G550, G450, GV, and GIV aircraft.

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ilot fatigue rarely was a problem until 1985. Before then, the furthest a large-cabin aircraft could travel nonstop was from New York to Europe, about 2,000 miles or five+ hours of flight time. Today, a variety of large-cabin, long-range aircraft are capable of flying more than 5,000 miles (ten hours) nonstop, too long for a traditional two-person flight crew to fly without concern for safety-related fatigue. Part 91 (owner-only) flying, however, has no FAA-imposed duty day limits. For that reason, most corporate flight departments have attempted to mitigate the risk of a fatigue-induced accident by limiting to fourteen to sixteen the number of hours a crew may perform flight duty. This mirrors the safety protections dictated by Part 135 charter regulations. Some owners prefer to fly their own trips under Part 135, and invoice their business for tax reasons. But these self-imposed limitations are not sufficient to provide adequate protection from fatigue for aircrews, particularly when trips involve multiple back-to-back long-distance legs with multiple time-zone changes and severe disruption of circadian rhythms. For owners who operate under Part 91, such extended nonstop routes bring additional challenges for aircrew fatigue management, a hot-button topic for the National Transportation Safety Board and other government agencies. Operator fatigue has shown up repeatedly as a factor in accidents across all modes of transportation. Studies show that, much like alcohol, fatigue can erode judgment, slow response times, and lead to errors (See “Good Nights Equal Good Flights,” BAA May/June 2015). The first safety requirement for such extended flights is to fly with additional flight crew members, to rotate with the primary flight crew. Responding to this challenge, Original Equipment Manufacturers (OEMs) are building dedicated crew relief/rest areas in some long-range, large-cabin models featuring beds or seats that recline fully to support augmented crews. But if these areas are positioned in the cabin next to the galley, or directly behind the pilot’s seat, they may not foster high-quality rest. In addition to designing newer aircraft models with rest areas more conducive to sleep, and adding training programs to help pilots self-identify fatigue factors. OEMs increasingly are adopting biomathematical fatigue prediction tools to address the fatigue issue. Originally developed by the military, this software is capable of accurately predicting periods during which a pilot may be seriously fatigued. Used to identify and mitigate vulnerabilities and

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■ FLIGHT OPERATIONS

Your Beautiful Time Machine Five Factors Drive New, Efficient Aircraft Design BY DONALD POINTER Dassault Falcon Jet / donald.pointer@falconjet.com

You likely bought your aircraft to serve you and your business efficiently. And while the onboard WiFi, SATCOM, and workspace contribute to your productivity, the design of the aircraft itself is paramount. What factors drive efficient aircraft design? While good planning is the cornerstone, these elements, when combined, yield a superior aircraft: Cost of Operation – Both fixed and Direct Operating Costs (DOCs, which include: fuel, maintenance, catering, landing, and some other, less expensive, items) are important considerations for any buyer. The main operating cost by far is fuel, which can account for up to 50% to 75% of total DOCs for a large cabin business jet. So designing an efficient airframe and integrating an efficient engine with low fuel burn is key, especially should fuel return to, if not eventually exceed, $6.00 per gallon. Technology – Since the first business jet flight in 1957, aircraft have undergone continual improvement. Turbofan engines were introduced in the 1970s, reducing fuel consumption and extending range by more than 30%. Yesterday’s manual flight controls and early fly-by wire systems have been surpassed by the more advanced digital flight control systems. Many aircraft sub-assemblies now are made of carbon fiber or other types of composites, making them lighter and stronger. More recent advances, such as high-mach winglets for improved high-speed performance, and Combined Vision Systems (CVS) provide pilots the ultimate in situational awareness, make business jets safer and more efficient. Performance – Efficient aerodynamics drives the aircraft’s performance. If you are not familiar with this facet of your aircraft, look at it before you embark on your next flight. Notice the overall size of the aircraft in comparison to the passenger cabin. Aerospace engineers work very hard to maximize the cabin space while keeping the overall aircraft footprint as small as possible, a concept known as “ramp image.” Keeping the aircraft “ramp image” modest while giving the occupants plenty of cabin space reduces the overall weight, meaning less fuel is required per flight, lowering cost and increasing efficiency. Other design elements, such as an aft fuselage that decreases in size where the engines are located, known as the “area rule,” and the winglets, help to reduce drag and thus gain efficiency, sometimes as much as 10%. In addition, the added curvature of the wing with the slats and flaps extended provides about 50% more lift, allowing for safer, slower approach speeds, shorter runway requirements, and less energy when braking.

