All Aviation Articles By David Wyndham

Planning Ahead For Your Aircraft Replacement

How long does it take to acquire an aircraft? For a cash deal, with very straight forward tax and ownership structures, and allowing for the due diligence and pre-buy inspection, you could close the deal with everything going perfect within a month or less. Add in real-world delays, financing, and ownership and tax planning, a more realistic minimum may be six months. Want to spec out a new aircraft, choosing your paint, interior, and other options? Six months if all goes well, but plan for longer, especially for in-demand models. Trying to sell your current aircraft, too? Could take even longer. I think the real answer to "how long" is two to three years. 

I have one prospect who has an aircraft lease expiring in 2019. They are looking for a study to help them identify and cost out their next aircraft. They have had their current aircraft for 13 years. Another active client has been looking at replacing their aircraft for the past eight years, with a hiatus from 2008 to 2012. 

Many corporations look out at least five years in their detailed planning with some, famously Toyota, having a 100-year business plan sketched out. For the corporate flight department to be an effective team member, they to need to plan with the same detail and discipline as their corporate parent. The aviation department needs to be proactive in meeting the air transportation needs of the company. Yes, events like a recession or major catastrophe will throw all those plans out. Good plans, whether for the company or aviation department, look at these key areas:

  1. The current situation and how well you are meeting the short-term goals.
  2. Clearly identifying the long term goals
  3. Identifying current and future needs and requirements to meet the long term goals
  4. Best and worst case scenarios
  5. Creating or identifying milestones and performance metrics to indicate how well goals are being met
  6. Having actionable steps to move in the direction of the goal

The third item, needs and requirements, is where the two to three year planning comes into play. Planning for a major acquisition should be done methodically. Budgeting and detailed travel planning really can only look out two years for most companies. The aviation department needs to be head of the corporation in identifying what its equipment needs will be. Waiting until the current aircraft is not capable of meeting the changing air transportation role, or is costing too much to operate, falls short on the aviation department's service goal.

The tough part of getting approval for the next aircraft is often that the aviation department is doing a great job with what they already operate.  "If it ain't broke, don't fix it" along with the magnitude of the acquisition price gets balanced against the short-term profitability goals of the company. This is where the people and management skills of the aviation manager can be tested. How well have you done your job of being known as a team player for the executive team? Is aviation just "the boss' plane" or is it seen as serving the corporate mission? Along with the two-minute elevator pitch for why you need to replace the aircraft, do you have the details the CFO or Board of Directors may need?

Doing detailed planning for the aircraft within the scope of your five-year plan allows you to identify and prepare management for those infrequent, high cost, maintenance inspections, overhauls, and upgrades needed. During the acquisition process, being prepared also aids in the aircraft price negotiations.  Negotiations from a position of strength, and a willingness to walk away from a deal that doesn't work will get you a fair price easier than being seen as needing an aircraft right away.

Having a plan and updating as you go is far easier than always being reactive and shooting the closest alligator. Sometimes things go awry, but when you have a plan, you at least know how far off course you are and the direction needed to get back.  Last tip, a plan is not worth much unless it identifies at least the next major action needed to accomplish the plan. 

I hope you all are ready for 2016 to 2020 (FAA NextGen anyone?). 

 

 

 

Need more personnel? Document first!

 

"I think we need another pilot" 

"I think an A&P would be helpful in maintaining our aircraft availability." 

I hear this a lot from aviation managers, but when pressed for the data by their boss, it may not be ready to hand over.  A really savvy manager knows this: intuition is wrong more that it is right. You need the data to back up your gut feel! In fact, when your gut feel turns out correct, it is usually based on a well reasoned approach from your personal experiences and education. To put it another way:

You Can't Manage What You Don't Measure

When it comes to justifying additional personnel, you must have the data to support your position. Personal costs can be a business' highest single cost. One place to start is the NBAA Management Guide. It has the general approach to calculating now many pilots your flight operation needs. It involves how frequently the aircraft flies, and how much standby and duty time is needed to meet a schedule. At one extreme is the Emergency Medical Services operation which must have crew available 24/7. At the other extreme was a pair of helicopter pilots whose job was to fly the prince from his home on the coast to his yacht. They were scheduled weeks ahead of time and much of their "duty" time was sitting on the yacht at sea! The rule of thumb of three pilots per aircraft is a starting point. The NBAA Management Guide takes you down the path.

