Welcome to GlobalAir.com | 888-236-4309    Please Register or Login
Aviation Articles
Home Aircraft For Sale  | Aviation Directory  |  Airport Resource  |   Blog  | My Flight Department
Aviation Articles

There Must Be A Pony In Here Somewhere

by David Wyndham 31. May 2016 16:35
Share on Facebook

A parent had twin boys. One was a pessimist and the other, an optimist. For their birthdays, dad gave the pessimist-twin a room filled with toys. The pessimist-twin was sad. When asked why, he replied that if he played with the toys, he'd surely break them all. For the optimist-twin, dad gave him a big pile of horse manure. The optimist grabbed a shovel and dove right into the pile exclaiming, "With all this manure, there has to be a pony in here somewhere!"  

Ronald Reagan was fond of this joke. And for the 2016 state of business aviation, I think it might be apropos. Three major new aircraft forecasts, two of which were related in the past month, all point to a healthy business aircraft market for new aircraft over the next decade. The forecasts expect from 7,900 to 8,300 new aircraft deliveries. Growth is expected to be solid in North America as it retains its title as the dominant business aircraft market fro at least 10 more years. But, still there are cracks.

Brian Foley recently released his look at the pre-owned business jet aircraft market. His prediction is for declining activity in the pre-owned market for the next five years. He thinks we have entered a slowdown in the pre-owned market. He's developing a pre-owned forecast model to get to the model and cabin-class level of detail. Lest you forget, Brian's firm, BRIFO, predicted a severe and lengthy downturn in the business jet market in September 2008. He has the input of some significant players in global business investing, so heed his call. 

In two recent events, at one of our Conklin & de Decker seminars, and again at the National Aircraft Finance Association annual meeting, forecasters and financiers were pretty flat on the state of the global economy.  A quarterly survey of leading CFO's by Duke University said these individuals think there is a 31percent chance of a recession in the US by year end 2016. Interestingly, 61% of the firms in the survey expect to increase employment in 2016. Top concerns in the U.S. include economic uncertainty, the cost of benefits, difficulty finding qualified employees and regulatory requirements. Don't forget, every four years, we worry with the uncertainty about the outcome of the Presidential election. Other concerns in the global economy include the price of energy and oil markets, China's slowing economic growth and currency problems,  terrorism in the Middle East, and economic and political turmoil in Brazil. 

Regardless of the forecast and opinions, aircraft will remain a vital tool for communicating and conducting business. You ned to have a plan, and a budget, and keep both up to date. Control what you can: your costs, your mission, your skills. Never miss an opportunity to market the effectiveness of the business aircraft. Buy now if you are in the market to do so. New aircraft manufacturers will be looking to make the year-end targets. As Brian Foley surmised, the pre-owned market will remain soft.  If you are selling, you are fine if you are upgrading. What you may "loose" in the value of your current aircraft will be made up in the value of a larger aircraft. If you are selling, and downgrading, might as well do it sooner rather than later. Don't walk away from qualified offers. Pick your broker carefully. Find one who is making deals and knows the market for your aircraft.  Communicate and listed to your customers. For the flight department, every person on your aircraft is a customer. And everyone in your company is important to your success.  Consider upgrading your aircraft if you are keeping it. Is your aircraft ready for ADS-B?

Last item, got a shovel?

Tags:

David Wyndham | Flight Department | Press Release

The Difference Between "Wet" and "Dry" Aircraft Leases

by Greg Reigel 31. May 2016 09:20
Share on Facebook

Many times an aircraft owner who is not fully utilizing the owner’s aircraft will lease the aircraft to maximize the use of the aircraft and to recover some of the aircraft owner’s expenses. One of the areas about which aircraft owners and operators are frequently confused is the difference between a “wet” lease and a “dry” lease. I’ll give you a hint: It’s not about the fuel.

The “Wet” lease

14 C.F.R. §110.2 defines a “wet lease” as “any leasing arrangement whereby a person agrees to provide an entire aircraft and at least one crewmember.” (Note no reference to fuel)

Ordinarily, the parties entering into wet lease arrangements are certificated air carriers such as airlines operating under 14 C.F.R. Part 121 and charter operators conducting operations under 14 C.F.R. Part 135. This makes sense since these air carriers have the authority to use aircraft and crew to carry passengers and property for compensation or hire. Non-air carrier aircraft operators conducting operations under Part 91 are prohibited from carrying passengers and property for compensation or hire except in very limited circumstances.

However, 14 C.F.R. § 91.501(c) does provide for certain timesharing and interchange arrangements in which both the aircraft and crew are provided together. And although these arrangements are considered wet leases because they include both aircraft and crew, they are Part 91 operations in which the parties to the transactions do not need to be air carriers.