12 B U S I N E S S AV I AT I O N A DV I S O R

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DONALD POINTER is Senior Director, Marketing and

Communications, Dassault Falcon Jet. He formerly served as Director of Service Engineering, and holds a BS degree in Aeronautical Engineering from Embry-Riddle and an MBA from Rider University.

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DAS SAULT FA LC ON JE T

Advanced Manufacturing and Support – Original Equipment Manufacturers (OEMs) today rely upon computer software like Computer-Aided Three-dimensional Interactive Application (CATIA), which produces more efficient designs on screen in three dimensions. Using CATIA enables manufacturers to design aircraft that are aerodynamically efficient, as well as faster and more cost effective to build and maintain. CATIA also provides a superior platform for electronic manuals and maintenance training. Environmental Impact – Efficient design informs the aircraft’s environmental impact, as emissions are directly linked to the amount of fuel burned by the engines. Burn less fuel for a given mission and fewer pollutants are emitted as a result. Today’s engines control performance using a Full Authority Digital Engine Control (FADEC). It’s a powerful computer that adjusts engine settings to optimize the thrust by regulating the fuel and air that are consumed. Newer, lower-noise-emitting engines boast ever greater efficiency, as OEMs seek to achieve lower fuel burns that are both environmentally responsible and favorable to your checkbook. Marcel Dassault has been correctly credited for saying: “For an aircraft to fly well, it must be beautiful.” What a great way for an engineer to see the aerodynamics, technology, and aesthetics in an aircraft and, in so doing, set us on the road toward design efficiency. BAA

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■ AVIATION LAW

Risks and Rewards of Fractional Shares Regular Appraisal Helps Prevent Sticker Shock

mong the many business aircraft travel options, fractional ownership offers the flexibility, convenience, privacy, and tax- and time-saving benefits of whole aircraft ownership, without the attendant capital expense or management responsibilities. Just buy the share size appropriate to your annual flight requirement in a suitable aircraft make, model, and size. Then pay a fixed amount per month and per hour flown, without having to hire personnel, pay hangar rent, or attend to the many other details inherent in whole aircraft ownership, including variable costs. Fractional ownership has been a useful corporate business tool for more than 20 years. Fractional providers enjoy a remarkable safety record, given the huge number of operations they perform. But when your share contract is due for termination or renewal, you may be in for sticker shock. Share values in fractional fleet aircraft have suffered from accelerated loss in recent years, often 25% to 40% more than that of a comparable single-owner aircraft. While some decline is normal, a fractional aircraft’s high flight time (3x the average on a wholly owned aircraft) creates a negative market perception of accumulated wear-and-tear. That factor, combined with the current surfeit of preowned aircraft for sale, has accelerated that decline. Fractional share owners generally depreciate the asset as would any whole aircraft owner, using a double-declining schedule over the five-year contract. At termination, you must decide whether to renew a share on the same aircraft, switch to a different model, or leave the program and sell the share back to the fractional operator at a price dictated by a formula in the fractional contract. 14 B U S I N E S S AV I AT I O N A DV I S O R

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AMANDA APPLEGATE , is a Partner at Aerlex Law Group.

She formerly served as Associate General Counsel and VP of NetJets Services, Inc., heading a team that handled more than 3,500 fractional ownership contracts.