Another great reference is the NBAA Benchmark and Compensation Survey. It contains member information on not only salaries, but also utilization and days/hours worked by aviation department job titles. A lot of times just showing that you are working more hours than 95% of your peers is validation enough for another employee.

Adding an extra pilot takes a bit more calculation. An on-demand pilot such as a charter pilot may not be able to fly a lot of hours. The scheduled pilot, like for an airline, can get a lot more flying hours. You need to look at the schedule variability and duty days, plus non-flying responsibilities. Also take into account the availability of part-time or contract pilots.  One thing that is important in your calculation for an extra pilot involves what the current pilots' duty time is like. Here are a few things to look at:

  • Total duty days
  • Total duty hours
  • Days away from home for flying
  • Non-flying duties and hours required
  • Days away for training, vacation, sick leave, etc.

For maintenance personnel, the list of considerations center around they aircraft types and and maintenance philosophy. Items to consider include:

  • Aircraft trip profiles - on the road a week at a time or back every night?
  • Aircraft utilization, and whether it is driven by calendar limits or hourly limits
  • How close are you to overhaul and repair facilities? Is there support on the field?
  • How old is the aircraft? Aircraft require more maintenance as they age.
  • Do you perform maintenance while the aircraft is not being scheduled for flights? i.e. Do you fly by day and maintain by night (or weekend)?

General considerations for both need to look at what the future demand for flights is. Are you anticipating increased flying activity? Are you unable to meet the current demand for trips? Are you having to turn down trip requests on a more frequent basis? Consider a survey of your aircraft users to ask if they have more demand and to see if there is a requirement for the use of more than a single aircraft at one time. The users of your aircraft will learn what your limitations are and will adjust their schedule. Ask them if they need to fly more but cannot.  You need to be tracking this. If you can quantify that the unmet demand is based on lack of available personnel (or needing to overwork people) , then your justification for the added personnel is complete.

Most organizations like to stay lean. But that does not mean working your people to bare bones on a regular basis. Aviation has a very strong safety component that extends beyond the cockpit to anyone who has a physical impact on the aircraft. Even so, adding additional personnel takes solid data. 

 

 

2015 Business Jet Traveler Readers Expect to Fly More in 2016

The October/November issue of Business Traveler Magazine contains the results of the 5th Annual Readers' Choice Awards.  As with previous surveys, they let the results speak for themselves. Go read it, but first, my observations.

 

Good news for 2016, their readers expect to fly more in 2016 than in 2015 (37.9%) with just over half flying about the same next year. Only 7.3% expect to fly less. This is encouraging since more than one in five (22.7%) reported flying less in 2015 than in 2014. I'd say this is more of a sign of stability or slow growth. Still, slow growth beats a slow decline.

Why people fly is as you think. These private aircraft "save time" by getting people to airports that are not served by the airlines and all the travelers to be productive while en route. These simply spell productivity.  Comfort, privacy and security round out that list. Those last three imply quality of life to me. 

What people fly remains consistent with previous years. It's the economics. That, along with range and cabin are the big three drivers in the aircraft the reader flies. A slight change from 2014 is economics is now the top driver, slightly more than range. Interesting was the number four response: Aircraft Manufacturer. The OEMs try to get brand loyalty and this indicates some level of success in that effort. Aircraft age and speed round off the top half of the list. 

