aviation

  • NAFA Administrator posted an article
    GAO Report: FAA Needs to Better Prevent, Detect, and Respond to Fraud and Abuse Risks in Aircraft Re see more

    NAFA member, Scott McCreary, Vice President at McAfee & Taft, shares the GAO Report.

    Today the U.S Government Accountability Office issued its long awaited report regarding the audit of the FAA Aircraft Registry. The report, titled "Aviation: FAA Needs to Better Prevent, Detect, and Respond to Fraud and Abuse Risks in Aircraft Registration" and can be found at www.gao.gov/products/GAO-20-164. The audit was extensive and ultimately provides the following recommendations:

    1. The Administrator of FAA should conduct and document a risk assessment that considers inherent and residual fraud and abuse risks that may enable criminal, national security, or safety risks. (Recommendation 1)
    2. The Administrator of FAA should determine impact, likelihood, and risk tolerance as part of a risk assessment. (Recommendation 2)
    3. The Administrator of FAA should develop a strategy that outlines specific actions to address analyzed risks, including periodic assessments to evaluate continuing effectiveness of the risk response. (Recommendation 3)
    4. The Administrator of FAA should collect and record information on individual registrants, initially including name, address, date of birth, and driver's license or pilot's license, or both, with subsequent PII elements informed by the risk assessment, once completed. (Recommendation 4)
    5. The Administrator of FAA should collect and record information on legal entities not traded publicly—on each individual and entity that owns more than 25 percent of the aircraft; for individuals: name, date of birth, physical address, and driver's license or pilot's license, or both; and for entities: name, physical address, state of residence, and taxpayer identification number. (Recommendation 5)
    6. The Administrator of FAA should verify aircraft registration applicants' and dealers' eligibility and information. (Recommendation 6)
    7. The Administrator of FAA should increase aircraft registration and dealer fees to ensure the fees are sufficient to cover the costs of FAA efforts to collect and verify applicant information while keeping pace with inflation. (Recommendation 7)
    8. The Administrator of FAA should ensure, as part of aircraft registry IT modernization, that information currently collected in ancillary files or in PDF format on (1) owners and related individuals and entities with potentially significant responsibilities for aircraft ownership (e.g., beneficial owners, trustors, trustees, beneficiaries, stockholders, directors, and managers) and (2) declarations of international operations is recorded in an electronic format that facilitates data analytics by FAA and its stakeholders. (Recommendation 8)
    9. The Administrator of FAA should link information on owners and related individuals and entities with significant responsibilities for aircraft ownership through a common identifier. (Recommendation 9)
    10. The Administrator of FAA should, as part of IT modernization, develop an approach to check OFAC sanctions data on owners and related individuals and entities with potentially significant responsibilities for aircraft ownership for coordination with OFAC and to flag sanctioned individuals and entities across aircraft registration and dealer systems. (Recommendation 10)
    11. The Administrator of FAA should use data collected as part of IT modernization as well as current data sources to identify and analyze patterns of activity indicative of fraud or abuse, based on information from declarations of international operations, postal addresses, sanctions listings, and other sources, and information on dealers, noncitizen corporations, and individuals and entities with significant responsibilities for aircraft ownership. (Recommendation 11)
    12. The Administrator of FAA should develop and implement risk-based mitigation actions to address potential fraud and abuse identified through data analyses. (Recommendation 12)
    13. The Administrator of FAA should develop mechanisms, including regulations if necessary, for dealer suspension and revocation. (Recommendation 13)
    14. The Administrator of FAA, in coordination with relevant law-enforcement agencies, should enhance coordination within the Aircraft Registry Task Force through collaborative mechanisms such as written agreements and use of liaison positions. (Recommendation 14)
    15. The Administrator of FAA, in coordination with relevant law-enforcement agencies, should develop a mechanism to provide declarations of international operations for law-enforcement purposes. (Recommendation 15)

    If implemented, these changes will clearly affect many individuals and companies that own and operate aircraft. The lawyers in the McAfee & Taft Aviation Group will continue to provide updates as the industry digests this information.

    This article was originally published by McAfee & Taft on March 25, 2020.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – October 2020 see more

    NAFA member, Tony Kioussis, President of Asset Insight, shares the October 2020 Used Aircraft Maintenance Analysis.

    Asset Insight’s October 31, 2020 market analysis of 134 fixed-wing models, and 2,174 aircraft listed for sale, revealed strong sales figures during October, leading to a 3.2% decrease of the tracked inventory (the fourth consecutive monthly reduction). Here are the aircraft that were most impacted...

    Curiously, buyer preference for lower-quality assets improved the tracked fleet’s Quality Rating and Maintenance Exposure.  October’s fleet ‘for sale’ Quality Rating (5.353) reflected a 12-month best, continuing to maintain the tracked fleet’s ‘Excellent’ standing for all of 2020 on Asset Insight’s scale of -2.5 to 10.

    October’s Aircraft Value Trends

    Average Ask Price increased 3.3% in October to set a 12-month high, while concurrently changing 2020’s downward trend to a Year-to-Date (YTD) increase of 1.7%. By aircraft group:

    • Large Jets’ average Ask Price was up 4.5%, reducing the YTD loss to 9.6%;
    • Mid-Size Jets’ pricing decreased a nominal 0.6% and is now up 3.8% in 2020;
    • Light Jets posted a loss of 0.9% in October, lowering the YTD gain to 7.8%; and
    • Turboprops gained 2.8% during the month, moving the YTD figure 0.6% into positive territory.

