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Your Acquisition Team

by David Wyndham 1. April 2006 00:00
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An old African proverb says it takes a village to raise a child. Regarding an aircraft acquisition, it takes a village, and a big pile of money! Given the amount of money involved in such a transaction; it pays to do your homework and assemble your Acquisition Team. You need to know these people and where to find them!

The first team member is the technical analysis person. This person is responsible for defining the mission and developing the measurable criteria for judging the ability of the aircraft to perform its mission. This person should be familiar with aircraft performance measures, and have available information that enables them to predict passenger loads, trip lengths, etc. Being a pilot, this person is you!

The next person to get on the team is the financial analysis person. That individual needs access to what it costs to own and operate aircraft. They will work with the financial department/CFO in determining what the financial ramifications are of various forms of ownership, charter, finance/lease including pre/post tax considerations. This person will do the Life Cycle Costing. You can contract this out, or do it yourself. Regardless, you'll likely need the help of…

A banker or financial institution. There are a number of ways to structure the acquisition of an aircraft. Financing is more than just getting a good interest rate. What are the tax and balance sheet implications of the acquisition? If leasing, what are the return and buy-out options? Is paying cash the best alternative for you?

Like ol' Ben Franklin said, the only certainties are death and taxes. If the aircraft is for business use, or mixed business and personal use, you need a tax advisor. How do you plan to structure the ownership of the aircraft? Where and when will you take delivery? Do you need to do a tax-deferred like kind exchange? Are there sales or use taxes due and if so, who is responsible for collecting and remitting them? Do this well before closing and there should be no surprises.

Speaking of aviation attorneys, one needs to be consulted to ensure that the contracts are appropriate and that the various regulatory issues are addressed. Will there be a management agreement? Will the aircraft be held in a separate LLC? Are there leases, timeshare agreements, charter? While your family lawyer can be a help, best to work with someone who does aviation law for a living.

Don't forget your insurance broker. They need to be kept informed as to what, when and how the aircraft is to be used. If you don't mention all the uses for the aircraft you may not be insured. What are your insurance company's requirements for the pilots? Will it be different if you acquire a different aircraft?

Last, and perhaps most important on this list, is the aircraft sales professional. They can make or break the experience of acquiring an aircraft. This individual needs to know the state of the aircraft sales market. Make sure they know your corner of the market. If they handle "anything from Bell 47s to 747s" I'd look around some more. If you are looking for a light jet, you want someone who knows that end of the market intimately. If your desired aircraft is a hot commodity, you'll need someone who knows when an aircraft is for sale before it is listed. Ask for references.

A good broker/dealer will also know who to contact about title searches, pre-buy inspections and appraisals. If they say you don't need one for a pre-owned aircraft, run away! Have those inspections done by someone who is familiar with that model and independent of the seller and buyer. BTW: Always have a Title Search performed before purchasing ANY aircraft.

Despite the all the used airplane/car/boat/goat salesman jokes, there are good, honest ones out there. Ask for references, see if they listen to you and offer sound advice. The broker typically works for the seller, but a good one realizes that a successful sale requires finding common ground between a buyer and seller.

Anyone with Internet access can "find" aircraft for sale, Globalair.com as an example is an excellent source for locating aircraft in the pre-owned market. Globalair.com also has tools and services such as A.Buyer (a tool to track aircraft on the market), loan calculator and Title Services to name a few.

The aircraft sales professional needs to act in an advisory role and as a facilitator to make sure the deal closes with all parties happy as a result. They won't know all the answers, but should know where to find them.

Acquiring an aircraft should never be done in a hurry. There are many issues to cover and remember the PPPPPP rule! (Prior Planning Prevents Pitifully Poor Performance). Don't set yourself up for a turbulent ride through the closing. Assemble your team in advance and things will happen smoothly.

If you have gone through the process of acquiring a corporate aircraft and would like to share your thoughts on the "Acquisition Team" please contribute to this interactive discussion. Your contribution could help someone remember to do the PPPPPP rule!

 

The Basics of Aircraft Finance

by Greg Reigel 1. April 2006 00:00
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Many individuals and businesses that have made the decision to purchase an aircraft do not necessarily have the cash to purchase the aircraft outright. Or, if they do have the cash available, tax or cash flow implications may dictate against paying cash for the aircraft. As a result, these individuals and businesses may purchase their aircraft using financing provided by a third-party.

The aircraft finance marketplace includes a wide variety of financial institutions and lenders that will finance aircraft. However, not all of these lenders are experienced with aircraft finance. As a result, some of the lenders may not be able to process aircraft financing transactions as efficiently or economically as lenders with more aircraft finance experience.

Individuals and businesses interested in financing the purchase of an aircraft should survey the marketplace and contact a number of lenders to locate a lender with experience who understands the borrower's needs and goals. Once selected, an aircraft finance transaction will involve a number of steps and processes to complete the transaction.

