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APR I L 2014

Buying Your First Bizliner There’s a different path to purchase for these converted commercial airliners


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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“Knowing more means we always provide our clients with seamless and timely transactions, backed by our proven expertise, commitment to integrity, and experience. JETNET’s professionalism and speed guarantee that our business, and our reputation, are on solid ground from start to finish. We couldn’t do it without them.” Rebecca Posoli-Cilli / President and COO, Freestream Aircraft Limited / Client since 1990

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President & CEO Corporate Flight Attendant Training & Global Consulting Beginning in 1970, Ms. Friedenberg has flown for American Airlines, Capitol Air, Coca Cola, DuPont Aviation, and American Standard Companies; and as a contract corporate flight attendant for several companies nationwide. In 1999 she founded “The Corporate Flight Attendant Training Program,” offered in two cities, and now conducts in-house training for clients globally, in addition to consulting within the business aviation community. On the National Business Aviation Association’s Flight Attendant Committee for 19 years, she was Women In Corporate Aviation’s 2011 Volunteer of the Year.

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President & CEO ARGUS International Mr. Moeggenberg began his aviation career as a Cessna Aircraft salesman and demonstration pilot. In 1977 he founded American Air Services, acquired in 1987 by NetJets and renamed Executive Jet Management. After serving as NetJets’ president for three years, in 1995 he founded ARGUS International, an aviation consulting and audit company specializing in market intelligence data and research services, aviation consulting, onsite safety audits, and Safety Management Systems (SMS) solutions. He is a commercial-rated pilot with more than 4,000 hours of flight experience.


Aircraft Sales Freestream Aircraft USA, Ltd. James Mose was involved in eight bizliner transactions in 2013, on behalf of Freestream Aircraft USA. Prior to founding White Mountain Aviation in 2007, he was a Client Aviation Manager for TAG Aviation. His 23 years of flying began with USAF assignments flying F16 and A10 fighter jets, then commercially for Northwest Airlines and International Paper Company. Mr. Mose holds a BS in Aeronautical Science from the University of North Dakota, and an AS in Flight Technology from the Florida Institute of Technology.


Founder and Medical Director Black Bag Private Emergency Medicine Dr. Christopher Sidford is a board-certified physician in Emergency Medicine with more than twenty years’ experience at leading medical institutions. As a US Navy officer, Dr. Sidford served as faculty member of the Emergency Medicine Residency training program in San Diego, as well as taught and practiced emergency medicine in more remote locations like the Mojave Desert and the Arctic Circle. He volunteers at the International Medical Equipment Collaborative, an organization dedicated to providing third-world nations with millions of dollars’ worth of used medical equipment.


JETNET iQ Creator / Director and President Rolland Vincent Associates, LLC With thirty years’ aviation experience, Mr. Vincent provides market research, industry forecasting, and strategic planning for the aerospace and aviation industries. Among his senior leadership positions were: Vice President of Strategy & Business Development at Cessna, Director of International Airline Analysis at Bombardier Aerospace, Director of Marketing, Strategy and Business Development at Flexjet, and Director of Strategy and Communications at Learjet. Mr. Vincent holds an MBA in International Business and Marketing, and a BA and MA in Urban and Economic Geography from McGill University.

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Buying Your First Bizliner

There’s a different path to purchase for these converted commercial airliners


Getting In the Zone: Managing Medications When You Travel

Staying healthy requires advance planning




Six Sigma for Corporate Aviation The accountable executive is responsible for ensuring the safety and security of your business aircraft operations



The Corporate Flight Attendant: Safety and Service

The corporate flight attendant is there to serve and keep you safe



Business Aviation’s Recovery: Are We There Yet?

The answer is a qualified “Yes”



Moving From Charter to Ownership

When your business aircraft travel moves from “occasional” to necessary, use these seven steps to buy your first business aircraft




Publisher’s Message

The Business of Business Aviation



Washington Report

The DOT finally takes a hard look at questionable subcontracting practices


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PUBLISHER’S MESSAGE ■ PUBLISHER Gil Wolin ART DIRECTOR Raymond F. Ringston MANAGING EDITOR G.R. Shapiro EDITORIAL ASSISTANT Michael B. Murphy WASHINGTON EDITOR David Collogan CONTRIBUTORS Susan C. Friedenberg Corporate Flight Attendant Training & Global Consulting Joe Moeggenberg ARGUS International James Mose Freestream Aircraft USA, Ltd. Christopher Sidford, MD Black Bag Private Emergency Medicine Rolland Vincent Rolland Vincent Associates, LLC BUSINESS MANAGER JoAnn O’Keefe BUSINESS AVIATION MEDIA , INC . PO Box 5512 • Wayland, MA 01778 Tel: (800) 655-8496 • Fax: (508) 499-2172 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

