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Key Missions & Evaluation Parameters

by David Wyndham 4. January 2018 13:05
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In the two previous issues, I introduced the Aircraft Acquisition Plan and your Acquisition Team. To be effective, your acquisition plan should consist of the following elements: - The organization's real aircraft needs. - Key missions and evaluation parameters. - Sources of information. - Technical analysis and ranking. - Fleet size. - Financial alternatives. - Financial analysis and ranking. - Tax Planning. This issue, I’ll focus on the first two items. 

“Mission drives requirements”

The foundation of the plan is to understand the mission assigned to the aviation function. Where does the aircraft add value to your company or owner? Yes, it makes better use of time. To what end? What is the importance of that time, and more over, the value of that time? Connecting the corporate goals and aspirations with the use of the aircraft enables you to define (and defend) the use of the aircraft as a valued business tool. Identify the most important mission for the aircraft as it relates to the achieving the corporations goals and vision. That is the mission which enables the aviation department to select the right aircraft by defining the parameters the aircraft must meet in order to help the corporation succeed. 

In defining the mission, we get to the importance of quantifying the mission. While a decision maker may select an aircraft from emotion, we need to make sure that they have the information needed to quantify their decision.  We need to quantify the mission, the aircraft requirements, and the costs. The decision maker can allow emotions in the process, as advisors, we cannot. Quantify every requirement to the greatest extent possible. 

Be proactive. If today’s mission is likely to change, focus your planning on what will come. While during times of rapid change, it is difficult to forecast, do it anyway. Ask the major users and decision makers for their inputs. Try to get a “probable” and a “best case” scenario. Or, if things are looking poorly, a “worst case” scenario.

Evaluation Parameters (Quantify!)

Evaluation parameters include cabin size, door size, cargo capacity, range, payload, etc. A key mission such as West Cost of the US to Asia could allow for a stop en route. If you can make it to Hawaii, every other over water leg can be made with less range.  The distance from the West Coast of the US to Hawaii is about 2,300 nautical miles (NM). Allowing for headwinds, you need at least 2,500 NM range to make it most of the time and 3,000 NM range to make it under almost any conditions. That Asia mission may require non-stop capability, but be aware of the available options.

Key missions allows you to define with the evaluation parameters needed to evaluate the possible aircraft. Identify aircraft that meet all the requirements and those that fall short in one or more areas. Include your current aircraft in this list as a baseline for judging other aircraft.  Once you have your aircraft criteria, it is usually good to list those in terms of “required” and “desired.” Required criteria are those which you must have to perform the key missions. Desired criteria are nice to have criteria that enhance the ability to perform the mission, but aren’t crucial to its success. 

If you don’t do your homework, you either end up with too much aircraft, or worse, end up with an aircraft that fails to do what was required. There is nothing worse than explaining to the boss why you can’t do the trip that was justification for the aircraft in the first place. Do this work up front and the rest of the analysis just falls into place. You’ll see. 

 

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Aircraft Sales | Aviation Technology | David Wyndham | Flight Department

Electric Airplanes

by Tori Williams 1. January 2018 20:52
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Last summer a family member of mine decided to take a leap into the future and purchased a Tesla Model S. When we went home for the holidays my husband and I were able to take a ride in the brilliant unity of technology and transportation that is an electric car. Outfitted with dozens of luxury features, and with an engine so quiet you’ll wonder why we’ve dealt with noisy mechanical engines for this long, riding in a Tesla will change your life. The power behind the electric car is amazing. There is no delay between pushing the pedal (Gas pedal? Go pedal?) and when you are moving along smooth as silk. After riding in the Tesla and seeing several charging stations “in the wild” I truly believe that electric cars are going to be the preferred way to travel in the future.

Bringing everything in my life back to aviation, as I am so inclined to do, I began to wonder about the options that are available for electric airplanes. Surely the innovations that Elon Musk has brought to cars was brought to airplanes long ago. Fuel is one of the largest costs when operating an aircraft, whether small or large, so surely someone has made an electronic solution. The engine noise inside an aircraft is so loud annoying that many people opt to fly gliders for some peace and quiet. To be rid of insane fuel costs and mind-numbing loudness would make aviation a much more comfortable place to be. I began digging around online and found some interesting developments that are striving to bring battery-powered flight to the public every day.