The “Dry” lease

In a dry lease arrangement, the aircraft owner is providing the aircraft to the lessee without crew. (Here again, whether the aircraft is provided with or without fuel has no bearing on the type of lease) Neither the lessor nor the lessee is required to hold an air carrier certificate in a dry lease arrangement, although nothing prohibits either party from being an air carrier.

Operational control

One of the key issues that distinguishes a “wet” lease from a “dry” lease is “who has operational control.” 14 C.F.R §1.1 defines operational control as “the exercise of authority over initiating, conducting or terminating a flight.” In a “wet” lease situation, since the lessor is providing both aircraft and crew, the lessor maintains operational control of all flights. In a “dry” lease situation, the lessee provides its own crew and the lessee exercises operational control of its flights.

If the lease is for private use or commercial, non-Part 135 use, typically each party will have operational control of the aircraft when it is in that party’s possession. Oftentimes in this situation, operational control will revert to the lessor during the times when the lessee is not using or possessing the aircraft.

What’s The Issue?

So, why is this distinction between “wet” and “dry” leases so important? Well, in the absence of a specific exemption (such as under 14 C.F.R. § 91.501(c)) the lessor who is operating an aircraft under a wet lease will need to have an air carrier certificate and operate under the regulations that govern air carriers (e.g. Part 121 or Part 135). This means the lessor will have to comply with regulations that are stricter than Part 91 including regulations relating to the types of airports the lessor may utilize, crew qualifications, crew rest and duty times, maintenance requirements etc. And those regulations increase the lessor’s cost to operate. Additionally, the lessor under a wet lease is required to remit federal excise tax (“FET”) on the amount charged to the lessee.

A lessee operating under a dry lease is permitted to operate under Part 91 and is not required to comply with many of the more restrictive and costly requirements of Parts 121 or 135. And federal excise tax is not due on the amounts paid by the lessee to the lessor, although sales tax is often assessed on the lease rate. For private operators, these are significant advantages. However, they also need to be weighed against the responsibilities, and potential liability, that goes along with having operational control of a Part 91 dry lease operation.

The situation may get confusing when parties decide they want the best of both worlds. Unfortunately, these Part 134 ½ operations, as I call them, are usually FAA enforcement actions waiting to happen. For example, if the lessor provides the lessee with the aircraft under a dry lease and that same lessor also supplies the crew under a separate agreement the FAA will likely view that as a wet lease arrangement since the lessor is providing both aircraft and crew. If the lessor does not hold an air carrier certificate then the FAA will consider those flights to be illegal charter flights. Additionally, the IRS would also probably assess FET on those flights.

A similarly improper arrangement occurs if the lessor leases the aircraft to the lessee and then requires that the lessee obtain the crew for the flights either from a specified source, usually affiliated with or controlled by the lessor. If the lessor does not hold an air carrier certificate, the FAA would also consider this a wet lease arrangement. Since the aircraft and crew are coming from closely related or affiliated sources, the FAA views them as both coming from the lessor.

It is important to keep in mind that the FAA will look beyond the actual written agreements to determine the relationships between the parties and how the arrangement is actually being conducted. Although a lease is written as a dry lease and says “Dry Lease” at the top of the agreement, for example, that doesn’t mean that the FAA can’t take the position that the arrangement is really being conducted as a wet lease. And if the FAA takes that position when the lessor who is actually operating the aircraft for the lessee does not have an air carrier certificate, then that will be a problem for the lessor, and potentially for the lessee as well.

Conclusion

The distinction between “wet” and “dry” leases isn’t always clear to aircraft owners and operators. However, it is important to understand the difference because each situation has separate regulatory obligations and requirements. Failure to comply with the legal requirements applicable to the chosen lease structure can result in problems for both the lessor and the lessee.

Additionally, as with all written agreements, it is essential that you carefully review all of the provisions of any aircraft lease before you sign. Consultation with an experienced aviation attorney beforehand can help you protect yourself, whether lessor or lessee. By taking the time to understand the terms of the aircraft lease and the applicable regulatory requirements, both parties can ensure that their expectations are met and their interests protected.

Tags: , ,

Greg Reigel

3 Things Writing Has Taught Me

by Lydia Wiff 15. May 2016 08:00
Share on Facebook

As the academic year is now over, I’ve been reflecting on the last several months and where I am today versus nine months ago.  More specifically, how writing for the Calvin L. Carrithers Aviation Scholarship has taught me three things:  good writing takes (lots of) practice, writing promotes learning, and writing takes you places.