The Business of Business Aviation


or more than 50 years, business owners, executives, and advisors have been using aircraft to make the most effective use of their time. During this last half century, dozens of magazines and now websites have sprung up, providing information on the technical aspects of how best to fly and maintain those aircraft. In today’s challenging economy, with business leaders like you flying more than 30,000 turbine aircraft between and among cities and continents worldwide, you need one go-to source for the best, most upto-date information on the business of owning, operating, and using corporate aircraft. We’re proud to introduce Business Aviation Advisor as that source: a print and electronic magazine presenting timely, critical information written by industry experts on virtually every aspect of business aviation. Joining these industry experts is Dave Collogan, award-winning Washington journalist, and former Editor-in-Chief of The Weekly of Business Aviation. Dave has been covering aviation in the nation’s capital since 1972, and will report on domestic and international regulatory issues affecting business aircraft ownership and flying. Whether you own and operate a jet, turboprop, or fractional share, or use a jet card or occasionally charter, Business Aviation Advisor is here to keep you informed. In this issue Rollie Vincent offers an overview of the state of today’s market. Thinking about switching from chartering to owning? You’ll find out how here. Considering joining the more than 250 bizliner owners? Jim Mose provides the roadmap for the new and used purchase process. If you use a charter broker to book your flights, Dave Collogan’s update on the DOT’s new licensing efforts and changing rules is a must-read. Joe Moeggenberg, Dr. Chris Sidford, and Susan Friedenberg keep you apprised of key safety issues, including managing operational safety, medications when traveling, and cabin safety. And me? Well, as the middle of three generations in the business aviation industry, I grew up in and around airplanes. In these pages, you will see my own 40-plus year passion for safety, service, excellence, and cost-effective operations. Our select group of advertisers are colleagues, friends, and people we trust to bring you the highest-quality products and services. Welcome to Business Aviation Advisor – your best source for information on the business of business aviation! Best regards,

Gil Wolin – Publisher

©Copyright 2014 by Business Aviation Media, Inc. All rights reserved

Printed in the USA

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BBJ cabin with Honeywell’s Ovation Select high-speed digital system and luxury interior completed by Jet Tech of Spokane, WA.


Buying Your First Bizliner There’s a different path to purchase for these converted commercial airliners BY JAMES MOSE Aircraft Sales, Freestream Aircraft USA, Ltd. /


usiness jets save time and give you direct access to more than 5,000 airports in the United Stated alone – more than ten times the number served by commercial airlines. Each aircraft make and model is designed to satisfy specific, defined trip profiles: from light jets carrying up to six comfortably on trips of 1,200 miles or less, to long-range, largecabin jets and airliners outfitted as business jets for longer intercontinental trips. Large-cabin, long-range business jets have fared best in the recent recession, holding their value among the growing number of international executive travelers. For only large cabin aircraft offer enough space for separate office and rest accommodations during the 12 hours required to fly nonstop from Dallas to Moscow, or the 13 hours from San Francisco to Chengdu. And they offer almost unlimited interior customization options. Until fairly recently, only a few select companies and Ultra High Net Worth Individuals (UHNWIs) purchased and refurbished airliners. By 1998, The Boeing Company recognized the strong – albeit limited – demand for new, modified, and properly outfitted 737 airliners as corporate jets, and created the BBJ: the Boeing Business Jet. Today, with auxiliary fuel tanks extending nonstop range to almost 7,000 miles, the BBJ and its competitor Airbus AC319 offer 6 B U S I N E S S AV I AT I O N A DV I S O R A p r i l 2 014

the business jet owner performance far beyond the original airline design criteria. There now is a full range of business jets based on the Boeing 700 series and AC300 series of aircraft, a category now referred to as “bizliners.” The Boeing 737-700 and Airbus A20/319 are logical, if costly, solutions for executive travel when a Global Express, Gulfstream 650, or Falcon 7X won’t accommodate your typical passenger load or in-flight working and comfort requirements. The larger and faster Boeing 757, 767, and 777, or Airbus’ equivalent A330, also are available as corporate jets, as are the even larger Boeing 747 or Airbus A340. Almost 300 aircraft operators, from heads of state to corporate executives and UHNWIs, have found these aircraft best suited to meet their business and personal travel needs. While understandably, there is an emotional component to acquiring an airliner for use as a business jet, the purchase should be handled with the same rational business discipline as with any other business asset. The Acquisition Process Acquiring a traditional business jet, regardless of size and range, may vary somewhat from model to model, but the process is relatively consistent. Acquiring an airliner for use as a business jet – a bizliner – is another matter entirely. There are three ways to do so. You can buy a pre-owned aircraft already configured for corporate use, or a pre-owned airliner available for conversion and refurbishment. Or you can acquire a w w w. B i z AvA d v i s o r. c o m

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The Airbus ACJ319 VVIP cabin features club seating, two lounges, a bedroom, two bathrooms and a shower, and it seats 19 passengers.