Among the readers using fractional, charter and jet cards, customer service rated top for all three. Overall satisfaction also rated consistently as ver good with no clear advantage to any of them. Value for price paid rated best for Jet Cards. Fractional rated lowest for value which ties into their ranking for residual value terms. That was the lowest average score among all the fractional rating categories. If the reader had not used the provider previously, the biggest factor in selecting the provider was a recommendation of a friend or colleague. Step aside Internet, word of mouth from someone you trust is still the number one reason to buy.

Speaking of value for price paid, for the fixed-wing aircraft, Embraer rated quite well in that category. They also rated very well in cost of maintenance and were close to survey-leader Gulfstream in product support. Kudos to them. Overall, the strongest fixed-wing OEMs were Embraer, Gulfstream, Dassault, and Pilatus. 

Regarding aircraft reliability, Pilatus and Gulfstream received the highest marks. Al the OEMs did well, with Hawker (as in the 800 series) and Bombardier receiving more "fair" ratings and fewer very good to excellent ratings. Regardless, all the fixed-wing OEMs having from 87% to 100% ratings when adding the very good and excellent scores. The wireless and cable providers would love rating like that.

On the helicopter aircraft, Business jet traveler only had sufficient data for Airbus (nee Eurocopter) and Bell. I was surprised that Sikorsky had too few responses. Like last year, neither helicopter OEM received greater than a 40% excellent rating in any category except for reliability, where Bell had 52.4% excellent ratings. That would be last place if put in with the fixed-wing. I'm not sure why the expectations aren't being met.

BJT did ask its reader's that if they could get a year of complimentary flying, which would it be for various categories of aircraft? Read the article to see what folks favored. Most choices were the popular new aircraft for each category. Of note, 6.5% of the Super Mid-Size Cabin Jet readers wanted a Hawker 4000 over the current production offerings. As with last year, no one listed a P51 Mustang. 

2016 looks promising from this survey. It's a small list, but here's hoping its representative. How about you, will you be flying more next year? Let us know if the replies.

Understand Your"Why"

Simon Sinek published "Start with Why" back in 2009.  Sinek is fascinated by the leaders and companies that make the greatest impact, especially those with the capacity to inspire. In his book, Sinek discusses the patterns about how they think, act and communicate. Examples include the Wright Brothers and Apple. These companies focus first on the why of their existence - the reason they exist. Not just what they do or how they do it. Read the book or watch his TED talk for more. So how does this relate to our aviation department?

Do you know why your company exists? Why does it do what it does? If your company can express this, then you can explore or define they ways the business aircraft can help achieve this. While this may sound like navel gazing, it is not. It involves a deep understanding the differences between successful and "nice try."  It is from this perspective that you can identify those things that the business aircraft can do to facilitate and advance the business at the most core level.  Tie the use of the aircraft into to loftiest, highest-meaning levels of the company's existence.

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? Does the business aircraft enable your company to make the most productive uses of its passengers' time? For one company, it may be that the leader is so incredibly valuable to the company's future growth, enabling that person to have one-on-one contact with customers, clients, and division leaders produces significant value in terms of motivation, desire, focus, and profit. For another company it may be that enabling scattered teams to work more frequently together in one place enhances their cohesion and unity, and enabling goals to be accomplished sooner and with fewer resources. 

Attaching 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. 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. 

“Mission drives requirements”

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. Then we can allow emotions in the process.

I had one client who needed frequent trips between New Jersey and Oregon & Washington. One part of the mission was passenger loads rarely exceeded four persons. That opened up a number of aircraft that had the passenger load been 15, would have defined a different aircraft all together. Since these individuals were senior executives, and the trip length relatively long, an en route stop for fuel left them with little time remaining in their travel day for significant productive work. They needed non-stop capability. Defending the use of a larger aircraft that will spend most of its time half-empty was easy once the mission was understood to require a non-stop capability. But why that non-stop capability was needed (and not just wanted) was important.  They ended up with a super mid-size business jet that accomplished their primary mission, and one that was cost-effective.