#1: Good Writing Takes (Lots of) Practice

I remember those first initial essays I ever wrote – my parents marked them all over with notes, enough to make one seriously doubt that writing was their thing.  I went on to take classes in writing, work with professional editors, and with many professors for various classes.  Long story short, good writing takes (lots of) practice.

Just how much practice?  Consider this: every time I write an essay, article, or research paper, I edit it.  No matter how much, or how often I write, I always print off a copy and mark it up with a pen or pencil.  I’ve written thousands of words over the last five years, but I still make many mistakes.  It could be grammar, sentence structure, facts, punctuation, etc.  Even now, as a “veteran” writer, I still find myself writing outlines, trying to gather my thoughts, and reformatting articles (even now, I’m trying to decide if I should reword this sentence…)

Just when I think I’ve got a handle on this writing business, I find myself mulling over what topic to cover next in my bi-weekly blogging.  I try to brainstorm a list of topics, which I inevitably write about and then need more.  I really don’t think any one person can master how to write well, but I’ve had a lot of fun practicing.

#2: Writing Promotes Learning

If you’re a student reading this article, you’re probably rolling your eyes because the last thing you want to do is study more.   I can relate because after writing papers for your classes, applying for scholarships and more, you might be sick of writing.  However, let’s consider how writing promotes learning.

I’m a prolific note taker when it comes to academics – I do most of my note taking by hand on the PowerPoints, on notebook, paper, and sometimes on my laptop.  Writing about what I’m hearing forces me to structure the information into short sentences that get to the point.  Sometimes this doesn’t always go as plan because I’ll come back to my notes later and can’t for the life of me figure out what I was saying.  Overall though, rewriting my notes, or taking them by hand, goes a long ways in comprehension of a subject matter.

Another way writing promotes learning is through exploring new subjects.  For instance, some of my past blog topics came about as a result of wanting to learn more about a particular subject such as the new Student Pilot Certificate rules, or new pieces of legislation affecting different segments of the aerospace industry.  I find that I’m much more informed on a subject when I actually write about it.

So, while you may shudder at writing to promote learning, just think of it as telling your best friend a story.

#3: Writing Takes You Places

Writing takes you places – maybe that seems too good to be true, but I can promise you it is.  Consider the following: job applications, resumes, cover letters, scholarship applications, and academic classes.  All of these require writing and they all can take you places such as a new job, money for your education, and a way to earn your degree – the possibilities are endless.

With GlobalAir.com, I’ve found a creative outlet, a scholarship curator job, and a way to hone my writing skills.  I’ve used my writing skills many times over for scholarship applications, class research projects, and much more.  I honestly didn’t think I’d be paid to write about my passion for aviation – the Calvin L. Carrithers Aviation Scholarship became my opportunity to pour my passion for aviation onto paper and pushed me to develop my professional writing skills while putting myself through school. 

I don’t think I’d be where I am today without my skills as a writer and the willingness to develop them.  If there is one piece of advice I could pass on to students it would be to practice, practice, practice – we’ll always be writing and there is no time like the present to get started.


Now, get out there and write!

Do you know a student in aviation (really, any facet) that has a passion for writing? 

Globalair.com is pleased to announce the opening for application submissions for the Globalair.com “Calvin L. Carrithers” Aviation Scholarship.  The scholarship is offered to all students who are currently enrolled in an accredited university or college aviation program for the 2016-2017 academic year.            

After a successful launch of the inaugural Calvin L. Carrithers Aviation scholarship program in 2014, students from around the country have benefited from the scholarship.  In the 2015-2016 academic year, students from University of North Dakota, Florida Institute of Technology and Eastern Kentucky University were chosen as recipients.  Each year four students are awarded the scholarship that entails writing weekly blog posts sharing their flight training or aviation management experiences while being awarded a scholarship of $250 twice a semester, equaling a total award of $1,000.

Interested students should apply at https://www.globalair.com/scholarships/ before August 10, 2016 to be considered.

 

Tags:

Keeping your FBO customers happy

by Joe McDermott 4. May 2016 16:57
Share on Facebook

Whether you run a small regional airport GA FBO or a major BizAv corporate facility there are many things you can do to keep your customers happy, be they crew, owners or trip support providers.

