private aviation

  • NAFA Administrator posted an article
    Immediate Private Aviation Solutions During and After a Pandemic see more

    NAFA member, Amanda Applegate, Partner with Aerlex Law Group, answers your questions regarding private aviation during and after a pandemic.

    As the United States and other countries around the world start to lift their stay-at-home restrictions, many individuals and companies are electing to increase or exclusively fly privately for the foreseeable future. Prior to the global pandemic, a number of companies and individuals used either a hybrid solution of flying, which included both private and commercial flights, while others elected to fly all flights commercially, even when private aviation was financially viable. The reasons for these choices, such as cost savings or flight shaming, are now being significantly overshadowed as a result of the global pandemic. Today those companies that previously used a hybrid model have new mandates which extend private flying rights to more employees for both business and/or personal use. In addition, those who previously elected to fly commercially are now more likely to select a private aviation solution when it is financially practicable.

    I have been inundated with questions related to immediately available solutions to cover the new normal individuals and companies are navigating. When looking for a private aviation solution the usual choices are still available: ad hoc charter, membership programs, pre-paid jet cards, leases, fractional ownership and whole aircraft ownership. What is different and hard to evaluate is the financial stability of the various service providers. When considering a service provider for private aviation, a few new questions should be asked:

    • What was the cash position of the service provider prior to the pandemic?
    • Did the service provider receive any funds from the CARES Act?
    • Has the service provider defaulted on any significant loans?
    • If funds are prepaid to the service provider, are the funds maintained in separate accounts and who is the owner of those accounts?
    • What budget cuts has the service provider implemented during the pandemic? Have any employees been laid off?

    We have already seen the closure of some private aviation companies as a result of the downturn in flying caused by the global pandemic. Some of these companies had significant prepaid deposits from customers on hand at the time of the closure, which are unlikely to be recoverable. Furthermore, we know that as companies struggle financially that budget cuts will be made, and it is important to understand how the budget cuts may impact safety and service.

    As a result of the financial uncertainty of many private aviation companies, it is more important than ever to have any unsecured prepaid funds maintained in a separate account and in the name of the customer. If that is not an option and the financial information of the service provider is questionable or not available, then negotiating that the prepayment of funds be adjusted into smaller and more frequent payments is recommended.

    When transitioning into a private aviation solution and/or increasing private aviation use, it is also important to look at the duration of time that the use and/or increase in private aviation use will occur. If the new normal for you or your company will likely become a permanent change, then whole aircraft ownership or fractional ownership should be strongly considered, particularly if the number of flight hours needed per year will exceed 100. If the change is anticipated to be temporary or the number of flight hours needed is not significant, then a less permanent solution such as a membership program, jet card or a fractional lease should be considered. If whole aircraft ownership is not the solution selected, then the cleaning process and safety procedures implemented by the service providers should also be evaluated.

    Finally, it is important to not rush the process of purchasing an aircraft or selecting a private aviation service provider. Be sure to evaluate the service provider selected and in the case of the purchase of a whole aircraft, the aircraft selected should go through a complete pre-purchase inspection. Taking such precautions and being deliberate in your evaluations will save you money and help you avoid pitfalls in the future.

    This article was originally published by Aerlex Law Group on July 14, 2020, in Articles, BusinessAir Magazine, The Latest.

  • NAFA Administrator posted an article
    Private Aviation Tax Considerations for Prospective Aircraft Buyers see more

    NAFA member, H. Lee Rohde, III, President & CEO of Essex Aviation Group, Inc., discusses tax considerations when purchasing an aircraft. 

    Acquiring a private aircraft for personal use is an exciting experience, one that opens innumerable doors for frequent travelers — however, to ultimately realize the benefits of your investment, you must first ensure that you’ve fully accounted for all financial considerations, especially aviation taxes.

    Too often, private aircraft owners aren’t fully informed of certain taxes that are involved in the ownership and operation of the aircraft; which are important as it relates to their operating budget and the overall aircraft ownership experience. That’s because tax considerations should be structured not only during the initial transaction, but throughout the ownership lifecycle, and can affect how you decide to utilize your aircraft.

