All posts tagged 'BizAv'

FBO Mergers and Acquisitions What Next?

Not unexpectedly, the subject of FBO mergers and acquisitions was one of the many talking points at this years’ EBACE, the annual European Business Aviation Conference and Expo, held at the end of May in Geneva, Switzerland.

The BBA acquisition of Landmark Aviation at the start of the year and subsequent rebranding as Signature Flight Support took many by surprise. Having divested itself of six Landmark locations, Signature still find themselves with 199 worldwide stations.

EBACE hosted the “Big is Beautiful” consolidation discussion with Mark Johnstone, Managing Director, EMEA region, BBA Signature Flight Support, Laura Pierallini of Studio Pierallini, Patrick Hansen, CEO of Luxaviation Group, Greg Thomas, President and Executive Chairman of PrivatAir and myself representing Global FBO Consult. Moderator was Taunya Renson-Martin. Looking at business aircraft management, the FBO sector and charter operations it became clear quite quickly that there was agreement among the panellists that mergers and acquisitions in the FBO sector will certainly continue for some time. Consolidation in the sector offers advantages of branding, purchasing power and economies of scale. For the smaller FBO chains or independents finding themselves sharing the ramp with a new or rebranded, well-funded competitor, it is not good news and can lead very quickly to a price “race to the bottom”.

 

And BBA are not the only movers in the FBO market place of late. Just a day ahead of EBACE, Dubai based JetEx announced that is has secured a tender from the Moroccan National Airports Authority to establish five new FBOs, the first such facilities in the North African country. It has already begun business aircraft ground support at Casablanca Mohammed V International Airport, Marrakech Menara and Rabat-Salé, where Swissport was also chosen to provide handling services. At the seasonal destinations of Agadir-Al Massira, and Dakhla, Jetex was named as the exclusive ground services provider. Jet Aviation, a General Dynamics company, seemed to be strongly hinting on their stand at two new locations to come very soon!

Luxaviation Group, new owners of well-established Execujet, Unijet (France), MasterJet (France), Abelag (Belgium), London Executive Aviation (UK), sound very bullish, so we can expect them to keep up the momentum for a while yet.

In the week following EBACE, French company Sky Valet announce it has completed the acquisition of JetBase, Portugal’s leading FBO network. JetBases’ ten FBOs, situated at the main Portuguese airports of Lisbon, Porto, Faro, Cascais and Beja, on the islands of Madeira, Azores and Cape Verde and in central Africa in Mozambique and Angola, will now operate under the commercial name of Sky Valet. This move follows on from the acquisition by Sky Valet in Q2 2015 of Gestair, Spain.

The addition of these new destinations consolidates Sky Valet’s international expansion strategy, which aims to create a network of FBOs located in the most iconic areas. The company already provides ground handling support services at Madrid, Barcelona, Gerona, Valencia, La Coruna, Santiago de Compostela, Palma de Majorca, Ibiza and Malaga airports. Dominique Thillaud, chairman of the management board of Aéroports de la Côte d’Azur (ACA) and Sky Valet, commented, “This acquisition allows us to expand our expertise across a new attractive area of the Iberian peninsula with a reach that even extends to Africa.”

Last April, Florida based Sheltair Aviation announced it had given its FBO network in the Sunshine State a major boost with the purchase the Tampa International Jet Center.

In the same month there were further notable indicators pointing to the continuing trend of aviation fuel suppliers actively expanding their services and branding across the industry, working closely with independent FBOs.

Skylink Services, the lone ground handling service provider for business aircraft at Cyprus’s Larnaca International, became the 52nd Diamond Service member of the World Fuel Services (WFS) Air Elite Network, the international group of FBOs established in 2011 from the remnants of the Avitat network.

WFS and Deer Jet Group expanded their eight-year relationship by signing a memorandum of understanding for the former to provide global aviation support solutions for Deer Jet’s eight FBOs in China and business aircraft handling subsidiary Honor Aviation.

Under the agreement, World Fuel Services will allow Deer Jet FBOs and Honor Aviation to accept its Avcard charge card for payment. More than 30,000 aircraft operators and pilots use Avcard worldwide for aircraft purchases such as fuel, ground handling and maintenance. Avcard is accepted at more than 7,600 locations in more than 190 countries.

