Business Aviation Advisor January/February 2017

JANUARY / FEBRUARY 2017

Back to Basics Post-Election Distractions Require Renewed Focus

When Charter Is Smarter What to Know Before You Fly THE AIRLINES VS. BUSINESS AVIATION EXCEEDING YOUR EXPECTATIONS DON’T COUNT OUT THE OEMS IS CHARTER WORTH IT? BOOMING BUSINESS A Business Aviation Media, Inc. Publication

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

ARE YOU MISSING OUT ON THE ADVANTAGES OF A PRIVATE AIRCRAFT OPERATING LEASE?

An operating lease is a popular financing tool that can provide you with the benefits of a private aircraft without the traditional risks of aircraft ownership. There are several different options, but in each case you do not take ownership of the aircraft, but have the full use of it as if you did. Plus instead of a large down payment, you put down a more modest security deposit and return the aircraft at the end of the lease term to Global Jet Capital.

You can choose to: · Enter into a sale and leaseback arrangement for your current aircraft · Identify a new or pre-owned aircraft for us to purchase · Assign your purchase contracts to us for your new, on-order aircraft

Balance Sheet Assets:

Loan

Liabilities:

Lease

Allocation of Capital

No Residual Value Risk

Predictable Costs

Off Balance Sheet

If you’re thinking about a true operating lease, give us a call at +1 (844) 436-8200.

We’ll get you in the air. globaljetcapital.com

LEASING & LENDING SOLUTIONS FOR PRIVATE AIRCRAFT

Easily adjust to changing needs

J a n u a r y / F e b r u a r y 2 0 17

10

6

06

• Volume 4 / I s sue 1

14

14

F E AT U R E S

Back to Basics

Post-election distractions require renewed focus

by ROLL AN D VIN C E NT

08

When Charter is Smarter

10

Don’t Count Out the OEMs

16

05

Your best buy may be a new aircraft

by D ON DW Y E R

12

Booming Business

The demand for supersonic transport is speeding up BA A S TAFF R E P OR T

Exceeding Your Expectations

Clear communication enhances your service experience

by C HR IS TIN E HILL

What to know before you fly

by G ARY G E NN AR I

16

Is Charter Worth it?

Understand when charter is or is not right for you

by DAV E W E IL

D E PA R T M E N T S Publisher’s Message New Year, New Aircraft

by G IL WOLIN

18

Washington Report

The Airlines vs. Business Aviation

by DAVI D COLLOG AN

18

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

w w w. B i z AvA d v i s o r. c o m

Ja n u a r y/ Fe b r u a r y 2 017 B U S I N E S S AV I AT I O N A DV I S O R 3

rolls-royce.com

Nobody does it like CorporateCare® Bringing you the most comprehensive and sought-after business jet engine maintenance program in the world, with industry leading service and expertise provided by the original manufacturer. Regardless of where you travel, CorporateCare will be there to support you. To help maximize your asset’s availability, value and liquidity, Rolls-Royce is proud to offer CorporateCare.

To find out more contact Steve Friedrich, Vice President – Sales and Marketing, at +1 (703) 834-1700, or email corporate.care@rolls-royce.com.

Trusted to deliver excellence.

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 Don Dwyer Guardian Jet don.dwyer@guardianjet.com Gary Gennari Priester Aviation gary.gennari@priesterav.com Christine Hill ServiceElements International, Inc. CHill@serviceelements.com Rolland Vincent Rolland Vincent Associates rvincent@rollandvincent.com Dave Weil Flight Dept Solutions, LLC dweil@flightdeptsolutions.com 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.

New Year, New Aircraft – New Opportunities The year 1968 found the United States embroiled in a presidential election as hotly contested as the 2016 race, with political differences defined just as sharply.

When it comes to business jets, one major difference between 1968 and 2016 is the sheer number of makes and models available. Back then you could select from one of ten models, built by one of nine manufacturers. Those ten models came in three sizes: small, medium, and large – and there were only two in that last category. It was business aviation’s slight variation on Henry Ford’s famous 1909 marketing maxim, “Any customer can have a car painted any color that he wants so long as it is black.”

Now to be fair, the industry was limited by available engine technology. Even the most popular engine, which powered the light jets, burned more than 250 gallons per hour.

Building anything that carried more than six passengers more than about 1,200 miles was just not possible – and only the large cabin Gulfstream II could cross the Atlantic without stopping in Iceland to refuel.

Fast forward to 2016. Today new, quieter, more fuel efficient engines abound, and there now are fifty models from which to choose, in eight sizes, with seven more due for initial delivery by 2020, all capable of intercontinental flight. And that’s not counting the various supersonic aircraft under development (See this issue’s “Booming Business”).

