MAY / JUNE 2020
Will That Be Cash or Credit?
Financing An Aircraft Can Make Good Fiscal Sense
Breathe a Sigh of Relief Aircraft Purification System Helps Keep You Safer A Business Aviation Media, Inc. Publication
NOT SO FREE PARKING ARE YOU COVERED DURING COVID? GETTING PERSONAL ABOUT PERSONNEL OWNER PORTAL TAKES FLIGHT BIZAV BUFFETED BY COVID-19, ECONOMIC UNCERTAINTY W W W . B I Z AVA D V I S O R . C O M
PRAETOR 600: CERTIFIED OUTPERFORMANCE. Announcing the certified Praetor 600, the world’s most disruptive and technologically advanced super-midsize aircraft that leads the way in performance, comfort and technology. Unveiled at NBAA in October 2018 and now certified by ANAC, FAA and EASA, the Praetor 600 did not just meet initial expectations, it exceeded them. Named for the Latin root that means “lead the way,” the Praetor 600 is a jet of firsts. It is the first super-midsize jet certified since 2014. The first to fly beyond 3,700 nm at M0.80. The first with over 4,000 nm range at LRC. The first with full fly-by-wire. The first with turbulence reduction capability. The first with a cabin altitude as low as 5,800 feet. The first with high-capacity, ultra-high-speed connectivity from Viasat’s Ka-band. And all of this, backed by a top-ranked Customer Support network. Learn more at executive.embraer.com/praetor600.
L E ADI N G T H E WAY
M ay / June 2020 • Volume 7 / I s sue 3
6
10
F E AT U R E S
Will That Be Cash or Credit? 06 Financing An Aircraft Can Make Good Fiscal Sense
by S TE V E FUS H E LB E RG E R
Breathe a Sigh of Relief 08 Aircraft Purification System Helps Keep You Safer
by HOWAR D H AC K N E Y
10
Not So Free Parking
Is Your Parked Aircraft Costing You More Than You Know?
by J OS E PH T. ZULU E TA , A SA
12
Are You Covered During COVID?
by ALISON L . S QUI C C IM AR RO
Legal Protection for You and Your Employees
12
14
Getting Personal About Personnel
Flight Department Leadership Informs Personnel Retention
by C HR IS TOPH E R M . BROYHILL , PH . D. , C A M
17
Owner Portal Takes Flight
by ALE K VE RNITS K Y
17
It’s your data – do you have access to it?
D E PA R T M E N T S
Publisher’s Message 05 Manifest Destiny
by G IL WOLIN
18
Washington Report
BizAv Buffeted By COVID-19, Economic Uncertainty
by DAVI D COLLOG AN
18
Above and Beyond 2020:
Business Aviation Advisor’s Podcast Series Want to Learn More About Your Investment in Business Aviation? Tune in to Business Aviation Advisor’s informative podcast series, on the business of owning and flying business aircraft – from entry portals, to acquisition and operations, to management, insurance, finance, and more.
The Information You Need, From Experts You Can Trust
www.bizavadvisor.com/podcast
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One JOurney TOgeTher Today and always, we are dedicated to keeping you safe, secure and connected.
PUBLISHER’S MESSAGE ■ PUBLISHER Gil Wolin gwolin@bizavadvisor.com CRE ATIVE DIRECTOR Raymond F. Ringston rringston@bizavadvisor.com MANAGING EDITOR G.R. Shapiro gshapiro@bizavadvisor.com ASSISTANT EDITOR Michael B. Murphy mmurphy@bizavadvisor.com WASHINGTON EDITOR David Collogan dlcollogan@gmail.com CONTRIBUTORS Christopher M. Broyhill, Ph.D., CAM Citadel Consulting LLC chris.broyhill@gmail.com Steve Fushelberger Fushelberger@gmail.com Howard Hackney Aviation Clean Air hhackney@aviationcleanair.com Alison L. Squiccimarro Law Offices of Paul A. Lange als@lopal.com Alek Vernitsky Portside, Inc. avernitsky@portside.co Joseph T. Zulueta, ASA Aeronautical Systems joe.zulueta@planeman.com BUSINESS MANAGER JoAnn O’Keefe jokeefe@bizavadvisor.com BOARD OF ADVISORS Paul Cardarelli • Larry Flynn Anthony Kioussis • Dick Koenig Joe Moeggenberg • Louis C. Seno Nel Stubbs • Rolland Vincent John (Jack) M. Young BUSINESS AVIATION MEDIA , INC . PO Box 5512 • Wayland, MA 01778 Tel: (800) 655-8496 • Fax: (508) 499-2172 info@bizavadvisor.com • www.bizavadvisor.com Editorial contributions should be addressed to: Business Aviation Advisor, PO Box 5512, Wayland, MA 01778, and must be accompanied by return postage. Publisher assumes no responsibility for safety of artwork, photographs, or manuscripts. Permissions: Material in this publication may not be reproduced, stored in a retrieval system, or transmitted in any form or by any means (electronic, mechanical, photocopying, recording, or otherwise) without the prior written permission of the publisher. The views and opinions expressed in Business Aviation Advisor are those of the authors and advertisers, and do not necessarily reflect the policy or position of Business Aviation Media, Inc. Articles presented in this publication are for general information and educational purposes and do not constitute legal or financial advice. Postmaster: Please send address changes to: Business Aviation Media, Inc. PO Box 5512 • Wayland, MA 01778, USA ©Copyright 2020 by Business Aviation Media, Inc. All rights reserved Printed in the USA