Maintenance cycles, lease terms, and airplane delivery schedules contribute to wide fluctuations in airline demand for equipment. Airlines also are irrevocably bound by their individually tailored government-approved commercial aircraft operating specifications, which define the specific aircraft and engine combinations that each is allowed to operate. The B777, for example, has 18 different available engine combinations. An expanding airline in need of as few as six B777-200ERs with Pratt &Whitney 4000 engines could pay dearly for the few available jets so configured at that time, causing prices to temporarily skyrocket. Or those six jets may be delivered to storage if there is no ready buyer. These factors make market value fluctuations very difficult to forecast: there may be no pre-owned aircraft inventory for sale one day, but six the next. Understanding the airliner marketplace puts you – the single airliner buyer – in a strong position. Commercial airline operators may assume that all aircraft buyers are other fleet operators, which can work in your favor. Most airlines are able to release any one of their airplanes at any time – they just need a credible and profitable reason to do so. An airline’s initial inflexibility juxtaposed with the one-aircraft buyer’s complete flexibility can result in a buyer’s advantage. A cash transaction which can be completed quickly and easily often induces a selling airline to act. Whether you are buying new or used, it’s best to assemble and work with a team of expert acquisition specialists, who will help ensure that your bizliner meets your specific requirements, and is purchased at the optimal market price. BAA


green (factory-new) big jet directly from Boeing or Airbus and arrange for a second-party completion center to outfit it to your specifications. With respect to the third option, while both manufacturers offer experienced professional sales executives and support personal to guide you through that complex process, many buyers prefer to use an independent acquisition consultant/broker and legal counsel. As with any high-priced capital asset, you can expect some negotiation to help ensure that you acquire the right aircraft at a fair price. Recognize that the vast majority of these aircraft are sold to commercial airlines, which have extensive teams of full-time specialists working with senior management to complete these lease or acquisition transactions. They don’t leave negotiations with Boeing or Airbus to the inexperienced – and neither should you. An alternative, and often more cost-effective, option to buying a new BBJ or Airbus Corporate Jet, is to purchase a former airliner and then convert the interior to your own exact specifications at an experienced aircraft refurbishment and completion center. As the 100,000 pound Boeing 737 has a tail height of more than 40 feet, a 117-foot wing span, and is almost 130 feet in length, there are a limited number of refurbishing companies that have both the hangar space and the expertise to properly complete the project. As with acquisition, refurbishing requires professional onsite oversight to insure that all details, from cockpit navigation equipment, to passenger amenities and air-to-ground communications equipment, are completed to your specifications. Some pre-owned aircraft brokers have their own staff to oversee refurbishment, but buyers may prefer to retain a dedicated completion consultant, like Aerospace Concepts, for such complex engineering, design, and installation projects. If a refitted airliner meets your travel requirements, don’t let the scale dissuade you. There are firms with the expertise and experience to see you safely and cost effectively through the process of buying and refurbishing a pre-owned Boeing or Airbus bizliner. The Challenge of Market Fluctuation Forecasting The bizliner marketplace is fundamentally different from corporate airplane markets. Freestream Aircraft president, Alireza Ittihadieh, says: “With the elasticity of a giant rubber band, the airliner market is generally characterized by large swings in available inventory, disparate and irrational asking prices, undefined and delayed delivery dates, and onerous acquisition terms.” To further his observations, airline patterns of buying and selling aircraft also can mirror their frequent passenger fare-wars: highly susceptible to macro-economic cycles and an “airline-passenger-as-a-commodity” mentality. Add to that the complex buying process and jet fuel price fluctuations, and highly elastic indeed describes the airliner-as-corporate jet marketplace. The airliner market is very closely traded by a few select companies typically interested in multiple airplane and engine transactions, new airline delivery position trades, leasing opportunities, or airline-specific fleet planning strategies.

Lineage 1000 Interior

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Getting In the Zone: Managing Medications When You Travel BY CHRISTOPHER SIDFORD, MD Founder & Medical Director, Black Bag Private Emergency Medicine /



ecently, a philanthropic couple I know invited me to accompany them to Nepal on a fact-finding mission for The World of Children Awards. One of the first things we discussed was how they should manage their medications while traveling, particularly through several different time zones. This question often arises, and there is no one right answer. Some medications call for maintaining a consistent level of the drug in your system at all times, which often means taking it at a specific and consistent time of day. People taking antidepressants such as Prozac®, Cymbalta®, and Paxil® and neuropathic drugs such as Neurontin® and Lyrica®, for example, must be extra vigilant as they are at greater risk for mild to severe withdrawal symptoms if they miss a dose. Exactly how your dosage instructions will change while traveling depends on the medications that you take and your doctor’s recommendations. 8 B U S I N E S S AV I AT I O N A DV I S O R A p r i l 2 014