Understanding the missions assigned to the aviation department and being able to quantify them is vital in making the right aircraft choices. But when the company stock price plummets, understanding and articulating the aircraft as it relates to why the business does what it does is vital in keeping the aviation department. 

Flight-Department-Fiscal-Flight-Plan

"Those who fail to plan, plan to fail." Now is a good time to start planning the next year's budget for your flight department. If you are a public company, you have two, or perhaps three quarters of your fiscal year already reported. How are things going? If your 401(K) is loaded with your company stock, you know that answer. That answer can also help with your 2016 budget, too.

A budget is a very important tool for planning an organization's use of its most limited resource - cash. Managing the cash is critical for any business, or individual. Failure to plan for the incoming and outgoing cash has ruined many a business. And that can limit your aviation operation’s ability to carry out its mission.

A budget is just estimate of the future showing the peaks and valleys of cash flow. A budget can also serve as a benchmark for evaluating actual versus planned-for expenses. Every organization must budget whether it goes through a formal or an informal process. Like any tool, used correctly it can be an asset in managing your aviation cash rather than a one and done exercise.

As an aviation manager, the budget should be more than just filling a square for your upper management reporting. It is a very useful tool that can enable you to track the effectiveness of your aviation operation. It can also alert you to the future peaks in expenses, such as scheduled major maintenance or an aircraft upgrade.

I like to think of the budget as a fiscal flight plan for the aviation department.

First, you need a destination. As a corporation, that destination is coming from the leadership. What are the corporate goals for the next year? How is the flight department going to support the goals of the company? Do you have the right assets (aircraft and people) to support that goal? Have you asked the boss what to expect for next year's flying? Understanding how your flight department supports the corporate goals gives you that higher level view of what to expect next year. Asking the main users gives you more details as to how or if your flying will change.

You need to check the weather. What are the restrictions or conditions that your flight department will face next year? Do you have a senior pilot retiring? Do you need to hire a new maintenance technician? Does your hangar need repaving in front? Did the word come down that your budget is frozen for next year?

Next up and maybe most critical is to preflight the aircraft. This is literal and figurative in that what condition the aircraft is in now, and at the end of the "flight" (year) determines its airworthiness. This is often the easiest part. Once you know to how much you expect to fly, you can forecast what maintenance inspections, overhauls, and part replacements will come due. You should have that running list of service bulletins that you'd like to have done. How does that interior look? What do you need, and want, to keep the aircraft flying in good condition for next year?

The cost details for your budget depend on who its for. You really need to have a budget for two people. The budget that gets rolled into to company budget is needed for reporting and overall measurement of costs. I had one client who had three line items for their budget to send to corporate: salaries, facilities, and transportation. That worked for the CFO's management reports but is insufficient for managing the flight department. You need a lot more cost detail in order to adequately measure your flight department. You need to know what is driving your aircraft costs, what your high cost maintenance costs are, most frequently replaced parts are, and much more.

Fodder for another article - how much detail is needed? Enough to see small problems become they become too big to control. You can't manage what is not measured.

Just as you monitor the weather and aircraft performance during the flight, so must you monitor the budget. Too many see a budget as a static "one and done" exercise. This misses the point of a budget. The budget at its best is a living tool that guides you through the fiscal year. It can alert you to small changes that are manageable. The budget should also be adjustable as the assumptions that went into it change. If you add an important new trip that you fly twice a month, that will increase your flight hours and could pull a big maintenance item into the upcoming year, or impact your ability to have the aircraft down for three weeks for that scheduled inspection. Not to mention if our sub-$50 a barrel oil goes back up, what will that do to your fuel budget?

You should be doing routine "actual versus forecast" reviews of the budget as well. It may be monthly or bi-monthly or whatever fits with your activity level. You also should have a documented set of assumptions that went into the original budget.  This is so much easier to do during the budget preparation than six months later trying to figure out where that number came from.

Ideally, your budget is a living document that can guide your finances throughout the year. You cannot make all the right assumptions, but with documentation and regular reviews you can keep the budget a useful document.

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