History

Electric powered flying machines have been around almost as long as aviation itself. The first instance was in 1883 when Frenchman Gaston Tissandier flew an electrically-powered airship using a Siemens motor. Improved electric airships were then created, however, most of them had to be tethered to a power source on the ground. Innovations to full-sized aircraft didn’t come until the invention of the Nickel-Cadmium battery, which could provide much more power with less weight. The first manned electric aircraft to fly under its own power was the Militky MB-E1 in 1973. This small two passenger aircraft had a flight time of just 14 minutes, but it was a good start. Ever since this first flight dozens of companies have been working on creating the perfect electric airplane.

NASA

It’s impossible to write an article about electric aircraft without mentioning all of the work NASA has done with solar-powered unmanned aircraft. They have set quite a few records with their Pathfinder, Centurion, and Helios. These long skinny planes look like something out of a sci-fi movie, and they made groundbreaking discoveries in the future of solar-powered flight. In 2001 the Helios set an altitude record of 96,863 feet! However, these are not manned and I wanted to focus more on the human transportation involved with electric aircraft.

The Sun Flyer

Of all the electric aircraft prototypes I saw in my research, none looked as complete and interesting as the Sun Flyer. The 2 seater aircraft is sleek, costs approximately $16 per flight hour (compared to $89 for a Cessna 172) and can fly 3 hours on a single charge. The founding management team includes Charlie Johnson, the former president of Cessna, so they must know what they are doing. They are not currently in production, but as is evident on their website, they have deposits for 105 aircraft. I can definitely see this company and concept becoming huge in the upcoming years. Although the short flight endurance may seem like a hindrance, this aircraft is perfect as a training aircraft. Training flights are often less than 2 hours, and having a more affordable option benefits both the students and the school.

Pipistrel Alpha Electro

The Sun Flyer is not alone in the race to become the best electric flight training aircraft. Pipistrel is a Slovenian light aircraft manufacturer that holds many awards for their eco-friendly aircraft designs. Their goals are to reduce emissions created by aircraft, make flying more affordable, and decrease the noise around airports. All of these things are achievable through electric aircraft, so their main focus right now has been developing the "Alpha Electro" to be a 2-seater ultralight flight training aircraft.

It will be interesting to see where electronic aircraft development takes us in the future. Teslas are quickly becoming a serious competitor in the car market, and it would be nice to see this same intense competition and innovation with electric aircraft. At the end of the day, everyone can benefit from more affordable and enjoyable flying options!

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Flying | Tori Williams

What Happens To An Aircraft’s Registration If The Corporation Or LLC Owner Is No Longer Qualified To Do Business?

by Greg Reigel 29. December 2017 14:47
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Many aircraft owners use a corporation or limited liability company to register and hold title to their aircraft. Oftentimes, the owners set up their legal entity and then forget about it. Unfortunately, many states require legal entities to file an annual renewal/registration or pay fees to stay “active.” If an entity does not perform the required filing, the entity could become “inactive”, “suspended”, “not in good standing”, or it could be “administratively dissolved.”

Fortunately, in most of those states the entity can be reactivated/reinstated, have the suspension removed, or be placed back in good standing by accomplishing the required filing (and usually paying an associated fee). But what happens to an aircraft’s registration if this happens to a business entity that holds title to that aircraft? Can the aircraft still be legally operated while the entity is “inactive” or “suspended”?

According to a recent Legal Interpretation issued by the FAA’s Office of the Chief Counsel, the short answer is “no.” But to understand why the answer is “no”, it is helpful to look at the regulations that govern registration of an aircraft by a business entity.

14 C.F.R. §47.3(a)(3) permits a corporation (or a limited liability company, which is also treated as a legal entity similar to a corporation) that otherwise meets the U.S. citizenship requirements, to register an aircraft with the FAA. 14 C.F.R. §47.43(a)(3) tells us that an aircraft’s registration is invalid if, at the time of that registration, the business entity applicant was not qualified to submit an application under 14 C.F.R. Part 47.

This means a business entity that did not have legal status at the time it submitted its registration application to the FAA would not have been qualified to submit the application. And by extension, according to the FAA, “a business entity that does not have or has lost legal status in the State in which it has been incorporated is neither eligible to register an aircraft nor operate that aircraft.”

However, whether a business entity has “lost legal status” will depend upon the facts of the situation and also the applicable state law. As a result, the applicable state law must be analyzed to determine the business entity’s true legal status if it is in this situation.

So, how does the FAA find out about an invalid registration? Well, since the FAA does not make determinations about the legal status of a business entity at the time of registration, or even while the aircraft is registered, this issue usually comes to light during an investigation or an enforcement action.