    October’s Fleet for Sale Trends

    Asset Insight’s tracked fleet posted its fourth consecutive monthly inventory decrease, down 3.2% (73 units), which led to a 0.4% YTD inventory decrease (-8 units).

    • Large Jet Inventory: Decreased 3.1% (-16 units), and is currently up 14.4% since December 2019 (+62 units).
    • Mid-Size Jet Inventory: Posted the largest decrease among the four groups (-23 units), and also the group’s fourth consecutive monthly reduction. Mid-Size Jet inventory is now down 7.7% YTD (-51 units).
    • Light Jet Inventory: Decreased for the fourth consecutive month, and October’s decrease of 3.2% (-20 units) reduced inventory by 4.7% YTD (-30 units).
    • Turboprop Inventory: Through its third consecutive monthly inventory decrease, this time 2.9% (-14 units), availability is currently up 2.4% (+11 units) YTD.

    October’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) improved/decreased 2.1% to $1.433m, signifying that upcoming maintenance events for available assets will be less expensive. The Maintenance Exposure figure by group was as follows:

    •    Large Jets: Improved 3.1% for October to a figure bettering the 12-month average.

    •    Mid-Size Jets: Worsened a nominal 0.2%, but Exposure was better/lower than the 12-month average.

    •    Light Jets: Improved 2.0% for the second consecutive month to a figure only marginally better than the group’s 12-month worst value.

    •    Turboprops: Improved 2.4% to a 12-month low/best figure.

    October’s ETP Ratio Trend

    The tracked inventory’s ETP Ratio improved/decreased to about the 12-month average figure at 69.8%, compared to September’s 73.7%. [The ETP Ratio calculates an aircraft's Maintenance Exposure as it relates to the Ask Price. This is achieved by dividing an aircraft's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by the aircraft's Ask Price.]

    As the ETP Ratio decreases, the asset's value increases (in relation to the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market (DoM) increases, in many cases by more than 30%.

    During Q3 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale 50% longer than assets with an ETP Ratio below 40% (269 days versus 404 days). How did each group fare during October?

    • Turboprops: For the eleventh consecutive month, Turboprops registered the best/lowest ETP Ratio (40.7%), achieving the group’s second consecutive best 12-month value.
    • Large Jets: Recaptured second position with an ETP Ratio of 61.8%, better than the 12-month average and a substantial improvement over September’s 12-month worst value (74.1%).
    • Mid-Size Jets: Dropped to third place, but improved to 68.9% from September’s 70.9%, equating to a 12-month best.
    • Light Jets: Improved from September’s 12-month worst figure (100.3%) to a still-troubling 98.8%.

    Excluding models whose ETP Ratio was over 200% during one of the previous two months (considered outliers), following is a breakdown of the business jet and turboprop models that fared the best and worst during October 2020.

    Read full report here.

    This report was originally published by AvBuyer on November 19, 2020.

  • NAFA Administrator posted an article
    7 Avoidable Mistakes in Acquiring a Bizjet see more

    NAFA member, David G. Mayer, Partner at Shackelford, Bowen, McKinley & Norton, LLP, discusses mistakes to avoid when acquiring a private jet aircraft.  

    Acquiring a private jet aircraft is fraught with the potential to make expensive mistakes. Yet, a qualified aviation team can help a purchaser achieve optimal results by avoiding these seven missteps:

    GOING IT ALONE

    Assembling the right aviation team admittedly entails some cost and initial effort. But most purchasers quickly realize that buying a jet is not like buying a car, real estate, or other assets. Rather, a jet purchase or lease is complex and requires the assistance of aviation experts who excel in the subject matter and interact seamlessly on a deliberate closing schedule. Tax-intensive, cross-border, and novel purchases may require additional expertise beyond the core team members described below.

    Aircraft broker. Purchasers buy aircraft solo, and that can work out. However, a purchaser might suffer buyer’s remorse or experience negative outcomes such as unnecessarily incurring taxes on the purchase. A skilled broker focuses on the purchaser’s needs and wants, knows the “market,” identifies the best available aircraft for the purchaser, and negotiates business and other terms with the team.

    Consultants and pilots. Various consultants perform visual and record inspections, appraise aircraft, supervise pre-buy inspections, organize flight departments (Part 91-private aircraft operations), provide insights into choosing Part 135 managers (commercial/charter use), and may provide broker services. Pilots may support, perform, or lead on some tasks but must collaborate with the other team members.

    Aviation lawyer. Aviation law is challenging, so non-aviation counsel should not act alone in aircraft purchases. Instead, they should hire an experienced aviation legal team that understands and regularly structures acquisitions amid conflicting tax, regulatory, liability, risk management, choice of owner entity, and other complex rules. They must also regularly draft and negotiate aviation-specific agreements and, importantly, have even broader financing expertise than just aircraft loans and leases.

    Aviation insurance broker. The aviation insurance market is no place for a generalist broker. Aviation insurance brokers know how to navigate aircraft insurance markets and negotiate complex policy terms. 

    Escrow agent and FAA counsel. With few exceptions, purchasers and sellers should use escrow agents, comprised of escrow companies and FAA lawyers. These agents hold and disburse funds, collect and file documents at the FAA, register interests and parties on the International Registry, and may issue title insurance. FAA counsel can also offer legal advice, write title opinions, and draft multiple documents.