According to the American Diabetes Association, patients who take insulin typically do not have to adjust their doses if they cross fewer than five time zones. But it’s even more nuanced than this: traveling east will shorten one’s day and may necessitate a reduction in insulin (particularly for shorter flights) because insulin doses then would be given closer together than normal and could raise the risk of hypoglycemia. Alternately, traveling west means a longer day, so insulin doses may need to be increased. Talk to your doctor, as differing times of departure and prolonged flights might require a more adaptable approach. This could apply to other medications as well. If you are someone who takes medications regularly, it’s crucial to talk with your doctor or doctors before you leave. You can’t rely on Internet chat boards to tell you what to do as every medication and every person is different. I recommend scheduling an appointment at least four weeks before you travel, as your doctor might suggest changing the times you take your medications before you go to match the time zone you’ll soon be in. w w w. B i z AvA d v i s o r. c o m

Is There An App for That? If you have a smartphone or an iPad, look into the Dosecast app, declared “best of breed” by The New York Times. Using Dosecast, you set daily, weekly, or monthly medication notifications, with or without WiFi. You can postpone reminders if you want to skip a dosage. This app even adjusts your schedule to different time zones. However, don’t rely solely on any app, as even the best tool is fallible, can break, or can be lost or stolen.


Always get prescriptions refilled before you travel overseas. A good rule of thumb is to bring at least twice the medication you need for the length of time you’ll be away. Getting a refill may not be difficult if you’re traveling in the US, but even if you are, it can’t hurt to bring extra, just in case. Since you will be travelling aboard your own aircraft, the possibility of lost luggage is minimal, but it’s always a good idea to carry a one- or two-day supply of any critical medications on your person. Check regulations before you fly. According to the Mission of the Bureau of Consular Affairs, medications should always be transported in their original, labeled bottles, along with documentation of the prescription. Although you’re not likely to be subject to TSA rules, it’s a good idea to check the laws of the destination country for any restrictions on importing your medications. Some countries require special permission or licenses in advance. Some, such as Japan and Australia, and parts of the UAR, like Dubai, don’t allow the import of specific medications under any circumstances, and others, such as the UK, allow only a predetermined amount of certain medications common here in the US (including some anti-anxiety drugs and pain relievers). Contact the consulate/embassy of your destination country before you go. Now that we’ve got all that covered, enjoy your trip and travel safe. BAA

CAN 8.5x5.5_CAN 2011 7/18/12 4:47 PM Page 1

Thanks to business aviation, we’re bringing cancer patients closer to their cure.

“After her cancer treatment, she could not fly commercially. “What a relief she could fly with Corporate Angel Network.” Through the generosity of corporations flying business aircraft, Corporate Angel Network arranges free travel for cancer patients using the empty seats on corporate jets.


This service is vitally important to cancer patients. Some simply can’t afford the cost to fly commercially. Others can’t handle the stress of navigating airports. Still others can’t risk the exposure of crowded airports because of immune system deficiencies. Since 1981, Corporate Angel Network, a not-for-profit organization, has worked with U.S. corporations to schedule more than 40,000 cancer-patient flights and currently transports between 250 and 300 patients a month to and from treatment. The process is simple. Corporate Angel Network’s staff does all the work. After all, patients and their families have enough to worry about.

Corporate Angel Network

Cancer patients fly free in the empty seats on corporate jets.

Corporate Angel Network, Inc. (914) 328-1313 w w w. B i z AvA d v i s o r. c o m

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Six Sigma for Corporate Aviation The accountable executive is responsible for ensuring the safety and security of your business aircraft operations BY JOE MOEGGENBERG t’s been almost three decades since “Six Sigma” entered our vocabulary. Developed at Motorola to improve manufacturing processes and eliminate defects, it revolutionized quality control processes around the world, by proving that proper investments in quality provided outstanding improvements to the bottom line. Implementing Six Sigma meant fewer reworks and fewer product returns, and higher quality meant improved sales and profitability. While originating as a manufacturing application, Six Sigma’s success there led to modifications and adoption in many other business processes. But where the goal of a Six Sigma process is achieving a 99.99966% defect-free rate of manufacture, our goal for aviation safety is Zero Defects, for obvious reasons. And that’s why the International Civil Aviation Organization (ICAO) developed what amounts to a Six Sigma safety program for business aviation, called a Safety Management System (SMS). Each Civil Aviation Authority (CAA), such as the US Federal Aviation Administration (FAA), has the option to augment those international standards with its own requirements. Flying a corporate jet no longer is just “kick the tires, light the fires and go.” The industry has evolved, and that kind of cavalier attitude toward safety just won’t fly anymore. What is Safety Management? As defined by ICAO, safety management is a process for establishing lines of safety accountability throughout the organization, including the senior managers. Safety management is created by a government developing and implementing a State Safety Program (SSP). The Safety Management System (SMS) is a systematic approach to managing safety in compliance with the SSP. It includes the necessary organizational structures, accountabilities, and policies developed by and for business aircraft operators. The Regulatory Environment is Changing… The FAA will have to transition from a regulatory compliance and oversight approach to one based upon risk management, utilizing safety indicators and safety targets. This represents a significant change, from a reactive to a proactive performance-based approach to air safety. Today, countries around the globe are in various stages of SMS adoption and implementation, and that is a source of frustration 10 B U S I N E S S AV I AT I O N A DV I S O R A p r i l 2 014