If you consider the known facts, talk to key personnel, listen to the rumours, filter out the uninformed comments, you will get a broad sense of how the FBO sector will evolve over the next five to ten years. I believe mergers and acquisitions will be accompanied by co-branding, strategic partnerships and franchising. Realistically the worlds’ capitals and most major cities are fully populated by FBOs, restricting expansion for those not already present in these centres, with many airports restricting the amount of FBO licenses they will issue compounding the problem. Other factors to be considered are the forthcoming sale of a number of airports (France, Germany for instance) and the issuing of new FBO franchise agreements by governments (Morocco just completed, Oman in the process and many more in the pipeline). Right now Africa, Central and South America, India and some of the Pacific Rim countries are getting a lot of attention, maybe it will be from these regions that we will see the next exciting developments emanate!

New Wi-Fi solutions for King Air Operators

By Mark Wilken
Director of Avionics Sales at Elliott Aviation

www.elliottaviation.com

With growth brings increased travel demands and so does the importance to stay connected to the office and your clients. Think wi-fi is out of your price range? Think again! Photo courtesy www.FreeDigitalPhotos.net

The importance of connectivity is often understated during flight. Historically, the use of your cell phone or internet in-flight was never an option. However, that paradigm seems to be shifting as businesses tighten budgets and workload increases. Business aviation continues to play a key role in shaping the future of many companies. With growth brings increased travel demands and so does the importance to stay connected to the office and your clients.

As employees and passengers alike travel more, a business may see flight time as an opportunity to recap an important meeting or prepare for the next. Or perhaps catch up on email to make sure you are responding to your customers’ needs in a timely manner. Your key employees can get work done on the aircraft so they don’t have to later that evening with the family. While the cost-analysis of productively over downtime might be somewhat intangible, ways to increase productivity have always been attractive to a CFO.

Wi-Fi providers for business aviation are delivering cost-effective solutions to the consumer, with owners and operators recognizing the benefits to these systems. However, King Air operators have long been searching for Wi-Fi solutions. Typically, only larger aircraft had Wi-Fi options available that made sense for the size and mission needs of their aircraft. Now, King Air owners and operators have a cost-effective solution with the Aircell ATG 2000for a fraction of the cost of the larger systems. Having your King Air equipped with Wi-Fi will keep you connected and your productivity high.

Recently, Aircell announced promotional pricing for the ATG-2000. From now until December 31, 2014, customers can own this system for $45,000, plus installation costs. In addition to lower installation costs, Aircell has lowered their monthly subscription costs and added a pay-as-you-go option.

The Aircell ATG-2000 provides Gogo Biz® in-flight Internet access for up to five connected personal devices. Passengers will have the ability to check email and browse the web. Additionally, the system allows for voice services via either the Gogo® OnePhone cabin handsets or on personal devices through the Gogo® Text & Talk service. The Gogo® Text & Talk service allows passengers to use their own smartphones and mobile phone numbers to call and text in-flight.

The Aircell ATG system operates in the 1.5 – 3.0Mbps range with future initiatives to increase speeds. Most information available on the web, including simple pictures in emails, has increased from 100K to 5,000K (5MB) in data size. This type of usage requires high-speed data transfer to view most content. Recently introduced systems have entered the market for a lower cost, but these systems only reach download speeds up to 100Kbps. Remember the days of 56Kbps dial-up service? This isn’t even twice as fast. With Wi-Fi routers, you now share that single data stream with multiple users further congesting the network. With an Aircell unit, you won’t waste your time and money waiting for an attachment to download.

In addition to Wi-Fi connectivity, the ATG-2000 allows operation of Aircell’s all-in-one cabin entertainment system, Gogo® Vision. Gogo® Vision is business aviation’s first turn-key, on-demand, in-flight entertainment system that puts movies, TV episodes, news, weather, flight progress and more at your fingertips. It allows access to a full library of some of the best titles in entertainment via personal tablets and laptops. The service is delivered by Aircell’s UCS 5000, an all-in-one smart router and media server.

Mark Wilken joined Elliott Aviation in 1989 as an Avionics Bench Technician. He was promoted to Avionics Manager in 1996 and joined the sales team in 2003. Mark has led many highly successful avionics programs such as the King Air Garmin G1000 avionics retrofit program. He recently led efforts for Wi-Fi solutions in Hawkers, King Airs and Phenom 300’s. Mark holds a Bachelor’s Degree in Aviation Management from Southern Illinois University and is a licensed Pilot.