    NOT SELECTING THE RIGHT AIRCRAFT 

    Despite the unquestionable benefits of owning or leasing a whole jet aircraft, notably during Covid-19, a prospective purchaser should first rule out other workable options to fly privately, such as chartering or buying a fractional share of a jet. After that, a purchaser should concentrate first on the aircraft/user’s “mission” before deciding on which new or used whole aircraft to buy or lease.

    Generally, the term “mission” is aviation speak for a purchaser’s effort to identify aircraft that will serve all or at least most of the private travel the purchaser envisions. When completed, the mission profile informs the search by purchasers and their brokers in today’s active market with numerous jet makes and models for sale.

    NOT PLANNING FOR TAXES BEFORE SIGNING AN LOI

    Private jets attract the interest of tax authorities at the federal, state, and local levels. Before signing a letter of intent () to acquire a jet, if possible, a purchaser should use accountants and lawyers to develop tax minimization strategies and structures under federal tax law, including the use of bonus depreciation and other business deductions, state sales/use tax laws, and local property laws. Solid planning may be slower than purchasers expect but failing to do so can wreak tax and financial havoc. 

    NOT CREATING A LEGAL OR STRONG AIRCRAFT OWNERSHIP/OPERATING STRUCTURE

    A purchaser should determine the person or entity, often an , that will own the jet, and then structure the operations of the jet in compliance with the s. An owner that violates the s invites FAA scrutiny and, sometimes, enforcement litigation by the FAA or the U.S. Department of Justice, easily causing owners to incur sky-high legal fees. 

    One of the most common problems stems from illegal charters, which take various forms. One rampant violation occurs when Part 91 operators lease their aircraft to many unrelated travelers, which is really a fake charter operation. Another violation often occurs when an LLC with no business enterprise operates the aircraft it owns or leases. The FAA views these flight operations as creating an illegal “flight department company.” When structured improperly, neither the leasing nor the LLC operator (allegedly) holds mandatory FAA certifications as commercial operators under the FARs. 

    Owners also frequently believe the same  provides a liability shield for its owners (members) from third-party liability claims. However, in general, the LLC will not protect the owners from any lawsuit or liability that may ensue from illegal aircraft flight operations or violations of federal or state laws. Although insurance helps mitigate this risk, it is a false premise that insurance suffices or will respond to alleged liability. More risk mitigation structuring and financial exposure analysis can pay off.

    SKIPPING AIRCRAFT INSPECTIONS

    Although I have seen prospective purchasers bypass independent inspections in buying a new or used aircraft, that omission has led to surprises or disputes without an adequate legal remedy. Purchasers typically arrange a visual inspection of a jet and a review of its records.

    If all goes well, an agreed maintenance facility then performs a pre-buy inspection, an in-depth aircraft checkup, and delivers an inspection report to the parties. This report identifies discrepancies that a seller usually fixes before the purchaser accepts or rejects the jet and closes the purchase. Leaving out this step is at best unwise. Beware—finding a facility and completing an inspection may push beyond a closing schedule. 

    NOT EXPLORING AIRCRAFT MANAGEMENT ARRANGEMENTS EARLY AND OFTEN

    Aircraft management companies hold the life of jet owners and passengers in their hands. These companies differ significantly in size, experience, and services. It is critical to conduct due diligence on at least two companies covering safety, service, transparency, integrity, pricing, and FAA status. Choosing based solely on the lowest cost or a referral may needlessly raise personal, asset, and operational risks. 

    A purchaser that does not consult a manager during an initial jet inspection may forfeit valuable hands-on knowledge about the operations and maintenance of the subject aircraft. In contract negotiations, a purchaser, with certain team members, should secure balanced terms in such key areas as safety practices, including Covid-19 protocols, expense controls, travel scheduling, and services provided. 

    NOT CONSIDERING FINANCING BEFORE SIGNING A PURCHASE AGREEMENT

    Even if a purchaser intends to buy a jet with cash, it is still worthwhile to inquire about leasing or borrowing to finance a jet acquisition before signing a purchase agreement. Most purchasers earn far more from their investments or businesses than the current very low rates. It is ideal to close a lease or loan at the purchase date, but either financing can occur later. Using a non-aviation lender or lessor is feasible, but may result in higher transaction fees, slower negotiations, and sub-optimal terms. 

    CONCLUSION

    With the support of an experienced aviation team, a purchaser can complete a simple or complicated acquisition of a business jet smoothly and correctly. As aircraft deal activity rises amid Covid-19 safety concerns, it is worth understanding where mistakes can occur and how to prevent them.

    This article was originally published by AINonline on November 13, 2020.

  • NAFA Administrator posted an article
    Bonus Depreciation in a COVID World see more

    NAFA member, Air Law Office, P.A. writes about aircraft depreciation bonus under the 2017 Tax Act.

    The IRS is pretty strict when it comes to 100 Percent Bonus Depreciation under the 2017 Tax Act, especially on the fundamentals.