Those seven NextGen jets will offer the latest in engine, airframe, and avionics technology. So if you like to own or operate the “latest and greatest,” and your aircraft replacement acquisition cycle occurs after the certification of the new Citation, Embraer, Falcon, or Gulfstream aircraft is complete, then it’s time to put your money down.

But unless you’ve already placed your order, you’ll likely miss taking delivery of the first aircraft. The first year’s production run for each is already spoken for – and that means either keeping the aircraft you now have longer than you intended, or shopping for a new or used interim jet, to keep you flying cost effectively until the new models arrive.

The good news is that, thanks to the recent economic slowdown, there are plentiful opportunities for you to acquire a brand spanking new, current production aircraft at a favorable price. And, as Don Dwyer describes in “Don’t Count Out the OEMs,” the total cost to purchase, operate, and trade that new interim aircraft may well be comparable to holding onto your older one for a few years longer.

The table is set for 2017, and new options are served!

Thanks for reading.

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

Gil Wolin — Publisher gwolin@bizavadvisor.com

Printed in the USA Ja n u a r y/ Fe b r u a r y 2 017 B U S I N E S S AV I AT I O N A DV I S O R 5

■ INDUSTRY UPDATE

Back to Basics Post-Election Distractions Require Renewed Focus

F

ollowing the most tumultuous U.S. presidential election in memory, business aviation users and proponents now are engaging in reflection and evaluation. What has changed or is about to change? And what impact will these changes have on the business of business aviation?

What’s Changed?

Our belief in how certain we can be in accurately predicting the future is now in question. Pollsters no doubt are collectively nursing their wounds – and maybe even wondering about their future job security – in the aftermath of consecutive elections in the U.K. and now in the U.S. in which their prognostications essentially completely missed the mark. Ahh, the fun business of forecasting, which remains a difficult task at the best of times, especially when it pertains to the future!

Time will tell if the unexpected U.K. and U.S. electoral results foster more certainty in economic and regulatory policy that is deemed to be “friendly” to business and business aviation. For the short term, and for 2017 in particular, there is likely to be considerable tension as nations across Europe – and now North America – find themselves on paths to renegotiate and reset the terms of their international trade agreements.

Pundits no doubt will be under tighter scrutiny going forward, especially regarding their level of confidence in deep data and 6 B U S I N E S S AV I AT I O N A DV I S O R

Ja n u a r y/ Fe b r u a r y 2 017

high-powered computer models. As we have seen in the polls, it may tempting to divide populations into various sub-groups, but life and business – and business aviation – simply are not as straightforward as Red v. Blue, Old v. Young, College Educated v.

Non-Educated, Haves v. Have Nots, or Globalists v. Nationalists.

There are victors and victims on all sides of the battle lines. Unlike the old movies, the “good guys” and the “bad guys” are indistinguishable by the weapons they carry, or the color of their hats, uniforms, and complexions.

With control of all three branches of the U.S. government – Executive, Legislative, and Judicial – shifting on January 20, 2017 to the Republican Party, we expect a flurry of policy and legislative activity, especially in the following 12-18 months, as the new president and lawmakers mark their territories and push their diverging agendas. This has been anything but a “Kumbaya” election, with multiple fractures splitting each major political party, and unshackled interest groups circling perhaps as never before to make sure they get what they want going forward.

What Will Be the Impact on Business Aviation?

Among the good news? The U.S. economy has been growing steadily and adding jobs, and the rate of growth could see a nice bump under business-friendly policies in the new administration that could help stimulate private investment spending. Fewer restrictions on energy production, lower corporate tax rates, the elimination of the budget sequester, and expected investments in infrastructure all should be net positives to business – and by w w w. B i z AvA d v i s o r. c o m

ISTO CKPHOTO

BY ROLLAND VINCENT Rolland Vincent Associates /rvincent@rollandvincent.com

Aircraft oversupply and lingering uncertainty regarding the economy and regulatory environment are the primary inhibitors to new business aircraft purchases. association, to business aviation. As a prolific and highly visible user of business aviation, President-elect Trump’s administration should be relatively friendly, and at worst indifferent, towards the industry. Some of the perks of the President-elect’s new job – beyond the keys to some fancy Washington, D.C. real estate – include unlimited travel and nonstop photo opportunities on the world’s most famous private aircraft. Mr. Trump also will enjoy less wear-and-tear – and no more out-of-pocket operating costs – for his private fleet of B757-200, Citation X, and Sikorsky S-76B aircraft. While this will do very little to bolster their residual values, heck, every little bit counts in an aircraft market that has yet to find a price/value floor in the post-2008 world.

Legislatively, the potential for significantly lower corporate tax rates and healthcare expenses should provide U.S. corporations with more after-tax profits, some of which could fund new business aircraft purchases and higher operating budgets to employ business aviation professionals and support increased flight operations.