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BY AMANDA APPLEGATE Aerlex Law Group / aapplegate@aerlex.com

For example, you may have purchased a quarter share in an aircraft, allowing for 200 hours of occupied flight hours annually, and depreciated it at the double-declining balance rate. But while you are flying only 200 hours annually, your shared aircraft is losing market value based on its total usage: perhaps as much as 1,300 hours per year. Furthermore, if your share is on an aircraft model that the fractional operator intends to retire, your options are even more limited. Since renewing the same make/model is not possible, you’ll have to sell your share back to the provider at contract end. For example, NetJets is replacing its fleet of Gulfstreams with Bombardier Globals and Challengers, and FlexJet is moving from Bombardiers to Gulfstreams. Your current make/model may not be available from your current fractional operator. So unless you’ve monitored the trends, when your contract term ends, you may not be anticipating the costs of making a change. And unless you’ve monitored your hours usage, you may discover you have a surplus of accumulated underflown hours which may be forfeited, all or in part, if you are not continuing with the same provider with the same share size. If you want to stay in the program with the same fractional operator, you’ll have to contribute significant additional capital to cover the difference between the reduced fair market value of the share on the aircraft being retired and the price of the share on the new model aircraft being introduced. When selecting or renewing a fractional program, either as your primary source of air transportation, or as supplemental lift, you have many options to consider – particularly if your current share is in an aircraft model your operator is phasing out. There are regional and global fractional programs, card memberships, pure charter programs, and whole aircraft ownership with guaranteed income derived from charter revenue – all very different offerings, each with its own advantages. Reexamine your flight requirements and choose the option – or options – that best meet your own distinct travel needs. Be sure to consult your tax adviser on any like-kind exchange issues before moving forward with any sale or purchase. BAA

HOURLY COST MAINTENANCE PROGRAM COVERAGE VALUE? MAJOR SECTO ADDING /DETRACTING VALUE? CURRENT AND PROJECTED ASSET INSIGH INDEX FIGURES? CURRENT MAINTENANCE EQUITY? LOW PRICE OR GOO VALUE? ASSET QUALITY RATING? ESTIMATED MAJOR MAINTENANCE COSTS FORECASTED MAINTENANCE EXPENSE? CURRENT MAINTENANCE EXPOSURE FORECASTED VALUE AT TRANSACTION CLOSING? ORDERLY LIQUIDATIO VALUE OVER THE NEXT FEW YEARS? PROJECTED QUALITY RATING? HOW DOES IT COMPARE TO& Maintenance THE “FOR SALECondition FLEET? FUTURE MARKET IMPACT Value Analytics ON ASSET FAIR MARKET VALUE? FUTURE MAJOR MAINTENANC Optimize Your Aircraft Investment. DATES? FUTUREtoRE-MARKETABILITY? RESIDUAL VALUE WITHIN A FEW From simplifi overviews to detailedPROGRAM analytics, weCOVERAGE generate in realVALUE? time MAJO YEAR? HOURLY COSTedMAINTENANCE the information you need toVALUE? make informed decisionsAND with confi dence. SECTOR ADDING /DETRACTING CURRENT PROJECTED ASSE up-to-date information via our online dashboards or downloadable reports.PRICE O INSIGHTView INDEX FIGURES? CURRENT MAINTENANCE EQUITY? LOW GOOD VALUE? ASSET QUALITY RATING? ESTIMATED MAJOR MAINTENANC COSTS? FORECASTED MAINTENANCE EXPENSE? CURRENT MAINTENANC EXPOSURE? FORECASTED VALUE AT TRANSACTION CLOSING? ORDERL LIQUIDATION VALUE OVER THE NEXT FEW YEARS? PROJECTED QUALIT RATING? HOW DOES IT COMPARE TO THE “FOR SALE FLEET? FUTURE MARKE IMPACTS ON ASSET FAIR MARKET VALUE? FUTURE MAJOR MAINTENANC DATES? FUTURE RE-MARKETABILITY? RESIDUAL VALUE WITHIN A FEW YEAR? HOURLY COST MAINTENANCE PROGRAM COVERAGE VALUE? MAJO SECTOR ADDING /DETRACTING VALUE? CURRENT AND PROJECTED ASSE INSIGHT INDEX FIGURES? CURRENT MAINTENANCE EQUITY? LOW PRICE O GOOD VALUE? ASSET QUALITY RATING? ESTIMATED MAJOR MAINTENANC COSTS? FORECASTED MAINTENANCE EXPENSE? CURRENT MAINTENANC EXPOSURE? FORECASTED VALUE AT TRANSACTION CLOSING? ORDERL LIQUIDATION VALUE OVER THE NEXT FEW YEARS? PROJECTED QUALIT RATING? HOW DOES IT COMPARE TO THE “FOR SALE FLEET? FUTURE MARKE Simplify Complex Relationships

