business aviation

  • Tracey Cheek posted an article
    Millennials in BizAv: What are the Opportunities? see more

    NAFA member, Michael Francis, Vice President with 1st Source Bank's Aircraft Lending Division, discusses the opportunities for millennials in business aviation.

    Millennials are changing the world as we know it for better or for worse depending on your perspective of the change(s) at hand. Michael Francis asks, what is their impact on business aviation? What are the opportunities and changes that they’re likely to bring?

    You may not appreciate avocado toast (yet), but few among us haven’t benefited from, or been impacted by the new ideas emanating from the Millennials, and manifesting into new business models like Uber, Spotify and Facebook.

    How, and in what form, Millennials will change Business Aviation is a conversation in its infancy, given the oldest Millennial is in his or her late 30s and still accumulating the wealth necessary to utilize a business jet in a meaningful way.

    Yet although, in general, finance lenders have not yet seen a meaningful change in how Millennials borrow money, the way they may use Business Aviation could alter how aircraft lenders provide acquisition financing in the future.

    The Sharing Economy

    We’re still some time away from drone-like air taxis dotting our skies, but new business models adapting the “Sharing Economy” model (i.e. Uber, AirBNB, and others) to Business Aviation are making it easier to interface with this demographic – and at a price point lower than it’s historically been.

    Surf Air, Wheels Up and JetSuite are three well-known examples of companies getting attention lately for their transformative business models. Although each of these companies differ in execution, one similarity is they all own or lease at least some of their aircraft, which have some form of secured debt financing.

    Not only have these companies started to change Business Aviation, they are also creating new opportunities for aircraft lenders.

    New Model of Financing?

    Although charter companies have been around since the dawn of private aviation, they’ve often been thinly capitalized and own older, high-time aircraft. This has created a challenge for lenders to finance these companies, since they are usually looking for a borrower with a strong enough balance sheet to weather downturns in the market, and an aircraft which will provide secure collateral with minimal variability in value.

    However, a primary tenant of these new Sharing Economy companies is having access to a fleet of aircraft they have control over, affording them flexibility and responsiveness, which is difficult to do without owning or leasing the aircraft.

    Given the capital required to acquire an aircraft, this usually requires some form of financing. The difference with these new companies though are that they’re a far cry from a “Mom and Pop” charter operator with one aircraft, but have seasoned management and multiple rounds of funding from committed funders and investors.

    Traditional aircraft lenders have had a difficult time financing companies at this stage in their growth, but the validation of these companies thriving and becoming profitable could create a real opportunity for lenders to move beyond the traditional model of financing high net worth individuals and companies.

    What’s the Key

    The key is closely watching the success of these companies, and also understanding how to redeploy their aircraft in the event of a bankruptcy or downturn in the market.

    The demand for high-time aircraft used in a high utilization environment, typical of charter operators, is minimal especially during a down market. However, if the concept behind these new companies thrives, that should increase demand for higher time aircraft as aircraft operators are relatively relaxed about total time on an airframe, but rather are focused on how much “life” is left in it.

    Considering cash has been more popular than debt or lease financing over the past decade, the opportunity to finance these new companies could be a significant opportunity for aircraft financiers in the decades to come.

    Although it’s likely sharing a ride with strangers in your “private aircraft” will be the wave of the future, we’ll see about the avocado toast.

    More information from www.1stsource.com/business/specialty-financing/specialty-financing/aircraft-and-helicopter

    This article was originally published in AvBuyer on October 24, 2018.

  • Tracey Cheek posted an article
    Podcast: AOPA's Mark Baker Talks Certification Trends see more

    NAFA member, Mark Baker, President of AOPA, gave a presentation about some surprising growth trends in pilot certification at Aero 2019 in Friedrichshafen, Germany.  In this podcast, he discusses the relationship between the number of active pilots, pilot salaries, and flight training in the U.S. and Europe.

    This podcast was originally published by Paul Bertorelli on AvWeb on April 11, 2019. 

     

     

     

     

  • Tracey Cheek posted an article
    Podcast: GAMA President Pete Bunce On The Boeing 737 MAX see more

    NAFA member and GAMA President Pete Bunce discusses the potential industry-wide impacts of the questions that have arisen regarding the certification of the Boeing 737 MAX including how to balance safety, regulation and providing a pathway for innovation and new certifications. In this podcast from Aero 2019 in Friedrichshafen, Germany, he also talks the economics of sustainable aviation fuel.  

    Click here to listen to the full podcast.

    This podcast was originally published by Paul Bertorelli in Aviation Safety Magazine's AVwebflash, Volume 26, Number 15c, April 12, 2019.  

     

  • Tracey Cheek posted an article
    FAQ: What is a Flight Department Review, and How Does It Work? see more

    NAFA member, Lee Rohde, Founder, President and CEO of Essex Aviation Group, Inc., discusses what a flight department review is and how it works.

    “Get a second opinion.” 

    It’s a phrase most commonly heard after a trip to the doctor’s office, but it’s applicable to almost all aspects of life. A second opinion provides fresh perspective, which can be valuable when figuring out what to do or how to improve. This is especially true for private business aviation when considering your aircraft management company or internal flight department.

    Whether applying due diligence or requesting information from your management company or flight department that might require mediation by a third party, a flight department review is an excellent way to ensure that your aircraft and the team that supports it are operating at optimal levels.

    H: What is a Flight Department?

    A flight department is the people and processes responsible for the ongoing management, maintenance and operations of an aircraft on behalf of its owner. A flight department’s responsibilities include, but are not limited to, trip analysis, ongoing maintenance, overall operations, aircraft scheduling, flight planning, crew management and so on. A flight department can range anywhere from a single pilot to an entire facility with an organization staffed by a wide range of aviation experts. 

    Although many aircraft owners choose to outsource their flight department to a third-party aircraft management company, it is possible — and common — to rely on an in-house flight department. There are, naturally, pros and cons to both options. First-time aircraft owners often utilize an aircraft management company in order to take advantage of its existing organizational structure, human resources, vendor relationships and regulatory knowledge. In-house flight departments will need to manage all of these aspects, often with the help of outside resources and the existing support available through their primary business organization. 

    Aircraft owners need to consider their overall goals and objectives in order to evaluate which option will best meet their needs. Most owners who are interested in chartering their aircraft will choose to work with a third-party aircraft management company and operate under its existing Part 135 certificate.

    H: What is a Flight Department Review? 

    A flight department review is, as its name implies, an evaluation of an aircraft owner’s flight department conducted by a third-party entity — usually a private aviation consulting firm

    During a review, a consultant will familiarize themselves with the company’s internal policies, as well as policies that ensure compliance with the FAA or other foreign aviation administration under which the aircraft operates. The primary objective of a review should be to determine whether a flight department is performing according to the standards outlined in their operating manuals, which are often contained within, but not limited to, flight operation and general maintenance manuals and safety management systems. In addition, the review should include an extensive study of maintenance records, personnel training, general organization and the level of care and custody extended to the aircraft.

    The results of this evaluation are presented in a written report to the client. More often than not, consultants have limited findings or concerns. The report will outline any findings, as well as potential solutions or options to correct existing issues. The owner is the sole recipient of this report unless they decide to authorize its release to any third parties.

    An experienced private aviation consulting firm will also share best practices and enhancements proven to be successful by other flight departments they’ve reviewed. Most flight departments are eager to share their experiences and solutions with others in the industry. Among other things, sharing best practices contributes to safety enrichment, costs savings and general efficiencies with flight operations.