    Read the recommendations below to avoid being blindsided by private aviation taxes.

    Location, Location, Location

    You might be surprised to learn just how many soon-to-be private aircraft owners ignore the opportunity to create even the most basic tax plan in advance of a transaction. Generally speaking, this isn’t for lack of interest but, rather, lack of understanding. Many buyers simply lack the awareness and experience to appreciate how seemingly minor factors, such as the physical location of the aircraft at closing or the location of the hangar where they intend to house their aircraft, can affect taxes.

    For example, some states place a substantial sales tax on aircraft, while others have fly-away exemptions with strict timelines and requirements. Certain states also apply use and property taxes to aircraft purchases or transactions, which can vary and are affected by a number of factors. As federal and state tax laws change over time, working with an experienced aviation advisory team during your transaction will only become more valuable and necessary.

    Plan in Advance

    It’s unreasonable to expect potential buyers to automatically be familiar with state aviation tax regulations and laws, especially as they pertain to private aircraft, which is why it’s important to work with a qualified aircraft consultant and aviation tax advisory firm. Although private aviation consultants aren’t able to provide complete tax advice, they can help you determine the following in advance of your purchase date:

    • What your regular usage will be
    • Where you intend to fly (and for how long)
    • Where you intend to store your aircraft
    • How tax considerations affect your ownership structure
    • How to identify aviation tax counsel

    Your consultant can also act as a liaison between you and the seller, representing you throughout the transaction, as well as managing the process of positioning your aircraft at the right location during the time of closing for tax purposes.

    Consult a Tax Attorney

    In addition to determining your private aircraft usage and handling your acquisition, an aviation consultant can set you up with experienced aviation tax advisors and tax attorneys to round out your team. Aviation tax advisors and tax attorneys are well-versed in aircraft-specific tax codes and have the expertise to identify possible deductions or opportunities to maximize your tax savings by reducing the amount you pay for sales, property and ongoing use taxes. It’s impossible to emphasize enough just how important it is to work with aviation-experienced tax advisors and attorneys — only professionals with extensive industry experience will have the unique knowledge to properly address all of your tax considerations.

    Your private aviation consultant should work closely with your tax team every step of the way. Even if you do your due diligence from a tax perspective, there’s a possibility that, at some point, you’ll be audited. Should this occur, your consultant, tax advisor and aviation attorney will collaborate and help represent you during the audit.

    The right aviation advisory team will consistently go above and beyond for its clients, whether that entails figuring out which private aviation travel option best meets their unique needs, helping them understand how tax considerations affect their cost of ownership and operation, or tirelessly advocating on their behalf. With a collective 70 years of experience in the aviation industry under their belt and a vast network of connections, the consultants at Essex Aviation Group are uniquely qualified to usher clients through every step of the private aircraft acquisition process, as well as put them in touch with some of the best aviation tax advisors and attorneys in the industry.

    This article was originally published by Essex Aviation.  

  • Tracey Cheek posted an article
    Eagle Creek Aviation Joins National Aircraft Finance Association see more

    FOR IMMEDIATE RELEASE

    EDGEWATER, Md. – Feb. 12, 2020 – National Aircraft Finance Association (NAFA) is pleased to announce that Eagle Creek Aviation has recently joined its professional network of aviation service providers. 

    “NAFA members form a network of aviation finance services who diligently and competently operate with integrity and objectivity throughout the world. We’re excited to welcome Eagle Creek to our growing organization as we head to our 50th anniversary,” said Jim Blessing, president of NAFA.

    For nearly four decades, Eagle Creek Aviation has provided the full spectrum of private aviation services. Family-owned and professionally-operated, the company strives to make owning, operating and flying aircraft safer, more productive and more enjoyable. Eagle Creek helps their clients sell and purchase new or pre-owned aircraft, with decades of proven experience and longstanding industry relationships to achieve their specific goals. 

    As one of the country’s only locally-owned and operated charter companies, Eagle Creek also offers premier, tailored private jet travel experiences. Operating out of Indianapolis, Indiana and Naples, Florida, they have been incident and accident-free for more than two decades and carry an ARGUS Gold rating and Wyvern Certification.