Jurassic Jets

Are older business aircraft even sellable? And how old is OLD?

At the recent NBAA convention in Las Vegas, I sat in on several briefings about the state of aircraft sales and residual values. It was unanimous that older aircraft are not selling. No news there. It's been that way since 2008. What was interesting is the speakers' definition of "old."

I've been going with older than 15 years as "old" in terms of the ability to sell at a reasonable price within a reasonable amount of time. Age 15 also works with getting financing: The Aircraft Age + Length of Lease/Loan should not exceed 20 years. Age 15 allows for a five year financial deal. It seems like the new "old" is younger than that. And no, we can blame it on the Millennials. Blame it on the economic booms of the late 1990s and again in the mid-2000s.

An "old" business airplane is now older than age 10 in terms of maintaining a residual value and being sellable.

Glancing through the GAMA shipment database by year, business aviation saw significant increases in sales and deliveries during the past 15 years. Many manufacturers saw their sales double, peaking in delivery backlog in about 2008. Thus, there are a large number of relatively recent vintage airplanes available that are in the 5 to 15 year group, and especially aged 5 to 10.

The future air navigation systems that have been developing are in place or will be in the next decade. New or nearly new aircraft are either capable of using the full airspace, or can be easily upgraded. Older aircraft may not be so easily updated, especially older business jets that need the upper altitudes for efficient flight.

Older business aircraft, especially jets, have operating costs significantly higher than their new equivalents. A second or third overhaul on most turbine engines will be very costly due to retirement components within the engine. Unscheduled maintenance is also much higher for these older aircraft.

Lastly, emerging markets outside the US can, and do, purchase mostly new or newer aircraft. Developing nations are adopting the EASA regulations as it relates to aircraft aging issues. Some even place an age limit on imported aircraft.

So we have a large number of recently produced aircraft, many with updated avionic systems, that can be purchased for quite reasonable prices. Financial institutions have the money to lend, provided the credit is excellent. The 20 or 30-year old airplane costly to maintain, and sending them to a developing nation to sell isn't viable. These aircraft are just not selling. Let’s take a look at an example.

Jet Years produced Percent Fleet For Sale Average Days Listed For Sale
Gulfstream GIII 1979-1987 18% 828
Gulfstream GIVSP 1992-2002 13.56% 375
Gulfstream G450 2005-current 7% 239

You can buy a used GIII for under $1 million. But almost no one wants one even at that price. Newer GIVSPs and especially the G450 have a market.

One of the speakers referred to the oldest business aircraft as "Jurassic Jets." They are from a bygone era of cheap gas. They are not selling and the financial institutions do not want them on their books. From what the speakers say, and I agree, this is not going to change. Many of these aircraft are with their last owner.

2011 Business Aviation Outlook

2011 Outlook

New Year’s Eve was an early night for me. I was fighting off a nasty cold and despite the intake of grape-related products, ran out of energy before 2011 said hello.  But as I didn’t sleep much either, I guess I was awake for the New Year. With some drugs in my blood, the cold’s effects are waning as I write this. If my outlook for 2011 is a bust, I will claim it is the after-effects of decongestants!

2010 was a year of what I’ll call a stagnant recovery. Economic signs were generally positive. The US stock markets finished 2010 with double digit gains versus 2009. NASADQ was the biggest gain up almost 17% over the year. However, rising corporate profits and stock indices have not resulted in job gains here in the US.

Business aviation is tied in with corporate profits, so that much bodes well for our industry in 2011. Aircraft sales are expected to be (relatively) strong for the last quarter of 2010 if the December activity of aviation tax and legal folks are any sign. Flight hours flown seems to be on the rise as well as charter activity. But again, new jobs and rehires are not showing strength just yet.

So here go my picks for 2011:

Business aviation activity will continue to show steady, but slow, growth. I think aircraft sales will slowly increase here in the US, be flat in most of Europe, and show some strong growth in the Middle East and Asia. As with the past several years, I think more than half of the new aircraft sales will be outside the US.  So for US-based aircraft brokers with International experience, this should be a better year for you.