President & CEO, ARGUS International /

for operators flying internationally. Although the global business aviation community is uniting around IBAC’s International Standard for Business Aircraft Operations (IS-BAO), it is not yet the unanimous choice. More detail regarding SMS can be found at . Phases of SMS Implementation The FAA is taking a phased implementation approach. Business aircraft operators who are IS-BAO (Part 91/135) registered should find that conformity with these standards provides a beneficial “intermediate step” toward full SMS implementation. A significant characteristic of the SMS standard is the emphasis on senior management – the C-Suite – commitment to operational safety. That emphasis is reinforced by the introduction of the terms “Accountable Executive” and “Documented Safety Accountabilities.” Although familiar concepts in the European Union, these may require some getting used to in the US. Who Is the Accountable Executive? The Accountable Executive (AE) is the aircraft operator’s senior management official with overall responsibility for ensuring the safety and security of business aircraft operations. This individual has authority to make policy decisions; provide adequate CONTINUED ON PAGE 17

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The Corporate Flight Attendant:

Safety and Service


n the winter of 2011, a business jet was deiced shortly before its 4:00 am departure from a London airport. Upon boarding, the flight attendant had pre-checked all emergency equipment, including the smoke hoods and life vests stowed in the “doghouse” under each seat. Fortunately, the company permitted him to sit in the cabin in an aft-facing seat adjacent to the overwing exit, a recognized “best practice” for business jet flight attendants. As the aircraft climbed to 3,000 feet, the cabin filled with dense black smoke. The attendant could just barely see the pilots donning their oxygen masks. Immediately, with his flashlight between his teeth to free his hands, he got the smoke hoods out from under the seats and onto himself and the three passengers. The pilots were able to land safely less than two minutes later, at which time they learned that the aircraft’s Auxiliary Power Unit had been saturated with deicing fluid, which turned to deadly smoke as the APU heated up. Had that quick-thinking flight attendant not been in the back – or if he’d not had the proper training – the ground crew very likely would have found four dead upon landing. Today’s corporate flight attendant is charged with much more than serving beverages and meals. He or she is, in every sense of the word, the first responder in the cabin in the event of any emergency, medical or otherwise. Hiring a Corporate Flight Attendant In the early days of business aviation, flight mechanics often performed cabin service for larger cabin aircraft. The new generation of aircraft offered more complex and customized interiors, with more passenger amenities due to the longer range. The galley equipment, electronic communication, and in-flight entertainment systems all became more elaborate and extensive. The third crew member – known by the 1980s as a “corporate flight attendant” – now handled more specialized and safe food service, as well as functioned as a trained safety officer in the cabin. Business aviation is a travel environment offering total flexibility. So whether you hire a dedicated flight attendant, or use a contract flight attendant, you’ll want someone who can adapt quickly and graciously to your often changing aviation schedule and evolving needs. That said, it is incumbent upon you to be sure that those you hire are trained specifically for corporate aircraft, and also attend their annual recurrent training in: w w w. B i z AvA d v i s o r. c o m



President/CEO, Corporate Flight Attendant Training & Consulting Services /

■■ Emergency procedures: First aid, CPR/AED, and procedures

for a decompression and planned or unplanned evacuations; ■■ Culinary arts: Designing and preparing a menu that meets your and your guests’ preferences and dietary needs, and the ability to assess the credentials of any caterer globally; and ■■ Food safety: Proper food handling techniques, to insure the safety of passengers and crew. The Contract Flight Attendant The contract flight attendant – while intent on performing to the highest service standards – is unfamiliar with your specific preferences and requirements. He or she interacts daily with those from many different cultures and corporate personalities, and serves on a variety of makes and models of aircraft. Each aircraft has its own separate and unique features, with different onboard amenities, emergency exits, emergency equipment, configurations, and a distinct galley setup. And each flight department has different standard operating procedures and philosophies – perhaps unspoken – to which the flight attendant must adhere. Unlike a dedicated, full-time flight attendant who is keenly attuned to your needs, and who always works in the same environment, the contract flight attendant is continually adapting to new situations and passengers. BAA In addition to superior training, experience, and flexibility, a professional flight attendant should possess these qualities: creativity and “out of the box” thinking; personal integrity and accountability, including absolute discretion and confidentiality; excellent time management skills; and the ability to take directions from multiple sources, including the CEO, his/her corporate and personal family, the aviation manager, the chief pilot, the dispatcher/scheduler, and the maintenance staff.

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How Is Your Aircraft’s Maintenance Condition Affecting Its Value?

Find Out – With the Asset Insight Index The Only “Credit Score” for Your Aircraft’s Asset Value This simple-to-understand, industry standard grading scale measures the single greatest factor affecting your aircraft’s asset value – its maintenance condition. The better your aircraft’s maintenance condition, the higher its Index. Avoid surprises, use the Asset Insight Index to: ▲ Objectively analyze and grade your aircraft’s maintenance condition. ▲ Compare your asset to aircraft listed for sale. ▲ Justify your ask or offer price for an aircraft.