    Eagle Creek Aviation also serves as Embraer Authorized Phenom Service Centers, having a long-standing business relationship with Embraer dating back to the design phase of the Phenom and introduction to the U.S. Market. The company is one of the premier providers of Cessna aircraft, service and maintenance in the Midwestern and Southeastern U.S as well. 

    Much like NAFA, Eagle Creek Aviation promotes safe, productive and enjoyable aircraft ownership. Eagle Creek and NAFA are committed to fostering the highest level of client services throughout the aviation industry.

    For more information about Eagle Creek Aviation, visit nafa.aero/companies/eagle-creek-aviation.

    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 NAFA.aero.

     

  • Tracey Cheek posted an article
    Innovative Private Aviation Options see more

    NAFA member, Amanda Applegate, Partner at AERLEX LAW GROUP, discusses innovative private aviation options.

    In 1986, when Richard Santulli created NetJets, it was considered revolutionary. NetJets opened up private aviation to a new segment of customers. Flexjet followed in 1995. The pool of potential private aircraft users was made even greater with the advent of Marquis Jet in 2001. Now more than 15 years after the launch of Marquis Jet, there are over 200 jet card products, private aviation membership programs, co-ownership and fractional programs in existence.

    The private aviation market, particularly the charter market, remains fragmented. Because of the fragmentation, many consumers find there is not just one solution that fulfills all of their private aviation needs. More than ever, we are seeing consumers use several solutions to meet their range of private aviation needs. Many of my clients own a whole aircraft and supplement their ownership with a membership program, fractional share and/or utilize the charter market. Often each category is sourced with a different provider, which adds unwanted complexity and inefficiencies to scheduling and tracking the multiple private aviation providers.

    We have seen some consolidation in recent years. OneSky, LLC, part of Directional Aviation Capital, has acquired Flight Options, Flexjet, Sentient Jet and most recently PrivateFly. PrivateFly is a digital booking service for private jet charters and the company plans to use PrivateFly along with its current digital on-demand charter broker, Skyjet. Further recent consolidation was announced with Vista Global acquiring XOJET, an on-demand business aviation company in North America with 43 aircraft. Vista Global will position XOJET as its entry level product into private aviation. Vista Global is attempting to eliminate the need to use multiple private aviation providers by offering a variety of products.

    While most agree that further consolation is needed, there is also a need to leverage technology. Arranging charter is often a manual process, with paper charter request forms for each charter segment and without an efficient payment system. The private jet charter market is not searchable on one software platform, mostly due to the number of Part 135 operators who haven’t yet found a system to consolidate all of their data, thus customers have to search multiple sources to evaluate their options. There are many companies working towards digitalizing the charter market, but until there is more consolidation of current, up to date data, inefficiencies will persist.

    In addition to consolidation of fragmented private aviation solutions and the implementation of new technologies to create efficiencies and grow the market, we will also see new product offerings continuing to emerge. Recently I attended revolution.aero, a conference organized by Corporate Jet Investors. This two day conference highlighted the vision of the future of aviation. Billions of dollars have already been invested this year in new aviation solutions. While many have likely heard of Uber Elevate, an urban aerial ridesharing solution currently in development, there are hundreds of other aviation solutions, software programs and aircraft currently in development. The solutions in development are focusing not only on urban mobility, but also the transportation of goods, including important medical needs like the movement of organs and blood. Within the next several years many new solutions, software programs and aircraft will be developed that could significantly change the way we use air transportation on a daily basis.

    This article was originally published in BusinessAir Magazine, October 2018, Vol. 28, No. 10.

  • Tracey Cheek posted an article
    The Realities of the Pilot Shortage see more

    NAFA member, Rene Banglesdorf, CEO of Charlie Bravo Aviation, discusses how good pilots are hard to find and how the realities of the pilot shortage are starting to affect the aviation industry.

    Gone are the days when aviation departments sort through a huge stack of resumes for pilots – though a few still do. Nowadays, good pilots seem to be hard to find. And the realities of a pilot shortage are finally starting to affect the aviation industry.

    High pilot training costs, several years of earlier hiring freezes in top markets, and the threat of technology replacing pilots in the not-too-distant future has deterred the next generation of talent.