    H: Who Can Request a Flight Department Review?

    A flight department review is typically requested by an aircraft owner or their direct advisor (such as a family office) as a measure of due diligence to ensure that their aircraft is being managed properly. However, an aircraft owner or advisor might also request a review if they have issues with personnel management or with certain aspects of their management company and its management of the aircraft. 

    In some cases, a management company will even request a flight department review in order to resolve a dispute with an aircraft owner. In situations like this, both parties look to the consultant to provide an unbiased review and information concerning industry best practices and procedures so that both parties can reach an amicable solution and move forward. 

    On occasion, an aircraft financial institution might request a flight department or management company review to ensure that their assets are being properly managed and operated and to confirm the aircraft records are properly maintained and up-to-date. 

    By getting a second opinion in the form of a flight department review, it’s possible for aircraft owners to ensure that they’re receiving the best service possible, be it from their management company or an in-house flight operation, and that they have a quality private aviation experience.


    Lee Rohde, Founder, President and CEO of Essex Aviation, a business and private aviation aircraft acquisition and consulting firm, has 30+ years of experience in financial and operational analysis, manufacturing, distribution and corporate business development.


    This article was originally published by Essex Aviation

     

  • Tracey Cheek posted an article
    Optimizing ROI in a depreciating asset see more

    NAFA member, Tony Kioussis, President of Asset Insight, breaks down the basic elements in understanding market dynamics using objective data points.

    Each day, countless organizations collect and disseminate vast amounts of data points relating to business aviation. The challenge has always been translating such data into useful, actionable and timely information. While computers can process immeasurable statistics at the speed of light, their analytical capability must be intelligently guided to generate useful conclusions, as opposed to new data points that further complicate, rather than answer, the original questions. And, perhaps even more important, computers are dispassionate workhorses that can objectively convert massive amounts of data into useful information.

    Asset Quality Rating

    When it comes to aircraft, one of the most basic objective analytics able to act as a planning and decision-making tool is the Asset Quality Rating – a standardized scale by which one can measure the maintenance condition of any asset.

    Asset Quality Rating is comprised of 2 data points. The first one is the aircraft’s Maintenance Rating, which grades an asset’s maintenance status on a standardized scale relative to its Optimal Maintenance Condition (maintenance condition on the day it came off the production line). In very simplistic terms, the figure is computed as follows for a theoretical asset that has only 2 maintenance events:

     

     

     

     

     

    The 2nd data point is the aircraft’s Financial Rating, which grades the asset’s financial condition on a standardized scale relative to its Optimal Maintenance Condition, meaning the aircraft’s Maintenance Rating is weighted by the estimated cost to complete each maintenance event. While the Maintenance Rating for this asset is 5.000 (see above), the asset’s Financial Rating is 2.955 by virtue of its proximity to future scheduled maintenance events (Remaining Useful Life) and the anticipated cost to complete each maintenance event (Maintenance Event Cost).

     

     

     

     

     

     

     

    Averaging the Maintenance Rating and Financial Rating figures derives the aircraft’s Asset Quality Rating:

     

     

     

    To simplify the Asset Quality Rating explanation we assumed the asset had only 2 maintenance events. In reality, an aircraft may have hundreds of maintenance events. Also, each aircraft must be continually compared against its own Optimal Maintenance Condition.

    Using this methodology, Asset Quality Rating permits us to establish a measurement standard that can be applied to all aircraft and allows us to compare different make/model assets directly on the same measurement scale (see Pro Pilot, Aug 2018, p 14). The Asset Quality Rating scale ranges from a low of -2.500 to a high of10.000, and the significance of the figures are detailed on Table A.

    The Maintenance Rating scale ranges from a -5.000 to a 10.000, while the Financial Rating scale ranges from 0.000 to 10.000. There are 2 reasons for this: 1, an operator lying on Part 91 can overrun the OEM’s “recommended” maintenance time-period, at which point the Maintenance Rating for that event would post a negative value. And 2, the financial Rating can be no less than the cost for conducting the event, therefore its value cannot go below zero.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    Maintenance Equity and Maintenance Exposure

    There are 2 other objective analytics that can help an aircraft owner plan an aircraft replacement strategy that optimizes their investment in the asset: Maintenance Equity and Maintenance Exposure.

    Maintenance Equity represents, in financial terms, the amount of maintenance value embedded in the asset. It defines the difference between the aircraft’s maximum scheduled maintenance financial value (achieved the day the aircraft came off the production line), LESS the maintenance financial value consumed through utilization.

    Maintenance Exposure represents, in financial terms, the amount of maintenance value consumed through utilization, LESS maintenance completed on the aircraft.

    There is a widely-held misconception that aircraft maintenance condition deteriorates dramatically over time. While some maintenance event costs increase as the asset ages, an aircraft’s Maintenance Equity is renewed as maintenance is conducted. Table B depicts the percent-age of Maintenance Equity retained by an aircraft during its first 5 years in operation, and the percent of Maintenance Equity available during operating years 15 through 20. The initial Maintenance Equity is available due to the aircraft’s recent production date, while scheduled maintenance completion will renew the asset’s Maintenance Equity in later years.

    Read full article here.

    This article was originally published in Professional Pilot April 2019.

     

  • Tracey Cheek posted an article
    McLarens Aviation Launches General Aviation Division in the US see more

    Aviation loss adjuster significantly expands its US operation with specialist team focused on domestic light aircraft claims 

    (Norcross, GA) — McLarens Aviation, a leading provider of survey and loss adjusting services to the global aviation industry, has announced the launch of McLarens General Aviation, a new division offering bespoke loss adjusting services to the US light aircraft market. A team of highly experienced adjusters has joined the global aviation specialist to handle domestic, general aviation claims across Continental USA. The move allows McLarens Aviation to significantly expand its existing US operation, which will now operate across a network of 19 strategically located offices, in 13 states. Locations include Atlanta, Austin, Chicago, Cincinnati, Dallas, Denver, Houston, Melbourne (Florida), Miami, Nashville, Newport Beach, Oklahoma City, Orlando, Philadelphia, Prescott (Arizona), Sacramento, Seattle, Scottsdale and St. Louis.

    The team will be led by Nic Stratta, who joins as Chief Operating Officer. A well-known and respected loss adjuster, Nic has over 40 years’ experience working in aviation insurance claims, across a number of major insurance, broking and loss adjusting businesses. Nic, who will be based in McLarens Aviation’s new Dallas office, will oversee a regional management team that includes David Gourgues, Regional Manager, Eastern Region; Michelle Brown, Regional Manager, Western Region; and Eric Rank, Regional Manager, Central Region – all of whom are seasoned aviation loss adjusting professionals.

    McLarens General Aviation’s team has an average of 25 years’ experience in handling general aviation claims of all classes, including first- and third-party hull damage claims, physical damage to property, bodily injury, third party liability, hangar keeper’s and product liability claims, in addition to offering salvage capabilities, environmental services and Certified Aircraft Appraisal. The team’s light aircraft expertise encompasses the full spectrum of general and light aircraft, including fixed wing and rotor, individual owner, rented and corporate-owned.

    Gary Brown, Chief Executive Officer, McLarens: “McLarens continues to deepen its specialty loss adjusting services across our global firm. This focus on the domestic general aviation market shows our commitment to leveraging our existing expertise and expanding capabilities where there is a need in the market. As our firm grows, we’ll look to serve these kinds of niche markets, where our specialised technical expertise is a tangible benefit to our clients.”