Manifest Destiny
Many of us have closets – or file cabinets – full of unfinished projects. The exigencies of business and daily life pull us in disparate directions, diluting and redirecting the best of intentions. There’s no escaping those unscheduled intrusions, even after hours, thanks to your uninterrupted availability via smartphone and video conferencing. Travel time aboard business aircraft often has been your respite, enabling you to work in quiet semi-isolation, away from the office. There, with self-selected cabin mates, you have almost complete control of others’ access to you. But in this time of mandated social distancing, almost no one is traveling. After an initial spike in owners and charterers heading home, General and Business Aviation flight activity fell more than 80% in March and April, according to aviation data tracking services Argus, FlightAware, and WingX. Fixed Base Operators report fuel sales have dropped to virtually zero, as fewer and fewer ringing phones echoed in empty executive terminals. In fact, flight activity in late April dropped to the point that JetSuite grounded its fleet of charter business jets, and New York’s vaunted Westchester County Airport (HPN), home to dozens of Forbes Global 2000 and Fortune 500 corporate flight operations, temporarily shuttered its doors. Aircraft owners based there will have to move their aircraft to other regional airports if they opt to keep flying. Fractional and charter fleet clients will have to rejigger their schedules, to allow for longer ground-based travel to other, less conveniently located, airports. That should make this a “Time To Catch Up” – one of the seasons that Ecclesiastes – not to mention Pete Seeger – missed. But thanks to video conferencing via computer apps like GoToMeeting and Zoom, your schedule may be more crowded than before, with online virtual meetings and presentations. That creates yet another new challenge, unknown before the pandemic: “Zoom Fatigue,” described in an April 24 article in National Geographic. We humans communicate only partly via spoken words. Nonverbal cues like body position, pace of breathing, and gesture are as much a part of communication as are words, conveying speaker attitude, interest, and enthusiasm in the discussion. All of which is missing in head-and-shoulders-only video calls. Trying to extract non-existent visual information is far more tiring than making a voice-only phone call. In-person contact not only is less tiring and more productive, it is now a luxury good, made all the more valuable by its scarcity. And that, coupled with the need to energize the economy (and boost stock prices) will help drive business aviation’s eventual post-quarantine recovery. C-Suite executives and HNWIs needing to travel will be reluctant to board crowded commercial flights. They instead will opt for the passenger manifest control offered by business aviation, to ensure travel privacy and security – and continuing good health.
Gil Wolin — Publisher gwolin@bizavadvisor.com Ma y/Ju n e 2 0 2 0 B U S I N E S S AV I AT I O N A DV I S O R 5
■ AIRCRAFT FINANCE
Will That Be Cash or Credit?
Financing An Aircraft Can Make Good Fiscal Sense Fushelberger@gmail.com
he decision to borrow money or pay cash for any capital asset, especially when that acquisition is a business aircraft, may seem to be multi-faceted and complex. In actuality, the question is really quite simple − how and where can corporate funds be used to generate the greatest return? Cash always has been, and always will be, king. But not all cash is created equal. Financial institutions commonly operate with the presumption that an accomplished businessperson can generate more revenue on the money he or she invests to grow his or her business versus using those dollars to purchase capital goods, such as new machinery, vehicles, or a business aircraft. Therefore, using these same funds to purchase capital goods, versus other operating or marketing investment opportunities, often may not make the best financial sense. Additionally, regardless of how substantially an aviation asset enhances management and employee productivity, a business aircraft still depreciates, just like machinery or rolling stock. In an alternative scenario, a prospective borrower may have the need for, but not the necessary reserves, to purchase a business 6 B U S I N E S S AV I AT I O N A DV I S O R Ma y/Ju n e 2 0 2 0
aircraft outright. Nevertheless, where there is a strong operating and profit history, the potential exists to demonstrate the loan can be serviced comfortably out of cash flow, and still provide an adequate allowance to cover unexpected events. Also, the existence of other physical assets that can be collateralized to support the loan is usually favorable.