    • Was your aircraft acquired and placed into service after September 27, 2017 and before January 1, 2027 – this one is fairly straightforward
    • Is your aircraft ‘qualified property’
    • Is your depreciable property of a specific type, including tangible property with a recovery period of 20 years or less, such as commercial and non-commercial aircraft – this one is probably affirmative
    • Was your original use of the aircraft the taxpayer’s use or the aircraft was not used by the taxpayer at any time prior to purchase – this one can be a bit tricky
    • Is your aircraft predominantly used for a qualified business use – this is going to be tough in the time of COVID and if you don’t meet 51% ore more qualified business use then you will need to explore an alternative depreciation system (ex., Five Year MACRS)
    • Is your aircraft used predominantly in the United States – this one can be a bit tricky

    There are, of course other nuances like “under contract” and “alternative deprecation models” and if you use your aircraft significantly for nondeductible entertainment travel (ex., vacation) you may be able to take your depreciation and use disallowance percentages to deprecation on a straight-line basis.

    The Bottom Line:  With face-to-face interaction at an all time low, many owners are in danger of loosing their bonus depreciation benefits.  Check in with your financial and legal teams ASAP, before it is too late to address potential pitfalls!  Remember, this article is intended to inform you about issues that you should discuss with your financial and/or legal team and is not intended as legal advice or opinion, you should not act on any information contained in this (or any other) article without directly consulting legal counsel.

    This article was originally published by Air Law Office, P.A. on August 5, 2020.

  • NAFA Administrator posted an article
    Why Does A Cash-Paying Partner Need To Be On An Aircraft Loan? see more

    NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, answers your questions about cash-paying partners on aircraft loans.

    Many lenders require that all partners are on the lien, even if one of those partners is paying cash. In particular it’s fairly common with lower-dollar loan amounts. And frankly, it’s a tradition that should be changed. 

    Lenders need a formal agreement with all parties involved in the ownership of the asset—the aircraft—stating that the lender has a first-priority interest in the aircraft in the event the loan goes into default.

    Generally speaking, there are two methods to achieve that aim. The most efficient way is to have all parties to the transaction attach themselves to the loan, the lien. The second way is by drawing up an addendum document, commonly known as a subordination agreement. The subordination agreement doesn’t tie the cash-paying participant to any of the debts or other obligations assigned in the loan. It’s a stipulation of first position rights by the lender and an acknowledgment by the cash party of that stipulation.

    One of these options is more customer friendly than the other. One is more traditional than the other. Our belief is in an age when loans have become as commoditized as they have become, lenders should emphasize customer service over tradition.

    Lenders might argue that the extra fees generated from creating a subordination agreement is not customer friendly. For instance, for loans between $20K and $50K, that extra cost could approach 4 %. In many a lender’s mind, that additional financial burden on the borrower is more nuisance than convenience.

    In more upmarket transactions, a PC-12, a TBM or a Cirrus, for example, where the loan amount is well north of half a million, lenders tend to be more willing to accommodate. That’s because the added cost as a percentage of the total loan is much smaller and therefore only minimally impacts them.

    We live in a world where people are more willing to pay for convenience. It would behoove banks to offer the option of drawing up subordination agreements for lower value loans if the borrowers believe that to be in their best interest. Doing so relieves the cash partner of loan default liability and credit exposure. And the bank can rightly charge for the convenience.

    This article was originally published by AOPA Finance on July 30, 2020.

     

  • NAFA Administrator posted an article
    Choosing Your Aircraft Management Company: Five Keys to Successful Due Diligence see more

    NAFA member, Joe Barber, VP Fleet Development, CAM with Clay Lacy Aviation shares five keys to successful due diligence when choosing your aircraft management company.

    In a perfect world, the due diligence process to select the right aircraft management company would be straightforward and objective. Competing proformas would be formatted identically with the same terms for every line item. There would be no hedging or ambiguity. No hollow promises or questionable guarantees. No missing budget variables that appear as unpleasant surprises on the first invoice. Clients could easily compare and contrast, and make better informed decisions.

    Instead, welcome to the real world, where proposals to manage business jet aircraft vary widely in organization and terminology, where the emphasis is often on salesmanship and showmanship, looking good rather than being thorough and transparent, and where the lowest estimate might end up costing you tens of thousands more in unexpected fees.

    This should not be a beauty contest—but it often is.

    Charles Porteus, president and founder of Seefeld Group, a leading business aviation marketing and research firm, notes that client surveys often show aircraft management is viewed as a “commodity.” For clients, there is little—or at least difficult to discern—differentiation among competing companies. The result is more like a beauty contest than the meticulous presentation and review of high-end business services to manage, operate and maintain a multi-million-dollar capital asset.

    There’s a reason they call it due diligence.

    The dictionary defines diligence as “persistent work and effort.” That sums up the challenge for business jet owners and their advisors as they seek to find not only the answers to questions, but to ensure that the right questions are being asked in the first place. Here are five guidelines that together are the key to finding the ideal aircraft management company for your specific needs.

    1. Focus on objective metrics—yours as well as theirs.

    You begin with the basics, of course. How many years has the company been in operation? How many aircraft do they manage? Part 91 vs. Part 135? Locations? Pilots? Management fees? Insurance? And so forth. Then dig deeper. Create constants for your comparison so you are comparing apples to apples. Fundamentally, you are conducting a gap analysis so you can more thoroughly understand what is being offered, what is different and what is missing.

    Each company should be able to demonstrate objectively why they are a better choice than their competitors—although beware if they seem to be “tearing down” other companies in order to build themselves up. Turn the tables and ask what competitors might say about them.