    Nigel Minett, Managing Director, McLarens Aviation: “General aviation is a distinct area of the market and one that requires a tailored approach to loss adjusting and claims management. The USA is the world’s largest market for light aircraft and is one we’ve been monitoring for some time, so we’re delighted to have Nic and his team on board to help us launch this specialist offering and serve the needs of this market.”

    Nic Stratta, Chief Operating Officer, McLarens General Aviation: “The size of our team, level of expertise and ability to offer rapid, local response to incidents across the country, mean that our proposition in this area really is second to none. We see huge potential for growth, particularly with the backing and expertise of McLarens Aviation’s existing US network.”

    NOTES TO EDITORS: 

    About McLarens and McLarens Aviation

    McLarens is a leading independent global insurance services provider with offices and operations strategically located around the world. With a focus on complex, commercial and niche markets, McLarens provides loss adjusting and claims management services, as well as auditing and pre-risk surveying. McLarens Aviation is a leading provider of loss adjusting, survey and risk services to the global aviation industry. Clients include the aviation insurance market, aircraft operators, airports, maintenance and repair organisations (MROs), financiers, lessors, oil and mining companies, law firms and regulators. It has a team of over 90 in-house aviation specialists, operating across 48 offices, in 22 countries across the globe and manages in excess of 4,000 insurance related assignments each year.

    McLarens Aviation Locations:

    London (City) – London (Heathrow) – Abu Dhabi – Algiers – Atlanta – Austin – Buenos Aires – Bangalore – Beijing – Bogota – Brasilia – Brisbane – Caracas – Chicago – Cincinnati – Dallas – Denver – Delhi – Frankfurt – Houston – Johannesburg – Kingston – Madrid – Melbourne – Melbourne (USA) – Mexico City – Miami – Montreal – Moscow – Nashville – Newport Beach – Oklahoma City – Orlando – Paris – Philadelphia – Prescott – Sacramento – Santiago – São Paulo – Seattle – Scottsdale – Shanghai – Singapore – St. Louis – Sydney – Toronto – Vancouver – Wellington

    Contact:
    McLarens 

    Linde Miscio
    Senior Director – Global Marketing & Communications
    linde.miscio@mclarens.com

    This press release was originally published by Mclarens on February 27, 2019.

     

  • Tracey Cheek posted an article
    Nardone and Company, Inc. Joins National Aircraft Finance Association see more

    FORT LAUDERDALE, Fla. – Dec. 4, 2018 – National Aircraft Finance Association (NAFA) is pleased to announce that Nardone and Company, Inc. has recently joined its professional network of aviation lenders. “NAFA members proudly finance - support or enable the financing of - general and business aviation aircraft throughout the world, and we’re happy to add Nardone to our association,” said Ford von Weise, President of NAFA.

    Nardone & Company, Inc., is a Veteran owned corporation in their 25th year of business. Experience within Nardone & Company exceeds 40 years in the salvage industry and since their establishment on July 8, 1993, they have been dedicated business partners, producing the highest salvage return on the sale of damaged goods - quickly and cost effectively. The company’s Aviation Technical Services focuses solely on aircraft-related salvage, sales/recovery, current market values, inventory loss, and damage evaluations.

    The company’s President, George Nardone, Jr. is a member of the National Aircraft Appraisers Association (NAAA).  Mr. Nardone has Airline Transport Pilot Ratings and over 40 years of aviation experience. Their staff of highly experienced and dedicated professionals, with senior certified aircraft and USPAP compliant appraisers, pride themselves on immediate response and rapid reporting with complete documentation on all assignments. 

    Aircraft appraisals by Nardone and Company’s professionals provide the buyer or seller with onsite inspections, valuation utilizing current market conditions and their sophisticated NAAA appraisal that measures every aspect of the aircraft's value at a reasonable cost. They can also manage pre-purchase inspection and provide consulting services to help match clients with the appropriate aircraft to meet their specific requirements. 

    Much like NAFA, Nardone and Companyupholds the highest standards in aircraft appraisal throughout the aviation industry as dedicated partners with their clients. “We provide credibility and trust every time,” said George Nardone, President and CEO. Nardone and NAFA are committed to fostering the education and experience necessary to develop the aviation industry as a whole.

    For more information about Nardone and Company, Inc., visit www.nardoneandcompany.com

    About NAFA:  

    The National Aircraft Finance Association (NAFA) is a non-profit corporation dedicated to promoting the general welfare of individuals and organizations providing aircraft financing and loans secured by aircraft; to improving the industry's service to the public; and to providing our members with a forum for education and the sharing of information and knowledge to encourage the financing, leasing and insuring of general aviation aircraft. For more information about NAFA, visit www.NAFA.aero.

  • Tracey Cheek posted an article
    What’s the Case for Becoming a Jet’s Last Owner? see more

    NAFA member, David Wyndham, VP and Director of Business Strategy with Conklin & de Decker, discusses options for a specialized aircraft buyer and how the operator justifies the decision to buy with a view to becoming an aircraft’s last owner.

    As aircraft age, they cost more to maintain and support. Spare parts for aging aircraft can be harder to come by as fewer of these models remain in service today and the OEMs shift focus to their in-production aircraft.

    Parts suppliers may ‘build to order’ certain spares when demand levels no longer justify keeping a production line running. Be aware that the cost of these spares can fluctuate greatly as the effects of supply and demand take hold. Finding airworthy used spares is often only possible if there were enough aircraft built for salvage companies to tear down and use as sources.

    These incremental maintenance costs and procurement hurdles can render an old aircraft unsuitable for a regular schedule of frequent flying. Nevertheless, for the savvy buyer with specific needs and managed expectations, there may be some value left in these airworthy but aged aircraft.

    How Old is too Old?

    If an aircraft is well cared for, it can have an almost unlimited life with respect to safety and airworthiness. There are DC-3 aircraft that were in service in the late 1930s still flying today. While not much more than the pilots’ control wheels and OEM’s data plate may be “original equipment”, they are still airborne.

    Such aircraft are in the hands of loving and dedicated teams who fly for the joy of keeping them flying, not for transportation or business use.

    What ends the life of most aircraft is economics—when the cost of flying them becomes more than the cost of replacing them. This is called the economic useful life, which is defined by the International Society of Transport Aircraft Trading (ISTAT) as follows:

    “As it pertains to an aircraft or engine, the economic useful life is the period of time over which it is (or is expected to be) physically and economically feasible to operate in its intended role. Periodic maintenance and repair will usually be required in order to preserve safety and efficiency during the economic useful life.”

    This age is contextual. An airliner flying 2,000–3,000 hours per year in short-haul trips will reach its end of life much sooner than a long-range business jet flying 300–400 hours annually. For a piston airplane flying 100 hours per year, its end-of-life can easily extend past a half-century. Age is a factor of calendar time and utilization, or flight time.

    Research from Boeing Commercial Airplanes published in an article titled ‘Key Findings on Aircraft Economic Life’ (March 2013) found that while no exact definition exists, their data on over 31,000 airliners suggest that this economic life can be expressed in two general ways:

    • The average age of airplanes when they are permanently withdrawn from service;
    • The interval of time between delivery of a cohort of airplanes and the date when 50% (or some other fraction) of the cohort has been retired.

    But what is a typical useful economic life for a business jet?