And among the not-so-good news? Rhetoric regarding the unraveling of international trade and security agreements, the erection of border walls, and the imposition of new visa restrictions could disrupt trade and travel flows, imperil peace, and erode confidence in the United States’ role as a leader and international peacekeeper within the global community.

Within North America alone, the impact of doing away with NAFTA will resonate throughout a region of almost 500 million people, with the distinct possibility of new two-way tariffs that would increase business costs on all sides of the borders, and reduce cross-border trade and travel flows. With Mexico and Canada among the largest markets for business aircraft after the U.S., it is difficult to see a business aviation “upside” to the proposed elimination of NAFTA.

subside, we suspect that 2017 will be a time to simply get back to the basics. For business aircraft manufacturers, this will mean trimming costs, resetting production rates to match lower levels of demand, and continuing along a path of prudent investments in new products for better days ahead. For business aircraft operators, becoming ever more productive, while ensuring that customers are completely delighted, will remain the vital “secret sauce” of success. Business aviation trade groups no doubt are delighted that the new U.S. administration will be led by a president who “gets” business aviation, perhaps as well as anyone who previously has occupied the Oval Office. Much work will need to be done advocating with a disparate group of new legislators and administrators who will have thousands of priorities other than business aviation on their “to do” lists.

For flight planners and dispatchers hoping to see fewer Temporary Flight Restrictions (TFRs) after the sunset of the highly mobile Obama Administration, our suggestion is that you not hold your breath: New York City, Washington, D.C., South Florida and countless points between and beyond will be inundated with TFRs for years to come. Watching out for TFRs – and drones in controlled airspace – will occupy more time than ever before.

As we approach what is likely to be a very uncertain 2017 in the largest market for business aviation, can there be a more critical time for careful flight planning, professional crew briefings, enhanced ground proximity warnings, and collision avoidance?

When conditions deteriorate and risks proliferate, pilots know that getting back to the basics – remembering to simply fly the airplane - is the key to a safe and successful journey. BAA

w w w. B i z AvA d v i s o r. c o m

FEDER AL AVIATIO N ADMINISTR ATION

Back to Basics

Aircraft oversupply and lingering uncertainty regarding the economy and regulatory environment are the primary inhibitors to new business aircraft purchases. These “poster children” of the go-slow business aviation market since the 2008 financial crisis have not changed. For those waiting for the “Aha! moment,” when skies suddenly clear and the flight path forward is unobstructed, the election certainly did not provide it.

Like the lingering smoke on the just-finished battlefield, there is pain, carnage, and debris to clear. This will take time and will require outreach, empathy, and goodwill from all sides – hardly the stuff that recently has been in abundance in a highly divisive election campaign.

For many business aviation professionals struggling to refocus after the blaring headlines and “breaking news” of November

NOTAM 6/6479 – New York, NY. Thursday, November 10, 2016 through Friday, January 20, 2017.

ROLL AND VINCENT is President of Rolland Vincent

Associates, an aviation and aerospace market research, forecasting, and strategic planning firm. His 30+ years’ experience includes work with manufacturers, commercial operators, and international organizations.

Ja n u a r y/ Fe b r u a r y 2 017 B U S I N E S S AV I AT I O N A DV I S O R 7

■ ALTERNATIVE LIFT

When Charter is Smarter What to Know Before You Fly

BY GARY GENNARI Priester Aviation / gary.gennari@priesterav.com

O

Before You Fly

When requesting a quotation from a charter company, know that each has different policies regarding payment, cancellation, peak day travel, passenger capacity, and more. For example: ■■ If a trip is booked with a company offering a “one-way” rate, your cancellation fee may be 100% upon booking.

■■ On a peak travel day, certain charter operators can move your departure time by up to 3 hours.

■■ Does the trip being quoted require “aircraft owner approval” in order to confirm the flight? If so, how long will that process take?

■■ If you plan to fill every seat, ask first, as many owners limit the capacity to avoid wear and tear to the interior.

■■ Check with your charter operator before bringing a pet onboard. Some aircraft prohibit them altogether, whereas others will charge a cleaning fee, typically $300-$500.

Make sure you read your quotation thoroughly and pay close attention to the details, as they can cost you money.

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

Ja n u a r y/ Fe b r u a r y 2 017

Is the price quotation firm, or variable due to winds or weather?

Even 30 extra minutes of flight time on a large cabin jet could increase your cost by $3000.

If the aircraft you booked becomes unavailable due to maintenance, crew shortage, or an unforeseen conflict with the aircraft owner’s schedule, will you be provided a comparable aircraft at no additional cost?

When planning to travel internationally, verify that all fees such as customs/immigration, ground handling, flight planning, and permits are included and at a fixed cost.