Keep in mind that as the size of the aircraft and the amount being financed increase, the structure, processes and procedures for obtaining aircraft financing become more complicated. This article is only intended to provide a general overview of the basic aircraft finance transaction and will not address the nuances and variations that may be associated with more complex transactions.

Applying For Aircraft Financing

The majority of lenders handle applications for aircraft financing similarly. The lender will require that the borrower submit information regarding the aircraft including make, model, year, registration and proposed purchase price.

The borrower will also need to provide personal financial information and, if the borrower or the entity purchasing the aircraft is a corporation or limited liability company, the lender will require copies of organizational documents for any entity involved in the transaction. Further, if the financing will include personal or corporate guaranties, the lender will require similar financial and organizational documentation from each guarantor.

Appraisal

If the lender does not have a great deal of experience in aircraft financing, or if the purchase transaction involves a larger aircraft, the lender will likely require an appraisal of the aircraft. The appraisal will allow the lender to ensure that the value of the aircraft is consistent with and supports the lender's "loan to equity" ratio for the particular transaction. For traditional financial institutions, it also provides back-up for the loan file to satisfy a bank examiner, who may have no aircraft finance experience, that the value of the aircraft meets the lender's lending criteria and authority.

On the other hand, for an experienced lender, an appraisal may not necessarily be required for transactions involving small, single-engine aircraft up to larger, twin-engine aircraft. An experienced aircraft lender often-times has a good sense of the market value of these types of aircraft based upon blue-book values and similar transactions processed by the lender. These lenders are typically not traditional financial institutions (e.g. banks) and, as a result, do not have the same file documentation considerations, vis-à-vis bank examiners, as a traditional bank.

From the borrower's perspective, the appraisal does not usually impact the purchase transaction. Although a purchase agreement may be drafted to include a contingency that the aircraft appraise at or above a certain value, usually the borrower has already agreed upon a purchase price for the aircraft prior to applying for its financing and the appraisal merely confirms whether the borrower has made a good deal.

Aircraft Title Search

The lender will obtain a title search on the aircraft to determine the current owner of record and whether any security interests, liens or other encumbrances are recorded against the aircraft. The title company will first search the FAA Registry in Oklahoma City. Then, if the aircraft is subject to the Cape Town Convention* , the title company will also search the international registry in Ireland. Unfortunately for subject aircraft, this additional search necessitated by the Cape Town Convention has added both time and expense to the title search process.

After the title company has completed the necessary search or searches, it will issue a title report to the lender disclosing the current status of the aircraft's title. If any liens, encumbrances or other title defects are disclosed in the title report, the lender will require that any issues are released or otherwise resolved to the lender's satisfaction prior to closing. The lender will also perform name and judgment searches to ensure that the aircraft seller will be able to convey clear title to the borrower. Although the lender will expect that the borrower resolve title issues prior to closing, ultimately, curing title defects and passing clear title to the aircraft is the seller's responsibility in an aircraft transaction.

Aircraft Title Insurance

A lender will often purchase title insurance to insure the lender's security interest in the aircraft. The aircraft title insurer will ensure that the registration documentation (bill of sale, application for registration, etc.) are accurate and that all documents, including the lender's aircraft security agreement, are filed in a timely manner. It will also require that any title defects disclosed by the title search be cured at or before the closing. Then, if any title issues arise after the transaction closes, the title insurer will be responsible for protecting the lender's interest in the aircraft and resolving any covered title defects.

Loan Documentation

The loan documents typically associated with a basic aircraft finance transaction include a promissory note, aircraft security agreement, guaranty/pledge and authorization. A promissory note contains the terms of the loan and the borrower's promise to repay the loan according to those terms. It also provides the lender with remedies if the borrower does not fulfill its obligations under the promissory note.

The aircraft security agreement pledges the aircraft as security for the promissory note. If the borrower fails to repay the promissory note, the lender will have the right to take possession of the aircraft. Once it has regained possession, the lender is able to sell or otherwise dispose of the aircraft to recover as much of the outstanding loan balance as possible. If the lender is able to sell the aircraft for more than is owed, the excess is paid to the borrower. However, after the lender offsets the amount received from sale against the outstanding balance and the lender's costs/fees incurred in repossessing and selling the aircraft, it is unusual for an excess balance to exist.

For transactions in which the loan is being guaranteed by someone other than the borrower, that individual or business will need to execute a guaranty that obligates the guarantor to repay the loan in the event that the borrower defaults. If the borrower or any guarantor is a corporation or limited liability company, the lender will require that an appropriate official of the entity execute an authorization representing that the person executing the documents on behalf of the entity is authorized to sign and bind that entity.

Most lenders will have standard or form documents they use in aircraft finance transactions. However, depending upon the lender, the financial position of the borrower, the relationship of the borrower with the lender and the amount of the loan, many of the terms in the loan documents may be negotiable.