    Data from JETNET showing the business jet retirements from 2011 to 2015 notes that 144 business jets retire each year on average. The vast majority of these are over 30 years of age. Meanwhile, AMSTAT data shows that today, of the more than 7,300 business jets built before 1998, about 46% of the fleet has been removed from service. This data suggests the useful economic life for a business jet is just over 30 years.

     When Does an Aircraft Reach Salvage?

    An aircraft at the end of its useful economic life can be sold for parts for salvage or scrap value. The Machinery & Technical Specialties Committee of the American Society of Appraisers (July 2010) defines scrap, or salvage, value as follows:

    “An opinion of the amount, expressed in terms of money that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date.”

    So, when does the scrap or salvage value of an aircraft exceed its ‘retail’ value as a flying asset?

    If the maintenance to be done exceeds the retail value of the aircraft and, if accomplished, does not return enough retail value to cover the cost of the maintenance, then your aircraft is at salvage. In summary, an aircraft would reach salvage when the upcoming maintenance costs exceed the value of the airplane. That can be any maintenance, be it airframe, engines or avionics.

    In Conclusion…

    Combining all the above information leads to the following conclusion: If you are the owner of an airworthy aircraft aged 25 years or older, you could be its final owner.

    Nevertheless, there may be aircraft younger than 25 that, owing to limited production runs and a lack of product support, will not be economically feasible to fly for much longer than a few years. Meanwhile, for some of the more popular aircraft with a long production run, you may see 40-year-old aircraft still in the air in sufficient numbers to make supporting them economically feasible.

    So why would anyone want to become the last owner of a business jet?

    If you understand the limitations, your value proposition is likely to be something like this:

    You buy a very old business jet for $2m, spending $3.5m operating it for four years, before selling it for salvage at $500k. The net cost to you is $5m. The owner of a new business jet that paid $30m, meanwhile, will see more than that in market depreciation alone.

    However, keep in mind that these older jets spend a lot of time in maintenance and there is a higher chance that you will not be able to “call when needed”, but if your flying needs are infrequent and predictable, you may find there is enough value left in these older jets to make the case for buying one.

    Next month, we will illustrate with a case study. Stay tuned!

    More information from www.conklindd.com or https://jetsupport.com.

    This article was originally published by AvBuyer on November 5, 2018.

  • Tracey Cheek posted an article
    Used Aircraft Maintenance Analysis – October 2018 see more

    NAFA member, Tony Kioussis, President of Asset Insight, discusses which models were the big movers and shakers in October’s used aircraft marketplace. 

    With inventory asset quality at a 12-month high, and maintenance exposure at a near 12-month best, it would be difficult to conceive a better environment for aircraft trades. So which models were the big movers and shakers in October’s used aircraft marketplace?

    Asset Insight’s market analysis on October 31, 2018 covering 93 fixed-wing models and 1,589 aircraft listed for sale revealed an Ask Price increase of 3.4%.

    • Large Jet values improved 5.3%, and prices are now up nearly 12% since December 2017;
    • Medium Jets lost 1.5%, and are now down 16.4% since December 2017;
    • Small Jet values gained 7% to post a 12-month high and a 7.5% gain in 2018;
    • Turboprops remained virtually unchanged, having lost 2.3% this year.

    The total number of used aircraft listed for sale for Asset Insight’s tracked fleet increased 2.3% (36 units). Large Jet inventory did not change, Medium Jet inventory increased 3.7% (18 units) and Small Jet inventories increased 5.5% (25 units). Turboprop inventory was the only one to experience a reduction, 2.4%, equating to seven aircraft.

    As the inventory fleet’s upcoming maintenance events are expected to be less expensive, average Maintenance Exposure (an aircraft’s accumulated/embedded maintenance expense) decreased (improved) slightly, nearly matching the 12-month best figure.

    • Large Jets increased (worsened) 0.5% as younger, higher-quality aircraft transacted;
    • Medium Jet transactions were of mixed asset quality, causing Maintenance Exposure to increase 1.3%;
    • Small Jet trades and fleet additions helped improve (decrease) Maintenance Exposure 1.1%;
    • Turboprops (possibly due to seller pricing concessions) helped improve the group’s Maintenance Exposure 5.9% to a 12-month best (lowest) figure.

    All this led to a Maintenance Exposure to Price (ETP) Ratio decrease (improvement) of 3% during October that, at 65.1%, was slightly better than the average figure for the past 12 months. Why is this information important?

    ETP Ratios Explained…

    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 Market increase (in many cases by more than 30%).

    So, for example, aircraft whose ETP Ratio exceeded 40% during Q2 2018 were listed for sale an average 72% longer than aircraft whose Ratio was below 40% (169 days versus 291 days on the market, respectively), while during Q3 2018 aircraft whose ETP Ratio exceeded 40% took nearly 34% longer to sell (280 versus 374 Days on Market).

    • Turboprops continued to post the lowest (best) ETP Ratio at 49.1%, reflecting a 7% improvement during the past 90 days;
    • Large Jets followed with 62.7%, a 2.3% improvement from last month but still 10.6% higher for the year;
    • With an impressive 18.7% reduction during September, and an additional 7.2% improvement in October (the group’s best figure during the past 12 months), Small Jet ETP Ratio has improved nearly 21% this year;
    • Medium Jets improved slightly in October, but the group’s ETP Ratio, at 77.5%, reflects a 19% increase during 2018 and quantifies the challenges faced by sellers within this highly competitive market sector.

    Excluding models whose ETP Ratio has remained over 200% during the previous two months (considered outliers), following is a breakdown of which individual models fared the best, and which fared the worst in October 2018…

    Most Improved Models

    All of the ‘Most Improved Models’ experienced a Maintenance Exposure reduction (improvement). The Gulfstream GIV-SP (MSG-3) and Bombardier Learjet 45 experienced an Ask Price reduction of $77,000 and $72,000, respectively, while the remaining models posted the following price increases:

    • Bombardier Learjet 35A (+$16,400)
    • Hawker Beechjet 400A (+$17,815)
    • Beechcraft King Air 350 Pre-2001 (+$1,071)
    • Embraer Legacy 600 (+$1,566,667)
       

    Most Improved Business Aircraft in October


    Gulfstream GIV-SP (MSG-3)

    Three retail transactions and two additions to the inventory fleet led to the model posting a near $778k Maintenance Exposure reduction (improvement) that overtook (by a factor of ten) an Ask Price decrease to earn top honor among the Most Improved models in October.

    With only 3.6% of the active fleet listed for sale, aircraft with engines enrolled on an Hourly Cost Maintenance Program (HCMP) could easily generate an HCMP-adjusted ETP Ratio below the 40% mark, improving their selling environment.

    Bombardier Learjet 35A

    The Bombardier Learjet 35A made this list for a second consecutive month by virtue of a $60k Maintenance Exposure reduction and an increased Ask Price.

    Actually achieving the price increase may be the real challenge, judging by the two October transaction, the group’s ETP Ratio, and the 36-unit inventory level (even though it represents less than 7% of the active Learjet 35A/36A fleet).

    Hawker Beechjet 400A

    The 59-unit inventory level remained unchanged in October, as one aircraft transacted, one was withdrawn, and two more assets were listed for sale. The model joined the ‘Most Improved’ list due to a $100k Maintenance Exposure reduction along with a price increase.

    However, with 18.4% of the active fleet on the market, sellers whose aircraft are not enrolled on HCMP are on the wrong side of the model’s 52.3% average ETP Ratio and must come to terms with market pricing reality if they hope to structure a deal before year-end.