    2. Listen to what they are asking you.

    At the same time, play close attention to the questions they are asking you. They should be probing to fully understand your unique requirements, mission profile, where you travel, how often and who goes with you. Your expectations of a management company, needs and preferences for meals and amenities, international issues, and other key details and concerns. If they are not asking these questions, you have to wonder if they are truly focused on your best interests.

    3. Seek expert insights.

    There are numerous professionals within the business aviation industry: the list includes aviation attorneys, CPAs and other financial advisors, aircraft brokers, insurance providers. Their knowledge of the industry and the major players, as well as their specific expertise, can be a valuable resource for you as you narrow your choices. Poll their opinions, while keeping an eye out for any possible conflicts of interest.

    4. Challenge any “guarantees.”

    The only thing that can be guaranteed is that nothing can be guaranteed. Not only is aircraft ownership inherently complex, our world is filled with variables. Who, for example, could have anticipated COVID-19? So it is wise to challenge any guarantees from a prospective management company.

    Guaranteed charter revenue. How can they promise that? Instead, ask the company to demonstrate how they will work to generate charter revenue to meet your agreed-upon goals.

    Guaranteed maintenance costs. Really? Ask them to show how will they work to minimize your maintenance costs without sacrificing quality or safety.

    5. Watch out for what might be missing.

    If a proposal is dramatically lower than others, it could be a sign that one or more variable budget items has been omitted or significantly underestimated. For example, international handing and other fees related to foreign travel. Or warranty and subscription costs. There are any number of candidates that can fluctuate wildly based on a number of variables specific to your use of the plane. This is the time to ask questions and demand answers. Otherwise you might find that the lowest bid was ultimately the most costly choice—a fact you might not discover until you see your first invoice.

    Otherwise you might find that the lowest bid was ultimately the most costly choice—a fact you might not discover until you see your first invoice.

    The bottom line is that this due diligence is worth it. With the right aircraft management company you will have an invaluable partner. Working closely with you, they can lower your ownership costs, add value, maximize efficiencies and ensure your asset is operated and maintained to the highest standards—so you can experience all the benefits and enjoyment of business jet ownership.

    This article was originally published by Clay Lacy Aviation on July 9, 2020.

  • NAFA Administrator posted an article
    NAFA Webinar: Bringing Title and Registration Into the 21st Century see more

    The FAA is updating and modernizing its title and registration system in accordance with the GAO report, but how much do you know about what changes are actually being made and how those changes might affect your business operations, costs, and registration systems. 

    What issues might arise from a newer, more modern electronic filing system and digital signatures?  What is the difference between digital and electronic signatures, and what position is the FAA taking on this in the modernization process.  

    And what about GATS?  What is it and how does it fit into the new modernization system? 

    Watch our webinar to learn more about everything that is happening to bring Title and Registration Procedures into the 21st Century.   

     

    Meet our Moderator and Panelists:

    Ford von Weise, Director & Head - Global Aircraft Finance & Aircraft Advisory Services, Citi Private Bank (Moderator)

    Scott McCreary, Shareholder, Director, McAfee & Taft

    Debbie Mercer-Erwin, President of Wright Brothers Aircraft Title 

    Jeff Towers, VP & General Counsel for TVPX

    Ed Kammerer, Shareholder for Greenberg Traurig, LLP 

     

    Webinar slides can be viewed here.This NAFA webinar originally aired on November 10, 2020.

  • NAFA Administrator posted an article
    Cloud Storage - The Data Revolution and Why It Matters see more

    NAFA member, Ryan DeMoor, Aviation Tax & Finance Reporting Solution Manager with Satcom Direct, discusses the data revolution and why it matters.

    Just like industries everywhere, business aviation is becoming increasingly digitized. Data generated from an aircraft can record and relay information, in real time, on just about every aspect of the flight. Intelligently collating and analyzing these data saves money on the cost of flight operations, improves your onboard and ownership experience, and helps preserve the value of your aircraft when it comes time to sell.

    Until now, business aviation has traditionally used data to provide historical diagnostic reference points; but in the same way Enterprise Resource Planning software revolutionized corporate financial management twenty years ago, so the ability to automatically collect, centralize, and analyze data is revolutionizing business aviation. 

    Transparent, reliable, timely data can give owners much clearer insight into an aircraft’s history and can answer many of the questions that influence the asset value and operational costs in a clear and verifiable way. How many hours has the aircraft flown? When is the next scheduled maintenance check? Why is the fuel burn going up? What are the monthly operating costs and what are they going to be? Which are the most expensive routes to fly and are there alternatives? These questions and a myriad more can be answered in a keystroke.

    New technologies that can instantly transcribe text, the evolution of Artificial Intelligence (AI), and the growth of machine learning, is making rich data analysis possible as it replaces the need for extensive amounts of inefficient human capital. After all, value can be extracted only if a distinction is made between deficient and qualified data. As the familiar phrase “garbage in, garbage out” states, inaccurate data or poor quality input will always yield flawed output.

    Yet when the data collected from automated entities such as aircraft platforms, scheduling systems, and financial software are centralized and verified, aircraft owners and operators benefit from a much clearer vision of what aircraft ownership looks like.

    Authenticated data, collected automatically as events occur and expenses are incurred, can define costs based on facts and intelligent analysis, rather than quotes and guesstimates. This creates standards enabling “apples to apples” comparisons and distinguishes between non-relevant comparisons. Through accurate benchmarking, purchasing behavior can be modified to identify budgetary savings or confirm peak performance on every action associated with a flight. Data synchronized and shared across global flight departments support even more efficient operations, improve customer satisfaction, and enhance asset management. 