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■ AIRCRAFT MAINTENANCE

In for the Long Haul Address Maintenance Risks with a Long Term Service Agreement BY STEPHEN FRIEDRICH Rolls-Royce / stephen.friedrich@rolls-royce.com

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mitigate maintenance cost risk and eliminate the necessity of investing in spare engines and accessories. Original Equipment Manufacturers (OEMs) know the aircraft inside-out, and are the first to recognize the need for, and the benefits of, LTSAs, which include: ■■ Engine/Accessory Replacement Service at Fixed-Cost-Per -Flight Hour ■■ Engine Health Monitoring ■■ 24/7 Operational Service Support ■■ Predictable Maintenance Costs ■■ Reduced Capital Investment ■■ Increased Aircraft Residual Value ■■ Risk / Transfer Management ■■ Free-of-charge support if your aircraft is ever grounded. The Risk/Transfer feature is of particular importance, as it provides the aircraft with perpetual coverage throughout the aircraft’s entire life. That feature enables the program to move with the aircraft to subsequent owners. It is increasingly in demand in the aircraft aftermarket, and helps maintain a higher resale value. Independent brokers confirm that business jets, particularly large-cabin, long-range aircraft, enrolled in LTSAs sell more quickly and with greater residual value. This kind of coverage is almost mandatory in today’s market. Maintaining your aircraft’s costs while reducing downtime is essential to your productivity and to your budget. BAA STEPHEN FRIEDRICH , is VP, Sales and Marketing for

Rolls-Royce Civil Small and Medium engines. Rolls-Royce created the concept of Long Term Service Agreements in 1962, offered today for aircraft engines under its CorporateCare brand.

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ROLLS -ROYCE

n recent years, a shift in the business aircraft market has been driving the need for higher maintenance predictability, cost control, and residual value. A Long Term Service Agreement (LTSA) can help. It is a longestablished method of managing both routine and unscheduled maintenance costs for turbine engines used in a wide range of industries, from large community power-generating gas turbines to business jet engines. With a LTSA in place, you pay a predetermined contractual per-flight-hour charge to your provider. You then are able to forecast precisely what your annual engine maintenance costs will be, based on your projected annual flight hours. The many benefits of a LTSA, however, extend beyond cost control and predictability. Aircraft values – particularly those in the large-cabin, longrange sector – continue to depreciate at an unprecedented rate. Enrolling your engines in a LTSA can help protect the value of your aircraft. For example, according to one aircraft value guide, a 2013 Gulfstream 650 enrolled in a LTSA is worth $53m, compared to $49m for the same model and year aircraft that is not enrolled. Reliability and Performance You need to be able to fly at any time in response to your unpredictable and sometimes hectic schedule, which calls for high levels of service and reliability of your aircraft. You want your aircraft to deliver top performance in terms of range, speed, and comfort every time you get on board. Making sure your aircraft performs flawlessly – and that any issues or problems are addressed immediately and thoroughly – can take a lot of time and money if you manage it on your own, an investment that could be spent more wisely on your business or family. Enrolling in a LTSA helps guarantee that your aircraft always performs in top condition. And with a LTSA, you no longer need to take on the risk of managing maintenance on a time and material basis, in contrast with the standard business model. LTSAs enable you to experience an exceptional level of service at a fixed price, which normally is far less expensive than standard time and material. In theory, all LTSAs meet business jet owners’ needs – however, in practice, not all LTSAs meet those needs equally. When searching for complete LTSA coverage, be sure that the program you choose captures complete engine and accessory replacement service on a fixed cost-per-flight-hour basis. LTSAs which offer fixed cost-per-flight-hour enable the operator to forecast costs with greater accuracy. Operators are able to

