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FAA Suspends Its Expunction Policy

by Greg Reigel 28. February 2011 15:09
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On February 11, 2011, the FAA published a Policy Statement in which it informs airman that the FAA is suspending its policy of expunging certain records of legal enforcement actions against individuals. Up until recently, the FAA would expunge an airman's personal information from the FAA's enforcement database 5 years after the FAA's action in civil penalty and certain certificate action cases (suspension cases, but not revocation cases). However, the FAA is now suspending that policy in order to ensure compliance with recent amendments to 49 U.S.C. 44703(h),the Pilot Records Improvement Act ("PRIA").

On August 1, 2010, the Airline Safety and Federal Aviation Administration Extension Act of 2010 (the "Act") amended PRIA to now require the FAA to create a pilot records database that, among other things, will include summaries of enforcement actions in which individuals were determined to have violated federal aviation regulations. Under the Act and PRIA, Part 121 and Part 135 air carriers will be required to use this database to perform background checks on pilots before hiring them. Rather than expunging individual information after 5 years as before, under the Act the FAA must now keep these records until it receives notice that the individual is deceased.

It is unclear exactly what impact this change in policy will have. Although PRIA requires the FAA to provide this information to air carriers making hiring decisions, as a practical matter, many, if not most, air carriers' employment applications also ask some variant of the question "have you ever been subject to an enforcement action in which you were found to have violated the Federal Aviation Regulations?" Of course, this amendment may, perhaps, deter airmen from providing a false answer, or, more likely, it will reveal an airman who has, in fact, provided a false answer to that question.

With respect to airmen who are not seeking employment with an air carrier, this amendment will likely have limited effect. It is possible that this could affect an airman involved in an aircraft property or casualty lawsuit in which the enforcement information that previously would have been expunged will now be available for use in the litigation. However, given that properly drafted discovery requests in such a case (e.g. "have you ever....") will ask for that same information, the impact of the Act may have the same effect as it might on air carrier applicants.

In any event, it appears that the amendment is another example of legislation resulting in, perhaps, unintended consequences. Fortunately, the FAA will continue to expunge records of administrative actions and cases with no enforcement action, since the FAA is not required to maintain that information under PRIA. However, for an airman who has had his or her airman certificate suspended or revoked, the phrase "till death do us part" now has a new, and unfortunate, meaning

For more information about expunction under PRIA, you can read the FAA's Pilots Records Expunction Policy Frequently Asked Questions or, for a general discussion of PRIA, you can read my article What Will The FAA Say About You?

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Greg Reigel

Trickle-Down is where the action is in Aircraft Sales

by Jeremy Cox 28. February 2011 14:11
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Today it is very easy to comfortably wear the rut of community despair that fits so snugly across yours and everyone else’s shoulders, while walking from meeting to meeting with a look of long and painful sorrow and a low-hanging head while muttering phrases like: “I can’t believe these values”; “my aircraft is barely above its salvage number.” “Nothing is selling”; “woe is me”, etc.

Well ladies and gentlemen please listen very carefully: There exists a business aircraft market that is zinging from real and deadly serious business that is being conducted in tens of millions of dollars every single day (or at least on the days that the FAA Registry is open for business.) This very same market shall also soon provide you with the salvation that you had so long ago given up on ever hearing it knocking at your door ever again.

Trickle-down wealth is the path to economic nirvana, and believe-me the golden tentacles of the few, are already seeping down and restoring the faith and confidence amongst the many. Have I got your attention? So where can salvation be found you may ask? Two words: ‘Large Cabins.’

The large cabin business aircraft used market woke-up last summer, and quickly went from a pipe and slippers to wearing running shoes in the blink of an eye. I believe that three factors caused the Atropine shot to this market’s heart:

1. Asking and selling prices hit their lowest point after the aircraft that had to be sold were actively being advertised waiting for a buyer, long after the casual     sellers had pulled their aircraft from the marketplace

2. Corporations and the mega-rich alike, decided that they had-had about enough of the politically-correct moratorium on private flying and decided that flying was okay again

3. The DOW Jones Industrial Average started trekking northward to conquer new dizzying heights

To support my assertions please allow me to show you the numbers:

I as well as the good folks at AMSTAT Corporation define a large cabin as any aircraft that has a maximum take-off weight greater than 40,000 lbs.

In May of 2010, the average asking price of the composite of all ‘used’ large cabin business aircraft dropped to a low of $12,750,000. In June this number started climbing until it crested in December at $13,800,000. The reason for the crest is that by the end of last year all of the ‘best-deals’ had been snatched up by hungry deal-makers. Now we shall again see this composite asking price climb again in the second wave buying spree that is already underway.