    From an aircraft’s first digital heartbeat, technology can unify visibility into all aspects of aircraft operations now, and into the future. Data enable powerful, predictive analysis. A single data resource can provide insight for the finance department into existing and anticipated costs, and supports the ability to intelligently query supplier pricing. It can help global flight departments make decisions about aircraft or fleet optimization based on an improved understanding of upcoming needs. Pilots can use data to efficiently plan future routing to maximize fuel burn, minimize turbulence, and improve the passenger experience. IT departments can use the same data to anticipate, manage, and mitigate cybersecurity risks associated with connected devices.

    For those that adopt a data-led asset management strategy, the gap between the value of an aircraft with data-rich heritage and one with manually recorded logs will be immense  and will only widen into the future.

    By increasing transparency, asset values not only are retained, they increase as capital and operating expenditure is reduced. Data are driving new standards and bring more accountability to the operations of business aviation. This stimulates demand as the asset values are better understood by all stakeholders. Considering the current state of the globe, this increase in demand could not be happening at a better time for our industry. The data revolution is here and for early adopters it is the only way to fly. 

    This article originally appeared in Business Aviation Advisor November/December 2020.

  • NAFA Administrator posted an article
    Used Aircraft Maintenance Analysis – September 2020 see more

    Asset Insight’s September 30, 2020 market analysis of 134 fixed-wing models, and 2,247 aircraft listed for sale, revealed the highest quarterly sales figure for the year while concurrently decreasing the tracked inventory fleet for a third consecutive month, this time by 1.5%.

    Buyer preference for higher-quality assets decreased the tracked fleet’s Quality Rating while raising (worsening) Maintenance Exposure to a 12-month high (worst) figure. However, September’s fleet ‘for sale’ Quality Rating (5.293), though below August’s 5.329, equaled July’s figure, maintaining the tracked fleet’s ‘Excellent’ range YTD on a scale of -2.5 to 10.

    September’s Aircraft Value Trends

    The average Ask Price increased 1.5% in September to a figure approaching the 12-month high level, thereby lowering the year’s average pricing reduction to 1.6%. By aircraft group:

    • Large Jets: The only group to post lower prices during September (1.5%) and Q3 (4.3%), Large Jets and are now down 13.5% for the year.
    • Medium Jets: Ask Pricing increased 5.5% in September, 10.1% during Q3, and the group’s figure is up 4.4% in 2020.
    • Small Jets: Pricing rose 2.2% in September, but recorded no change for Q3. Small Jet prices are up 8.8% YTD.
    • Turboprops: Ask Prices rose 0.3% in September and 3.1% during Q3, but are still down 2.1% during 2020.

    September’s Fleet for Sale Trends

    Asset Insight’s tracked fleet’s total number of aircraft listed for sale decreased a further 1.5% in September (34 units), resulting in a YTD inventory increase of 3.0% (65 units).

    • Large Jet Inventory: Increased yet again – this time by 2.2% (11 units) – and is now up 18.1% (78 units), YTD.
    • Medium Jet Inventory: Availability decreased for the third consecutive month, down 1.4% (nine units) and inventory is now down YTD by 4.2% (28 units).
    • Small Jet Inventory: Posted the largest decrease among the four groups for the second consecutive month. September’s decrease of 3.5% (23 units) contributes towards a 1.6% lower inventory for the year (10 units).
    • Turboprop Inventory: Posting only its second monthly decrease since January, the group’s inventory fell 2.7% (13 units) thereby lowering its YTD increase to 5.6% (25 units).

    September’s Maintenance Exposure Trends

    Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) worsened/increased 3.3% in September (6.4% during Q3), to $1.464m, a clear signal to buyers that upcoming maintenance expense for the now-available inventory mix will be higher. Maintenance Exposure worsened (increased) for all four groups in September.

    • Large Jets: Worsened by 3.0% for the month for a total Q3 increase of 3.3%. That brings Maintenance Exposure above the 12-month average.
    • Medium Jets: Worsened 1.2% during September, and rose 1.3% across Q3. Nevertheless the figure was better than the 12-month average.
    • Small Jets: Increased 2.0% for the month while skyrocketing 14.6% during Q3 to a figure only marginally better than the group’s 12-month worst.
    • Turboprops: The only group to post a Q3 improvement (3.0%), Turboprops nevertheless degraded during September by 1.3% to a figure marginally worse than August’s 12-month low (best) figure.

    September’s ETP Ratio Trend

    The tracked inventory’s ETP Ratio rose/worsened to 73.7%, from August’s 70.9%, to post a new record high figure. [The ETP Ratio calculates an aircraft's Maintenance Exposure as it relates to the Ask Price. This is achieved by dividing an aircraft's Maintenance Exposure (the financial liability accrued with respect to future scheduled maintenance events) by the aircraft's Ask Price.]

    As the ETP Ratio decreases, the asset's value increases (in relation to the aircraft's price). ‘Days on Market’ analysis has shown that when the ETP Ratio is greater than 40%, a listed aircraft’s Days on the Market (DoM) increases, in many cases by more than 30%.

    During Q3 2020, aircraft whose ETP Ratio was 40% or greater were listed for sale 50% longer than assets with an ETP Ratio below 40% (269 days versus 404 days). How did each group fare during September?