If the plane is Wi-Fi equipped, ask about the cost in advance.

Whereas many aircraft have complimentary domestic Wi-Fi, some charge up to $7.50/megabyte. Watching one movie could cost you up to $4,800.

When selecting a charter company for your on-demand needs, it’s important to look beyond its website or app and ask the following questions: ■■ How long has the company been in business?

■■ Is it an FAA Part 135 charter operator or a charter broker?

■■ Does it provide 24/7/365 customer service?

■■ Does it carry adequate flight insurance?

■■ Is it an ARGUS Gold or Platinum, Wyvern Wingman Certified, or IS-BAO registered operator?

Choose an established charter operator with a focus on safety and customer service, and your overall experience should be safe and worry free. BAA GARY GENNARI is Senior Vice President, Charter Sales, for

Priester Aviation, based in New York. He has more than 25 years of business aviation experience and holds a degree from Embry Riddle Aeronautical University.

w w w. B i z AvA d v i s o r. c o m

ISTO CKPHOTO

n-demand charter – that is, flights departing at a time you specify, according to your travel requirements – can be a cost-efficient means of providing supplemental lift with no long-term commitment. Consider: ■■ What do you do when your fractional provider tells you they can’t guarantee an upgrade to a larger plane until 24 hours prior to the flight? Or perhaps your flying now outpaces your available fractional hours. Rather than foregoing a trip or paying surcharges for excess hours, on-demand charter can fill the gaps.

■■ Your company owns one aircraft, but you need to fly board members in from multiple locations around the country. Or your firm owns an eight-passenger Hawker 800xp, and it is hosting an event for ten key clients. Using on-demand charter for this one trip will allow you to choose a large cabin jet such as a Challenger 605, Falcon 2000, or Gulfstream 450, capable of accommodating all passengers and luggage, thus helping you handle sporadic increases in passenger capacity or additional flight hours without another capital intensive purchase.

■■ Your aircraft is scheduled for maintenance and will be unavailable for 30 days. On-demand charter provides aircraft access as needed.

For many years, on-demand charter was the primary means of accessing a business aircraft without full ownership. In this era of fractional ownership, jet cards, and memberships, on-demand charter is still a valuable supplement to your own whole aircraft or share. But be aware of the “claws” in many charter contracts.

BFI

ADS-B INSTALL LOCATIONS

PDX

STP HPN BDR BTL

MHR

PVU BJC

HWD

LNK

APA

TEB

OMA

MKC

LAS

MMU

LUK SUS

VNY SDL FTY FTW AUS SAT

DAL

IAH HOU FXE

AOG

DEALING WITH SCHEDULING CONFLICTS

PAYING HIGHER PRICES

SLOTS ARE LIMITED. SCHEDULE NOW! www.DuncanAviation.aero/adsb

APA AUS BDR BFI BJC BTL DAL FTW FTY FXE HOU HPN HWD IAH LAS LNK LUK MHR MKC MMU OMA PDX PVU SAT SDL STP SUS TEB VNY

+1 303.649.1790 +1 512.530.7050 +1 203.386.0111 +1 206.764.3962 +1 303.410.7053 +1 269.969.8400 +1 214.352.3468 +1 817.740.9266 +1 404.227.9766 +1 954.771.6007 +1 713.644.0352 +1 914.686.8294 +1 510.780.1640 +1 281.821.2689 +1 702.262.6142 +1 402.475.2611 +1 513.873.7523 +1 916.231.0943 +1 816.421.1836 +1 973.326.1110 +1 402.326.8432 +1 503.287.7777 +1 877.771.2788 +1 210.267.9644 +1 480.922.3575 +1 651.209.8430 +1 636.536.7090 +1 201.288.1550 +1 818.902.9961

■ AIRCRAFT ACQUISITION

Don’t Count Out the OEMs Your Best Buy May Be a New Aircraft

BY DON DWYER s residual aircraft values continue to drop, many companies and individuals with a history of buying new aircraft look to the resale markets to update their aircraft.

While this is not an unwise decision, you might be better served to buy a late model aircraft directly from the Original Equipment Manufacturer (OEM). Here’s why: Today, many aircraft owners are holding on to their aircraft longer before replacing. This is an excellent strategy if your current aircraft will be your last one (See “Will You Be the Last Owner of Your Aircraft?” BAA Nov/Dec 2014).

But if you plan to replace that aircraft, hanging on to it longer in a declining market could result in a significant decline in your eventual trade-in value, and cost more in the long run. You definitely will write a bigger check when you do replace the aircraft.

Unsurprisingly, as residual values fall, selling new aircraft becomes a more difficult job for the manufacturers. But what is a challenge for the OEM can be an opportunity for you, the buyer.