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Used aircraft values will stabilize. Popular, newer models will likely show some appreciation as the correct for being under-valued. Older business aircraft values will be stable. I don’t look for any appreciation in first generation business jets as these low prices are the new normal.

As one banker said to me about aircraft age, 15 is the new 20. In other words, financial institutions will continue to be wary of lending substantial amounts on older aircraft. Full disclosure and down payments will continue to be required as credit is available to the well qualified.

Fuel prices will rise considerably in 2011. Crude is inching to $100 per barrel. While some have forecasted up to $150 per barrel for this year, others think the increases will be much lower. So $6 to $7 per gallon may be on the near horizon. This will have negative effects on business aviation as I doubt budgets are increased for many operators. So if you don’t have a wallet full of fuel discount cards, better sign up now! And don’t forget to
use Max-Trax to map out your fuel stops en route.

Jobs. I don’t see a lot of hiring in new manufacturing within aviation. The OEM’s are still hurting and will be very cautious in re-hiring employees until they start getting a solid order book. Even with Bonus Depreciation here in the US that is still a ways off. MRO’s should see a good year as operators that have put off maintenance and refurbishments need to have the work done. That should bode well for jobs in that sector.  As flight hours pick up, that should mean more jobs in the cockpit. Again, I suspect companies will be cautious and slow to re-hire. Do more with less is the mantra for aviation managers (again) this year.

So what does this mean for the typical operator? I hate to repeat myself, but managing and controlling your costs will be job #1. Which means that you will need to understand your costs, track your costs, and budget wisely. I hope we can be a help.

Are we losing our sovereignty and freedom in all things commercial, business and general aviation?

Even though this past year in aviation legislation has been a quiet one, there has been a discernable undercurrent of change seeping into the foundation of the commercial, business and general aviation industry these past several years. The changes that have been slowly seeping in under most of our ‘news radars’, and when viewed as a composite, are so significant that we all now need to take immediate action before our worst fears become an industry reality.

The changes that I am referring to, and a lot of them are not caused by the Department of Homeland Security (DHS) or Transportation Security Administration (TSA), are as follows:

Establishment of an International Aircraft Registry in March 2006. This program is mandated by the FAA, whereby a seller cannot warrant ‘Free and Clear Title’ to his or her aircraft, unless it has registered with the I.R. The treaty resulted from a diplomatic conference held in Cape Town, South Africa in 2001. The conference was attended by 68 countries and 14 international organizations. In all, 53 countries signed the resolution proposing the treaty. It took effect when ratified by eight countries: Ethiopia, Ireland, Malaysia, Nigeria, Oman, Panama, Pakistan and the United States.

Failed attempt to introduce Aviation User Fees in June 2007. Proposed by Sen. Jay Rockefeller, along with the then-ranking minority committee member Sen. Trent Lott, and wrapped up in Senate Bill S.1300. The airlines were all for this, because they saw an opportunity to deflect public scrutiny away from their intensely bad ways of managing their respective companies, while firing media shots at business and general aviation. This caused so much division within both houses of Congress that the FAA was put on probation starting in September 2007. Ever since then, the FAA has been on a month-to-month, and sometimes quarter-to-quarter basis for funding.

Failed attempt to introduce the Large Aircraft Security Program (LASP) in October 2008. This regulation would require all U.S. operators of aircraft (both Part 135 and 91) that exceed 12,500 pounds maximum take-off weight to implement security programs that would be subject to compliance audits by TSA. The proposed regulation would also require operators to verify that passengers are not on the No Fly and/or Selectee portions of the federal government's consolidated terrorist watch list.

Failed attempt to introduce an FAA Certified Repair Station (CRS) Security Plan in November 2009. Repair stations on and off airports are so different that it wouldn’t be possible to create a security plan and audit system to fit all of the stations. However, this plan required that all CRS facilities to implement security procedures and infrastructure such as access controls to the facility or aircraft, and a means to identify those who should have access to the facility. Additionally, there would have to be procedures established for challenging unauthorized people who are trying to get access to the facility, along with a security awareness training program for all employees.

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The Introduction of Plastic Airmen Certificates in April 2010. The paper to plastic conversion is in response to the Drug Enforcement Assistance Act of 1988, which directed the FAA to modify the system used to issue airmen certificates to help prevent abuses, including the use of counterfeit and stolen airman certificates, as well as the submission of unidentifiable names on aircraft registration applications.