Call (540) 905-4555 Manage your aircraft as you do your other Financial Assets.


Business Aviation’s Recovery:


JETNET iQ Creator / Director and President, Rolland Vincent Associates, LLC /

FACTORY BILLINGS, WHICH MEASURE THE DOLLAR VALUE OF THOSE NEW DELIVERIES, TOPPED $20 BILLION IN 2013 At the other end of the market, the turboprop segment’s available inventory for sale as a percentage of the fleet is now below pre-recession levels. Beechcraft, fresh from bankruptcy protection and readying for new owner Textron, completed a strong year, with flagship King Air family deliveries of 135 aircraft, up 52% year-over-year. Twenty-nine years after initial entry-in-service, Cessna’s venerable Caravan 208 — ably led by the longawaited, higher-powered “EX” version — quietly celebrated its best-ever delivery performance in 2013. Bracketed by these two strong markets, why is the middle still so sluggish? Orders, deliveries, and backlogs in the light and medium jet segments are down sharply during the last five years at all of the Original Equipment Manufacturers (OEMs), with preowned values still seeking a floor. The medium jet segment is held w w w. B i z AvA d v i s o r. c o m



usiness aviation’s “vital signs” are healthier than they have been for more than five years. According to the General Aviation Manufacturers Association, new factory deliveries, which fell almost 50% from their peak, have stabilized in the 650-675 jets per year range. Factory billings, which measure the dollar value of those new deliveries, topped $20 billion in 2013, a near-record level driven by the large, long-range jet segment, which rode out the recessionary storm relatively unscathed. Pre-owned for-sale inventories have declined from about 18% of the jet fleet to 12% — far lower for the more popular models less than five years old — with most of the decline occurring in the last six months. Business turboprop deliveries fell 36% from their 2008 peak to 2012 trough, but climbed a robust 20% in 2013, while pre-owned turboprop inventory was 7.8% at 2013 year-end, lower than before the recession. So… Are We There Yet? “YES!” says Gulfstream, which just closed out a remarkable year, surprising many with 144 customer deliveries, up 35% year-overyear. It completed and delivered more than forty G650s, up from just six in 2012, and completed 2013 with a healthy 45-month G650 backlog. Dassault’s Falcon and Bombardier’s Global families also turned in impressive 2013 performances, with the largecabin, long-range jet segment that has continued to expand.

Dassault’s Falcon 2000LXS was recently certified and continues the tradition of the Falcon 2000 family.

back by a sizeable proportion of owners who are “upside-down” in their existing loans, complicating trade-in decisions and casting a cold freeze of inaction into the marketplace. For example, Cessna’s midsize and light jet backlog is down more than 90% as the company retools and repositions for a future that includes larger-cabin, longer-range Citation jet models. What Does This Mean For You? The discounted, highly contested deals being written reflect an ongoing buyer’s market, with demand and supply forces not yet in balance. Aircraft utilization levels are slowly recovering, and are expected to accelerate in the rest of 2014. US business jet cycles (one takeoff and one landing is one aircraft cycle) have, for the most part, tracked closely with changes in corporate profits through 2008. This relationship “came off the tracks” with the Great Recession. From their peak in 2007, cycles fell 28% before beginning a slow rebound in 2009. The FAA reported that annual cycles in 2013 were 4,043,300: up 17% since the 2009 trough year. Cycle improvement since the trough has been slow but steady as business jets have begun to return to the skies, fueled by renewed business confidence, investment, and ongoing profitability. However encouraging this trend, flight activity in 2013 was still 16% below that of 2007, despite the fact that the US-registered fleet has grown by 17% during that time. So, are we in a full recovery? The answer is a qualified “yes.” Many of the economic factors that have historically influenced business aircraft sales – corporate profits, stock market valuations, aging fleets, even consumer and business confidence – are pointing towards a broad-based recovery. R&D spending is at a high level, unlike the 1980s and other periods of doldrums for the industry. The skies are clearing, and buyers who recognize this will take advantage of the opportunities the new days will bring. BAA A p r i l 2 014 B U S I N E S S AV I AT I O N A DV I S O R 13


Moving from Charter to Ownership When your business aircraft travel moves from “occasional” to necessary, use these seven steps to make sound decisions as you buy your first business aircraft long-range jet such as a Challenger 605, Gulfstream 450, or Falcon 900, will cost upwards of $20 million, and incur operating costs of $2500-$3600 per hour. Select a Broker or Acquisition Consultant: You’ll want someone with an excellent reputation who knows the market as well as the available aircraft. It is to your advantage to pay the broker a flat fee, not a percentage, for this expert advice. To find a reputable consultant or broker, you can ask your friends. Or contact the National Aircraft Resale Association for a roster of members, all of whom subscribe to a strict code of ethics. Prearrange Your Financing: Finding financing can be a challenge, due to changing regulations and the unstable global economy, which has caused lenders and lessors to become more selective as to the assets they will finance. While your banker or existing lines of credit may be helpful, aviationspecific financiers know the market and aircraft values, and can help you structure the optimal finance package.


