business aviation advisor september/october 2015

September / OctOber 2015

w w w.biz avadvisor .comA Business Aviation Media, Inc. publication

smooth moves

Less vexation for aviation taxation

don’t fLy-by-night

breaking Up is hard to do

aviation safety action program

Aircraft Financing rules Have changed: are you prepared?

converging conditions Lift current market but continued caution counseled

mind the gaps

better days ahead for business aviation

Trusted to deliver excellence.

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CorporateCare®-a global liquid asset

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the business of business aviationthe information you need, from experts you can trust

Aircraft owners and charterers now have a resource to help you make the most effective use of your investments in business aviation. Business Aviation Advisor provides the information you need, without technical jargon, on the business of owning and flying

business aircraft – from operations to acquisition, to management and finance.

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Fe Ature s

06 mind the gaps Aircraft financing rules have changed: are you prepared? by michaeL t. amaLfitano, sr .

08 better days ahead for business aviation Converging conditions lift current market but continued caution counseled by jeff agUr

10 smooth moves FBOs keep you and your aircraft safe and on schedule by sUe sommers

12 Less vexation for aviation taxation States give tax relief to business aircraft owners and operators by gary i . horowitz

De pArtMe nts

05 publisher’s message The Accidental Publisher by giL woLin

18 washington report Aviation Safety Action Program by david coLLogan 18

14 don’t fly-by-night Take care when shopping for a jet card BAA staff report

16 breaking Up is hard to do When your changing needs means changing management companies by charLie hUghes

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S e p t e m b e r/ O c t o b e r 2 0 1 5 B U S I N E S S AV I AT I O N A D V I S O R 5

puBLIsHerGil Wolin

[email protected]

CreAtIVe DIreCtorraymond F. ringston

[email protected]

MAnAgIng eDItorG.r. Shapiro

[email protected]

eDItorIAL AssIstAntmichael b. murphy

[email protected]

wAsHIngton eDItorDavid collogan

[email protected]

ContrIButorsJeff AgurVanAllen

[email protected]

michael t. Amalfitano, Sr.Stonebriar Commercial Finance, LLC

[email protected]

Gary I. HorowitzHCH Legal, LLC

[email protected]

charlie HughesPriester Aviation

[email protected]

Sue SommersAtlantic Aviation

[email protected]

BusIness MAnAgerJoAnn O’Keefe

[email protected]

BusIness AVIAtIon MeDIA, InC.

PO Box 5512 • Wayland, MA 01778

Tel: (800) 655-8496 • Fax: (508) 499-2172

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©Copyright 2015 by Business Aviation Media, Inc.

All rights reserved Printed in the USA

I didn’t set out to be a publisher. I began my career directly out of college, to help business aircraft owners and users, pilots, and technicians – as well as the companies that sell to and sup-port them – get the best return on their investments in aviation.

In 1999, after three decades working with manufacturers, charter and management companies, maintenance service providers, and FBOs, Business and Commercial Aviation maga-zine decided to tap me for my knowledge and experience as its publisher.

Over the years, I’ve witnessed many changes in our industry. Today, not only can you charter or own a fraction of or a whole aircraft, you can avail yourself of any number of new options, from prepaid charter and charter broker cards, to all-you-can-fly business aircraft airlines. Financing options expanded, then contracted. And since the economic crisis began in 2008, the conditions and assumptions under which owners buy, finance, operate, and sell aircraft have been dramatically transformed. Coupled with government and media demonization of “private jets” that same year (a result of the ill-advised trip to Washington in company jets by the “Big Three” automaker CEOs to ask for industry bailouts), it became clear that business aircraft owners and operators like you needed a new source of aviation information: one that focuses solely on the business – not the lifestyle – of business aviation.

And because aviation is not your primary business, it needed to be in plain English, without technical jargon. Enter Business Aviation Advisor, a print and electronic maga-zine in which experienced industry experts offer the insights and knowledge you need to fly safely, securely, efficiently – and yes, with privacy.