Implementation of an Emissions Trading Scheme, with mandatory Annual Carbon Emissions Monitoring in September 2009. This European-mandated program is spearheaded by the ICAO and EASA and will lead to an Eventual Carbon Cap and Trade Program. At the close of its 37th assembly last Friday, the International Civil Aviation Organization (ICAO) agreed to what it characterized as the first global approach to reducing air transport's impact on climate change. Under the resolution, ICAO committed to achieving a 2 percent annual fuel-efficiency improvement until 2050, as well as a global framework for the development and deployment of sustainable alternative aviation fuels and a world standard covering carbon dioxide limits for aircraft engines. The resolution also calls for the creation of a global market-based measures scheme. But with the ink barely dry on the document signed by the UN body's 190 member states, opinion remains divided as to whether the development weakens or strengthens the European Union's emissions trading scheme. The EU has always said it will exempt non-European operators from its ETS if its own national governments have implemented a comparable system. However, the EU has made it clear that it will not defer ETS implementation while it waits to see if such alternatives ever materialize.

 

Re-Registration and Registration Renewal of U.S. Aircraft in October 2010. Now all aircraft registrations will expire in the next three years, possibly as early as March 31, 2011.  The FAA has issued a final rule that took effect on October 1, 2010, that requires all aircraft owners to renew their registrations by December 31, 2013 and then re-register every three years thereafter.  The purpose of the rule is to maintain an accurate aircraft registry database; a goal not achieved by the Triennial Aircraft Registration Report.  The FAA estimates that one-third of the 357,000 aircraft registrations currently on file are inaccurate.  The FAA uses the database for ownership determination and response to an overdue flight or downed aircraft report.  Law enforcement and other government agencies use the database for their own purposes.  The federal register’s summary of the rule mentions inclusion of registry information and status on a display depicting each flight operating on a flight plan in the national airspace system.

Implementation of the International Civil Aviation Organization (ICAO) International Standards of Business Aviation Organization (ISBAO) Safety Management System (SMS) Requirement mandated for enforcement, Nov. 18, 2010. While the FAA has filed a “difference” explaining that it does not have a formal safety management system (SMS) rule for aircraft operators, despite ICAO's Nov. 18 deadline, it is in the process of SMS rulemaking. The FAA is already sponsoring voluntary SMS implementation by Part 121, 135 and 145 organizations to provide learning and experience for both industry and the FAA in SMS development, implementation and oversight. The FAA is also considering SMS regulations for Part 135 operators and Part 145 repair stations. There are reports of Part 135 operators being denied entry into various international airports and/or airspace due to lack of an approved SMS manual and/or FOQA which stands for Flight Operations Quality Assurance; a flight-data analysis program has been an ICAO requirement since 2005. Starting on Nov. 19, 2010, Bermuda was the first nation to officially require that all foreign operators of business aircraft with an MGTOW of more than 12,500 pounds have an SMS and meet other requirements under ICAO Annex 6.2.3. For U.S. operators, this includes both Part 91 and 135 operators. Compliance with the ICAO annex is monitored by random ramp inspections at the L.F. Wade International Airport. Operators discovered to be not compliant will be refused entry to Bermuda until they can demonstrate compliance. Besides the precedent-setting SMS requirement, affected operators will also need an operations manual, fatigue management program, MMEL, Type 1A flight data recorder and crew microphone-based communication system. Additionally, aircraft with an MGTOW exceeding 59,400 pounds are required to have a Type 1 FDR and a cockpit voice recorder. On the other side of the Atlantic Ocean, French civil aviation authorities now require foreign operators to demonstrate they have an SMS and a FOQA program before they grant traffic rights. In fact, for the past two years, France’s aviation authority (DGAC) has mandated that foreign operators flying commercially or operating an aircraft weighing more than 27 metric tons (59,500 pounds) have a flight data analysis program (FDAP). The requirement is independent of any EASA regulation, with the DGAC maintaining it is enforcing ICAO standards. The EASA’s remit does not include foreign operator monitoring yet; the agency will manage technical authorizations (possibly including question forms) at the European level beginning in 2012. States will retain authority of commercial authorizations, such as traffic rights.