hours annually, the possibility of owning an aircraft starts to make economic sense. On average, an owner flies between 200 and 400 hours a year. Do you project a sustained increase in travel? Is there someone else in the company who can use the aircraft? Has chartering sometimes been inconvenient? If these factors plus increased privacy and security are a concern, you may consider buying a fractional or a whole aircraft. If the latter, here are the first steps to take: Define Your Mission: First, you need to decide the primary purpose for which the aircraft will be used: short solo trips to oversee several facilities in one day, or flying coastto-coast with key employees? Will your travel be strictly domestic, or international? Will there also be occasional vacation, family, or other personal use? Select An Aircraft: Some of the factors to consider are: average stage length (individual flight segment), the typical number of passengers, annual utilization (the number of hours you plan to fly), at what kind of airport you’ll be based (some aircraft are better than others on short landing fields), your acquisition and operating budgets, as well as your tax situation and appetite for depreciation. Establish Your Budget: For a good late model preowned small cabin business jet, such as a Citation CJ3, Phenom 300, or Learjet 45, with a range of 1700-2000 miles, you can expect to spend $3-$8 million and operating costs of $1550 an hour. A midsize jet, like the Hawker 850 or Citation Excel, with a range of 2400-3000 miles, can cost $4-$9 million, with operating costs of $2000-$2500 an hour. A large-cabin,



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Secure the Services of a Good Aviation Lawyer:

Acquisition contracts, especially pre-owned acquisition, require a specialized knowledge of the industry. For example, an airplane consists of three major systems: the airframe, the engines, and the avionics. The purchase contract must specify the equipment list, the engines by serial number, and any spare parts like extra wheels and maintenance equipment. Only an attorney with aircraft acquisition experience will make sure that the purchase contract protects your rights as a buyer. Hire a Management Company: Unless you have the in-house knowledge and expertise to manage the myriad of details to operate the aircraft safely, effectively, and according to rapidly-changing state, federal, and international regulations, then you will want a reputable management company to help put your airplane in service almost immediately. In addition to providing safety and regulatory oversight, the management company will help you to: hire a crew and maintenance technician, buy insurance, take advantage of its fleet purchasing power, and secure a hangar at your local airport. If your airplane is underutilized, the management company can make it available for charter when you’re not using it, to offset your cost of operation. Purchasing an aircraft is a major capital investment, requiring the same due diligence and planning as any significant long-term investment. Using these seven steps as a guide can help you make the best possible decisions as you acquire your new asset. BAA


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resources; maintain financial control; lead organizational performance, safety, and management reviews; and accept operational risk. The AE may be a non-pilot CEO or COO, or in the case of smaller organizations, the Director of Operations who is assigned additional responsibilities. What the Accountable Executive Needs to Understand SMS implementation may involve significant change for many operators. The commitment to SMS must be endorsed, supported, and communicated by the AE who leads that change and must understand: ■■ SMS is a business approach to managing safety. ■■ The use of risk indices and risk mitigation. ■■ The SMS standard requires his or her leadership in the management review process, the identification of and mitigation of identified operational hazards, and acceptance of predicted residual risk associated with a significant change in operations. ■■ The requirement to provide adequate resources for the safety and quality services departments that lead Safety Risk Management. ■■ SMS implementation is a major cultural change in terms “of the way we do business.” ■■ Direct responsibility for safety rests with line management and employees, but must be modeled and supported at the senior management level. ■■ A healthy corporate culture requires constant nurturing, is composed of multiple components, and that non-punitive methods are necessary to manage human error. ■■ Certain individuals in the organization will resist SMS implementation and that the Accountable Executive must model desired attitudes and behaviors to all employees. ■■ There must be continued support for the SMS champion (safety manager) who will lead and communicate the development progress throughout the organization. As a Member of Senior Leadership, What Should I Be Doing Now? Despite pushback from many experienced pilots and aviation managers, SMS is going to be a requirement for all aircraft operations worldwide. As the global regulatory community’s processes and procedures for monitoring SMS implementation and regulation evolve, here is what you can do to increase your comfort level and enable development of an SMS implementation strategy and timeline: ■■ Ensure that the organization’s “SMS champion” (safety manager) is both qualified and trained to lead the SMS development effort. Since SMS implementation may require from one to four years, this individual needs to remain in this role for continuity. ■■ If not already in progress, begin to familiarize yourself with SMS standards, vocabulary, tools, and techniques. A useful website to obtain the latest FAA SMS materials is sponsored by MITRE Corporation: SMS/documents.html. ■■ As an interim step, consider either IOSA or IS-BAO registration. This commitment will provide operators with a start down the path of SMS implementation now rather than waiting for the FAA rule to be published. For international operators, registration signals positive intent to meet SMS requirements and evidence of actual progress. Taking these steps now to understand the new regulations will ensure a smoother transition, greater productivity, and, most importantly, increased safety. BAA