Two years ago, in February 2009, the Percentage of Active Fleet For-Sale (Large Cabin) peaked at 15.3%. Today that has dropped to 11.4%. Specific models chosen as a snapshot are at the following numbers:

Falcon 2000EX  =  9.6%
Challenger 604 =  11.3%
Falcon 900EX =  7.2%
Embraer Legacy =  9.2%
Gulfstream V =  3.6%
Gulfstream G550 =  3.5%
Global Express =  10.2%
Global XRS =  7.3%
Boeing BBJ =  7.4%

Remember that a normal healthy market for most used business aircraft (all sizes and classes) is 10%.

Since a peak number in August 2009, the number of large cabin aircraft that were available for purchase has dropped by 20% (from 635 down to 510.)

While the House, Senate; and most prospective used business aircraft buyers and sellers settled down to their long, quiet and lazy summer holidays, the DOW began its climb from 9,700 points to well over 12,000 points today. The large cabin buyers then made their long awaited jump into the used business aircraft market as soon as the climbing ascent of the DOW became a certifiable trend.

Unfortunately the majority of all aircraft in the Midsize and Smaller markets still remain stalled today, and some are plumbing the depressing depths of even lower values. Regardless of this I can confidently argue that the time is definitely coming nigh for everyone in all categories below the large cabin segment. It is distinctly a simple law of nature that ‘trickle-down’ gold will eventually make it to the absolute bottom of the deepest of all subterranean markets. All you have to do is slough off your coat of misery, rise up your head, think positive, be positive, and most importantly live positive, and soon the world about you shall change and blossom into greatness as it passes through our long lost friends: ‘it’s alive’, ‘it’s getting up’, ‘fair’, ‘average’ and ‘good.’ Trust me on this. So, will you please stop moping about and making the market look bleak and untidy, and instead cheer-up and again restart living the dream?

Another good point to look at is the number of aircraft with "Real Pricing" listed on Globalair.com's Aircraft Exchange.  More and more listings are getting into the "Real market value" than ever before.  It might surprise you to know that we are getting back to business!

While the numbers are showing an upswing what have you seen to prove me right or wrong?  Pilots, bankers, brokers, dealers, CFO's what say you?

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Jeremy Cox | Aircraft For Sale

There's Money For Aircraft Deals, You Just Have To Know How To Ask For It.

by David Wyndham 28. February 2011 11:46
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This article was written with the aid of Joseph Dini of Air Credit Alliance.

ABBA was a Swedish pop music group who had quite a number of hits in the 1970s. At one point, they had album sales outside of the US exceeding that of the Beatles. One of their songs had a chorus of

“Money, Money, Money, it’s a rich man’s world”

If you are looking to finance an aircraft, it may seem to you that the only ones getting financing don’t need it; that there is no money for aircraft deals. That statement is only partially true. There is money out there, but not for crazy aircraft deals. Crazy aircraft deals are as follows:

  • No 100% financing. No interest only with a big balloon payment, either. Too risky for the banks to even consider.
  • No "trust me, I'm good for it" loans. You may know someone famous, or rich, or rich and famous. It will take more than your word for the bank to lend money.  Banks need verification.
  • No old airplanes. There is still a glut of used aircraft on the market. The last ones moving generally are the oldest aircraft. Rule of thumb: the aircraft age at the end of the deal must not exceed 20 years. So if you want a 5 year loan, the aircraft must be no older than age 15 at the start.

This “no old planes” is very true in the turbine world, and even in the piston market banks are loathe to take a risk on a stable, popular piston.

What you need for a loan or a lease of an aircraft are the good old fashioned banking requirements of Credit, Character, Collateral, and Capacity.

When I use the term "bank" I mean that to cover all financial institutions that are (still) in the market of leasing and loaning money for business aircraft.  You need to prove that the deal works for the bank.

Credit. You need to demonstrate that you have the finances to acquire and operate the aircraft. Complete fiscal disclosure is needed. You need to show that your Assets exceed your Liabilities and that your Assets are able to survive an economic downturn.

Character. Who are you? Reliable, dependable, salt-of-the-earth type character counts.  If you (or your own business) has a bankruptcy history, don’t plan on financing. Consistent creditworthiness needs to be demonstrated. If your record matches that of Lindsey Lohan, then you'd better pay cash.

Collateral. No 100% financing means both a down payment and sufficient cash or cash-equivalents to secure the aircraft. Today, as a rule of thumb, you will need 20% down payment on a new business jet. As the aircraft gets older, you will be asked to come up with a larger down payment. For a 10-15 year old business jet, 50% down is not unexpected. Same for pistons, expect a sizeable down payment. You may also need to post a security deposit for a lease as well as be required to pay down the loan should your aircraft value deteriorate to an unacceptable level during the loan period.  In the event you want to sell the aircraft, this is in your benefit as you will be maintaining equity in your aircraft.