European Aviation Safety Agency (EASA) Proposition to eliminate Third-Country Aircrew and Aircraft Licensing validity, details released in October, 2010. If passed into law, the proposal would adversely affect U.S. flight schools that train foreign pilots, as well as pilots coming to the United States for training. Pilots who complete their flight training in the United States would be required to repeat the majority of their training upon their return to Europe. The FAA instrument rating would be considered useless in Europe. EASA has made no secret of the fact that it wants to get third country aircraft – and specifically the N-register – out of Europe by ensuring that there are no advantages to being on the N-register. The flight crew licensing proposal is only the first stage in EASA’s move against the N-register, with more to come in proposals on Operations in 2011.

 

Picture I.D. Requirements for Pilot Certificates. NPRM out for comment until Feb. 17, 2010. This proposal responds to section 4022 of the Intelligence Reform and Terrorism Prevention Act (IRTPA). The FAA previously required all pilots to obtain a plastic certificate (excepting temporary certificates and student pilot certificates). This proposal furthers the fulfilment of IRTPA by requiring a photo of the pilot to be on all pilot certificates. The new certificates shall remain valid for only 8 years, and then they must be replaced with a new one featuring a recent photograph. 

 

Part 25 Airworthiness Requirements Harmonization with EASA. NPRM out for comment until Feb. 17, 2010. The FAA tasked the Aviation Rulemaking Advisory Committee (ARAC) through its Flight Test Harmonization Working Group to review existing regulations and recommend changes that would eliminate differences between the U.S. and European performance and handling characteristics standards by harmonizing to the higher standards. This proposed rule is a result of this harmonization effort.

 

Significant escalation in the frequency of occurrences, and the penalty amounts levied in fines against U.S. Operators and Businesses by the FAA. In light of the problems that the FAA has had in receiving a consistent operating budget from Congress, President Obama’s administration is more actively looking and willing to bring about civil penalties against the aviation industry. All money collected by the federal government goes into the general fund.

 

The U.S. aviation industry has lead the rest of the world for more than a century, and effectively it is this system that has firmly established the U.S.A. as the ideal model which has caused more than 75 percent of the world’s civil aircraft fleet to be based here. Maintaining a healthy, safe and prosperous aviation industry takes government support and funding. The lion's share of the costs of running this national transportation system, are eaten up by the air-traffic and navigational infrastructure. The need for a near autonomous, free-flowing and independent on-board traffic guidance, avoidance and clearance system has been on the FAA’s books for more than a decade now. They call it NextGen, while it has also been named “Free-Flight.”

Unfortunately we, the users of this system, are not able to make our voices heard, because the past two governments have chosen to strangle the FAA and force it to step down as the leader of aviation safety oversight, all because of the lack of a proper and appropriate funding budget.

In fact, the FAA’s FY 2010 portfolio of goals document states that: “There is no budget associated with this performance target, as the global support that the ATO provides in support of NextGen is assumed by the specific program offices or paid for by international civil aviation authorities or air navigation service providers through the execution of reimbursable bilateral technical assistance agreements. However, political will, cultures, foreign policy, and other government budgets can be significant factors in the success of the NextGen performance target.”

I worry that the U.S. aviation industry is being forced to the back of the ‘special bus’, thus allowing organizations like the ICAO and EASA to run amok with biased, politically based legislation that is calculated to seize the balance of power in aviation oversight – and ultimately cause the global aviation industry to contract due to the financial burdens that these socialist based systems shall levy against us all. Couple this trend with the willingness that governments have in using the spectre of terrorism as a means to further cheapen and ultimately enslave free societies; we are all in for a very dark future indeed.

 

The International Civil Airworthiness Organization (ICAO) and its subsidiary, the International Business Aviation Council (IBAC), are both based in Montreal. The European Aviation Safety Agency (EASA) is based in Cologne. EASA has taken over from the Hoofddorp-based Joint Aviation Authorities (JAA.) The International Aircraft Registry (IAR) is based in Dublin, while the Aviation Rulemaking Advisory Committee (ARAC) is still based in Washington, D.C. This all leaves me to wonder when the Federal Aviation Administration shall be disbanded and all governance moved to Cologne. It is time to start writing to our representatives in Washington, I think. What say you on this matter of sovereignty?

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