The Basics of Aircraft Financing Remain Unchanged
While memories of the 2008 economic downturn still loom in most loan originators’ minds, the basics of financing a business, or a business aircraft, for the most part remain unaltered. What has changed is that lenders have become much more analytical when evaluating loan applications – and they tend to stay more involved after the loan has been made. Generally, you can count on additional, but not necessarily onerous, lender requests in order to obtain financing. For example, aircraft engines may have to be on hourly cost maintenance support programs (See: “Over and Above,” BAA Jan/Feb 2020), acceptable insurance coverage must be in place, and registration numbers cannot be blocked by flight tracking systems. w w w. B i z AvA d v i s o r. c o m
EMBR A ER
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BY STEVE FUSHELBERGER
Lender verification that required appropriate maintenance is being performed at the scheduled intervals, along with monitoring the number and destinations of flights, has become much more prevalent. Periodic physical inspections of the aircraft by the financial institution granting the loan also are more commonplace. Lenders’ perspectives of business aircraft themselves likewise have changed. Experienced aircraft finance professionals, now quite astute in the areas of market segmentation and marketplace values, no longer view aircraft simply as commodities without further scrutiny required. Another difference is that frequently an aircraft is 1) no longer being accepted as the only collateral, and 2) valued solely on its purchase price. Banks also now calculate a loan amount based on the value for which an aircraft can be sold, versus the total acquisition cost. Finally, borrowers having equity in the aircraft is viewed positively, and often even is a requirement (See: “Structuring a Deal,” BAA Jan/Feb 2020). Forget the timeworn, inaccurate belief that banks only loan money to those who don’t need it. Financial institutions have cash and want to do business. This desire is heightened by competition between lenders and new entrants in the marketplace. Varying approaches to financing aircraft are taken by different lenders. A well maintained and conservatively operated aircraft that is 20, or more years old may not be an issue, particularly if the asset is part of a large fleet with good resale value, such as the Beech King Air turboprop. On the other hand, some institutions may look only at aircraft below a certain age. Still others use the Rule of 25 (or 20, or even 15, depending on the current and projected state of business aircraft values). This approach combines the term of the loan and the age of the aircraft to determine that the result does not exceed a preset number. While the methods that financial institutions employ to evaluate loan applications may differ, there is significant commonality. In general, loan officers will analyze: ■ The borrower’s ability to service a loan/Creditworthiness ■ Business operating results for the last three to five years ■ Aircraft acquisition cost/Residual value at loan termination ■ Market value changes and forecast (fleet, OEM, model) ■ Category appropriateness/Mission fit/Comparables ■ Any additional business the applicant has with a lender ■ The amount of loan competition from other institutions, and ■ Unique factors that may have a direct or indirect impact on the application.
Be Successful By Being Prepared Start the application process by approaching the institution(s) that you want to consider to be your loan partner as just that – a partner. View these prospective lenders as the assets they truly are – knowledgeable resources with the expertise to guide you through the process and assist you in obtaining the best possible outcome. w w w. B i z AvA d v i s o r. c o m
A lender who is deeply involved with their client should be seen as a positive. Financial partners can assist with problem prevention, or help to identify issues early enough so that corrective action can be taken. Don’t give them pause by what you do, or don’t do. Start by compiling your financial information into a complete and comprehensive package. Three years of history usually is the minimum time requested to review, but five years is even better.
EXPERIENCED AIRCRAFT LOAN PROFESSIONALS CAN PROVIDE INVALUABLE ASSISTANCE. Cash flow (not just profit) and the type of equity a company possesses are the first two aspects lenders will review. For example, a developer with 90 percent of the corporate assets in real estate could be of concern. An economic downturn in that business segment may well create a large default potential. Make use of the aircraft loan professionals’ expertise. Bring these individuals into the equation as early as possible to allow them help you proceed in a prudent, reasonable, and efficient manner. These experts know the financial pitfalls that can befall the unprepared or unwary. Since the conversation is free, why not have it? Chasing the lowest rate, or focusing solely on the loan rate, is one of the biggest mistakes made. Take time to research a lender’s client service availability and quality, their business aircraft marketplace knowledge, and the institution’s financial stability. It’s only prudent to partner with those who have “been there and done that” in the aircraft financing arena, and who are aware of all the potential problems that can create major headaches. You can bank on the fact that those unforeseen issues will cost a lot of dollars and cents. That’s why choosing an experienced aircraft financing partner makes good economic sense. BAA STEVE FUSHELBERGER is a marketing and
communications consultant to the business, general, commercial, and defense aviation industries. Possessing a Commercial Pilot license, he’s held senior leadership positions at Rolls-Royce, United Air Lines, Textron Aviation, and Leonardo.