    By my math, the number of pilots retiring exceeds the number of new entrants by more than 100-percent – with an increasing demand from commercial, cargo and private operators. To us that signals a critical shortage – and if the airlines are feeling it sharply, general aviation will be too.

    Already we hear about American or Canadian pilots being recruited to the Middle East and Asia at salaries double or greater the averages in North America. Larger carriers are offering signing bonuses, 20-percent-plus pay increases and better benefits to attract and retain experienced pilots.

    Boeing’s job forecast

    In its most recent jobs forecast, Boeing indicated an unprecedented 20-year demand for pilots at 790,000 – double the current workforce. And according to their report, 80,000 pilots in the US alone will age out in that same timeframe.

    “Despite strong global air traffic growth, the aviation industry continues to face a pilot labour supply challenge, raising concern about the existence of a global pilot shortage in the near-term,” said Keith Cooper, Vice President of Training & Professional Services, Boeing Global Services. “An emphasis on developing the next generation of pilots is key to help mitigate this. With a network of training campuses and relationships with flight schools around the globe, Boeing partners with customers, governments and educational institutions to help ensure the market is ready to meet this significant pilot demand.”

    To this end, Boeing touts its Pilot Development Program – an accelerated training program that guides future pilots from early stage ab-initio training through type rating as a first officer – to help operators meet their growing pilot needs.

    That’s great for companies or people operating Boeing’s aircraft, but it may not factor down into providing a pipeline of pilots for general aviation, especially piston or turboprop operators.

    The competition is on

    Regional airlines have doubled starting salaries and bonuses in recent years, which heralds stiff competition for lower-time pilots, as regional airlines typically serve as time and tenure builders for younger pilots.

    Private aviation flight departments are getting more competitive as well. Recent news of airline compensation increases has encouraged some firms to bump salaries by 30 or 50 per cent to avoid pilot turnover.

    The pilot shortage that’s affecting commercial and private aviation is affecting the military, as well, as fighter pilots are leaving the military in droves for cushier, better-paying jobs in commercial and private aviation.

    “Despite strong global air traffic growth, the aviation industry continues to face a pilot labour supply challenge, raising concern about the existence of a global pilot shortage in the near-term.” ~Keith Cooper

    In order to compete with the airlines and private flight departments, the military is taking steps to improve benefits to their pilots in addition to increasing pay, including more cockpit time, increased flexibility in assignments, more career options, and shorter deployments.

    Many flight departments and airlines are doing the same.

    While I’m all for more competition among operators – especially with my daughter in expensive flight training – the bigger question here is how can we make training less cumbersome or costly?

    Flight schools

    Flight schools, like Flight Safety International, where my daughter is in training for her airline transport pilot (ATP) license, are competing for certified flight instructors to keep up with demand for training. When there aren’t enough instructors, training is delayed, pilot trainees are discouraged, and expenses increase – all deterrents to increasing the numbers of pilots entering the workforce.

    According to a 2017 study conducted by CAE, a civil aviation training provider, the global airline industry will require 255,000 new pilots in order to meet the demand of airline growth and pilot attrition over the next 10 years. “The largest requirement will come from the Asia-Pacific region which alone will need 90,000 new pilots, followed by the Americas which will need 85,000,” said Kinda Sarrage, Regional Sales Manager for the Middle East, Northern Africa and South Asia.

    “The largest requirement will come from the Asia-Pacific region which alone will need 90,000 new pilots, followed by the Americas which will need 85,000.” ~Kinda Sarrage

    “Many regions have been experiencing a higher than usual turnover of experienced pilots or captains leaving them for the Asian carriers as they offer more competitive packages, tax benefits, and flexible work rotations. To compensate for this loss, airlines should establish second officer recruitment schemes. Though some airlines have begun implementing programs to attract lower hour pilots, it is at a much slower rate than that which is required. If airlines established such programs several years ago, they would have a steady pipeline of first officers coming through that would be upgradable to captains today. The reality is that the pool of available captains is shrinking, and this is becoming apparent as airlines struggle to recruit and train pilots to meet their demands,” Sarrage said.