In our pages, you will not find articles on travel destinations or celebrity profiles. We do not accept advertisements for non-aviation, luxury products. What you will find are fea-tures and advertisements you need to make informed decisions about the best use of your business aviation dollars – to keep you abreast of those aforementioned transitions.

That’s exactly what you’ll find in this issue. Whether it’s how to respond to the trans-formation of aviation financing (“mind the gaps”), evolving aviation tax laws (“Less vexation for aviation taxation”), the influx of new – and not always reputable – jet card programs (“don’t fly-by-night”), or how and when to change aircraft management companies (“breaking Up is hard to do”), the Advisor keeps you ahead of the curve.

While I didn’t set out to be a publisher, this transition best harnesses my 40+ years of business aviation experience – as well as that of our contributors – on your behalf. We know the Advisor is doing something right – your many calls, emails, and letters tell us so.

I continue to welcome your feedback – and thanks for reading!

the accidental publisher

Gil Wolin — Publisher [email protected]

PUBlISher’S MessAge ■

6 B U S I N E S S AV I AT I O N A D V I S O R S e p t e m b e r/ O c t o b e r 2 0 1 5 w w w. B i z AvA d v i s o r. c o m

by michaeL t. amaLfitano, sr.Stonebriar Commercial Finance

[email protected]

in the past five to six years, the rules for aircraft financing have changed dramatically. Your excellent banking relationship, no matter how long-standing, now may not serve you as you seek

to borrow for a new or pre-owned airplane. Don’t be caught off-guard. Currently, there are two big gaps in aircraft acquisition: 1) an

Asset Gap, as you decide what airplane to buy, based not only on your travel requirements but also on what will best hold value, and 2) a Finance Gap, as you determine how you will pay for your new asset.

Examining the latter first, what do owners and operators need to know?

Finance gapAviation is one segment of the commercial equipment finance market, a $900 billion market that has grown consistently during the past five years. Large banks and financial institutions have reduced their lending activity to some clients in this market, due to increasingly stringent, restrictive – and costly – capital and regulatory constraints set in place in response to the 2008 eco-nomic crisis.

Until 2008, there were three ways to pay for an aircraft: cash, borrowing from a bank, or from highly-regulated lenders. Like banks, these lenders are bound by the same government regula-tions, and like virtually all commercial banks, are publicly traded and so have a responsibility to shareholders.

The willingness of banks to loan money to finance aircraft tra-ditionally was informed by the predictability of the residual value is

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mind the gaps Aircraft Financing rules Have changed: Are You prepared?

■ AIrcrAft FInAnCe

w w w. B i z AvA d v i s o r. c o m S e p t e m b e r/ O c t o b e r 2 0 1 5 B U S I N E S S AV I AT I O N A D V I S O R 7

of the aircraft. Based on historical data and current trends, they could predict with reasonable certainty what the aircraft was likely to be worth in two to seven, or even ten, years.

Beginning in 2008, sales of new and used aircraft slowed, and in some cases, stopped. OEMs (Original Equipment Manufactur-ers) experienced negative sales – that is, more deals in progress were cancelled than new aircraft were sold. Banks holding a large number of leases were left with a huge inventory of aircraft to sell in a market with very few buyers.

For example, before 2008, a bank might have been willing to fi-nance as much as $18 million of the $23 million purchase price for a new aircraft. But as some owners unfortunately experienced, the value of that aircraft may have dropped suddenly and radically. That $23 million airplane’s value declined to $13 million, over-night. (see “the changing Lending climate,” baa, sept/oct 2014, p. 14).

As a result of those sharp declines in aircraft residual values, banks also began to shy away not only from loans, but from busi-ness aircraft leases. Because so many of their leases were now up-side down, several banks had to mark down the value of their corporate aircraft asset portfolios.

When the predictability of asset values became so uncertain, the government stepped in to protect shareholders with new reg-ulations to make sure banks didn’t lend on risky assets.

Today, with the demand for new aircraft still lagging in every segment except for the large-cabin, long-range market, banks still cannot accurately forecast future aircraft residual values.

The pre-owned aircraft markets are particularly challenged by the inability to predict future residuals. In response, banks also have shortened the terms of loans and leases as a result of higher regulatory costs.