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■ CABIN SAFETY
Breathe a Sigh of Relief Aircraft Purification System Helps Keep You Safer he spread of the COVID-19 virus has intensified the focus on the importance of ensuring a safe and healthy environment, including aboard your business aircraft. Enhanced cleaning procedures for sanitizing and disinfecting aircraft cabins have been implemented by aircraft owners and operators, maintenance facilities, and OEMS. The FAA and CDC have published detailed guidelines, and organizations, such as NBAA and NATA, have been posting recommendations, sharing resources, and hosting webinars to provide information on how to effectively clean the cabin before and after each flight. These measures help to ensure that crew members, passengers, and all those with whom they come in contact are kept safe while allowing the business aviation industry to function. Aircraft cabins, especially commercial airliners, easily play host to viruses, bacteria, and airborne mold spores, as well as gases and odors. Just by sneezing, coughing, and even breathing within an aircraft, you release contaminants and pathogens. The current pandemic spotlights the need to provide a clean and healthy interior when an aircraft is in the air as well as on the ground. While a variety of excellent products and procedures are effective for cleaning aircraft interiors when on the ground, it’s important to be aware of cleaning and purifying the cabin while an aircraft is in flight. Aircraft are equipped with filters that work through the environmental control system (ECS), but they work passively, meaning that the air, along with any contaminants it contains, must come to the filter. A proactive system that complements the ECS system provides a more effective way to purify the cabin. A growing number of both FAA- and EASA-registered business aircraft are equipped with this type of system, developed by Aviation Clean Air (ACA). The system consists of a component mounted on the existing ECS supply duct. It works electronically to create positive and negative ions from the hydrogen and oxygen molecules in the water vapor present in the air, and serves as a cleaning agent to purify the air and surfaces. The system pushes air through the cabin and distributes ions throughout the aircraft interior. As a result, pathogens are immediately killed wherever they live in the air and on the surfaces throughout the cabin. The technology replicates and accelerates nature’s cleaning process that successfully inactivates airborne and surface viruses, instantly sanitizing the cabin. In addition to its disinfection and purification capabilities, the ACA system offers a number of other benefits. It eliminates all types of odors onboard, including those from the galley, lavatory, 8 B U S I N E S S AV I AT I O N A DV I S O R Ma y/Ju n e 2 0 2 0
and even passengers. Lingering odors from jet fuel emissions and engine starts dissipate very quickly, and use of the system also greatly reduces the static electricity normally generated on board aircraft. An added benefit is that passengers and crew report feeling refreshed even after long flights. ACA took on the development and design work necessary to manufacture a system that is small enough and light enough to use onboard aircraft and creates no ozone. The component was tested extensively to ensure it met DO-160, the international standard for environmental conditions and test procedures for airborne equipment. It then was patented for Design and Utility, after which the FAA issued a Parts and Manufacturing Authority approval for the system. In the process of killing pathogens and eliminating odors, the system produces no harmful ozone or chemicals and requires no maintenance. Once installed, it functions automatically whenever the ECS is running. While there are a variety of tools available to aircraft owners and operators to help mitigate the spread of all types of viruses and other containments, new solutions are being rolled out. The effective use of these products and practices help provide a healthy and safe environment for business aviation, and keep you flying. BAA HOWARD HACKNEY is Managing Member and Co-Founder of Aviation Clean Air. His 50+ year career includes flight operations, business development, and senior management positions with OEMs, corporate flight departments, Part 135 operations, and aviation services companies.
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BY HOWARD HACKNEY Aviation Clean Air / hhackney@aviationcleanair.com
CAN WE HELP YOU
FLY
HIGHER?
PNC AVIATION FINANCE | Privacy. Security. Efficiency. Luxury. Maximizing the benefits of private aircraft ownership requires an experienced aviation lender that delivers flexibility, capital strength and confidence of execution. As a leading lender in aviation-specific lending for more than 10 years, our 40+ industry professionals provide a concierge-level experience to help you fly higher and be ready for today. For your next jet, turbo prop or helicopter finance need, connect with us by going to pnc.com/aviation.