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■ WASHINGTON REPORT

Wide Divide on FAA Consensus On a Governance Plan for the Agency Remains Elusive BY DAVID COLLOGAN dlcollogan@gmail.com

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reauthorization bill centered on the same ATC privatization plan Shuster was pushing in the previous session of Congress. In the Senate, where there is much less enthusiasm for privatization, the Senate aviation subcommittee heard expressions of concern about another Trump proposal – eliminating all funding for the Essential Air Service program. EAS, which came into existence in 1978 as part of the Airline Deregulation Act, provides subsidies to carriers which operate scheduled flights into small community airports. Laurie Gill, the mayor of Pierre, South Dakota, the state capital, told the subcommittee that without EAS service local residents would have to drive 200 to 500 miles to access reliable scheduled air transportation. Officials and residents of the other 108 EAS-eligible communities in the continental U.S., plus nearly 200 more points in Alaska, share similar concerns. The widespread industry opposition to privatizing the ATC system was underscored in letters sent to the senior members of House and Senate transportation committees in March by a coalition of 16 business and general aviation organizations, including AOPA, EAA, GAMA, and NBAA. The coalition reiterated its “very real and long-standing concerns,” about the likely effects of privatization on general aviation. It called on Congress to “provide ample opportunity for all stakeholders and citizens to carefully review, analyze and debate any proposed legislation changing the governance and funding for air traffic control.” BAA DAVID COLLOGAN has covered aviation in Washington, DC

for more than four decades. This award-wining journalist is known as one of the most knowledgeable, balanced, wary, and trusted journalists in the aviation community.

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ISTO CKPHOTO

he annual high-stakes card game to determine if Congress can ever pass a long-term FAA reauthorization bill is underway in Washington, with some new players, a couple of new plot lines, and action on multiple fronts. The most prominent new player is President Donald Trump. The president’s first budget message devoted just 43 words to the U.S. air traffic control system, saying it should be removed from FAA and delivered to “an independent, non-governmental organization…” That was certainly not a surprise to Rep. Bill Shuster (R-PA), the chairman of the House Transportation & Infrastructure Committee and principal congressional proponent of privatizing the U.S. air traffic control system. Trump and Shuster campaigned together on several occasions last fall, and Trump appears willing to let Shuster do the heavy lifting on ATC privatization. As part of that effort, Shuster got new U.S. Secretary of Transportation Elaine Chao to join a delegation to Canada at the end of March to meet with Canadian transportation officials to discuss the Nav Canada experience. ATC privatization backers love to point to Canada. In 1996 a new entity called Nav Canada became the owner of all air navigation services formerly provided by Transport Canada. By most accounts, Nav Canada, which is funded by a complex series of user fees, has done a good job of providing air navigation services. But claiming the Canadian experience can or should be replicated south of the border is a huge stretch. Canada has fewer than 34,000 registered aircraft and logs 12 million aircraft movements annually. Most of that activity occurs within 200 miles of the U.S. border, where nearly 80 percent of all Canadians live and work. In the U.S. there are nearly 200,000 registered general aviation aircraft, some 7,500 commercial aircraft and 10,000 rotorcraft. The U.S. ATC system is responsible for monitoring 5 million square miles of U.S. airspace and 26 million square miles of oceanic airspace. While Nav Canada has seven air traffic control centers and 41 control towers, FAA operates 21 ATC centers and 476 control towers. That’s because airspace is much more densely populated in the U.S., with 7,000 aircraft in the air at any given time and nearly 24,000 commercial flights daily. In graphic terms, think of Nav Canada’s operations as a walnut and the U.S. ATC system as a watermelon. The House aviation subcommittee held the first of what are expected to be several hearings leading to mark-up of an FAA

Revealing the

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