    • Turboprops: For the tenth consecutive month, Turboprops posted the lowest (best) ETP Ratio, 41.6%, to achieve a new 12-month best (low) figure.
    • Medium Jets: Fell in step with a 12-month low figure of their own, at 70.9%. However, that is likely to create few additional opportunities for most sellers.
    • Large Jets: Set a record high (worst) figure, posting a Ratio of 74.1%.
    • Small Jets: Nearly eclipsed their record worst Ratio of 101.7%, registering a 12-month high 100.3%.

    Excluding models whose ETP Ratio was over 200% during one of the previous two months (considered outliers), following is a breakdown of the business jet and turboprop models that fared the best and worst during September 2020.

    Most Improved Models

    All six ‘Most Improved’ models in September posted a Maintenance Exposure decrease (improvement). The Beechcraft Premier 1, Beechcraft King Air C90, and Cessna Citation VII posted Ask Price decreases of $15,629, $2,536, and $42,500, respectively, while the Bombardier Learjet 36A registered no Ask Price change.

    The remaining two models experienced the following price increases:

    • Dassault Falcon 2000: +$417,784
    • Bombardier Learjet 40XR: +$125,833

    Beechcraft Premier 1

    Top position for September was captured by the Premier 1, which posted a Maintenance Exposure decrease approaching $185k that more than cancelled out the model’s Ask Price loss approaching $16k.

    The inventory fleet mix saw one unit sell during September, one addition to the fleet, and one withdrawal from the ‘for sale’ pool. That left 20 assets listed ‘for sale’, or 16.8% of the active fleet.

    With a very high percentage of these aircraft enrolled on an engine Hourly Cost Maintenance Program (HCMP), that tool is not a useful differentiator for sellers. With an ETP Ratio exceeding 83% little other than price is likely to capture a buyer’s attention.

    Dassault Falcon 2000

    One of only two aircraft on the Most Improved list to post an Ask Price increase in September, the Falcon 2000 took second place, having also achieved a Maintenance Exposure decrease $136k.

    Two aircraft transacted in September, and when all of the jostling ended (including five additions to the inventory fleet), 27 aircraft were available to buyers. That equates to 12.1% of the active fleet and, keeping in mind the model’s 72.7% ETP Ratio, HCMP coverage may be the only value lever that some operators have to distinguish their asset.

    Seller Advice: Those whose aircraft are not enrolled on an engine HCMP are advised to carefully consider all offers as this model sports engines with significant overhaul costs.

    Bombardier Learjet 36A

    A model that posted no transactions in September, along with no change in Ask Price, the Learjet 36A is next on the ‘Most Improved’ list, thanks to a Maintenance Exposure decrease approaching $81k.

    However, with an ETP Ratio exceeding 175%, sellers of the four assets listed for sale must be open to all offers, even though the inventory level amounts to only 10.8% of the active fleet.

    Beechcraft King Air C90

    Four King Air C90s transacted during September, while another was withdrawn from the listed fleet. The 43-aircraft inventory that remained equated to 11.1% of the active fleet. The problem for sellers is tri-fold:

    • First, the model’s ETP Ratio stands at 114.5% (well above the problematic 40% point).
    • Second, few of these aircraft have engine HCMP coverage, limiting leverage as a discriminator.
    • Third, while Maintenance Exposure decreased over $49k, Ask Prices also decreased.

    Although this aircraft moved from August’s ‘Most Deteriorated’ list to September’s ‘Most Improved’, the facts do not really favor sellers. Buyers, on the other hand, have ample choice.

    Cessna Citation VII

    The single transaction in September, along with one withdrawal from inventory, allowed the remaining 19 aircraft listed for sale (16.7% of the active fleet) to join the ‘Most Improved’ list. Maintenance Exposure decreased nearly $156k, a figure that eclipsed an Ask Price decrease of $42.5k.

    However, the model’s ETP Ratio of nearly 73% poses a significant challenge for sellers, except, perhaps, for some whose aircraft are enrolled on engine HCMP.

    Bombardier Learjet 40XR

    The final aircraft on the ‘Most Improved’ list occupied the ‘Most Deteriorated’ list in August. A Maintenance Exposure decrease approaching $94k, and an Ask Price increase approaching $126k were what made this possible.

    No Learjet 40XRs transacted in September, and the 13 inventory assets represent 14.1% of the active fleet. While availability exceeding 10% generally favors buyers, the model’s ETP Ratio, at 58.4%, can be favorably and sufficiently adjusted by engine HCMP coverage to help many sellers.

    Read the full report here.  

    This report was originally published by AvBuyer on October 14, 2020.

  • NAFA Administrator posted an article
    FAA Aircraft Registry Reaffirms its Position on Digital v. Electronic Signatures. see more

    NAFA member, Scott McCreary, Vice President at McAfee & Taft, discusses the FAA's Aircraft Registry's position on digital versus electronic signatures.

    The United States Federal Aviation Administration (FAA) issued a Memorandum to the FAA Public Documents Room on September 9, 2019, reiterating the position that it would accept documents with digital signatures, but not accept documents executed with only the electronic signature methodology.  The Memorandum provides that “An electronic signature is a method of signing a document whereas a digital signature is the encryption/decryption technology of which an electronic signature is built. The digital signature secures the data associated with an electronically signed document.”

    The Memorandum confirms that in the past the FAA Aircraft Registry (Registry) may have unknowingly accepted documents with merely electronic signatures. The most common electronic signatures filed with the Registry were produced with DocuSign or Adobe, but the Memorandum confirms both programs have a digital signature option that could be utilized.