PNC is a registered mark of The PNC Financial Services Group, Inc. (“PNC”). Equipment financing and leasing products are provided by PNC Equipment Finance, LLC, a wholly-owned subsidiary of PNC Bank, N.A. Aircraft financing is provided by PNC Aviation Finance, a division of PNC Equipment Finance, LLC. In Canada, PNC Bank Canada Branch, the Canadian branch of PNC Bank, provides bank deposit, treasury management, lending (including asset-based lending) and leasing products and services. Deposits with PNC Bank Canada Branch are not insured by The Canada Deposit Insurance Corporation or by the United States Federal Deposit Insurance Corporation. Lending and leasing products and services, as well as certain other banking products and services, require credit approval. ©2020 The PNC Financial Services Group, Inc. All rights reserved. CIB EF PDF 0520-062-1628201
■ AIRCRAFT MAINTENANCE
Not So Free Parking Is Your Parked Aircraft Costing You More Than You Know? BY JOSEPH T. ZULUETA, ASA Aeronautical Systems / joe.zulueta@planeman.com
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Keep the aircraft in a hangar if possible. If stored on ramp, cover windows and strobe lights. Consider local atmospheric conditions, as humidity will accelerate corrosion. Make sure all control locks or control column gust locks are installed to prevent movement of flight control surfaces. ■ If required, install lock pins on emergency escape hatches. ■ Install protective engine covers and, if required, moisture-absorbing desiccant bags. ■ Drain fuel from engine fuel controls and install preservative oil. ■ At least once a month, exercise the APU and engines for a specific interval of time as recommended by the OEM. ■ Remove and store lead-acid and NiCad batteries. ■ Lubricate flight control hinge pins. ■ Keep tires inflated and rotate tires at specified interval or place aircraft on jacks. ■ Coat exposed surfaces of hydraulic actuators with preservative hydraulic oil. ■ Drain the toilet. Whether you choose long-term storage or shorter-term ground runs, all the work must be documented in your logbooks. Required data include the duration of the engine runs and instrument indications verifying proper oil distribution, not just the fact that the run was accomplished. The more detailed information you put in the logbooks, the better off you will be in avoiding significant degradation to your aircraft’s value at time of sale. BAA ■ ■
JOSEPH T. ZULUETA , ASA , is Managing Partner of Aeronautical Systems. His 30+ years of expertise includes jet aircraft valuation consulting, technical inspections and retrospective, and current and future value appraising of aircraft assets.
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ith no quick resolution to the pandemic in sight, your aircraft could be parked longer than expected. When an aircraft is improperly stored, the costs associated with the corrective action could be significant, with additional costs – both tangible and intangible – having an impact on your asset’s market value at time of resale. All business aircraft, engine, and auxiliary power unit (APU) manufacturers have established storage maintenance procedures outlined in their maintenance manuals. And if those procedures aren’t followed, expensive engine bearings, electronics, and components could suffer damage. On the resale market, an airplane stored for any period raises red flags. If the required storage and preservation maintenance isn’t done properly, you should ask some important questions about how that could affect the quality of the multimillion-dollar asset you’re about to buy or sell. Parking any aircraft for the short term requires different maintenance procedures than that of storing an aircraft for the long term. For example, for aircraft storage lasting longer than six months, engine manufacturers advise expanded maintenance items, including replacing fuel in the fuel control with special lightweight oil; while other manufacturers recommend draining all fuel to prevent buildup of fungus and resulting corrosion. Since each aircraft model is unique, both short- and long-term storage require specific preservation actions to the airframe, engine, and APU. In addition to the OEM’s recommendations, for every week or two that your aircraft is idle, its system should be “exercised.” This refers to operating every system as well as taxiing the aircraft, which allows for fluids running through the aircraft and the wheels moving to avoid the formation of flat spots on its tires. Such actions also should include the health of the aircraft’s APU, the tiny turbine engine that generates electricity on the ground for air-conditioning and engine starting. The APU should be run as often as the engines, and the simplest method is to start the APU and use that to start the engines, in conjunction with operating the airplane’s lavatory and environmental control systems as well as its SatCom and WiFi, in case there are software updates that need to be downloaded. It’s also important to document in detail everything that happens to the aircraft while it is parked or stored. Doing so will help avoid problems when it comes time to sell the aircraft. How can you prepare to initiate a longer-term preservation program? When grounding your aircraft for more than 30 days: ■ Have your flight department evaluate all aircraft, engine, APU, and component manufacturer recommendations for storage.
TRUSTED GUIDANCE THROUGH LEGAL TURBULENCE Whether dealing with the unprecedented circumstances of COVID-19 or the everyday issues of business aviation, we have the knowledge and experience to guide you. Clients turn to our sophisticated and accomplished counsel for such matters as: • Legal protection and insurance coverage for potential disease contamination • Contracts and force majeure • Work-outs and credit facilities • Aircraft interchange and timesharing agreements • Aircraft management agreements • Aviation-related federal and state tax advice • FAA approvals and exemptions • Employment and workplace safety
K&L Gates LLP. Global counsel across five continents. For more information about our services and a comprehensive resource center on the legal issues associated with the impacts of COVID-19, visit klgateshub.com.
Contact: Robert E. Wolin, 214.939.4909, Robert.Wolin@klgates.com
■ AVIATION LAW
Are You Covered During COVID?
Legal Protection for You and Your Employees BY ALISON L. SQUICCIMARRO
he current pandemic caused a drop in turbine aircraft flying of more than 25% in March 2020, compared with March 2019, according to aviation safety and data company Argus International. Are you among the many owners now contemplating terminating, laying off, or furloughing members of your flight crew? If so, consider these three things before making a decision. If you’ve reduced or ceased aircraft use due to the pandemic, you likely are considering cost-saving measures including workforce reductions. Those reductions probably include flight crew, and may include permanent measures like terminating employees or temporary measures, i.e. furloughs or layoffs. Whether you employ the flight crew or they are employees of a management company, you have influence in any change in their employment status. Before making a decision and/or exerting your influence, it’s important to consider: whether contractual obligations are triggered, risks that the employee may seek alternate employment, and whether workforce reduction precludes or limits benefits available to your business under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).