This may serve to explain the recent rise in buyers paying cash rather than financing their business aviation transactions: they have been unable to meet the new leasing terms and conditions.

At the same time, those highly-regulated lenders’ traditional competition – companies such as GE Capital and CIT – have been retrenching, either to focus on core businesses or to eliminate the increased expense of regulatory oversight. Some, like GE Capital, have decided to sell the bulk of their assets. At their peak, these lenders accounted for 32% of the assets in the equipment finance industry, according to the Equipment Leasing & Finance Association.

As these companies shrink their equipment finance businesses, and banks withdraw from the market, they have made room for new non-bank lenders to enter the commercial finance sector.

Asset gap Banks and other regulated financial institutions typically also have credit and risk governance policies that restrict the age of the aircraft at lease and/or loan maturity to no more than ten

years. This means that bank financing for the glut of higher qual-ity, eleven-to-fifteen-year-old business aircraft, or even six-to-ten year-old aircraft, simply is not available.

Today, banks typically will finance only new or like-new assets, with minimal lending/leasing terms, to exceptionally creditwor-thy clients. They may offer low-priced financing in order to cap-ture such highly-qualified new clients or to protect valuable existing relationships. This leaves small- to mid-sized private and public companies, as well as some high net worth individuals, seeking to purchase an aircraft with few banks willing to provide financing.

Many owners and operators have changed their buying habits as well, as many extend their periods of ownership beyond the historical five year average. Fractional operators too have in-creased their average aircraft ownership term, from four years to the current nine year average.

The gap is even wider for certain aircraft makes and models. Until very recently, demand for light and mid-size aircraft has been weak, despite their still having strong economic useful life remaining. These aircraft represent 73% of the current fleet, ac-cording to JETNET.

As a result of OEMs’ continuing introductions of new business jet models, the ongoing global demand for new large-cabin, long-

range aircraft, and evolving regulations requiring costly modifi-cations to older aircraft, an aging inventory of used, but still capable, business aircraft sits idle in the for-sale inventory, with little or no capital financing available.

Filling the gapsThe equipment finance sector has weathered the credit financial crisis, due in large measure to its ability to evolve. Both the fi-nance and asset gaps in the market can be filled by non-regulated, non-bank, commercial finance companies, able to offer greater flexibility in loan advance rates, terms, amortization, and air-craft age and usage, while still generating premium economic re-turns to their shareholders. Commercial finance companies, with capital backing from entities such as insurance companies, offer an array of well structured, secured loans and leases to pub-lic and private entities for both new and pre-owned aircraft.

For those who can mind the gaps, there are compelling indus-try dynamics and investment opportunities in the commercial equipment finance industry to bring aircraft financing back into balance. baa

tHe wIllInGneSS Of bAnkS tO lOAn mOney tO fInAnce AIrcrAft trAdItIOnAlly wAS InfOrmed by tHe

predIctAbIlIty Of tHe reSIduAl VAlue Of tHe AIrcrAft

■ AIrcrAft FInAnCe

MICHAeL t. AMALFItAno, sr. is EVP & Senior Managing Director for Stonebriar Commercial Finance. With 33+ years of financial services experience, he previously led global corporate aircraft finance for Bank of America Merrill Lynch.


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by jeff agUrVanAllen /[email protected]

put together a group of business aviation advisors and bro-kers, and it will be no more than five minutes before some-one asks: “What are you seeing in the market?”

Yes, we read all the press releases and we monitor data pro-vided by the various analysts. But for those in the trenches who experience the market first-hand, we continually conduct our own informal polls. Based on both quantitative and qualitative data, here’s what owners and operators need to know right now:

■■ Confidence Is High – Confidence comes in a number of forms and has a trickle-down effect to business aviation. Even through moderate economic turbulence, companies have greater confi-dence that the U.S. and world economies are more predictable than during the past eight years. This, in turn, gives companies confidence to execute corporate strategies that include expan-sion and acquisition. Nearly all clients with whom we work are ex-panding in some form this year. In the business aviation market, this translates into a greater investment in aircraft: often a valu-able tool for these corporate strategies. The byproduct of more aircraft transactions is a more stable, more predictable market which will help values and, ultimately, market confidence. What does this mean for you? With cautious optimism, you can develop business aviation strategies that support today’s confidence and growth. Plan ahead for a finite ownership period, have an exit or upgrade strategy, and be prepared to modify along the way, should economic conditions change.