While several factors, including original purchase price, operating costs, and tax benefits, must be included in the total cost of ownership, the three biggest factors now are residual value, the currency of the aircraft model (when was the model first introduced), and market supply.

Residual Value

The eventual disposition price, or residual value, of the aircraft has a significant impact on your total cost of ownership. Light jet and turboprop pricing in the latest models stabilized more than a year ago, making their residual values, and thus the total cost of ownership, more predictable, while the larger cabin markets have fallen dramatically during the last two years, and are just now beginning to stabilize. Although you don’t have to wait for market stabilization to upgrade your aircraft, it is a factor in whether to buy new or used. A preowned market, with rapidly changing residual value, is far more volatile than new aircraft purchase prices.

Currency

Recently introduced models like the Phenom 300 and Gulfstream G650 fare better than do older, “legacy” aircraft. Introduced in 2009, both aircraft have limited numbers in service, and have enjoyed strong residual value histories.

Consider the company which two years ago replaced a Gulfstream V (purchased new) with a newer model preowned Gulfstream 550, while waiting for the ultimate replacement aircraft, a new Gulfstream 600, due for a 2020 delivery. After analyzing that 10 B U S I N E S S AV I AT I O N A DV I S O R

Ja n u a r y/ Fe b r u a r y 2 017

total cost of ownership under both scenarios – keeping the GV until the G600 arrived, or trading the GV for the G550 and then trading that for the G600 – it was determined that taking the intermediate step of buying the G550 was no more expensive than trading directly from the GV to a G600.

Market Supply

Every OEM works hard to produce the right number of aircraft for the current market reality: a challenge, since a new aircraft is, to some degree, comprised of outside vendor parts. Companies have used furloughs, layoffs, and product line reductions to achieve their goal of matching supply with current and forecasted demand.

For example, at the end of 2015, there were a number of new, unsold Global 6000s available for immediate delivery, while at the end of 2016, none were available. This dearth leads to more disciplined pricing, which in turn leads to more stable residual values, then to less risky purchases of new aircraft.

No single solution is right for everyone. Selecting the right aircraft, at the right time, at the right cost to meet your travel and budgetary needs, requires a careful analysis of many factors. Today, new aircraft acquisitions are winning the analysis battle more often than in the last few years. So don’t rule out looking to the OEMs for your next aircraft. BAA DON DW YER , Managing Partner of Guardian Jet, formerly

was VP, Global Sales at Hawker Beechcraft. A 4,500-hour commercial pilot, he is on the board of Challenge Aspen, which offers recreational therapy for those with disabilities.

w w w. B i z AvA d v i s o r. c o m

GULFSTRE A M AERO SPACE C ORP.

A

Guardian Jet / don.dwyer@guardianjet.com

Total Support.

NEVER SETTLE FOR LESS. Your PT6A — More Than an Engine

Beyond the pure performance of the world’s favorite turboprop engine, the PT6 offers best engineering and support; a global crew watching out for you from the ground; available before-you-need-it maintenance; when-and-where-you-need-it parts delivery; and an unmatched understanding of the need to keep your aircraft flying. Both you and your PT6 engine are at the heart of all we do. You shouldn’t have to settle for less. www.pwc.ca

■ AIRCRAFT MANAGEMENT

Is Charter Worth it?

Understand When Charter Is or Is Not Right for You

BY DAVE WEIL Flight Dept Solutions, LLC / dweil@flightdeptsolutions.com

Y

When Is Charter Not A Good Idea?

Charter may not be beneficial for you if: ■■ Your Charter Gross Profit is negative.

■■ Your Charter Gross Profit won’t be large enough to cover the additional costs incurred to fly charter. For example, you would need an additional full-time or part-time crew member to handle the extra flying.

■■ Your existing aircraft was not originally equipped to fly charter, and the expense to bring it into compliance with FAR Part 135 regulations (e.g. replacing the flight data recorder) is very large compared to the potential Charter Gross Profit.

■■ Even when the economics seem favorable, if your schedule is unpredictable, frequently changes at the last minute, and/or you always want your own aircraft available for your own flying, then charter is not for you.

When Is Charter Worth Strong Consideration?

If making your aircraft available for charter will not have an adverse impact on your own flight schedule, chartering may make sense if: ■■ Your Charter Gross Profit is a large number (e.g. at least 30% of net charter revenue).

■■ You are flying in your aircraft fewer than 250 hours per year.

■■ Your crew is willing and has the time to fly the extra hours, while still receiving adequate time off.

■■ You do not want regulatory responsibility for operational control under FAR Part 91. In that case, shifting regulatory liability to a charter company by operating all your own flights under Part 135 is a good option.