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Are you required to pay severance or other benefits to employees?
First, review contracts with your flight crew. If the crew is employed by a management company, review the management agreement. Does your business have obligations to keep the flight crew members employed for a specified time period, pay severance on termination, or continue benefits following a change in employment status? Generally, employment is typically at will; an employer is not obligated to provide the above absent a written contract with the employee. In addition to reviewing the contracts, it is imperative to also review employee handbooks and manuals. If you have a policy that provides for any of the above, provide the benefits as specified in the policy. In addition to providing these benefits, you also may be required to pay accrued but unused vacation time to departing employees. Vacation time must be paid upon departure if you have a contract that so requires or you are required by state law to pay accrued but unused vacation time upon an employee’s departure.
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The risk that an employee is not available to you when you are ready to start flying again.
You may be exploring furlough or temporary layoffs as a means of avoiding terminating your flight crew. Terminated, furloughed, and laid-off employees are entitled to expanded unemployment 12 B U S I N E S S AV I AT I O N A DV I S O R Ma y/Ju n e 2 0 2 0
benefits under the CARES Act. Those expanded unemployment benefits, however, may not fully compensate the employee for all their lost wages. Thus, he or she may look elsewhere for work. Even if your employee isn’t actively seeking alternative employment, a competitor may make an offer too good to refuse — and as a result, hire away your valued employee. In that situation, you will find yourself needing to swiftly return to normal operations but without a valued, trained, current, and trusted employee — and needing to incur additional training and other costs and risk associated with hiring anew.
3
Reduction of your work force may limit or reduce relief available to you under the CARES Act.
Many businesses are eligible for relief as a result of the CARES Act. That relief potentially includes the Paycheck Protection Program and Loan Forgiveness, and the Employee Retention Credit. If you reduce your workforce or decrease employee wages, you may risk becoming ineligible or reducing the benefits otherwise available to you. Thus, be sure to consider both your eligibility and the impact that workforce reduction may have on the benefits you expect to receive. When contemplating reducing your workforce, carefully evaluate these three questions to determine what is most cost effective. The calculation may prove surprising. Careful review and consultation with your counsel and accountant may persuade you that you are better off maintaining your workforce during the pandemic. BAA ALISON L . SQUICCIMARRO , attorney with the Law Offices of Paul A. Lange, focuses her practice on aviation related commercial litigation with an emphasis on FAA and DOT Regulatory Issues, Airports, Insurance Coverage, and Employment matters.
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Law Offices of Paul A. Lange / als@lopal.com
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■ FLIGHT OPERATIONS
Getting Personal About Personnel Flight Department Leadership Informs Personnel Retention BY CHRISTOPHER M. BROYHILL, PH.D., CAM
n the past two years, the problem of pilot and technician retention in the business aviation industry has become more acute, as the Boomer Generation continues to retire (See: “Pay Attention to Retention,” BAA Jan/Feb 2018). The airlines continue to hire aggressively to fill the gap, and their personnel acquisition tactics continue to create vacancies in business aviation organizations. Those vacancies generate churn, as illustrated by these independent research results, which showed that in the three-year period between 2015 and 2018: ■ 63% of the operators surveyed had lost at least one pilot to a position elsewhere, and 29% of the pilot workforce changed jobs, and ■ 33% of operators surveyed had lost at least one technician to a position elsewhere, and 22% of the technician force changed jobs. Personnel retention is a multifaceted issue that can be likened to a three-legged stool, which will topple if any one of the three legs are either absent or not given equal emphasis. Quality of life is about predictability – that is, can an employee plan to be somewhere on a specific date, at a particular time, and not have his or her job interfere? Compensation is relatively straightforward: is the employee paid fairly? Individual value can be summed up easily. Does the employee enjoy coming to work? Does he or she like the job? The 2017 research revealed that “quality of life” was the number one reason why business aviation pilots were considering leaving their jobs for the airlines. The 2018 research showed that compensation was the number one reason given by pilots or technicians for a job change. In 2019, the focus was on the role of leadership in creating an organization culture wherein employees felt valued and enjoyed coming to work. The results were not surprising. Surveys sent to almost 23,000 recipients generated just more than 1,000 usable responses (a sufficient response rate to be generalizable). Where the elements of personnel retention were concerned, respondents ranked them as follows: 1. Quality of Life 2. Compensation 3. Benefits 4. Leadership Actions/Attributes 5. Organizational Culture 6. Individual Value/Morale, and 7. Opportunities for Advancement. While most respondents indicated they were not considering a departure from their current organization, both leaders and followers agreed that if they were thinking about leaving, the quality of 14 B U S I N E S S AV I AT I O N A DV I S O R Ma y/Ju n e 2 0 2 0