Here are just a few often over looked areas worth considering:

Billing: Must always be prompt, transparent and complete. Airport fees such as landing, parking and security fees should be clearly displayed as such, ideally shown as a sub item, right up the top. FBO fees should always be accompanied by a full description. Third party fees, such as catering, taxis, chauffeurs etc. again should be in one section & accompanied by a full description. If a flight department or trip support service provider supplies special billing instructions they should be followed. Nothing is worse for a crew (billing wise that is) or trip support provider than a late or incomplete invoice. For the FBO, it can result in late payment, part payment and even loss of the customer. Every FBO needs to have a front line staff member in the billing loop as accounts department staff very often do not have any understanding of what happens on the ramp and probably could not care less. Almost every FBO I have consulted for was found to be losing out on significant revenue due to a disconnect between the services provided by the ramp agents and the accounts department processing of the bill.

Aircraft: All aircraft owners or flight crew are concerned about their aircraft while left on the ramp or in the hangar. Security, hangar rash (minor incidents involving damage to aircraft that typically originate due to improper ground handling in and around a hangar, other aircraft or objects on the ground) and FOD are a constant consideration. A well kept hangar and tidy ramp will always be noticed by pilots and will instil confidence.

Ramp staff: Your front line defence! Well trained, courteous and knowledgeable staff will always stand out. Clean, tidy and with matching uniforms suitably selected for ramp operations will catch the eye but also ensure your team are provided proper PSE and always ware/carry it.

Customer service: “Going the extra mile” is often cited as the mark of a good customer orientated operation. Frankly, the simple things come first, reading, understanding, confirming and carrying out the handling request instructions. Have everything in place and be ahead of the curve at all times. Get all of this right and it’s a great start. When the customer throws a curve ball, that’s when your team need to be able to fall back on training, back office contacts lists, excellent communication and a will to source a solution. Sometimes the customer will be unreasonable, looking for something that is just unavailable or not possible at that time. This is when team members get the chance to either pull out all the stops to comply with such a request or to fully explain why the request cannot be fulfilled and to explore all the alternatives. Above all, staff should try to anticipate clients needs, learn what specific clients likes, dislikes and patterns are for future reference.

Pet hates: Owners or passengers can react badly to staff for what they may see as over familiarization, inattentiveness, sloppiness, unkempt dress, cheap aftershave/perfumes or abrupt manner. Handling their baggage with due consideration is paramount. If an owner takes a dislike to a member or members of staff it can cause all kind of problems and can lead to a change of FBO and loss of business.

Keep Your Banker Happy

by David Wyndham 4. May 2016 13:19
Share on Facebook

Financing rates for loans and leases are very low. Yet it isn't easy to get financing and the paperwork can be daunting. If you are looking for a lease or a loan for an aircraft, here are a few tips to help you help your financier.

Educate your financier as to how your lease or loan is a great risk. There is plenty of money to lend and financial institutions want and need to do business. They need to do transactions, but they also need to carefully manage their risk. It is up to you to provide them the information they need demonstrating you are a good credit risk. That means lots of financials of course. But is also means that the individual you are working with needs to understand your business.  Much of the decision is based on analytics, but there is room for judgment.

Your local banker with whom you have had a long term business relationship may be more likely to support your need for financing, even if they don't know much about aviation. Educate them on the lower depreciation that aircraft have relative to other transportation forms. Yes, since 2008 aircraft resale values have not fared well, but relative to trucks, they are a much better risk with a much longer life. That may not be obvious to your banker.

Pick your aircraft like a banker or risk manager. New aircraft are easier to finance, but older aircraft do get financing. Turbine financing rule of thumb: aircraft age at the start of the lease/loan plus the length of the term should not exceed 15 years. Example: your should be able to get a five year term on a 10-year old aircraft. Don't expect the five-year term on the age 20 aircraft. Also expect to put 20% down on the loan - more if the aircraft is older. That down payment is the cushion the banker needs to keep what is owed well under what the outstanding debt is at any time.

Reducing financial risk also means that the banker will favor, or even require, a guaranteed hourly maintenance program on at least the engines. This is routine with leases. Lease return conditions generally require all components have at least 50% of their useful life remaining or you pay a detriment adjustment. The engine guaranteed hourly maintenance program both covers the time to overhaul adjustment plus makes the returned aircraft at lease-end more popular in the resale market, either in another lease or as a sale.

Plan on time to research and secure your financing. Talk to your banker early in the acquisition process and see what information they will need. You may need to check out several sources. One banker that deals with turbine equipment up to $5 million in value isn't likely to want to do a deal on a new mid-size business jet. Know who and what your options are.

There are a lot of financial uncertainties in any time. Right now the oil/energy markets, China, the Middle-East, and the US election are in the front of their anxieties. When looking for financing or a lease, don't add to them! And yes, cash is and always will be King. 


 

Tags:

David Wyndham | Leasing



Archive



GlobalAir.com on Twitter