Several other key factors to consider include: Charter Contract Terms – These can vary greatly among operators. How much will you get per charter hour flown? What 12 B U S I N E S S AV I AT I O N A DV I S O R

Ja n u a r y/ Fe b r u a r y 2 017

charter-related costs are your responsibility, and which are covered by the charter company? How does the scheduling work and who handles that? What are your costs if the aircraft breaks down during a charter trip? Will the charter operator make available any of its fleet discounts to you? How are crew expenses and flight attendant (if applicable) costs handled?

Fuel Efficiency – What is your aircraft’s average fuel consumption per flight hour? Does it have access to one or more good fuel discount programs? The cost of fuel is a major factor in the economics of charter.

Maintenance Status – Your aircraft will need to follow the charter company’s Part 135 maintenance program. Will this requirement increase its maintenance costs? Will extraordinary charter usage increase the engine/APU power-by-the-hour cost?

Also consider additional wear and tear and possible damage to the aircraft interior. For older aircraft, the cost of maintenance may be a more important factor than the cost of fuel in evaluating the economics.

Resale Value – What impact will charter have on your aircraft’s resale value? While the extra hours of wear and tear may make it less desirable, qualification as a Part 135 aircraft may make it attractive to potential buyers who want a charter-ready aircraft. And current enrollment on a Part 135 maintenance program also may make it more saleable.

Since every situation is unique, your specific requirements, travel pattern, and preferences should be evaluated to determine if chartering your aircraft is right for you. BAA DAVE WEIL , CEO of Flight Dept Solutions LLC, helps aircraft

owners have a more positive, customized and cost-effective aviation experience. Formerly with TAG Aviation USA for 17 years, he is past Chair of NBAA’s Tax Committee.

w w w. B i z AvA d v i s o r. c o m

ISTO CKPHOTO

ou often may wonder: “Is charter worth it?” The simple answer is: it depends. Both economic and other reasons will have an impact on your decision.

Always start your analysis with realistic expectations. You will never make a profit by chartering out your aircraft. However, charter may allow you to reduce your overall cost of ownership.

A key factor in your analysis will be your aircraft’s “Charter Gross Profit.” This is the net charter revenue paid to you by the charter operator, minus all the direct costs of flying a charter trip.

Assuming your aircraft has a positive Charter Gross Profit, charter is worth considering.

■ ALTERNATIVE LIFT

Booming Business The Demand for Supersonic Transport is Speeding Up ince the retirement of the Concorde in 2003, aircraft manufacturers have invested relatively little in new supersonic technologies, despite the obvious reductions in point-to-point flight times. While Gulfstream, Lockheed Martin, NASA, and others are doing interesting work in the area of mitigating sonic boom, this technology is far from mature. To date, no established original equipment manufacturer is building an aircraft based on a low-boom design.

The largest hurdle for civilian supersonic jets is not sonic boom mitigation, but meeting stringent airport noise standards during takeoff and landing, a concern voiced by airport neighbors ever since the first business jets took flight.

Those first aircraft entered service more than 50 years ago, and were as noisy as military fighters. By the early 1970s, the FAA and others agencies mandated lower noise standards for jet aircraft: standards the Concorde was unable to meet. So, will we ever fly supersonically again? Will you again be able to enjoy the benefits of reducing trans-Atlantic time by three hours, or longer trans-Pacific routes by six hours? Or more?

Are the regulatory and technological hurdles too high?

■■ The FAA prohibits flight over land in the U.S. at Mach 1 or above. More liberal international rules simply dictate that no boom reaches the ground. But there is no single worldwide standard as to how loud a supersonic boom can be, or what the minimum altitude must be for supersonic flights.

■■ The FAA and its counterparts have moved the noise bar even lower, now requiring aircraft developed and certificated after 2017 to meet even more stringent noise standards.

■■ Aircraft wings that are optimal for subsonic travel and fuel consumption are not optimal for supersonic flight.

■■ High fuel consumption remains a challenge, despite improving aircraft aerodynamics.

While all of these technical and regulatory issues likely have solutions, solving them will not be quick or simultaneous.

There is no single sonic boom that occurs when a jet reaches the speed of sound. Rather, as long as the aircraft is flying faster than Mach 1, the boom continues – it’s just heard only once as the jet flies over. A first generation supersonic jet like the Concorde can operate at low supersonic speeds (up to about Mach 1.2) overland without a boom reaching the ground, and up to Mach 1.5 over water. Moreover, it can meet current “Stage Four” airport noise requirements. Newer designs may incorporate boom mitigation technology that would allow unfettered cruise over land at speeds up to Mach 1.6 and beyond.

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

Ja n u a r y/ Fe b r u a r y 2 017

With support from Airbus, Aerion Corporation is developing a supersonic business jet, dubbed the AS2, with first flights planned for 2021, at a sale price of $120 million. Market studies indicate a demand for 600 supersonic business jets in the first 20 years, even with the proviso that such an aircraft would be restricted to subsonic speeds over land.