leadership in the organization would be a factor in their decision. They also strongly agreed that the action and attributes of leadership have a direct effect on personnel retention. When respondents were asked which leadership attributes were most important to them, both leaders and followers agreed on the top five attributes: 1. Integrity – They can trust what my leader says 2. Leading by example – The leader sets the example through his/her actions 3. Communication – Leaders keep their personnel informed 4. Empowerment – Leaders give their people the resources to do their jobs and trust them to do it, and 5. Credibility – Leaders know what they are doing. Finally and most importantly, leaders and followers were divided on the questions of whether department leadership manifested the traits they considered most important, with leaders more in agreement than followers. Leaders and followers also were divided on their satisfaction with the department leadership, with the leaders more satisfied than the followers. Additionally, followers’ consideration about leaving or staying with their organization correlated strongly with their satisfaction with their leadership, and how they perceived they were valued as individuals. As a business aircraft owner, what do these data mean for you? While the quality of life and compensation you offer your personnel is important, it is the quality of the leadership of your aviation department that will have the greatest impact on whether your personnel stay with you or seek a job elsewhere. BAA CHRISTOPHER M. BROYHILL, PH.D., CAM is the
Founder and President of Citadel Consulting LLC. He is the author of Business Aviation Leadership: From the Traits to the Trenches.
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Citadel Consulting LLC / chris.broyhill@gmail.com
Business Aviation’s Most Advanced Aircraft Valuation Tool Simply enter an aircraft’s serial number online: ■ Obtain Current Market Value and Residual Value figures. ■ Compare an aircraft with all units listed for sale. ■ Predict future maintenance events and expense. ■ Value the impact of any Hourly Cost Maintenance Program enrollment. ■ Forecast anticipated marketability – and much more. ■ All information is updated daily. The same methods, techniques, and processes an aircraft appraiser would use. eValues is the only valuation tool that runs on a true Artificial Intelligence platform.
To learn more call us at (540) 905-4555 or visit our website: www.assetinsight.com Atlanta • Chicago • Las Vegas • Orlando • Portsmouth • Washington
FLIGHT OPERATIONS ■
Owner Portal Takes Flight It’s your data – do you have access to it?
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BY ALEK VERNITSKY Portside, Inc. / avernitsky@portside.co
hether you are building your own flight department, or hiring a management company, will you have easy access to your aircraft schedule and financial data? You, your team, and your accountants and tax advisors certainly will need it in order to operate safely, productively, and cost effectively. Flight departments and management companies, big and small, use many software tools. Most use scheduling, accounting, maintenance tracking, HR, and expense management systems that tend to not communicate effectively with one another, if at all. Until recently, only the largest management companies could afford to integrate all the systems and make the data available to you in a useful way. Today, owner portal, billing, and reporting technology, built specifically for business aviation, make it much easier for aircraft management companies and flight departments to share schedule, maintenance, and financial data with you and your team in real time. As an owner, you or your chief pilot should have access to the following data, ideally in real time, on your desktop, tablet, and mobile phones.
Calendar ■ See your own and charter flights, including details such as travel arrangements and catering requests for your own flights. ■ Ability to request flights and make changes electronically. ■ Ability to block time on the calendar so your aircraft doesn’t get chartered when you might be planning a trip. ■ See (and potentially approve) maintenance and crew events, so you know when the aircraft or crew are not going to be available.
Metrics & Stats
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■ Cost per hour; fixed vs. variable expenses; categorized expenses; expense and revenue heat maps (indicating how often your aircraft flies certain routes and/or to certain destinations); and route, charter, and home base analyses are just some of the many metrics you will need to operate your aircraft effectively. Ask if your flight department or management company is able to provide your team with ready access to these data in an easy-to-use format. ■ For corporate aircraft used by multiple teams and organizations, or aircraft owned by multiple people, ask if you will be able to slice the data by who is using the aircraft. If all the data are co-mingled, reporting can be very time-consuming and error prone.
Financial & Operational Reporting Ask what financial, operational, and tax reports your management company or pilot will be able to provide, and how they build
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these reports. Most do so manually, burning hundreds of hours and making mistakes along the way. Your flight department or management company now can have access to reporting tools that make it easy to generate operational, financial, and tax reports, and to do so quickly and accurately. Ideally, reports should be interactive, and easy to extract to Excel and PDF for further analysis. ■ Be sure that you will have digital access to all the expense receipts, particularly if you share the aircraft with others. Being able to produce your own deductible business expenses will make audits go more smoothly.