Closing

Either the lender or a title company on behalf of the lender will handle closing of the loan transaction. Prior to disbursing any funds, the lender will require that the appropriate parties execute the loan documentation and that any other requirements of the title insurer are satisfied. The aircraft title company will ensure the appropriate documents are received, completed, and that the documentation is accurate and filed in a timely manner to ensure perfection and priority of the lender's interest in the aircraft. In the absence of a title company processing the transaction, a lender may utilize an experienced aviation attorney to close the transaction on its behalf.

Costs

The borrower is usually responsible for the costs incurred by the lender in processing and closing the aircraft finance transaction including application fees, title search fees, appraisal fee, title insurance premium and recording/registration fees. However, depending upon its financial condition and its relationship with the lender, the borrower often times can negotiate the allocation of costs between the borrower and the lender.

Conclusion

In today's marketplace, aircraft financing is readily available. Although the processes and procedures involved in an aircraft finance transaction are similar to other finance transactions, an aircraft finance transaction involves many nuances and unique aspects. Having a general understanding of the nuances associated with an aircraft finance transaction can assist a borrower in successfully closing an aircraft finance transaction.

*Aircraft and equipment subject to the Cape Town Convention include: (1) Airframes, that when appropriate aircraft engines are installed thereon, are type certified by the competent aviation authority to transport at least eight (8) persons including crew; or goods in excess of 2750 kilograms (6,062 pounds); (2) Helicopters, heavier-than-air machines, supported in flight chiefly by the reactions of the air on one or more power-driven rotors on substantially vertical axes and which are type certified by the competent aviation authority to transport at least five (5) persons including crew; or goods in excess of 450 kilograms; and (3) Aircraft engines, powered by jet propulsion or turbine or piston technology and: (a) in the case of jet propulsion aircraft engines, have at least 1750 lb of thrust or its equivalent; and (b) in the case of turbine-powered or piston-powered aircraft engines, have at least 550 rated take-off shaft horsepower or its equivalent

The Cape Town Convention

by Greg Reigel 1. April 2006 00:00
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If you are selling, purchasing, leasing, financing or otherwise acquiring an interest in an aircraft or turbine engine, you need to be aware of the Cape Town Convention. The Cape Town Convention is an international treaty that went into effect March 1, 2006 and it applies to many twin-engine and most jet aircraft. Technically speaking, the Cape Town Convention is comprised of two documents: The Cape Town Convention on International Interests in Mobile Equipment ("Convention") and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment ("Protocol"). Many people simply refer to the Convention and the Protocol collectively as the Cape Town Treaty. (For purposes of this article, I will simply refer to the Convention and the Protocol collectively as "the Treaty"). This article will discuss what the Treaty is, why it is important and what it will mean to the U.S. aircraft market.

What Is The Treaty?

The Treaty creates new laws governing transactions involving subject aircraft and engines that change or supercede conflicting laws within a country governed by the Treaty (also referred to as a "Contracting State"). The Treaty addresses transaction issues including perfection of ownership, security interests/liens and possessory rights such as leases, default, remedies and insolvency. The Treaty applies to a transaction that (1) meets the aircraft/engine size requirement; (2) involves an international interest; and where (3) at the conclusion of the transaction, the subject aircraft/engine is registered in a Contracting State or the aircraft/engine owner or debtor is situated in a contracting state.

The United States and seven Contracting States (Ireland, Panama, Pakistan, Oman, Nigeria, Malaysia and Ethiopia) have ratified or acceded to the Treaty and it has been in effect since March 1, 2006. In connection with its ratification of the Treaty, the U.S. also amended many U.S. laws to comply with the Treaty (e.g. Federal Aviation Regulations, Title 49 of the United States Code, and the Uniform Commercial Code).

The aircraft and engines subject to the Treaty include: (1) Aircraft that are type certificated for at least eight (8) persons including crew; or goods in excess of 2750 kilograms (6,062 pounds); (2) Helicopters that are type certificated for at least five (5) persons including crew; or goods in excess of 450 kilograms (990 pounds); and (3) Aircraft engines having at least 1750 lb of thrust or at least 550 rated take-off shaft horsepower. The Treaty does not contain any provisions for registering propellers. International interests under the Treaty include aircraft sales, aircraft security agreements, aircraft lease agreements, aircraft conditional sales agreements, aircraft liens, assignments, subordinations etc.

The Treaty established an International Registry that allows registration of international interests in aircraft and equipment that are subject to the Treaty. The International Registry is located in Ireland, but registration is performed through its website: www.aviareto.aero. The computer driven system is available 24 hours per day, 7 days per week.

Why Is The Treaty Important?