    Hawker Beechjet 400A

    Beechcraft King Air 350 Pre-2001

    Only 20 units were listed for sale at the end of October, and with five units trading during the month the pre-2001 King Air 350 trading environment is very active. With only 7% of the active fleet listed for sale and considering the ETP Ratio ended October at 27.9%, sellers are definitely well-placed to secure good value.

    Interestingly, the model’s Maintenance Exposure dropped nearly $173k in October due to lower quality assets transacting, so good value is also available for buyers, assuming they understand the maintenance condition of aircraft they are considering.

    Beechcraft King Air 350

    Bombardier Learjet 45

    One aircraft sold in October and one joined the inventory to maintain the eight-unit fleet for sale. The changes reduced Maintenance Expense by a substantive $189k. More importantly, the $72k ask price reduction resulted from pricing reductions on previously listed aircraft; it was not affected by either the single unit sale or the new addition to the fleet.

    It would appear that at least some Learjet 45 owners are focused on selling their aircraft prior to year-end.

    Embraer Legacy 600 

    We were a little surprised to find the Legacy 600 on this list, but detailed analytics provide plenty of explanation. Only three inventory aircraft listed an actual selling price in September, and two of them traded in October (a third one was withdrawn from inventory).

    Of the ten listings that were left (5.3% of the active fleet), only one posted an actual Ask Price, and it was substantially higher than those posted for the two traded assets.

    Between the model’s relatively low ETP Ratio, the limited listings, and a Maintenance Exposure reduction exceeding $241k, this aircraft might have made the list even without the ‘technical Ask Price reduction’, but it goes to show how figures can be misleading without the benefit of interpretation.

    Embraer Legacy 600 Jet

     

    Most Deteriorated Models

    All of the ‘Most Deteriorated Models’ experienced a Maintenance Exposure increase, while Ask Price changes were as follows:

    • Gulfstream G100 (No change)
    • Hawker Beechjet 400 (No change)
    • Bombardier Learjet 31 (No change)
    • Cessna Citation VI (+$2,000)
    • Cessna Citation CJ2 (+$63,214)
    • Beechcraft King Air 300 (-$36,111)
       

    Most Deteriorated Business Aircraft in October


    Gulfstream G100

    No Gulfstream G100 transactions closed in October, and with one addition to the fleet the inventory stands at only three units. This might sound positive, but with production totaling only 22 units that means 13.6% of the fleet (aged between 12-17 years) is listed for sale.

    A Maintenance Exposure increase exceeding $1m is unlikely to invite buyers, let alone help sellers. The best opportunity for sellers to market their aircraft lies in identifying a ‘disposable aircraft buyer’ and coming to terms with the true (read, ‘low’) value of their asset.

    Hawker Beechjet 400

    To understand how quickly marketing opportunities can go from bad to worse, readers might recall that this model was on the ‘Most Improved’ list for September. One model transacted in October, but another joined the inventory to keep the total at five units (9.3% of the active fleet).

    The issue challenging sellers is their aging aircraft’s value since ask prices (ranging from $195k to $550k) have little negotiating room. Couple an $87k Maintenance Exposure increase to an already high ETP Ratio and it becomes clear why the Beechjet 400 is on this list.

    Bombardier Learjet 31

    One transaction closed in October, and the four remaining units represent 11.4% of the active fleet. Similar to the previous two models on this list, Learjet 31 sellers are hobbled by a lack of negotiating room when it comes to their aircraft’s value.

    Add a $76k Maintenance Exposure increase to the model’s ETP Ratio and the situation becomes virtually irrational, even if a seller is able to locate someone willing to become the asset’s final owner.

    Cessna Citation VI

    With only 36 aircraft in the active fleet, the nine listed for sale represent too large a competitive fleet for sellers to benefit. The addition of one lesser quality aircraft increased fleet Maintenance Exposure by over $100k, and the nominal Ask Price increase could not prevent the Citation VI from joining the Most Deteriorated list.

    Unlike the previous three models, sellers have some pricing room to maneuver but generating interest in this well-aged fleet will be difficult.

    Cessna Citation VI

    Cessna Citation CJ2

    Sales were non-existent during the month of August, and the listed fleet increased by over 50%. The additions increased Maintenance Exposure by over $238k, not a minor figure for this model, nor a number that a $63k average Ask Price increase could overcome.

    On the surface, opportunities for sellers do not appear good. However, the 23 aircraft available for sale represent only 9.7% of the active fleet.

    With an ETP Ratio averaging 35.1% we believe sales figures will increase once October’s newly-listed eight aircraft have had some market visibility. Prospective buyers are encouraged to act, as CJ2s representing good value are unlikely to enter 2019 as inventory.

    Beechcraft King Air 300

    No transactions closed in October, and the fleet saw three more aircraft enter inventory, raising the total to 14 units (7.6% of the active fleet). While the King Air 300 is a well-aged model, it continues to experience decent sales due to its operating performance and characteristics.

    A Maintenance Exposure increase exceeding $78k and an Ask Price reduction (due to a couple of lower priced units entering inventory) helped secure the model’s place on this list, but several inventory assets offer good value and should be quite marketable.

    Since most King Air 300 engines are not enrolled on Hourly Cost Maintenance Programs, owners marketing (or considering selling) non-HCMP aircraft nearing major engine events should be aware that the financial penalty buyers will assess is likely to exceed the cost for each overhaul.

    The Seller’s Challenge

    Aircraft are, and will continue to be, depreciating assets, making it illogical to think of how one can profit through the sale of an asset acquired five years earlier. However, one can ‘optimize’ their aircraft investment by:

    • Acquiring an aircraft, at a reasonable price, able to perform the mission requirements;
    • Correctly projecting maintenance costs during the ownership period, perhaps through Hourly Cost Maintenance Program enrollment;
    • Limiting scheduled maintenance expense (not covered through HCMP) through detailed analytics of the aircraft’s future maintenance requirement when considering its purchase;
    • Securing science-based, objective, Residual Value analyses on an ongoing and regular basis; and
    • Remarketing the aircraft at a point in time when its ETP Ratio is below 40%.

    It is also important to understand that the ETP Ratio has more to do with buyer and seller dynamics than it does with either the asset’s accrued maintenance or its price. For any aircraft, maintenance can accrue only so far before work must be completed.

    But as an aircraft’s value decreases, there will come a point when the accrued maintenance figure equates to more than 40% of the aircraft’s Ask Price. When a prospective buyer adjusts their offer to address this accrued maintenance, the figure is all-too-often considered unacceptable to the seller and a deal is not reached.

    It is not until an aircraft undergoes some major maintenance that a seller is sufficiently motivated to accept a lower figure, or a buyer is willing to pay a higher price and the aircraft transacts, ultimately.

    A wise seller needs to consider the potential marketability impact early maintenance might have on their aircraft, as well as enrollment on an Hourly Cost Maintenance Program where more than half of their model’s in-service fleet is enrolled on HCMP.

    Sellers also need to carefully weigh any offer from a prospective buyer against the loss in value of their aircraft for sale as the asset spends more days on the market awaiting a better offer while simultaneously accruing a higher maintenance figure.

    More information from www.assetinsight.com.

    This article was originally published by AvBuyer on November 13, 2018.

     

     

  • Tracey Cheek posted an article
    Where is Business Aviation Heading in 2019? see more

    NAFA member, Johnny Foster, President and CEO of OGARAJETS spoke with AvBuyer’s Rebecca Applegarth to discuss some of the current trends in the Business Aviation marketplace and offer insights on where the aircraft sales market could be heading in 2019.