Supersonic flight will increase users’ mobility exponentially – a transition similar in magnitude from piston transports to jet aircraft.

What are the advantages? The typical user of today’s longrange business jets could expect to save as many as 200 hours annually – time to reach more destinations, meet with more customers, confer more frequently with partners, and complete more deals. Supersonic speed can enable a major boost in personal productivity, and has the potential to reduce travel-induced physical and mental stress.

A first generation supersonic business jet, cruising at Mach 1.4, would shorten a San Francisco to Singapore trip from more than 17 hours to about 12 hours. Or imagine taking off from New York in the morning, conducting a half day of business in Paris, and returning home to New York that same night.

The case is compelling, and the technology is within our grasp.

Expect to see a faster future within a decade, and probably sooner. BAA w w w. B i z AvA d v i s o r. c o m

AERIO N C ORP.

S

BAA STAFF REPORT

ARGUS Ratings The Most Recognized and Requested Symbol of Quality

ARGUS Rated Charter Operators are the most trusted and respected in the world. ARGUS Rated Operators are the only choice for the most selective buyers of charter. ARGUS Ratings are private aviation’s only truly independent, third-party source for trusted operator due diligence. Demand the best, demand ARGUS Rated Charter Operators.

FLY CONFIDENTLY WWW.ARGUS.AERO

■ GROUND SERVICES

Exceeding Your Expectations Clear Communication Enhances Your Service Experience

BY CHRISTINE HILL ServiceElements International, Inc. / CHill@serviceelements.com

W

Safety

Crew members, maintenance professionals, schedulers, and dispatchers are trained and licensed, with recurrent training required by federal regulation. FBO employees, including line service, maintenance assistants, and charter and customer service representatives must have aviation-specific knowledge regarding regulations, security and safety requirements and precautions, aircraft types, fuel types, and aircraft equipment requirements.

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

Ja n u a r y/ Fe b r u a r y 2 017

Security and Privacy

Many business aviation users prefer, and may require, anonymity.

You can expect a reasonable level of privacy with respect to the security of the information discussed aboard your aircraft, or in any private waiting areas. When you require the highest level of privacy, you may wish to consider putting into place a confidentiality agreement. (See “Keep Your Business Your Business,” BAA May/June 2016).

At the very least, be sure to communicate to all concerned that discretion is of the utmost importance. Your service providers understand and will accommodate your request, once you make it explicit.

You also can expect that your aviation professionals will maintain some distance, and not get too personal or friendly in the course of their jobs. They understand when they need to be present and offering services, and when to be scarce – not always an easy task in a small cabin aircraft.

Responsiveness To Your Needs

Aviation professionals are trained to be proactive in providing services, from meal service to ground transportation. However, it is up to you to let them know your specific needs or preferences, from a food allergy to which model car you’d like upon arrival. You should have to make your requests only once. Expect they will be followed until you direct otherwise.

Good communication is key. Be certain to clearly communicate your requests to your aviation service team, as they are there to ensure you have the best possible experience. BAA CHRISTINE HILL is Executive VP & Co-Founder of

ServiceElements. Drawing on her academic and professional experience, she is responsible for curriculum and service standards development, leadership coaching, and workshop facilitation.

w w w. B i z AvA d v i s o r. c o m

ISTO CKPHOTO

hether you fly aboard your own or your company’s aircraft, or use charter, you understandably have very high expectations for safety and service.

What goes into an excellent service experience, and who makes it happen? Aviation service providers – most of whom are passionate about aircraft and about their work – include a number of professionals, both seen and unseen, who are there to ensure your expectations are met: every trip, every time. They include: ■■ Executive Assistants: set up the trips and make any arrangements you may need.

■■ Schedulers and Dispatchers: handle flight planning and flight following, to scheduling all the details of the flight.

■■ Pilots: manage and fly the aircraft, and are responsible for delivering you to your destination safely, and whenever feasible given safety considerations, on time.

■■ Flight Attendants: required by federal law on aircraft with 20 or more seats, trained in safety and evacuation methods, as well as in preparing services on the aircraft and serving during the flight, or ■■ Cabin Servers: on smaller aircraft, provide service only, and are not considered crew members.

■■ Maintenance Professionals: maintain the aircraft and its records, keep track of when maintenance needs to be done, as well as fix any parts or systems on the aircraft that need repair.

■■ Line Service Professionals: marshal the aircraft into the Fixed Base Operator locations (FBOs) from the incoming runways; fuel the aircraft; help get baggage off the aircraft; procure needed essentials at the FBO, such as ice, newspapers, and trash/ waste removal; and clean, de-ice, park, and hangar the aircraft.