Capacity. Can you afford to not only make the payments, but also pay the bills to operate the aircraft and still pay your other debts, too? 

In all of the above, relationships matter.  If you have a significant long-term history with a bank, they should be your first stop for all financing issues. They know you, your character, and your credit history and should be able to make the best deal to secure your business.

Leasing follows similar requirements. One plus in today's market is that short term leases (two to three years) may have more attractive rates as the banks are still looking to unload aircraft. Three to ten years is a typical lease duration.  If you do not have significant business use of the aircraft, a lease may be a better deal as the bank can make use of the tax depreciation of the aircraft. Remember, plan carefully with a lease. Exiting a lease early is easy, just pay off the remaining lease payments! You may wish to negotiate for an early buy-out option if you think you may not make the full lease term.

You will need a stack of paperwork at least a high as the tail of the aircraft!

  1. Historical financial and tax information (may include your spouse too for an individual)
  2. Credit and bank references
  3. Aircraft purchase agreement
  4. Information on the seller (or dealer-broker)
  5. Used aircraft deals may be helped if there is a pre-purchase inspection already done

This is all very much like applying for your mortgage.

The rate you will get on a loan or lease will be in proportion to both what the bank’s cost of money is, the risk they see in the deal, plus their need to cover expected or historical losses, and taxes.  Today, money is cheap for the banks, but their risk tolerance is low.  If you want to check out some of the financial institutions in the aviation business, head over to the Globalair.com - Finance Directory

So the money is there, you just have to qualify. In 2008, aircraft lending was like a community college, almost everybody got in! Today, they are more like an Ivy League School. When looking for a loan or lease, be ready to discuss your finances, and remember that the banker you know may be your new best friend!  So if you have your best friend in hand and ready to buy or lease an aircraft Globlair.com offers a great place to start looking for "Aircraft for Sale" or "Aircraft for Lease".  Who knows some of them may even have Owner Financing!

Do you have any thoughts and/or suggestions regarding the Financing of capital assets (Aircraft).  What are your experiences?  The only way we learn from mistakes

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David Wyndham | Leasing

Piper increases in shipments, billings in 2010

by GlobalAir.com 23. February 2011 16:17
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AOPA Pilot reported yesterday, Piper Aircraft released its 2010 shipment and billing figures Feb. 22, reporting an increase in both areas. The news came the same day as the General Aviation Manufacturers Association’s State of the Industry address, which reported a continued decrease in GA shipments but an increase in billings.

 As GAMA had reported, emerging markets worldwide contributed to the increase in billings. The same was true for Piper, which delivered 47 training aircraft to four foreign countries—Australia, Malaysia, South Korea, and Qatar—and the United States. Piper said that it also expanded its overall market share in deliveries of piston and turboprop aircraft from 10.5 percent in 2009 to 20.1 percent this year.

Piper deliveries increased 75 percent in 2010, with 160 aircraft. Billings rose nearly 38 percent to $120 million, the company reported.

Of Piper’s eight models of aircraft that were shipped in 2010, each saw double-digit numbers, except for the Arrow. The Mirage and Meridian accounted for the most deliveries, with 26 and 25, respectively. The company shipped more than 20 of the Warrior III, Archer III, Seneca V, and Matrix. It delivered four Arrows and 16 Seminoles.

Shipments and billings in the fourth quarter gave Piper a boost, with 53 deliveries and $42 million in billings.

While Piper expanded its market share in piston and turboprop aircraft, it is eyeing the business jet market with the PiperJet Altaire. Piper announced a redesign of the PiperJet, along with the new name, during the National Business Aviation Association annual convention in October. As AOPA previously reported, the first flight is scheduled to take place in 2012, with deliveries beginning in 2013.

In January, Piper left a new segment of the aviation industry—the light sport aircraft market. It ended its one-year relationship with Czech Sport Aircraft, which built the PiperSport LSA, because of a difference in business philosophies.

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GlobalAir.com

February is a big month for Boeing first flights

by GlobalAir.com 9. February 2011 15:12
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February is a big month for first flights at the Boeing Co. The aircraft maker, 41 years ago today, first flew its iconic Boeing 747 jumbo jet, whose legend rests among the biggest rock stars of commercial airlplanes. (Hat tip to Avtips, which earlier today tweeted the YouTube video embedded above.)

Today also marks a year and a day since Boeing first flew its 747-8, helping mark the 40th anniversary of the original 7-4.

More...

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