    Johnny Foster, President and CEO, OGARAJETS, grew up around Business Aviation. His father, John Foster III, known as the ‘World’s Greatest Fighter Pilot’, retired from the US Navy in 1973 and moved directly into Business Aviation. Johnny and his brother David have many early memories of playing around aircraft in the hangars and flying as their father’s co-pilot on both business and personal trips.

    John Foster III formed O’Gara Aviation Company in 1980 with a Naval squadron mate Ed O’Gara, and Johnny joined the team in 1991 just after the company had purchased three Gulfstream GIIs and the outbreak of the Gulf War.

    Those were challenging times for a small family business, but tenacity and commitment saw it emerge through recession with its head above water and grow from Turboprop and Light Jet sales into heavy aircraft.

    With almost 30 years in the industry, Johnny has experienced up and down cycles in aircraft sales, was appointed president of the company in 2006 and oversaw the rebranding of his business as OGARAJETS in 2013.

    Now, at a time that he notes a lack of transparency in much of the industry (with back-to-back deals and ‘flip’ structures common), Johnny points to his father’s vision for the company which has never faltered: “Family values, unquestioned integrity, personal relationships, and roll-your-sleeves-up hard work remain at the cornerstone of our commitment to clients and assurance of continued success,” he offers.

    Since its formation, OGARAJETS has completed roughly 1,100 transactions in over 60 countries, totalling more than $5bn in market value. Services offered by OGARAJETS range from sales, brokerage and acquisition to management, leasing and flight operation services.

    Tapping in to his vast experience of the pre-owned business jet marketplace, AvBuyer spoke with Johnny to get his perspectives on where the market is, and where it’s going as 2018 draws to a close…

    AvBuyer: A review of AMSTAT data released in October representing used aircraft sales between January-August shows the percentage of Heavy/Large Jets for resale to be at its lowest since 1998.

    Notably the biggest improvement in turn-over YTD was in the Large Jet ‘mid-age’ segment. What does this tell you about that market, and how do you see the scenario playing out as we move into 2019?

    Foster: More than anything, I believe the positive statistics of the pre-owned space reflects a high level of confidence that remains in the market, and that today’s prices (which largely have been compressed over the previous eight-plus years) represent unimaginable values.

    As for the Large Jet segment, a quality turnkey aircraft, fully programed, and capable of flying 5,000-plus miles for less than $10m? Wow! There are some tremendous transportation values in this space across all makes and models, especially those aged under 20 years.

    The OEMs have largely remained disciplined in their new jet production, which has helped to strengthen the jets aged less than five years old. This is one of the few segments we have actually seen prices rise over the previous 12 months. This thinning supply and strengthening of prices are now opening the door to ‘recovery’ for the six-to-15-year-old space, as AMSTAT is reporting.

    While the transaction pace remains feverish, and good quality aircraft that are priced appropriately are selling quickly, the value opportunities remain. Buyers in today’s market must be prepared to move quickly when the right opportunity presents itself. There could never be a more appropriate time to engage a trusted professional to guide purchase efforts and success.

    Let’s not overlook that the ‘Tax Cuts and Jobs Act’ has imparted a very measurable and positive impact on the pre-owned aircraft marketplace. We believe the market will continue to enjoy a continued boost into 2019 and beyond.

    AvBuyer: At the other end of the market, AMSTAT says the Light Jet fleet for sale is at 10.8%, down 0.7% from this time last year. Can you see a point in the next year or so where the Light Jet market actually moves into traditional sellers’ market territory (i.e. <10% for sale)?

    Foster: Business Aviation is not immune to Business 101 lessons of supply and demand. As values across the board have compressed significantly over the last decade, buyers today can simply purchase ‘more’ cabin for the same dollars. So, much of the Light Jet market has continued to lag in transaction flow.

    All the while, the OEMs in this segment continue to produce significant numbers of new aircraft of many varieties. There simply is not the demand to absorb the supply. Price compression, or market depreciation will continue.

    With that said, looking on a micro-level, there are some specific over-performers in this space, namely Embraer’s Phenom 300.

    AvBuyer: Price depreciation has been a hallmark of the used jet market since the great recession. What needs to happen for values to increase again, beyond the newest, best conditioned aircraft on the market?

    Foster: This is an interesting thought. Until the collapse in 2008, most owners experienced at least a level (even a rising) value over the term of their ownership. Sure, there were dips in the economy that drove values down in spurts, but most were short-lived and generally owners enjoyed an appreciating asset.

    This really made owning aviation assets fun and often ‘justified’. Value appreciation was so common that it took several years after 2009 for me to stop apologizing to clients for their aircraft values slipping.

    By 2014, it was clear annual depreciation was here for good, similar to virtually every other piece of capital equipment. Today, in very general terms, we see annual depreciation of over 10% per year for less-than five-year-old assets, trailing down to 2-3% annually on aged assets.

    The positive transactions over the last 18 months have begun to flatten the curves, but I am confident depreciation is here to stay and should be factored in any purchase decision.

    AvBuyer: In which segments of the market would you expect to see higher demand in 2019?

    Foster: I believe the Large Jet sector will remain a point of focus, driving all markets. Each of the OEMs have some amazing launches planned for 2019; significantly more speed, range and comfort all in one package! I suspect there are some more announcements coming, too – though only time will tell…

    We also like what we’re seeing with some of the ‘disruption’ now present in the Super-Mid-Size sector; jets with capacity to fly eight passengers over 3,500 miles at a fraction of the capital and operating costs of the Large Jet market. There’s some tremendous value all around.

    What do I see ahead for 2019?

    Our enjoyment of favorable conditions remains very closely tied to domestic and global environments. So we’re keeping a careful eye on a stock market that has been on an almost eight-year bull run.

    In addition, with US mid-term elections that just can’t seem to settle, tariffs being shuffled between global super-powers and ADS-B mandates that are now just 13 months away – there are many factors at play that could influence the pre-owned market for better or worse in 2019.

    More information from www.ogarajets.com

    This article was originally written and published by Rebecca Applegarth with AvBuyer on November 12, 2018.

  • Tracey Cheek posted an article
    Wayne Starling’s advice for anyone starting out in business aviation see more

    NAFA member, Alasdair Whyte, Co-Founder and Editor of Corporate Jet Investor, talks with Wayne Starling, with Starling Consulting, LLC., about starting out in business aviation.

    Recently, I had the pleasure of being on a panel at the Corporate Jet Investor conference in Miami.  One of the questions asked was for any guidance or counseling that I could give a new person starting out in the aviation business.  My advice was for a person to find a mentor.

    I have thought about that question over the last few days.  I wished I would have had the time to go into more depth. Yes, a mentor is important throughout your career, but there are other important elements as well.    Throughout my career, I have hired and observed many young talented people come and go.  I often reflect on what makes the difference in people succeeding and what causes many of them to fail.  I have analyzed this for years and believe that the top 5% do many things that make a big difference in whether they “stay with the pack” or become top performers in their field.

    My observations watching those top 5%: 

    ATTITUDE:   It starts and ends with their attitude.  What is interesting is the fact that I have asked hundreds of people if they think they have a bad attitude.  No surprise here, but almost all of them never admit to being negative or having a bad attitude.  However, you and I know that when you are around a person that has a negative attitude, they will brighten a room by leaving! One person with a bad attitude can and will cause severe problems if they remain part of a team.