■■ The Market Is Complex – A client once told me: “I’ve completed numerous corporate sales and acquisition transactions worth bil-lions of dollars, and none were as complex as buying an aircraft.” As an owner and/or operator, you are faced with an endless num-ber of options. The choice of existing makes/models, new makes/models, emerging technologies, and amenities all have their pros and cons. Regulatory and tax pitfalls abound and must be exam-ined and managed closely. The selection of a safe, efficient opera-tion can be daunting. You are best served by putting your focus on the most critical elements – those which could introduce opera-tional or financial risk. Don’t let yourself get mired down in minor technical or cosmetic details. (see “don’t be emotionally compro-

mised,” baa may/june 2014, p. 13). In the final analysis, just about ev-ery aircraft could meet your mission, if you are willing to be flexible. Know what’s important to you, and what you can let go.

■■ Exit Strategies Remain Difficult – In the past eight years, many companies took the position of “hold” and continued to op-erate their aging aircraft. As we now examine upgrade opportu-nities, the hold strategy can create a burden for transition. Perhaps the aircraft is a pre-2000 vintage, and now is faced with costly upgrades to comply with the FAA’s NextGen navigation equipment requirements. Or its operating/maintenance costs are rising due to required engine overhauls or age-related major maintenance inspections, reducing the number of potential buy-ers and hindering the sale. Or quite simply, the aircraft’s fair mar-ket value is far lower than the book value, requiring your company to take a write-down; not a popular choice if yours is a publicly-held company (see “mind the gaps,” p. 6).

Even if you’ve leased your aircraft, costly return conditions create a financial burden. Your role as Asset Manager is not only to preserve and maintain the value of the asset, but to adequately and proactively examine exit strategies that support your compa-ny’s goals. Just as with other parts of your business, your aviation strategic plan should look ahead one, three, and five years to an-ticipate changes with your business and the market.

With most world economies growing, and commercial airlines continuing to consolidate, the business aviation market is on the rise. With careful planning, you can take full advantage of the op-portunities ahead. baa

better days ahead for business aviationconverging conditions Lift current market but continued caution counseled

JeFF Agur , CEO of VanA llen, handles f leet planning and aircraf t acquis i t ion projects . This year, he suppor ted the detai led planning and acquis i t ion of more than hal f a bi l l ion dol lars in jet s , turboprops , helicopters , and f ract ional shares .

■ InduStry upDAte

better days ahead for business aviation

globaljetcapital.com

At Global Jet Capital, we provide flexible, streamlined financing for the private aircraft market. Our team is comprised of senior-

level executives who possess both impressive financial acumen and vast aviation industry experience. If you’re thinking about mid- to large-sized

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smooth moves

by sUe sommersAtlantic Aviation / [email protected]

whether you’re flying aboard your own aircraft, or using charter, fractional, lease, or jet card, you have made a significant investment in travel. You expect the very

best service, both in the air and on the ground. Not only do you ex-pect the best, you require it, because the time you save by flying aboard business aircraft can be lost via inefficient transitions from air to ground transportation.

The Fixed Base Operators (FBOs) at each airport are respon-sible for those transitions, as well as for any and all ground ser-vices that you, your aircraft, and your flight crew may need to complete your trip safely and efficiently: ground transportation arrangements, aircraft fueling, maintenance, deicing, hangar storage, and more.

More than 2,000 airports in the U.S. alone have runways capa-ble of supporting business jet operations. Since many have mul-tiple FBOs offering service, your flight crew and schedulers will select the one that best meets your specific air-to-ground transi-tion requirements for that trip.

From the moment your car arrives at the FBO, some aspects of superior service will be quite noticeable, while others should not be apparent.