The Treaty is important because it pre-empts existing laws in Contracting States and it changes the manner in which interests in subject aircraft and engines are documented, recorded and enforced. Under the Treaty, the first party to register an interest in a subject aircraft/engine with the International Registry will have an interest prior and superior to all other interests. Documents evidencing interests in subject aircraft/engine(s) must still be recorded with the FAA. However, it is important to keep in mind that the filing with the International Registry will supercede the priority date of any documents filed with the FAA Registry. Simply put, if you have an interest in a subject aircraft/engine, you must be the first to file with the International Registry or you will lose to other competing interests. (This is a significant change from prior U.S. law under which a filing party would not have priority over an unrecorded interest if that filing party had actual notice of the unrecorded interest at the time it filed with the FAA Registry).

Additionally, the Treaty allows a party to file a "prospective international interest" to perfect its interest in a subject aircraft/engine prior to closing the transaction. The typical situation involves a creditor perfecting its security interest in an aircraft/engine prior to closing and funding of the transaction. Both parties must consent to the filing of the prospective interest with the International Registry. If the transaction then closes after the prospective interest is filed with the International Registry, the priority date relates back to the date of the filing of the prospective interest. However, if the transaction does not close, no interest is created and the prospective interest has no effect. (Although technically it will still appear as a cloud on the aircraft's/engine's title unless it is released.)

What Does The Treaty Mean To The U.S. Aircraft Market?

Title Search. Unfortunately title searches have now become more expensive for aircraft/engines subject to the Treaty. Not only must the FAA Registry be searched to confirm aircraft/engine registration and status of pre-Treaty liens etc., but the International Registry will also need to be searched. Additionally, it is also taking a longer time to receive the results of a title search because the International Registry is not processing such requests as quickly and efficiently as one would expect. Hopefully this delay is simply the result of the International Registry's infancy and will be reduced as the International Registry becomes more adept at processing such requests.

Registration With The International Registry. Each party to an aircraft transaction will need to register as a transactional user entity ("TUE"). The one-time fee for this registration is $200.00. If a party anticipates more than two subject aircraft transactions within the next five years, it will be more cost-efficient register for the five-year period and pay the $500.00 fee. Each party will need to use a single computer for the registration because the International Registry assigns a digital security certificate for the transaction that the TUE must download. The same computer must then be used to complete the transaction. Registration approval is supposed to occur within 48 hours. However, the initial volume of TUE registrations has resulted in a delay of up to several days for receipt of a TUE registration approval.

Once registered, a TUE may also appoint a professional user entity ("PUE") to assist with transmitting information to the International Registry. PUE's include title companies, attorneys, aircraft tax consultants etc.

Filing With The FAA Registry. Parties to an aircraft transaction will still need to file transaction documents with the FAA Registry. In addition to such documents as a bill of sale, application for registration, security agreement, lease etc., FAA Form 8050-135 will also need to be filed in order for the FAA to provide the parties with an authorization number to complete the transaction with the International Registry. If a prospective interest has been filed, the transaction documents must be recorded with the FAA Registry within 60 days of the filing of the prospective interest with the FAA Registry.

Completing The Transaction. Once the authorization number is received from the FAA Registry, a party must then go to the International Registry's website, log-on and complete an electronic form asserting an international interest against the subject aircraft/engine. The International Registry will then send an e-mail message to the second party to the transaction seeking consent to the filing. If the second party consents to the filing, a permanent record of the registration will be created at the International Registry and perfection is then completed. This record can be searched and will appear as an interest in the subject aircraft/engine(s). If the second party does not consent or does not respond to the International Registry's e-mail message within 36 hours, then no interest is created or perfected.

Costs. The Treaty has definitely added costs to transactions involving subject aircraft and engines. In addition to the costs of registering as a TUE, the International Registry charges registration and search fees for a subject aircraft ranging from $35.00 to $100.00. This does not include the increased attorney and title fees a party will incur to comply with the Treaty's requirements.

Conclusion

As of today, the Treaty is the law of the land and must be complied with if a party wants a perfected and enforceable interest in an aircraft subject to the Treaty. In the aftermath of the deluge of TUE registrations following March 1, 2006 and the resulting delays, it has been suggested that congress increase the seating configuration and weight requirements in order to exempt the many twin-engine and jet aircraft that are currently subject to the Treaty. However, such a change will most likely not occur anytime soon, if at all. As a result, a party entering into a transaction involving any aircraft/engine(s) subject to the Treaty should consult with an aviation attorney familiar with the Treaty to make sure that the transaction is documented appropriately and properly recorded with both the FAA Registry and the International Registry.

Employee Relations

by Jeremy Cox 1. April 2006 00:00
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Hate, Anger, Discord, Management, Pilots, Unions, Ground Crew, Professionalism and Love.