    MOTIVATED:  Have you noticed most people that complain and develop a bad attitude are the ones doing the least amount of work or nothing at all!  This is where they need help by taking an inventory of their activity.   It is hard to be unmotivated when you are busy.   If you want to get motivated, then get busy!  Do something, i.e. get motivated by making some calls, setting up appointments, talking with customers, reading, studying and learning.  Understand that real motivation comes from the “doing” not the “wishing” things would improve.

    STEP UP AND MOVE FORWARD:   Successful people have a desire to learn. They are involved in stepping up by setting realistic goals and then by moving forward.  They take action!  Do they make mistakes?  Yes, but that is a sign of stepping up and moving forward.  In many situations, they will learn from these mistakes more so than from the successes.   They don’t coast through life.  We all know if you are coasting, you can only coast downhill.

    PATIENCE AND COMMITMENT:  I don’t mean sit around and wait.  Yes, sustainable success takes real time and effort to get the greatest rewards. The road to success is not straight without bumps, hills, and plenty of detours.  How you handle the bumps and detours, will determine the person you become.  If you want to become a person of value, a person of character, a person respected, then you must be patient while you work and take the steps and move forward.

    MONITOR CLOSELY THE PEOPLE AROUND YOU:   Some person you meet along the road of life will either pick you up or pull you down, or just hang on to you for a ride.  People that don’t know you will form an opinion of your worth based on the people that are your associates. Who are your role models, your mentors, people you respect in the business and would like to emulate?  Life is full of choices on your way to success so be picky about your influencers!

    All of the above recommendations are part of the puzzle that will make up your success:  your attitude, people that you surround yourself with, your patience and commitment, staying motivated, finding a mentor.  All pieces of the success puzzle.

    Do you want to be one of the top 5% of highly successful people? Step up and move forward and you will not only enjoy the journey, but you will also enjoy success at the destination.   Good Luck!

    This article was originally published by Corporate Jet Investor on November 29, 2018.

  • Tracey Cheek posted an article
    Whole Aircraft Ownership: Is It Right For You? see more

    NAFA member, David Wyndham with Conklin & de Decker, highlights the benefits of sole ownership of a business aircraft.

    If control over your company’s transportation is paramount, sole ownership of a business aircraft is particularly attractive. With high enough utilization, it is also very cost effective. 

    As a generalization, when your flying needs come close to (or exceed 200 annual hours), whole aircraft ownership can be more cost effective than fractional, charter or membership programs. Whole aircraft ownership offers the following benefits.

    Freedom: With whole aircraft ownership a company has the freedom to select the best aircraft to satisfy its needs. Within safety and operating regulations, that aircraft can be operated as the owner requires.

    Customization: When a company acquires its own aircraft, the outfitting of the aircraft can be done to suit its operational and travel requirements.

    Options for colors, seating, carpeting materials (and more) are able to be matched to your needs and preferences. The larger the cabin size, the more flexibility there is in how the interior can be configured.

    Service Levels: The aviation department personnel are the owning company’s employees. Not only is that company able to shape their training and manage their competence, it can affect how they interface personally with passengers.

    The ability to hire the employees that fit the organization can be invaluable, and this service level generates a rapport that is effortless and comforting.

    Control: In the US, Federal Aviation Regulations (FARs) allow the most flexibility and opportunity for control to not-for-hire operations flown on behalf of the aircraft owner. A company-owned aircraft that is used in support of the business of the company falls under these rules.

    While all aircraft must be operated safely, the sole owner of a business aircraft has greater influence over operations than either a charter customer or a fractional owner. Factors influencing safety and security are within the operator’s control.

    A whole-aircraft owner has the highest levels of privacy. You can discuss sensitive business, or leave important corporate documents and personal items on board the aircraft.

    Responsibility: With this high degree of control comes an equally high level of responsibility. While the FARs state that the pilot in command is the ultimate person responsible for the safe operation of the aircraft, the owner is responsible for the hiring and training of that pilot. The owner has liability for the actions of its employees, and this extends to the aircraft operation.

    The owner can manage this risk via high-quality training and insurance. The crew should be trained to the highest appropriate levels of competence. Maintenance engineers (if applicable) also require regular training.

    An individual or company owning or leasing their own hangar is also responsible for ground safety. The owner shares the risk by properly insuring the aircraft and crew.

    Managing and directing the detailed operation of aviation activities requires individuals versed in management and Business Aviation - a skillset commonly accomplished either by having an in-house aviation manager/director, or by contracting the management of the aviation operation to a management company.

    The Role of Management Companies

    A management company can offer a turn-key approach of contracting the function and oversight of the aviation operation. These companies specialize in flight operations.

    For a first-time owner of a business aircraft, we usually recommend contracted management for starting the aviation operation. In additional to providing flight crews and functional oversight, the management company can provide economic benefits as well:

    • Fuel can be purchased in bulk on behalf of multiple aircraft owners;
    • Discounts can extend to maintenance (the management company with multiple aircraft should be able to negotiate discounts for spare parts);
    • The management company can purchase insurance for its group of owners at rates that can be lower than for a single aircraft.

    While management companies tailor their services to meet an owner’s unique requirements, they typically offer the following oversight:

    • Hangaring the aircraft
    • Managing the aircraft records
    • Hiring and training the flight crews
    • Managing the maintenance of the aircraft
    • Handling the billing and verification of all variable operating expenses (including fuel, maintenance, etc.)
    • Ensuring that all regulatory requirements are met by the aircraft and crew
    • Refueling the aircraft
    • Cleaning and cosmetic upkeep of the managed aircraft.

    Offsetting the Costs of Whole Ownership 

    If you, as the owner, desire to further reduce your total costs, a management company can charter the aircraft when you’re not using it, provided the firm has authorization under FAA Part 135 (or its equivalent in non US countries).

    This relationship is complicated as there are regulatory restrictions governing operational control of any aircraft used for commercial service. The general terms are as follows: 

    • The aircraft owner pays all the operating costs (fuel, maintenance and other aircraft operating expenses).
    • The crew may be billed as salaries or as an hourly fee.
    • The aircraft owner gets a set percentage of the charter revenue. 

    The charter revenue the owner receives should be more than enough to cover the operating costs, but will not be enough to cover all of the fixed expenses, debt service and depreciation. The charter revenue is shared between the charter operator and aircraft owner. Rarely, however, does a chartering arrangement with a management company produce a profit for the aircraft owner.

    The relationship with the management company is as much a personal relationship as a business relationship. Communication and shared goals are important. If you want control, fly enough hours and accept the responsibility, whole aircraft ownership can be very rewarding.

    This article was originally published in AvBuyer on May 14, 2018.

  • Tracey Cheek posted an article
    Industry Leaders Voice Growing Concerns about Shutdown see more

    Business aviation leaders are expressing growing concern about the increasing ramifications of the prolonged partial U.S. government shutdown. “It is clear that the shutdown’s impact is being felt,” NBAA said in an update to its members today, pointing the cessation of activities such as the issuance of new pilot certificates and letters of authorization.

    In addition, training centers are concerned about the possibility for expiration of authorizations for evaluators and flight training devices, and certification of aircraft and equipment is affected. Further, the association has been concerned that Customs and Border Protection is not processing requests for new overflight exemptions.

    The FAA has indicated plans for a number of safety inspectors to return to work, but details about which functions will resume remain unclear, the association said, adding the primary focus is anticipated to be on safety surveillance.