You should notice■■ Privacy and anonymity. When you are boarding or deplaning

your aircraft, the FBO staff should respect your privacy, and never engage in any conversations about your business or personal life, regardless of how often you use their facility. If you are a well-known public figure, they certainly should not approach you for autographs or photos.

■■ Aircraft catering that is complete to your exact specifications, and in full compliance with your and your passengers’ dietary requirements. The galley should be stocked with your preferred beverages, and the cabin with your favorite publications for inflight reading.

■■ Your car pulling up planeside as you arrive at your final destination, if requested prior to arrival, or hired car at your intermediate destination, appropriately equipped with GPS, baby seats, or other requirements.

■■ Facilities that are easily accessible and meticulously main-tained. If you have planned a meeting at the FBO, a confer-ence room will be reserved and ready with your audio visual needs, coffee, refreshments, and an onsite notary as required.

You should not notice

■■ Security cameras scanning the ramp 24/7, ensuring the safety and security of your aircraft. At your home base airport, your car should be whisked away and parked in your hangar or a secure parking area, where again, you shouldn’t notice the security cameras scanning the lot around the clock.

■■ Training that supports every aspect of your interaction with FBO personnel, from safe fueling, aircraft towing and ground handling, to pleasant and efficient customer service, to line service technicians skilled in the refueling of more than 100 different business jet and turboprop makes and models.

■■ Safety officers on the ramp, watching every movement of every aircraft and monitoring fueling operations.

■■ The FBO staff on the phone, making your reservations for hotels, limo services, catering, or car rentals. You won’t notice your flight department’s calls to check on fuel price and parking fees, ensuring you are getting the best value.

■■ Emergency maintenance or required deicing performed if required before departure.

■■ Your flight department double checking, then triple checking every detail prior to your trip. Each destination FBO becomes an extension of your own flight

department. And your flight crew understands that for your travel to be smooth and efficient, they have to trust their chosen FBO to make your transition from air-to-ground travel seamless, safe, private, and secure. baa

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sue soMMers brings more than 25 years of aviation industry experience to her posit ion as VP Sales and Marketing at Atlantic Aviation, where she oversees brand management, marketing, sales init iatives, and customer development.

FbOs Keep You and Your Aircraft Safe and On Schedule

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by gary i. horowitzHcH legal, llc /[email protected]

while both business aviation and taxes benefit local economies, some states choose taxation over aviation. Policies that encourage owners to hangar and

maintain their aircraft in-state create revenue and jobs for FBOs, airports, and maintenance facilities. Five states recently enacted new tax laws that will benefit business aircraft owners and operators.

As of September 1, general aviation aircraft purchased or used in new york are exempt from NY sales and use tax, as are ma-chinery or equipment purchased in NY for installation on general aviation aircraft.

Formerly, leases of certain aircraft in NY were subject to accel-erated sales tax on the lease payments, requiring that all sales tax be paid on all such lease payments at the time of lease inception. Now, sales tax on aircraft lease payments, if tax is still owed and not otherwise exempt, is not accelerated and sales tax is payable as lease payments are made.

Finally, certain aircraft transfers pursuant to a merger, contri-bution, or distribution between related parties now qualify as sales and use tax-free transfers in NY.

connecticut and massachusetts have similar tax exemp-tions for most general aviation aircraft, so the new tax laws make NY more competitive with its neighboring states. It will be inter-esting to see what new jersey, which still imposes sales and use tax on business aircraft, does in response to this change in NY.

As of September 1, under new texas law, aircraft purchases are exempt from sales tax under a “sale-for-resale” exemption when the purchaser resells or leases the purchased aircraft. This ex-emption applies even if the owner uses the aircraft, in addition to leasing, renting, or reselling it to another person, if more than 50% of the aircraft’s departures are made under the operational control of one or more lessees pursuant to a written lease that provides for some consideration.

TX also cannot assess sales tax on aircraft used by an affiliate after the owner paid sales tax on the aircraft’s purchase, or ac-quired the aircraft in certain exempt transactions.