Okay I know that you are looking at that title above and wondering what the heck we could possibly be discussing this month? Well as you have seen in previous articles, I am not unabashed about handling controversial issues in this column and this month is no different. Let me tell you why I have even come up with this topic: Last month I spent eight days at the Cessna Citation Service Center in Wichita overseeing a Citation that was in my care. While there I very much enjoyed the courteous and respectful treatment that everyone at Cessna appear to provide to all clients that visit them there. I basically camped out in the business center where high-speed internet, telephones, work desks, a refreshment center, a home theatre and a flight planning room were neatly arranged together. In this environment I observed a constant stream of fractional share Citation X aircraft and crews passing through the facility. I know that there have been on-going labor disputes at a couple of the fractional share companies, between their pilots and management; some would even call it a battle. From my brief view at the sideline, listening to the pilot's side of it, I would personally call it a war! This one sided experience got me thinking and I had to ask myself ‘Why or what has to happen to make a pilot/mechanic/cabin-crew member, etc. into someone who appears to be entirely focused on limiting or even withdrawing their professional services to their employer in a way that they still get paid and not get fired?' I recall some very eye-opening conversations in the mid 1990's back in the galley of several Boeing and Airbus aircraft owned by America West. The cabin crews were both very nice and extremely open about their collective ‘hate' of their management. In fact I had never come across this type of emotional anger before in America, and especially in my chosen field of Aviation. Many years ago I did read the fascinating book ‘Grounded': Frank Lorenzo and the Destruction of Eastern Airlines written by Aaron Bernstein (ISBN1893122131) that discussed in detail the fall of Eastern Airlines. The individual stories of employee relations battles that were hinted upon in this book, makes your toes curl. A similar situation may well have taken place here in St. Louis between Carl Icahn, the Employees of the late Trans-World Airlines and the management of American Airlines, I really don't know, however from the viewpoint of a passenger, I can tell you that hatred and anger was rife amongst the cabin staff onboard my many flights in and out of St. Louis during the 1990's. So with all of these examples of poor employee relations I shall return to my question of ‘why…?' In every case that I have cited, a union was involved, so are the unions the cause? Before we tackle the union question, first it is prudent to discover how and why unions came into effect. The first known trades union organization came into existence in the sleepy agricultural town of Tolpuddle, Dorset, England in the 1830s. The six Tolpuddle Martyrs were all farm labourers that pretty much lived in poverty because of the extremely low wages that the landowners collectively were only willing to pay to their workers. The leader of the six, a Mr. George Loveless decided to set up a ‘Union' to give the local farm labourers some bargaining strength. The six became Martyrs because the Landowners led by Mr. James Frampton and backed by the then British Government, set out to squash the Union by framing the six on a trumped-up charge of administering an unlawful oath, using a law that was applicable to the Royal Navy, not workers rights.  With the six out of the way by transporting them to Australia (a penal colony at that time), Frampton and the Government continued to control the increasing number of outbreaks of spreading dissent across the country. The trades' union movement gained phenomenal strength and power in the midst of the Industrial Revolution in Great Britain under the rule of Queen Victoria in the mid to late 1800s.

One of the first trades' union organizations to conduct business on behalf of its employees within the field of Aviation, is the Airline Pilots Association (ALPA.) This union was formed in 1931 in Chicago. Aviation employee membership in the United States, like in other countries probably peaked in the late 1970's and today they are now most likely declining. Unfortunately I could not find any accurate figures to help in this article, but I assume that the trade union organizations that represent aviation workers in the United States probably boast a membership role in the mid one hundred thousands (lets call it 500,000 people), and I am ‘lumping' pilots, mechanics and manufacturing personnel all together. Then with a total of approximately Three Million aviation workers that I estimate to be currently employed in General Aviation today in the USA (Reference the FAA's 2004 Estimated Active Airman Certificates Held, Table 1, which is available at
http://faa.gov/data_statistics/aviation_data_statistics/civil_airmen_statistics/2004/ The numbers are 257,857 Commercial and ATP Pilots + 651,341 Non Pilot certificated Airmen = 909,198 Airmen, which I then multiplied by three to cover the non-FAA certified personal gives a total of 2,727,594 people), union membership therefore probably only accounts for about 15% of these workers. Therefore are unions the cause of the current unrest that is on-going in several iconic companies? Maybe; But then again probably not. My reasoning is thus: Is there anyone out there employed in the US aviation industry that are living in poverty? I say no, apart from maybe a handful of fledgling career pilots who are building time as a flight instructor. Therefore do you, like me, believe that there is probably Hate, Anger, Discord and Un-rest at non-union companies today? So if I am right about this, maybe we need to dig a little deeper and get into the dynamics and psychology of our industry to find a more accurate answer to my question of ‘Why…?'