And if the FAA learns the business entity has lost its legal status and that the aircraft’s registration is therefore invalid, it could pursue enforcement action against anyone who operated the aircraft when the registration was invalid in violation of Section 47.3(b). It could also pursue the business entity owner for failing to return an invalid or ineffective registration certificate as required by Section 47.43(b).

The Moral of the Story: If you are going to use a corporation or limited liability company to own an aircraft, don't create the entity and forget it. Make sure you keep up with the required formalities and filings, including payment of fees etc., to ensure your business entity remains active and in good standing.

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Greg Reigel

The "Acquisition" Team

by David Wyndham 11. December 2017 13:37
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Remember the old TV show called the A-Team? A rag-tag bunch of former soldiers travel around fighting criminals and righting wrongs. The A-Team was borderline psychopathic (especially their pilot), but they were always on the side of good. Regarding an aircraft acquisition, it takes your own A-Team: an Acquisition Team. You need to know these people and, if they are not within your organization, know where to find them! 

As the leader of this team, you are responsible for defining the mission. What is the key mission of the aircraft? What defines success for the aviation operation? Does everyone on your team know what this mission is? Most importantly, will the decision maker agree to the definition of this mission. This is used to define the minimum deliverable product in terms of capability and performance.

The next team member is the technical analysis person. This person is responsible for developing the measurable criteria for judging the ability of the aircraft to perform its key mission. If you are the pilot, this will be you. That person should be familiar with aircraft performance measures, and have available information that enables them to predict passenger loads, trip lengths, etc. There may need to be runway analyses, equipment needs, and for helicopters, the vertical performance measures necessary for the operation. The technical person needs to be able to have the data needed for this comparison. This person will help to identify candidate aircraft and then to analyze the aircraft against the mission.

Part of the technical analysis deals with maintenance requiorements. If purchasing a pre-owned aircraft, what may be required in terms of upcoming maintenance or upgrades? Where and who can do the pre-buy? If you have in-house maintenance, they are the best as they already know your operation. 

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. There are different ways to finance an aircraft, and if it is for business use, different tax ramifications. This person needs to understand Life Cycle 

Costing and be able to look at the total cost of owning and operating the aircraft.  If leasing, what are the return and buy-out options? Many leases have significant penalties for early returns, and most have specific return conditions that can add cost. Leases can be a great way to acquire an aircraft, but they aren’t for everyone. This person needs to understand the nature of operating costs and be able to communicate with the maintenance professionals regarding the costs of upcoming maintenance as well as then communicate and understand the costs as looked at by the Chief Financial Office or accountant.

A close ally of the financial analysis person is the tax/ownership advisor. Tax planning should begin well before the purchase, not after the closing. Aircraft, by the nature of their mobility, may be exposed to taxes in multiple states. You need someone familiar with taxes as they apply to aviation. How do you plan to structure the ownership of the aircraft? Things to plan for are where and when will you take delivery? Are there sales or use taxes due and if so, who is responsible for collecting and remitting them? 

With the aviation tax person should be an aviation attorney. This person will  need to be consulted to ensure that the contracts are appropriate and that the various regulatory issues are addressed. Are there leases, timeshare agreements, charter? A document that looks good from a basic business perspective may not be legal in the eyes of the FAA or other aviation authority. The FAA can be strict in enforcing the regulations regarding "for-hire" operators and you need to make sure that you are operating legally. 

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 training and currency? Will it be different if you acquire a different aircraft? If the aircraft is to be on a management agreement, who and how are each of the parties to that agreement covered?

Next is the aircraft sales professional. This individual needs to know the state of the aircraft sales market, what the availability and lead times are for various models, who to contact about pre-buy inspections and appraisals, and what sort of time it could take to dispose of your current aircraft. Anyone with Internet access can "find" aircraft for sale. 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. 

Lastly, don’t forget the a title search for used aircraft. They can also provide title insurance and provide the escrow entity for the closing as well as register the aircraft. The minor cost of this is well worth the piece of mind. 

If your are looking at large cabin jets, you may have requirements for crew rest, galley equipment, and internal baggage. If you have a cabin attendant, they need to be on the team. Same with the scheduler or dispatcher. Anyone with an interest in the successful outcome of the acquisition needs to be at least informed as to what is happening. Everyone has a different perspective and will see things that others may miss.

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). 