The new TX law allows aircraft to be brought to, stored, or used in TX and not be subject to sales tax if the aircraft (a) was brought to TX for the purpose of being completed, repaired, remodeled, or restored; (b) was brought to TX by a person who had not acquired

it directly from a seller by means of a purchase; and (c) made more than half of its departures from locations outside the state for a year after either the acquisition of the aircraft or its first flight containing passengers or property, whichever date was later.

south carolina recently passed a sales tax exemption on maintenance and repair (parts and supplies) performed on gen-eral aviation aircraft, which is expected to help attract business aviation activity to the state’s certified aircraft repair stations. Formerly, only parts and supplies used to repair government and commercial aircraft were exempt from SC sales tax.

Qualified nevada businesses that own, operate, manufacture, service, maintain, test, repair, overhaul, or assemble an aircraft, or any component of an aircraft, can apply to the Office of Eco-nomic Development for a partial abatement from certain prop-erty or sales and use taxes, if certain economic development thresholds are met.

Under a new arkansas “flyaway” exemption for aircraft sales, certain sales by non-resident sellers to non-resident buyers are exempt from AR sales tax, if the aircraft will be based outside of AR, and the aircraft leaves AR after the sale or upon completion of maintenance or modification. AR also enacted a sales tax ex-emption for aircraft maintenance service (parts and labor).

Since more states are likely to change their tax laws for busi-ness aircraft in the future, aircraft owners and operators should continue to monitor these developments. baa

Less vexation foraviation taxation

States Give tax relief to business Aircraft Owners and Operators

gArY I. HorowItz , cofounder and CFO of HCH Legal, LLC, is an attorney who provides business aircraft transaction and tax planning services to aircraft owners and operators.

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BAA staff report

whole aircraft ownership may not meet your travel pro-file or your budget. Or you may own an aircraft and find, as do 25% to 30% of owners, that you sometimes

need alternative lift. Charter and fractional ownership fill the gap for some, while others use the rapidly expanding number of jet card options.

Jet cards enable you to contract to pre-pay to fly for 10 to 50 oc-cupied hours annually with no capital investment or long-term commitment. They can be a flexible and cost-effective option, particularly if your trips have various origin points, or if your in-termediate stops require extended time on the ground.

You pre-pay for annual hours based on the size of aircraft you anticipate using most, drawing down on that deposit as you fly. Most jet card companies will allow you either to extend your con-tract term, or to add the unused hours to your renewal commit-ment for the next contract year.

Scheduling a trip is similar to booking a charter flight. The main difference is that you book a category of aircraft, rather than a specific make and model. For example, “mid-size” can mean any one of an extensive number of aircraft models.

To meet your trip requirements, the jet card charter broker will vet potential charter providers, auditing them for operational safety and reliability as well as for financial stability. The broker depends on its ability to purchase “empty legs” (repositioning legs already paid for by another charter client) at a discount, and re-selling them to its own jet card clients at contract rates.

With a jet card offered by fractional operators, you gain access to an entire fractional aircraft fleet with no capital commitment and no monthly management fee. In exchange, you pay a higher occupied per-hour charge. You commit to fly aboard a specific make/model aircraft in the provider’s fractional fleet, with the op-tion to trade up or down on specific flights (with an appropriate adjustment to the hourly cost).

Since each program offers different benefits, and has various restrictions such as black-out dates and expiration clauses, match-ing your unique travel requirements to the right program can be a challenge. A professional aviation consultant can help answer your questions and determine which program is best for you.

All major fractional ownership operators, as well as many na-tional and regional charter operators and charter brokers, offer a jet card option. And unfortunately, so do a growing number of

fly-by-night, Internet-only-based operations. If you do decide to shop on your own, be aware that jet card providers range from the excellent and reputable to the shoddy and frankly dangerous.

A number of new jet card apps promise to find you “a low-priced seat on an empty airplane flying home.” These may be tied to unknown entities with little or absolutely no aviation back-ground or experience. All they need to operate is a computer pro-gram that can scan online charter market sites, looking for low-priced trips.