Monthly Statements Ask if you will receive paper/PDF statements or access to a dashboard, providing data on your Key Performance Indicators (KPIs) on a single webpage, so that you and your team can review, analyze, and act on the data. Many owners also prefer to be able to pay invoices electronically via ACH, wire, or even a credit card. If you are still getting a 300-page PDF monthly statement and not much else, you can do better. Business aviation technology took a few big steps forward during the past few years. The technology is affordable, easy to deploy, highly secure, and available to management companies and small flight departments alike. Make sure you are using the right tools to manage and share your data – it will save you and your team lots of time and money. BAA
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ALEK VERNITSK Y, co-founder and CEO of Portside, Inc., is a serial technology entrepreneur with 20+ years of sales, marketing, and product development experience, including ten years developing cutting edge, technology-enabled services for commercial and business aviation.
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■ WASHINGTON REPORT
BizAv Buffeted By COVID-19, Economic Uncertainty The entire business aviation community is taking a big hit, but it will rebound. BY DAVID COLLOGAN he business aviation industry, which began the year with optimistic sales and growth expectations, was reeling less than a month into spring as travel restrictions and fears of the Coronavirus – along with widespread economic uncertainty – sharply reduced demand for business air travel. The impact on business across the U.S. has been a devastating one-two punch. First came wide-ranging business closures mandated by state and local governments to help curb the spread of COVID-19 by reducing public contact. Second, even businesses and industries permitted to remain open have had to resort to layoffs and employee furloughs after some workers were diagnosed with the virus. In addition, many businesses have decided to purposely reduce output because of falling demand for a wide range of products – automobiles, homes, appliances, airplanes, furniture, and even consumer staples like soft drinks. Low oil prices traditionally bode well for transportation companies. But worldwide demand for oil plunged so far and so quickly oil producers were facing a storage space crisis that threatened to worsen in coming months, and oil price futures were trading below zero. If all that weren’t dire enough, the Trump Administration was continuing to issue a daily scramble of mixed messages and outright falsehoods about the availability of virus test kits. State governors and many health care officials have decried the lack of test kits. On April 17, the American Medical Association cited “four essentials that must be in place” before relaxing stay-at-home orders: minimal risk of community transmissions; a robust, coordinated, and wellsupplied testing network; a well-resourced public health system for surveillance and testing; and well-resourced hospitals and health care workers. But despite test kits still being in critically short supply, President Trump and the governors of some states were urging businesses to begin reopening in May in an attempt to jump-start the economy. All of the negative news manifested itself in a huge drop in demand for charter aircraft flight. The National Business Aviation Association said April 21: “charter operators across the country are reporting sharp drop-offs in flight requests and activity, in some cases by more than 75% over the same period last year.” Flight tracking numbers from FlightAware tell the same story. U.S. business aircraft flights in the week of April 15, 2019 (MondayFriday) averaged 11,236 per day, with a high of 12,966 on April 18. 18 B U S I N E S S AV I AT I O N A DV I S O R Ma y/Ju n e 2 0 2 0
For the week of April 13, 2020, (Monday-Friday) business aircraft flights averaged 3,519 per day, with a high of 4,054 on April 17 – and a low of 2,803 on April 13, 2020. A check of FlightAware’s live tracking data by aircraft manufacturer and model on April 21, 2020 at 1100 EDT revealed fewer than 200 business jets in the air over the continental United States. Worldwide civil aircraft movements of all types are off by approximately 80 percent since the beginning of 2020. NBAA said it welcomed news that the U.S. Treasury Department had begun making payments “to many of the small and mid-sized general aviation air carriers, including FAR Part 135 charter operators struggling with the unprecedented financial challenges raised by the COVID-19 pandemic.” But NBAA noted those government payments may be used only for “employee wages, salaries and benefits,” leaving operators to find ways to cover an array of fixed costs, including aircraft and facility leases, training, and maintenance, all while generating much less revenue. It will take many months for business aviation flight activity to return to pre-COVID-19 levels. There will probably be considerable consolidation among charter operators. But once people begin to feel safe to travel again, business aircraft will still be the most convenient, safest, flexible, and fastest way to get where you need to be. Business aviation permits you to select your seatmates and set your own schedule. It will help the economy – and the country – recover. BAA 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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dlcollogan@gmail.com
WE’RE HERE FOR YOU FROM HORIZON TO HORIZON We want to reassure you, our clients and partners, that we are here to support you, from start to finish, from horizon to horizon. We haven’t changed. Our business model is designed to adapt to a changing world, and we are moving forward to meet your needs. We’re still here working for you, we’re still researching, and we’re still developing the tools you need to sustain your business and help you grow during this crisis and beyond. We have the intelligence you need when you need it most. As you work to sustain, to grow, to gain an advantage, we are here for you. Let’s do this together.
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