    SARA Act

    In the US, Senators James Inhofe and Tammy Duckworth are co-sponsoring bipartisan legislation aimed at helping the general aviation community.

    The Securing and Revitalizing Aviation (SARA) Act of 2018 (S.3270) calls for the creation of an Aircraft Pilot Education Program that would allow high school students to get a head start on their flying careers by taking aviation-related courses for credit, according to a press release from the National Business Aircraft Association (NBAA).

    The bill also includes reforms to existing Federal Aviation Administration (FAA) regulations to ease the shortage of qualified designated pilot examiners (DPE) needed for initial and recurrent pilot training.

    Additional provisions would enhance existing due process protections for pilots; extend limited liability coverage for FAA designees performing agency duties, but who are not covered under immunities for government employees, as well as for pilots performing volunteer missions; and grant the National Transportation Safety Board (NTSB) the authority to review denials of airman certificates by the FAA.

    AOPA

    The Aircraft Owners and Pilots Association (AOPA) has worked diligently for years for medical requirements reform, facilitating the renewal of licenses for more than 5,000 “rusty” pilots.

    The AOPA You Can Fly High School Initiative ninth-grade STEM curriculum was tested in 29 high schools during the 2017-2018 school year. It has proved popular with teachers and students alike because it engages youth with hands-on activities and exposes them to the world of aviation and potential careers. The program, created in partnership with educators, curriculum developers, and aviation experts, offers four-year study options in aviation career pathways and is aligned with rigorous math and science educational standards already in use.

    Each of us should be working toward attracting as many pilots and mechanics as possible to aviation –and then working to keep them here!

    General aviation flight departments are beginning to awaken to a reality that pilot salaries, bonuses and flexibility are changing. What are you doing to adapt?

    Rene Banglesdorf is the CEO of Charlie Bravo Aviation, a worldwide aircraft brokerage based in Austin, Texas. She is an author, speaker and podcast host.

    This article was originally published in Altitudes Magazine on October 14, 2018.

     

  • Tracey Cheek posted an article
    Charting New Directions in the Life Cycle of Private Aviation Usage see more

    NAFA member Amanda Applegate, Partner with AERLEX Law Group, discusses the life cycle of private aviation usage.

    When I began my career in the aviation industry 20 years ago, the “life cycle” of private aviation consumers was fairly straightforward and predictable: first, they sampled non-commercial aircraft travel by chartering, then they moved into fractional ownership and, eventually, whole aircraft ownership if the demand existed. Later in the life cycle, when the consumer’s travel decreased, they moved back into fractional ownership and
    eventually returned full circle to charter. Typically, a consumer would rely on a single provider at a given time until that provider could no longer satisfy their requirements.

    For a variety of reasons, this conventional life cycle of the private aviation buyer no longer exists. There has been a revolution in private aviation options and platforms, creating many new alternatives that did not exist 20 years ago. This has led to a decrease in brand loyalty by private aviation users. Also, many first-time aircraft buyers have not flown privately for an extended period of time and often skip the fractional ownership step. Additionally, many private aviation consumers have become much savvier and depend on a combination of multiple aviation solutions to fulfill their various travel needs.

    WHY IS THIS IMPORTANT?
    When a private aviation buyer finds herself in any one or more of the following scenarios: considering private aviation for the first time, looking for an alternative option to a current provider, contemplating whole aircraft ownership, or resolving dissatisfaction with a current service provider, there is no standard answer as to what program or option would be best. There are many factors to consider when selecting one or more private aviation products and the consumer does not often have the time to fully explore the multitude of available options. Here are some key considerations to keep in mind:

    1. Number of hours flown per year
    2. Destinations
    3. Importance placed on the age of the aircraft
    4. Length of flight segments
    5. Ratio of roundtrip vs. one-way travel
    6. Number of passengers
    7. Peak time traveler or business week traveler
    8. Acceptable service level (on time performance, working entertainment systems, interior condition and amenities)

    Given the complexities of the offerings in today’s aviation market and the limited research time available to most consumers, it is often advisable to hire a consultant who charges by the hour (not on commission). The consultant can help the buyer consider the key factors mentioned, explore the various options and evaluate the solution that makes the most sense for the customer’s mission. When selecting the consultant, it is important to confirm that they do not receive any referral fees or other types of compensation by referring one program over another. The buyer must be sure the consultant is making their recommendation based solely upon the client’s best interests.