There’s no evidence that these companies do any due diligence whatsoever. They don’t own or operate the aircraft they are urg-ing you to use – they simply shop for you based only on price and availability. The aircraft operators may not carry proper safety ratings from industry audit leaders Argus or Wyvern. The com-panies offer you no assurance of the maintenance condition of the aircraft, experience or training of the pilots, insurance cover-age, or safety record.

While their websites offer superlatives about the company and its good deals, there usually is insufficient information about its leadership, how long it’s been in business, or how it guarantees the safety of aircraft it offers for rent.

Jet cards can be a convenient option for those who value safety and reliability above price. Doing research before you buy will help ensure your security. baa

don’t fly-by-nighttake care When Shopping for a Jet card

wouLD You put Your LIFe In tHe HAnDs oF A MoBILe App?

■ AlTernATIVe LIFt

Manage your aircraft as you do your other Financial Assets.

How Is Your Aircraft’s Maintenance Condition

Affecting Its Value?

call (540) 905-4555

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■ AlTernATIVe LIFt


by charLie hUghespriester Aviation / [email protected]

sometimes, relationships just don’t work out the way you expect them to. When might it be time to change your air-craft management company? When:

■■ You’ve upgraded your aircraft, and your current company is not experienced with that make or model.

■■ It’s not generating the amount of charter revenue you require.■■ Recent personnel changes have undermined your confidence.■■ The company is no longer financially stable. It’s not paying its

bills or meeting payroll on time, risking your operational safety and aircraft asset value.

■■ It’s not paying attention to critical details. You feel like “just another client.”The change process includes many of the same steps you used

to make your original selection, with additional legal, financial, operational, and service delivery factors and challenges.

Legal and Financial – The “termination” language in your air-craft management and lease agreement (if applicable) should de-fine the terms of transition in detail. You should expect: an accurate accounting of anything still owed on outstanding in-voices, time for all vendor invoices to work their way through its accounting system, the return of any remaining operating deposit funds, and payment of any outstanding charter revenue earned if your airplane was on the company’s FAR (Federal Aviation Regu-lation) Part 135 Charter Certificate.

If you are retaining your current crew, employee health and re-tirement benefits should be covered and the transition to the new company handled seamlessly, to avoid any crew concerns.

Since the aviation legal and tax environment is complex and continues to evolve, be sure to engage a qualified aviation attorney to represent your interests. He or she should have a thorough knowledge of the FAA, DOT, IRS, and state tax guidelines for the state in which the aircraft owning and/or operating entity resides. Your attorney should review and approve all agreements between you and the management company, hangar facility, and crew as-signed to your aircraft.

Operational – Four factors will have an impact on your own or charter revenue flying.

1. Crew Retention – The prospective management company should welcome the opportunity to consider your current crew and confirm their credentials and cultural fit within the new company.

2. Crew Hiring – If a new crew is required, you and the prospec-tive company together should define what constitutes a qualified and acceptable crew. It should provide a realistic time line for

recruiting and selecting your new crew, and help them make a smooth transition to you and your aircraft.

3. Training – Your crew likely will require some training before flying your aircraft, whether recurrent, new aircraft-specific, or as required by the management company’s operating procedures. It should be scheduled to minimize interruptions to your flying.

4. Aircraft Transition/On-Boarding Process – The new man-agement company should clearly define the requirements for your aircraft to make the transition (“On-Board”) to its operation. What is needed to comply with the appropriate FARs, Part 91 for owner flying and Part 135 for charter? Which flight authoriza-tions will move from your previous management company? How will it transfer all maintenance records and logbooks? Remember, these records are your property and are critical to the operation of your airplane.

Service Delivery – Since your service experience will be in-formed by how well the operations department performs in re-sponse to your travel requirements, you should plan to meet with your new customer service representative to define those require-ments. Include your executive assistant or designated scheduler and your pilots, maintenance technician, and flight attendant at this meeting, so you all can set realistic expectations for aircraft and crew scheduling, communications, scheduled and unsched-uled maintenance, specific traveler requirements, and after-hours contacts.