    By way of background, in May of 2016 the FAA issued a Notice of Policy Clarification for Acceptance of Documents With Digital Signatures (81 FR 23384). The Policy Clarification confirms that the Registry will accept printed duplicates of electronic documents that display legible, digital signatures that are filed in compliance with Parts 47 and 49 of the FAA Regulations (14 CFR parts 47 & 49). The Policy Clarification is clear that only digital signatures, as compared to the broader classification of electronic signatures, are acceptable. The Registry expands on the distinction between digital signatures and electronic signatures in its AFS-750 Change Bulletin 16-03, which further references FAA Order 1370.104, Digital Signature Policy.

    The Policy Clarification goes on to provide that "A legible and acceptable digital signature will have, at minimum, the following components: (1) Shows the name of the signer and is applied in a manner to execute or validate the document; (2) Includes the typed or printed name of the signer below or adjacent to the signature when the signature uses a digitized or scanned version of the signer’s hand scribed signature or the name is in a cursive font; (3) Shows the signer’s corporate, managerial, or partnership title as part of or adjacent to the digital signature when the signer is signing on behalf of an organization or legal entity; (4) Shows evidence of authentication of the signer’s identity such as the text ‘‘digitally signed by’’ along with the software provider’s seal/watermark, date and time of execution; or, have an authentication code or key identifying the software provider; and (5) Has a font, size and color density that is clearly legible and reproducible when reviewed, copied and scanned into a black on white format."

    Prior to the Policy Clarification, the Registry would only accept originally, ink signed documents. The use of digital signatures has certainly been a great benefit to the industry and very helpful for closing aircraft transactions which require filings with the Registry.

    It is often difficult to determine if a document has been digitally executed, and different programs (such as DocuSign and Adobe) identify digitally executed signatures differently. Parties should be careful to make certain any documents filed with the Registry are ink signed originals or digitally executed in compliance with the Registry requirements.

    This article was originally published by McAfee & Taft on September 9, 2019.

     

     

  • NAFA Administrator posted an article
    NAFA Webinar: Final Comments - Overview of the Current State of the Aviation Industry see more

    Final Comments - Overview of the Current State of the Aviation Industry

    Meet our Moderator and Panelists:

    Gil Wolin, Publisher, Business Aviation Advisor Magazine.

    Ed Bolen, President and CEO, NBAA (National Business Aviation Association) 

    Pete Bunce, President and CEO, GAMA (General Aviation Manufacturers Association)

    Tim Obitts, President & CEO, NATA (National Air Transportation Association)

    Mark Baker, President, AOPA (Aircraft Owners and Pilots Association

    This NAFA webinar originally aired on October 15, 2020.

  • NAFA Administrator posted an article
    NAFA Webinar: Continuing Rise in Insurance Prices see more

    Continuing Rise in Insurance Prices 

    Meet our Moderator and Panelists:

    Gil Wolin, Publisher, Business Aviation Advisor Magazine.

    Ed Bolen, President and CEO, NBAA (National Business Aviation Association) 

    Pete Bunce, President and CEO, GAMA (General Aviation Manufacturers Association)

    Tim Obitts, President & CEO, NATA (National Air Transportation Association)

    Mark Baker, President, AOPA (Aircraft Owners and Pilots Association)

    This NAFA webinar originally aired on October 15, 2020.

  • NAFA Administrator posted an article
    NAFA Webinar: Current and Future Issues in Aviation see more

    Current and Future Issues in Aviation

    Meet our Moderator and Panelists:

    Gil Wolin, Publisher, Business Aviation Advisor Magazine.

    Ed Bolen, President and CEO, NBAA (National Business Aviation Association) 

    Pete Bunce, President and CEO, GAMA (General Aviation Manufacturers Association)

    Tim Obitts, President & CEO, NATA (National Air Transportation Association)

    Mark Baker, President, AOPA (Aircraft Owners and Pilots Association

    This NAFA webinar originally aired on October 15, 2020. 

  • NAFA Administrator posted an article
    NAFA Webinar: Advances in Technology and Hybrid Options in Aviation see more

    Advances in Technology and Hybrid Options in Aviation

    Meet our Moderator and Panelists:

    Gil Wolin, Publisher, Business Aviation Advisor Magazine.

    Ed Bolen, President and CEO, NBAA (National Business Aviation Association) 

    Pete Bunce, President and CEO, GAMA (General Aviation Manufacturers Association)

    Tim Obitts, President & CEO, NATA (National Air Transportation Association)

    Mark Baker, President, AOPA (Aircraft Owners and Pilots Association)

    This NAFA webinar originally aired on October 15, 2020.

  • NAFA Administrator posted an article
    NAFA Webinar: Overview of the Current State of the Aviation Industry see more

    Overview of the Current State of the Aviation Industry

    Meet our Moderator and Panelists:

    Gil Wolin, Publisher, Business Aviation Advisor Magazine.

    Ed Bolen, President and CEO, NBAA (National Business Aviation Association) 

    Pete Bunce, President and CEO, GAMA (General Aviation Manufacturers Association)

    Tim Obitts, President & CEO, NATA (National Air Transportation Association)

    Mark Baker, President, AOPA (Aircraft Owners and Pilots Association)

    This NAFA webinar originally aired on October 15, 2020.