The very nature of aircraft and aviation is that it is still considered to be somewhat glamorous and romantic while it is still extremely expensive. Because of these considerations, aviation attracts many different kinds of people to our industry. We have plenty of enthusiasts, you know the type, and maybe you are even one of them? These are the people that love aviation and all things aeronautical. They show up early, work all day and still hang out at the end of the day talking, living, breathing, and being totally ‘aviation.' They are usually not the best paid people, as in the minds of these enthusiasts; a lot of their reward is gained by action and association, not in dollars and cents. Next there is probably a somewhat sizeable contingent of ‘Time-Clock-Punchers' who may be found in manufacturing and other areas. Next again, we also have many second career people, I.e. the type of person that may have been a career military person or maybe someone who has found success in a business and they have sold out of it early. Not wanting to retire, some of these people are attracted to our business and find haven here. Some become pilots, others may become mechanics, administrators, sales people, or whatever. The bottom-line is that they are living out a second career path. Next we have the entrepreneur. These are the type of people that end up creating pockets of new employment for many of us in general aviation. It's a running joke that we all know well: "How do you make a small fortune in aviation? Well first you must start with a really big fortune!" This may sound comical but unfortunately it is proved as a true statement, over and over again. Still, there are people that enter our business as an entrepreneur and they leave wealthier than when they first entered. Lastly we have the crooks and criminal elements that enter our industry. Even though Aviation is a heavily regulated industry with oversight coming from many government branches, groups and organizations, it also unfortunately has many areas where the criminal mind can thrive. It never ceases to amaze me the number of times that I hear that someone died because they flew an aircraft that had counterfeit parts installed on it (mostly helicopters). Read some of the Airworthiness Directives that are issued for bad parts or overhauls! Additionally there are the times that we read about or hear that someone is selling aircraft or parts that never materialize after the deposit has been sent to them. How many beginning pilots have you personally known or suspected, that had some of the old ‘Parker P51 pen' time in their logbooks, so they can get a flying job, i.e. they wrote in fictitious time to qualify. I have seen mechanics logbook entries made in pencil, I have seen other entries that look great for content and form, but lack even a certificate number to go with the signature. The criminal element I have no time for, and I will always go out of my way to expose them and bring them to justice! Unfortunately when all of these varied and different groups of people are placed into the same industry, there will always be potential friction and strife. So how do we answer the question ‘Why…?' Does the problem lie with the ‘Fat-Cat' aircraft owning people and companies? Does the problem lie with the philosophy clash of ex military personnel against career civilians? How about jealousy of the pilots and their privileged jobs, by the land-locked workers? Or maybe it's an issue of spending too many boring hours in a rarefied atmosphere close to the sun. I really don't know. I do know this though, I have known many people that have tried to leave our industry, only to be lured back after they felt an emptiness in the pit of their stomach, because they missed being around aeroplanes and the people that make them soar! So what is the elusive answer to ‘Why…?' Maybe you can answer that better than me by participating below, and adding your own comments or insights. I do know that I was pretty shocked by what I overheard while sitting in Wichita and in retrospect I came away with an even deeper question, which is, as coined by Mr. Rodney King in 1991

"Can we get along here? Can we all get along?"

So what experiences have you had regarding poor or tempestuous employee relations in the aviation industry?

Have you been ‘hard-done' by a member of management, or maybe an employee?

Any input that you care to make will be of great interest to all of the readers here at Globalair.com. So please don't be bashful and go ahead and write your comments and suggestions here. Please don't forget that whatever your write here, can be seen publicly by everyone that visits this page, so "be nice."

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Jeremy Cox

The Federal Aviation Administration

by Jeremy Cox 1. April 2006 00:00
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Last month's poll (April 2006) asked the question: ‘Do you feel the FAA has gotten better or worse in the past few years?' with the following responses available for you to respond: ‘Yes, great progress'; ‘No, has gotten worse'; ‘The same'; or ‘Fat cow with no direction.' At the time of my writing this article, the poll is still in full-swing and therefore I cannot report the final result, however I can say that the results so far are rather interesting as they indicate a sliding scale that indicates that the FAA's customers (i.e. the majority of everyone at Globalair that participated in the poll), appear to be rather dissatisfied with the job that the FAA is doing:

‘Yes, great progress' = 14.2%
‘No, has gotten worse' = 17.5%
‘The Same' = 36.6%
‘Fat Cow with no direction' = 31.7%

So what is causing this unrest and dissatisfaction? To come to some kind of conclusion, let's take a closer look at the FAA, its purpose, its history and its programs.

There is a wealth of information packed tightly into the FAA's website at http://www.faa.gov/, which is where I gathered my information for this article. First a direct quote:

"Our mission is to provide the safest, most efficient aerospace system in the world. Our vision is to improve the safety and efficiency of aviation, while being responsive to our customers and accountable to the public. Safety is our passion. We're world leaders in aerospace safety. Quality is our trademark. We serve our country, our customers, and each other.  Integrity is our character. We do the right thing, even if no one is looking. People are our strength. We treat each other as we want to be treated."