With careful planning and preparation, you transition to a new management company should be smooth and easy. baa

breaking Up is hard to dowhen your changing needs means changing management companies

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CHArLIe HugHes is SVP, Aircraft Management Sales for Priester Aviation. He has more than 20 years of aviation experience, having held executive-level positions in charter sales and client relations, as well as management sales.

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She’s already taken flight

Now you can help her soar

She’s already taken flight

Now you can help her soar


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by david [email protected]

a safety improvement program that’s paid big dividends for the scheduled airlines and other large fleet operators for decades is now available for small and medium size Part

135 and Part 91 operators.The Aviation Safety Action Program (ASAP) is administered

by the Air Charter Safety Foundation under a Memorandum of Understanding (MOU) with the FAA. ASAP enables flight crew-members of charter and business flights to file reports when they are involved in situations with safety implications or possible vi-olations of FAA regulations.

Those reports are analyzed by an event review committee (ERC) comprised of FAA, company management, and participat-ing employee group representatives (pilots, mechanics, etc.). Af-ter carefully reviewing the circumstances surrounding each report, the ERC decides on the appropriate course of action to mitigate or eliminate similar occurrences.

The U.S. aviation community spends billions of dollars annu-ally training pilots, mechanics, and other employees in the inter-est of safety. Operators invest resources in developing standard operating procedures (SOPs) to provide a safety road map for em-ployees to follow. FAA encourages the use of Safety Management Systems to identify and manage risks. Despite all those efforts, mistakes still happen, procedures are not followed, and safety is compromised. That’s where ASAP can help.

“The whole premise behind the program is determining root cause” of errors and mistakes, says Russ Lawton, ASAP program manager for ACSF. Most ASAP reports involve things like alti-tude deviations, navigation errors, or speed restriction violations. “So, you just had a deviation. What was going on in the cockpit, what was happening?” said Lawton.

Filing an ASAP report provides crewmembers with immunity from FAA for inadvertent, unintentional violations of the Federal Aviation Regulations, to encourage people to speak up when something goes wrong.

“Being forthright and honest, it leads to better procedures, bet-ter training,” Lawton said, and helps prevent the same mistakes from being repeated. And that makes the operating environment safer for everyone.

Such reporting programs have been used by the employees of major airlines and other large-fleet operators for the past 25 years, generating tens of thousands of reports that alert the car-riers and FAA to problems that can be addressed by changes in training and procedures.

ACSF officials wanted to provide a way for smaller operators to gain the benefit of similar feedback, and began working closely

with FAA in 2012. With encouragement from FAA senior man-agement in Washington, officials of the agency’s Great Lakes Re-gion headquarters got the ball rolling. ACSF signed an MOU with the Great Lakes Region, and operators who wanted to participate in ASAP then signed MOUs with their local Flight Standards Dis-trict Offices (FSDOs).

Six of the eight FAA regions in the lower 48 signed ASAP MOUs, and ACSF officials are hopeful the other two – Northwest Mountain and Central – will sign on later this year.

As of mid-summer 2015, there were 16 operators enrolled in the ACSF-administered ASAP – 12 Part 135 charter operators and four Part 91 corporate flight departments. Over the past three years, employees of those 16 operators have generated nearly 300 ASAP reports. There are another 15 operators in vari-ous stages of the MOU/employee training process that should be participating before year’s end.

ACSF President Bryan Burns said the program is structured so ACSF, not FAA or the operator, shoulders 90 percent of the ad-ministrative burden. The price to participate is based on the number of employees in a company and is designed to cover AC-SF’s costs, not make a profit. “In all respects, it’s a win-win for all parties involved,” Burns said.

In addition to encouraging employees to report safety issues, Lawton says ASAP participation results in a lot of information sharing among companies and safety administrators. “People network and really get a lot out of it,” he said. baa

aviation safety action program

DAVID CoLLogAn has covered aviation in Washington, DC for more than four decades. This award-wining journalist is known as one of the most knowledgeable, balanced, wary, and trusted journalists in the aviation community.

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Finally, one clear source to fuel all your aviation business needs. Aviation Business Index (ABI) is a worldwide portal for aviation sales information.

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business aviation advisor september/october 2015

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