    “Since the partial government shutdown began on December 21, our nation’s aviation system has functioned safely and efficiently thanks to the hard work of dedicated FAA professionals,” said NBAA president and CEO Ed Bolen. “That said, general aviation is a highly regulated industry, so it’s no surprise that some service disruptions are becoming visible.”

    NATA agreed, saying the aviation industry is one of the hardest hit because of safety and security requirements. “The shutdown has halted work on new aircraft certification, interactions between FAA and other nations, some aircraft registrations, commercial drone flight authorizations, aircraft mechanic licenses, introduction of new air traffic technology and airport construction approvals.”

    The effect has been “very real” for controllers and other workers missing paychecks, NATA said.

    The association further pointed to specific disruptions, such as a member company that has had two aircraft stranded in Canada, awaiting FAA approval to return. Others have had issues with ferry permits and/or special flight permits, both domestic and international-bound flights and NetJets has not been able to add new aircraft into its operations, NATA added. Training companies, including FlightSafety International, have reported multiple delays and cancellations.

    GAMA president and CEO Pete Bunce, meanwhile, warned during a recent rally that even though the aircraft registry is open, the FAA and DOT have taken a narrow view of what is authorized registry activities, hampering its full use. If the shutdown was to continue in the next few weeks, the costs could run into the billions, he added.

    The associations were among the more than 30 organizations signing a letter last week to leaders on Capitol Hill, outlining some of the many ramifications and urging them to work to end the shutdown.

    Another signatory of that letter, NATCA, meanwhile, has taken a multipronged effort to put pressure on the government to end the shutdown, through a rally, leaflet campaign, and lawsuit. The organization, however, did welcome passage and signing into law of the Government Employee Fair Treatment Act of 2019, which guarantees back pay to federal employees affected by the shutdown. But NATCA president Paul Rinaldi added, “There is no reason to keep employees home and furloughed now that they are guaranteed their pay. Our elected leaders need to be responsible stewards of American taxpayer dollars and end this shutdown immediately.”

    He added that the shutdown is “eroding the layers of redundancy and support necessary” for the National Airspace System.

    This article was originally published on AINonline on January 17, 2019.

  • Tracey Cheek posted an article
    Latest Harris Poll Survey Reaffirms Importance of Business Aviation to Companies, Communities see more

    NAFA member, GAMA, releases the latest Harris Poll survey findings.

    Orlando, FL –– The General Aviation Manufacturers Association (GAMA) today joined with the National Business Aviation Association (NBAA) to release the findings of the latest survey conducted by The Harris Poll demonstrating the value of business aviation in providing safe, efficient transportation to companies of all sizes, particularly those located in smaller communities with little to no commercial airline service.

    “The Real World of Business Aviation: 2018 Survey of Companies Using General Aviation Aircraft,” represents a statistically valid representation of the use of business aircraft. The following are among the survey’s key findings:

    • Most users of business aviation are small companies employing 500 or fewer workers. Sixty-two percent of pilots and flight department leaders (identified as "pilots" for survey purposes) stated their companies utilize a single, turbine-powered aircraft.
    • Many business aircraft are largely flown to towns with little or no airline service, with pilots reporting that, on average, 31.5 percent of their flights over the past year were to destinations lacking any scheduled airline service.
    • Scheduling flexibility remains a key driver for business aviation, with 51.6 of passengers stating that traveling on business aircraft enables them to keep business schedules that could not be met efficiently using the scheduled airlines.
    • A significant portion of business aircraft passengers are technical specialists, managers and other company employees, as well as customers. These passengers spend an average of 63 percent of their time on board business aircraft engaged in work, compared to just 42 percent when traveling commercially. Furthermore, two-thirds of these passengers say they are more productive on business aircraft flights than when they are in the office.
    • During the past year, 38 percent of pilots reported flying business aircraft on humanitarian missions, averaging three such missions annually.

    "Since 2009, we've said, 'No Plane No Gain,' and this updated survey confirms the power of the slogan," said GAMA President and CEO Pete Bunce. "General aviation aircraft are indispensable business productivity tools, allowing flexibility, connectivity and efficiency. But they are also on the front line, providing an essential transportation and supply link for those in need around the world."

    “Once again, we see that business aviation is a vital tool for companies of all sizes, enabling passengers to use their travel time for more effectively and efficiently than alternatives, while also providing critical lift to smaller communities and areas in need of emergency relief,” NBAA President and CEO Ed Bolen said.

    The Harris Poll conducted 202 online interviews of pilots, flight department managers and directors of flight operations or aviation for this survey, with 276 interviews among passengers on business aircraft. Its findings are in line with previous Harris Poll surveys in 1997, 2009 and 2015. Like those examples, the 2018 study was conducted on behalf the No Plane No Gain industry advocacy campaign, co-founded by NBAA and GAMA.

    View the complete survey.

    This press release was originally published by GAMA on October 16, 2018.

  • Tracey Cheek posted an article
    Jetcraft Releases Fourth Annual 10-Year Business Aviation Market Forecast see more

    NAFA member, Jetcraft, has released the findings from its fourth annual 10-year business aviation market forecast, building upon the 2017 prediction of a new business cycle of steady, healthy growth and expanding revenues.  

    Jetcraft, the global leader in business aircraft sales and acquisitions, is today releasing its fourth annual 10-year business aviation market forecast.

    The annual market forecast reaffirms that steady growth in the private jet industry is set to continue, with predictions of 8,736 unit deliveries over the next 10 years, representing $271bn in revenues (based on 2018 pricing). North America will once again take the lead, accounting for 60% (5,241) of predicted new unit deliveries over the forecast period, with Europe expecting 18% (1,572), and Asia-Pacific 13% (1,136).

    Jahid Fazal-Karim, Owner and Chairman of the Board at Jetcraft, says: “2018 has been a real turning point for business aviation, as we have now successfully navigated through our industry’s most difficult period. This year’s forecast predicts the continuation of our current business cycle of steady and healthy growth, driven by an increase in wealth creation and the demand for larger and more expensive aircraft.”

    The increase in wealth creation over the past decade has spurred growth in family offices that are now offering a wide variety of specialized services, including business aviation. Together with the increase in block charter and fractional programs, this is exposing more UHNWIs to the industry than ever before.

    However, despite continued economic growth, Fortune 500 companies have yet to return to historical aircraft transaction levels, due to maintaining a focus on other financial priorities, such as share buybacks and paying down debt. This customer segment is unlikely to restart aircraft purchasing programs until well into the cycle.

    The forecast predicts that the large jet category, comprising super large, ultra long range and converted airline segments, will constitute 32% of total units (2,778) and 64% of total revenue over the next decade. All new aircraft model programs, both announced and projected, during the forecast period are exclusively widebodies.

    Fazal-Karim adds: “Predicted unit deliveries in the large jet category account for a huge proportion of total revenues in the industry, demonstrating the trend towards larger, long range aircraft to support today’s global business needs.”

    While the industry is set to embark on a period of substantial growth, its resilience during the challenges of the previous business cycle has prepared it well for expansion.

    Fazal-Karim concludes: “We’re confident that the lessons we’ve learned over the past decade will ensure sustainable growth for business aviation in the years to come. Ours is an enduring industry, and one with a buoyant future ahead.”

    Jetcraft’s full 2018 10-year Business Aviation Market Forecast is available to download here. Report graphs available for publication on request.

    This market report was originally published by Jetcraft on October 10, 2018.