 

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Aircraft Sales | David Wyndham | Flight Department | Aircraft For Sale

What’s Good About Used Aircraft Sales? Market Changes Could Stimulate Used Jet Sales…

by GlobalAir.com 8. December 2017 12:02
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Article written by and with permission:
Michael D Chase
Principal
Chase & Associates
1628 Snowmass Place
Lewisville, TX 75077
www.mdchase.aero
Cell: 214-226-9882 • Office: +1.972-966-1440
services@mdchase.com

Questions about the Business Aviation recovery still linger as there has not been much market movement to date. With most of 2017 behind us, however, we may be on the ‘cusp of change’. ‘For Sale’ inventories are down and aircraft transactions are up, while business jet prices remain weak.

Real gross domestic product (GDP) increased at an annual rate of 3% percent in Q3 2017, according to the ‘advance’ estimate released by the Bureau of Economic Analysis. In Q2, real GDP increased 3.1%. This is welcome news because, as we have historically seen, when GDP is at the 3% growth mark (or higher) Business Aviation traditionally does well.

These quarterly GDP changes between 2009 and 2017 can be viewed in Table A. Highlighted in yellow are the quarters that GDP was 3% or higher. Historically, we have not seen two back-to-back quarterly GDP increases of 3% or more since Q2 and Q3 2014.

 

 

The ‘For Sale’ Inventory

Chart A illustrates that the ‘For Sale’ inventory of Business Jets has decreased steadily from a high-point in July 2009 (2,938) to 2,225 jets in September 2017. That’s a reduction in the percentage of the in-service fleet from 17.7% in July 2009 to 10.4% now. This is a positive sign as the inventory ‘For Sale’ is dropping, albeit slowly.

Today’s market remains good for buyers because the aircraft ‘For Sale’ inventory remains over 10%. If jet owners are retaining their business jets longer since the downturn began in 2008, perhaps that would help explain why the used business jets ‘For Sale’ inventory has remained at such high levels since the Great Recession.

The percentage ‘For Sale’ has dropped from 11.0% in January 2017 to 10.4% at the end of September 2017. Indeed, most aircraft business jet dealers and brokers today would tell you that the pristine used jets that were on the market a few years ago have become more challenging to locate.

 

 

Used Full Sale Transactions (Including Whole Sales & Leases)

Further analysis of January-September 2017 shows mixed results for the six segments reported by JETNET in the September 2017 YTD Market Information release that included full sale transactions increase for business jets (5.9%), turbine helicopters (5.7%) and Commercial Airliners (8.8%) in YTD numbers (YTD September 2017 versus YTD September 2016).

The remaining three segments reported double-digit decreases in transactions with piston helicopters (-14.1%) showing the largest drop in YTD 2017 vs 2016.

Charts B & C depict the 12-Month used business jet and turbine helicopter moving average, displayed for the full retail transactions from January 2012 to September 2017.

From January 2012, used business jet transactions steadily increased until 2014—from 2,300 to over 2,800. A leveling-off followed in 2015, and 2016 produced mixed activity (while remaining well above the 2,800 line of transactions).

Since dropping to 2,652 transactions in January 2017 the used business jet market segment has shown a sharp recovery through September 2017 (2,833). This could be a result of built-up demand in the US after the newly-elected government administration finds its footing and the stock market continues to climb to record highs.

 

 

Since reaching a low point in January 2017, the used turbine helicopter market segment has shown a very rapid recovery leading into September 2017 (see Chart C). This is great news, and could indicate better days ahead for the turbine helicopter market.

 

US Jet-A Fuel Price

As of November 6, 2017, US Jet-A average price was $4.76/gallon and appeared to be on the rise. This fuel cost increase could have a negative impact on some of the progress we have been making in business aircraft flight activity. Nevertheless, today’s price is still around $2.00 less than the 2012 record fuel price of $6.84/gallon, as shown in Chart D.

 

The past 12 months of flight operations from September 2017 have been running 2.3% ahead of last year. Flight operations have not reached the peak of 2007 yet, but the trend is a positive sign nonetheless.

 

 

In Summary

Historically, the fourth quarter of the year reflects the most sales growth over the other quarters. We expect to see further growth in Q4 2017 to round out a very good year for used business jets and turbine helicopters. ‘For Sale’ inventories are slowly coming down and sales transactions continue to trend in a positive direction. We keep our fingers crossed and will continue to monitor business aircraft activity through future articles.

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Aircraft Sales | GlobalAir.com | Aircraft For Sale | News



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