Impressive ideals indeed; It would be unfair to ‘pooh-pooh' them. So what exactly does the FAA do to live up to their ‘Mission Statement'?

Well the FAA's publicly reports a summary of major roles which include:

  • Regulating civil aviation to promote safety.
  • Encouraging and developing civil aeronautics, including new aviation technology (my underline, not theirs.)
  • Developing and operating a system of air traffic control and navigation for both civil and military aircraft.
  • Researching and developing the National Airspace System and civil aeronautics.
  • Developing and carrying out programs to control aircraft noise and other environmental effects of civil aviation.
  • Regulating U.S. commercial space transportation.

These major roles are expanded by the FAA telling us that they are active by issuing and enforcing regulations and minimum standards covering manufacturing, operating, and maintaining aircraft. They certify airmen and airports that serve air carriers. They operate a network of airport towers, air route traffic control centers, and flight service stations. They develop air traffic rules, assign the use of airspace, and control air traffic. They build or install visual and electronic aids to air navigation and maintain, operate, and assure the quality of these facilities. Additionally they sustain other systems to support air navigation and air traffic control, including voice and data communications equipment, radar facilities, computer systems, and visual display equipment at flight service stations. Here it is again: "We promote aviation safety and encourage civil aviation abroad." Again I underlined that passage myself. Accordingly they further disclose that they exchange aeronautical information with foreign authorities; certify foreign repair shops, airmen, and mechanics; provide technical aid and training; negotiate bilateral airworthiness agreements with other countries; and take part in international conferences. Also they (here we go again): "We regulate and encourage the U.S. commercial space transportation industry." (That's very interesting) They say that they license commercial space launch facilities and private launches of space payloads on expendable launch vehicles. Also that they do research on and develop the systems and procedures needed for a safe and efficient system of air navigation and air traffic control. They help develop better aircraft, engines, and equipment and test or evaluate aviation systems, devices, materials, and procedures. They admit to also doing aeromedical research. Continuing on, they register aircraft and record documents reflecting title or interest in aircraft and their parts. They administer an aviation insurance program (I am personally not familiar with this program, are you?), develop specifications for aeronautical charts, and publish information on airways, airport services, and other technical subjects in aeronautics. Wow! That's a lot of duties and tasks for one government agency to be in charge of, so who actually carries this out on our behalf? The FAA is organized and structured as follows:

ADMINISTRATOR

An Administrator manages the FAA, assisted by a Deputy Administrator.

ASSOCIATE ADMINISTRATORS

Five Associate Administrators report to the Administrator and direct the line-of-business organizations that carry out the agency's principle functions.

THE CHIEF COUNSEL

The Chief Counsel and nine Assistant Administrators also report to the Administrator.

The Assistant Administrators oversee other key programs such as Human Resources, Budget, and System Safety.

NINE GEOGRAPHICAL REGIONS/TWO CENTERS

The FAA has nine geographical regions and two major centers, the Mike Monroney Aeronautical Center in Oklahoma City, Oklahoma and the William J. Hughes Technical Center in Atlantic City, New Jersey.

STATISTICS

The FAA has an annual budget of almost $14 Billion US Dollars and it currently employs more than 45,000 full-time employees. It maintains more than 41,000 facilities, and oversees approximately 17,000,000 square miles of airspace. Within that airspace approximately 200,000 flight operations occur daily. The FAA also boasts that it certifies almost 75% of the World's Large Jet Aircraft fleet, and it assists more than 100 different countries with their aviation operations. The biggest ‘catch-word' in the FAA's vocabulary is ‘Safety.' They state that "Safety is Job One." According to their records in the past three years Commercial Aviation is at its lowest accident rate, ever in history. i.e. 0.15 fatal accidents per 100,000 take-offs, or 1 fatal accident for every 7,000,000 flights.

ANNUAL BUDGET

To properly research this subject I have read the Budget Summary Reports for 2005, 2006 and 2007. All three documents do make very interesting reading indeed even for a layman like me!

Last year (2005) the FAA requested and received $13.97 Billion US Dollars (yes, that's $13,970,000,000.00 US Dollars.) This year's budget is 0.6% less than 2005, at $13.78 Billion. The budget requested for 2007 is lower again at $13.749 Billion. Since the FAA is being run "…to operate more like a business…" (Its own words) Only about 20% of their total budget (approximately $2.73 Billion in 2005) has to come from the coffers of the Federal Governments tax base. The FAA generates its own income, here is my summary of their statement of income report from last year:

INCOME = $11.24 Billion approximately
Passenger Ticket Tax                       48.75%
Passenger Flight Segment Tax               18.70%
Waybill Tax                                04.15%
Fuel Tax                                   07.29%
International Departure/Arrival Tax        13.97%
Rural Airport Tax                          00.73%
Frequent Flyer Tax                         01.39%
Trust Fund Interest (FAA's Saving Account) 03.67%
Sale of Facilities and Equipment           01.20%
Sale of Research/Engineering/Devlpmt, Svcs. 00.14%

TOTAL                                      99.99%

 

The FAA states that it is facing the need to hire more employees, mainly due to the number of upcoming retirements of existing personnel. This year alone (2006) they have budgeted for and plan to hire the following ‘Critical Employees':

595 Air-Traffic Controllers (1,136 in 2007)
97 Safety Inspectors and Engineers
258 Maintenance Technicians (this is because of a labor union arbitration ruling.)