■■ FBO Customer Service Representatives: help with fuel tickets and car rentals, schedule hotels and catering, arrange storage of the aircraft in a hangar or on the ramp, assist with your other needs between trips or at your destination/departure location.

What can you expect from these service providers?

■ WASHINGTON REPORT

The Airlines vs.

Business Aviation Squaring Off in a Battle to Decide the Structure and Funding of FAA

BY DAVID COLLOGAN dlcollogan@gmail.com

fter nine months of behind-the-scenes horse-trading, Rep. Bill Shuster (R-PA), chairman of the House Transportation & Infrastructure Committee, on Feb. 3 introduced his “transformational” legislation to remove the nation’s air traffic control system from FAA and hand it to a private corporation. As detailed in the 273 pages of H.R. 4441, the Aviation, Innovation, Reform and Reauthorization Act (AIRR) of 2016, the new ATC Corporation would be governed by an 11-member board.

In designating who could nominate members to that board, Shuster pre-selected winners and losers. The biggest winner is Airlines for America (A4A), the lobbying organization for major U.S. airlines, which would get four seats on the ATC Corp. board.

Another winner is the National Air Traffic Controllers Association, which would get to pick one board member, and apparently received assurances that the new ATC Corp. would be adding more controller jobs.

The CEO of the new corporation also would serve on the board.

So, if the big airlines and the controllers union could get the CEO to vote with them, they would have six votes – and a majority – on any issue. Not surprisingly, A4A and NATCA leaders were among the first to embrace Shuster’s bill.

Hoping to blunt potential criticism from small aircraft owners, H.R. 4441 exempts operators of piston-powered aircraft and noncommercial (Part 91) turbine-powered aircraft from new fees adopted by the ATC Corp. board.

Commercial air charter flights conducted under Part 135 did not get such an exemption. In fact, commercial business aviation users and operators are in the bulls-eye for any ATC charges the new corporation might levy.

The Aircraft Electronics Association was “extremely displeased,” warning of “unforeseen transition costs and increased operational costs.”AEA President Paula Derks labeled the ATC privatization effort “a power play by the airlines to dictate what fees the general aviation industry will pay in the future.”

National Business Aviation Association President and CEO Ed Bolen said the ATC privatization scheme “is modeled on foreign systems that can be – and in many cases have been – harmful to general aviation, including business aviation.”

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

Ja n u a r y/ Fe b r u a r y 2 017

Bolen said NBAA “believes that the public airspace belongs to the public, and should be run for the public’s interest. Putting our nation’s ATC system beyond the reach of elected officials has the potential to not only harm general aviation, but also stifle innovation and new competition.”

The National Air Transportation Association cannot support the privatization proposal in H.R. 4441, said President and CEO Thomas Hendricks. He reaffirmed NATA’s opposition to “leap of faith proposals that place the fate of any segment of general aviation – in this case the air charter community – in the hands of a yet-to-be determined board of directors – especially given the fact that this segment of general aviation is denied a voice in the corporation’s governance.”

Hendricks warned, “A user-fee-funded ATC corporation, controlled in perpetuity by a board of industry insiders, will place general aviation in constant peril, starve rural America of access to cutting-edge technology, and saddle the traveling public with ever increasing fees.”

Delta Air Lines, a long-time member of A4A, is terminating its membership in that organization, in part because of differences over the ATC privatization issue. In addition to its worldwide scheduled airline service, Delta owns Delta Private Jets, a provider of business jet charter and aircraft management services.

In a statement issued just two days before Shuster released H.R. 4441, Delta warned “air travelers could be on the hook for 20-29 percent higher costs if the U.S. moves to a private ATC organization funded through user fees. Nations that have privatized ATC have seen operational costs increase at a much higher rate than has been seen in the U.S. under the FAA.” 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.

w w w. B i z AvA d v i s o r. c o m

ISTO CKPHOTO

A

With the coming changes in Washington, this reprint provides a needed refresher on this timely and critical issue.

Revealing the

FUTURE Many Services – One Jet Aviation Celebrating our 50th Anniversary and Beyond in 2017 MRO, Refurbishment, Completions, FBO, Aircraft Management, Flight Support, Charter, Staffing.

www.jetaviation.com

[ discover ]

Finally, one clear source to fuel all your aviation business needs. Aviation Business Index (ABI) is a worldwide portal for aviation sales information.

Easily find: • jets, turboprops, piston aircraft and helicopters for sale worldwide • market reports and lists • aircraft owners/operators, dealers/brokers and FBOs • aircraft financiers and insurance providers • aviation industry news and events Go to aviationbusinessindex.com to find accurate, real-time, updated information on aircraft for sale worldwide.

The World Leader in Aviation Market Intelligence | 800.553.8638 | +1.315.797.4420 | jetnet.com