    It seems that almost monthly there is a new aviation program or offering that I am hearing about for the first time or a new permutation on an old program. It is sometimes exhausting to keep up with all of the changes that are occurring in the marketplace. However, even if you read all of the marketing literature, you can’t truly understand a program, the “enhancements” it offers and the performance of the provider unless you place multiple users into a specific program on a regular basis. That is why an experienced consultant can bring tremendous value to a buyer evaluating private aviation solutions. And as I always remind my private aviation clients, please don’t simply select the program that your friend uses unless your friend has the exact same travel needs and service level expectations. You may be setting yourself up for a costly disappointment.

    There is no longer a typical life cycle pattern for the consumer of private aviation. Take the time to evaluate all the options available and chart your own path based on the solutions that best suit your unique travel needs.

    The original article was published on March 28, 2018 in BusinessAir Magazine, March 2018, Volume 28, No. 3.

  • Tracey Cheek posted an article
    Private aviation usage growth may be due to increased demand for long-range international travel. see more

    NAFA members, Scott McCreary at McAfee & Taft and Jeffrey Towers at TVPX, weigh in on deciding where to register an aircraft that is operated in multiple jurisdictions.  Originally published in Corporate Jet Investor's Official Guide to Aircraft Registration - April 2018.  

    As many aircraft are regularly operated in multiple jurisdictions, corporate aircraft owners are faced with multiple choices as to where they will register their aircraft for nationality purposes. Once the pros and cons of each registry are fully considered, owners often choose to register their aircraft on a registry that does not correspond with the nationality of the corporate jet owner. One of the most frequently chosen aircraft registries is the United States Federal Aviation Administration (FAA) Aircraft Registry, commonly referred to as the N Registry.

    The FAA is the primary US regulatory agency that governs and oversees registration, maintenance and operation of aircraft. In addition, the United States Department of Transportation further provides economic authority for certain aircraft operations and protects consumers from unfair and deceptive trade practices involving the sale of air transportation. The FAA Aircraft Registry located in Oklahoma City, Oklahoma, issues Certificates of Aircraft Registration for both commercial and general aviation aircraft. To register an aircraft with the FAA, the applicant for registration must file documents evidencing ownership of the aircraft in the name of the applicant, as well as an AC Form 8050-1 aircraft registration application. To perfect liens or encumbrances against aircraft registered with the FAA, parties must (i) file the security documents with the FAA and (ii) comply with the registration requirements under the Cape Town Treaty, when applicable.

    Why is the US a preferred jurisdiction for aircraft registration?

    There are several advantages to registering an aircraft in the US. The FAA is widely respected for its easy, secure and inexpensive processes for filing aircraft title transfer, registration and security documents. There is also a long history of court decisions and other legal precedents regarding the processes for registering and canceling aircraft from the FAA, as well as the validity, priority and enforceability of security interests in aircraft. The US was also one of the first countries to adopt the Cape Town Treaty, thus providing the additional comfort and assurance that interests properly created and registered under the Cape Town Treaty will be recognized in other Contracting States. The clarity of applicable law and long history of legal precedents for enforcing rights of owners and lenders for US-registered aircraft appeals to aircraft lenders, lessors and borrowers.

    The FAA provides an efficient system for owners and lenders to file documents and now accepts documents bearing appropriate digital signatures, which simplifies and expedites the closing process. There is a large pool of internationally-recognized aviation attorneys and other professionals in the US available to assist aircraft owners and lenders. Many parties also take comfort in the fact that the FAA, as part of the US government, has the resources and wherewithal to properly oversee and enforce its rules and obligations as an aircraft registry. Finally, there is ample evidence that registration with the FAA helps to preserve the value of a business aircraft, both because the FAA’s standards for aircraft operations and maintenance are among the highest in the world and because the US is the most active market for
    aircraft sales.

    Read more at McAfee & Taft and Corporate Jet Investor.