Did you know that the FAA will be opening an office in China sometime this year (2006)? In their own words they state:"…Of special importance to the FAA and international aviation is China. US industry is now making major investments in aircraft design and manufacturing ventures in China, including major investment in a Chinese regional jet. These ventures cannot succeed without either a rapid improvement of capabilities of the General Administration of Civil Aviation of China (CAAC), or significant support of the FAA. China must develop the capability to ultimately oversee these activities on their own. The solution to address this gap is for the FAA to establish an office in China to provide comprehensive training to build CAAC competency." I wonder if this is part of what the FAA terms "Promotion"?

HISTORY

Since Mr. Elwood R. Quesada (an Air Force general who served as President Eisenhower's principle advisor on civil aeronautics) became the first Administrator at the FAA in 1958, there have been fourteen subsequent Administrators that have each been appointed by the President of the United States of America, including the current Administrator, Ms. Marion C. Blakey who first took the reins in 2002.

The Federal government started to regulate civil aviation after the Air Commerce Act was passed into law in 1926. This Act was passed because the aviation industry leaders of that time believed that ‘the airplane could not reach its full commercial potential without Federal action to improve and maintain safety standards.' The Act charged the Secretary of Commerce with fostering air commerce, issuing and enforcing air traffic rules, licensing pilots, certificating aircraft, establishing airways, and operating and maintaining aids to air navigation. A new Aeronautics Branch of the Department of Commerce assumed primary responsibility for aviation oversight. The first head of the Branch was William P. MacCracken, Jr., who played a key part in convincing Congress of the need for this new governmental role.

In 1934, the Aeronautics Branch was renamed the Bureau of Air Commerce to reflect its enhanced status within the Department. In 1938, the Civil Aeronautics Act transferred the Federal civil aviation responsibilities from the Commerce Department to a new independent agency, the Civil Aeronautics Authority. In 1940, President Franklin Roosevelt split the Authority into two agencies, the Civil Aeronautics Administration (CAA) and the Civil Aeronautics Board (CAB). CAA was responsible for ATC, airman and aircraft certification, safety enforcement, and airway development. CAB was entrusted with safety rulemaking, accident investigation, and economic regulation of the airlines. Both organizations were part of the Department of Commerce. Unlike CAA, however, CAB functioned independently of the Secretary.

With the introduction of jet airliners and a series of midair collisions, the Federal Aviation Act of 1958 was passed into law. This legislation transferred CAA's functions to a new independent body, the Federal Aviation Agency (FAA) that had broader authority to combat aviation hazards. The act took safety rulemaking from CAB and entrusted it to the new FAA. It also gave FAA sole responsibility for developing and maintaining a common civil-military system of air navigation and air traffic control, a responsibility CAA previously shared with others.

In 1966, Congress authorized the creation of a cabinet department that would combine major Federal transportation responsibilities. This new Department of Transportation (DOT) began full operations on April l, 1967. On that day, FAA became one of several modal organizations within DOT and received a new name, Federal Aviation Administration. At the same time, CAB's accident investigation function was transferred to the new National Transportation Safety Board. The CAB ceased to exist at the end of 1984.

In November 1994, a reorganization of the FAA took place and in 1995 the Office of Commercial Space Transportation was transferred to FAA from the Office of the Secretary of Transportation. The addition of this office gave the agency regulatory responsibilities concerning the launching of space payloads by the private sector. Reform legislation gave FAA increased flexibility regarding acquisition and personnel polices in 1996. Further legislation in 2000 prompted action to establish a new performance-based organization with responsibility for air traffic services within the agency. In the aftermath of the terrorist attacks of September 11, 2001, Congress created a new Transportation Security Administration that succeeded FAA as the agency with primary responsibility for civil aviation security.

So what experiences have you had in dealing with the FAA yourself?

Why do you consider them to be a ‘Fat cow that has lost direction'? Or explain why you believe that the FAA has made great progress and is better than it was before?

Any input that you care to make will be of great interest to all of the readers here at Globalair.com. So please don't be bashful and go ahead and write your comments and suggestions here. Please don't forget that whatever your write here, can be seen publicly by everyone that visits this page, including the FAA, so please "be nice."

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Jeremy Cox



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