chief pilot’, or the use of any word – taken in the possessive tense – that could be interpreted by the general public leading them to believe the air charter broker is a certificated direct air carrier [DAC].” While DOT expressed reluctance to establish a registry of air charter brokers because of concerns about the cost of maintaining such a database, numerous industry organizations say such a national registry is critical to making the new rule effective by making information available to charterers, direct air carriers and the government. The National Air Transportation Association, which represents hundreds of charter operators, said it “objects to the self-identification of brokers as proposed. NATA does not take lightly a recommendation to impose new regulations,” but said, “the NPRM lacks the ‘teeth’ necessary to accomplish the DOT’s stated goals of taking action to protect consumers and improving the air travel environment for consumers of chartered transportation without some form of registry” for brokers. The Air Charter Association of North America noted that to date there has been “no effective way for DOT to know who is engaged in air charter broker activities.” Establishing a simple, public registration system would permit “consumers as well as direct air carriers… to make more informed decisions based on relevant information and DOT will be better able to enforce its consumer protections,” ACANA said. NBAA said an air charter broker registration system should include the name, address, telephone and fax numbers, email address, and website of each registrant. “This would give the Department, the air charter industry, including DACs and consumers, basic information pertaining to each entity that buys and sells single entity charter air transportation.” Broker registrations “should be accessible to the public via the Internet, providing a simple way for charterers and DACs to confirm the status of a charter broker prior to making a commitment,” the Association said. BAA

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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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Requirements Proposed For Air Charter Brokers The DOT finally takes a hard look at questionable subcontracting practices BY DAVID COLLOGAN he US Department of Transportation is attempting to unscramble some of the long-standing confusion about who the players are in the air charter market. In a rulemaking published last fall, DOT announced plans to create “a new class of indirect air carriers – air charter brokers – to provide indirect air transportation of passengers on single entity charters aboard large and small aircraft…” Air charter brokers have been around for years, but their activities have been largely unregulated, their roles misunderstood, and their connection to the entities who actually operate the airplanes… often murky. Let’s start with some definitions: charter operators, certificated by the FAA, are those who directly book and fly charter trips; charter brokers can only “arrange” charter flights with certificated charter operators – hence the label “indirect air carrier.” DOT is attempting to impose some transparency into the business dealings of air charter brokers. The September Notice of Proposed Rulemaking (NPRM) would require brokers to offer air transportation only on duly authorized air carriers and would prohibit the use of unfair and deceptive practices.

THE LACK OF REGULATIONS COVERING CHARTER BROKERS HAS BEEN A SOURCE OF FRUSTRATION FOR MANY YEARS TO PEOPLE IN THE CHARTER INDUSTRY Before entering into a contract for a flight, brokers would have to make a series of specific disclosures to the aircraft charterer (the person or entity contracting for the flight), including: providing the corporate name of the direct air carrier in operational control of the aircraft; the capacity in which the broker is acting; the existence of any corporate or business relationship between the broker and the direct air carrier that will be providing the transportation; the make and model of the aircraft; the total cost of the air transportation, including any air charter broker or carrier imposed fees and government taxes; the existence of any related fees or charges; the existence or absence of liability insurance held by 18 B U S I N E S S AV I AT I O N A DV I S O R A p r i l 2 014



the air charter broker covering the charterer and passengers and property on the charter flight; and the existence or absence of a written contract with a direct air carrier to provide the flight. The lack of regulations covering charter brokers has been a source of frustration for many years to people in the charter industry, who have complained that brokers sometimes claimed to represent a direct air carrier when, in fact, they did not. In 2009, in the absence of government intervention, the National Business Aviation Association – which represents more than 10,000 member companies that operate general aviation aircraft – developed “NBAA Best Practices for Air Charter Brokering.” That eight-page document, which is available on NBAA’s website, provides a straightforward overview of the air charter broker business. It defines four broker categories – agent of the customer, agent of the air carrier, a true middleman, or an indirect air carrier – and details best practices for each. Most of the organizations and individuals who submitted comments to the docket support the concept of the DOT proposal, but many want to see its provisions broadened. NBAA told DOT the rule should cover all four categories of charter brokers, not just indirect air carriers, to ensure that all brokers are operating under the same standards. Sentient Jet, a major “jet card” provider, told DOT it should prohibit certain practices that are deemed unfair and deceptive. “Such practices include air charter brokers making statements in their advertising such as ‘our fleet’, ‘our flight crews’, ‘our CONTINUED ON PAGE 17

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Business Aviation Advisor April 2014  

Whether you own and operate a jet, turboprop, or fractional share, or use a jet card or occasionally charter, Business Aviation Advisor is h...

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