Business Aviation Advisor January/February 2016 by Business Aviation Advisor Magazine

JANUARY / FEBRUARY 2016

Climate’s Changing In Business Aviation Stage Set for 2016 Selling to Soar

Questions to Ask Before Chartering Your Next Jet OPTIONS FOR VALUING YOUR AIRCRAFT COVERING YOUR TAIL CROWDS FROM THE CLOUDS RISKY BUSINESS LINKING OWNERS TO DRONES A Business Aviation Media, Inc. Publication

W W W . B I Z AVA D V I S O R . C O M

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F E AT U R E S Climate’s Changing In Business Aviation Stage set for 2016 selling to soar by ROLL AN D VIN C E NT

5 Questions to Ask Before Chartering Your Next Jet

Crowds from the Clouds

Risky Business

There’s no app for safety

by E D WAN DALL

Options for Valuing Your Aircraft

Covering Your Tail

Clear choices for a complex process

by ANTHONY K IOUS S IS

• Volume 3 / I s sue 1

10 steps to moving your N-Number by LISA HOLT, J D/LLM

Flying to special events requires planning and patience by G IL WOLIN

Avoid these six common aircraft acquisition errors by DAV E W E IL

D E PA R T M E N T S Publisher’s Message Plan for Change by G IL WOLIN

Washington Report

Linking Owners To Drones by DAVI D COLLOG AN

The Business of Business Aviation The 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.

Business Aviation Advisor: the Business of Business Aviation

Subscribe to our digital edition at www.bizavadvisor.com/subscribe

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Ja n u a r y/ Fe b r u a r y 2 016 B U S I N E S S AV I AT I O N A DV I S O R 3

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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 EDITORIAL ASSISTANT Michael B. Murphy mmurphy@bizavadvisor.com WASHINGTON EDITOR David Collogan dlcollogan@gmail.com CONTRIBUTORS Lisa Holt, JD/LLM Cooling & Herbers, P.C. lholt@coolinglaw.com Anthony Kioussis Asset Insight, Inc. akioussis@assetinsightinc.com Rolland Vincent Rolland Vincent Associates rvincent@rollandvincent.com Ed Wandall ARGUS International ed.wandall@argus.aero Dave Weil Flight Dept Solutions dweil@flightdeptsolutions.com BUSINESS MANAGER JoAnn O’Keefe jokeefe@bizavadvisor.com 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.

Plan for Change

Every four years for the past four decades, business aviation in the U.S. has hit the “pause” button. Aircraft sales, as well as owner and charter flying slows, as we wait to see which party and policies will prevail in November. It’s tough to plan future business and investment activities until you know the rules under which you’ll have to operate. It’s already clear that the 2016 primaries and the general elections will be particularly contentious. That turmoil will have an impact on aircraft values for sellers and insurers. And while in the near term, good deals are in the offing for savvy buyers, as Rollie Vincent explains in our cover story, “Climate’s Changing in Business Aviation,” the longer term view is murkier. It’s worth taking a historical look at aircraft asset values, as the rules regarding business jets as investments have evolved significantly in the past decade. Business aircraft were viewed as a capital asset with a stable resale value. You could buy a jet, take the 10% Investment Tax Credit, use a double declining depreciation schedule, and thanks to inflation, sell the aircraft in three years at a price nearly equal to its original purchase price. Of course, having recaptured all that depreciation, you then had to purchase a new aircraft of equal or greater value to avoid significant capital gains tax – a cycle the Original Equipment Manufacturers grew to know and love. That provided an economic rationale for current owners to upgrade, as well as a healthy inventory of late-model preowned aircraft in excellent condition – some still under warranty or enrolled in an hourly-costmaintenance program – for first-time buyers. Today, great leaps in both technology and regulation, not to mention NextGen mandatory updates and current economic conditions, have relegated that part of the cycle to history books. Business aircraft operating economics are under fire as well. Congress is taking a hard look at privatizing the Air Traffic Control (ATC) system, to be governed by a board comprised chiefly of commercial airline representatives. Its primary concern will be the 550 airports with commercial airline service, not the 4,800 corporate and general aviation airports which serve suburban and smaller communities. Privatizing the ATC likely would change the way we pay for the system, as burdensome per-flight segment user fees probably would replace current fuel taxes, at rates set by the airline-dominated board. The National Business Aviation Association (NBAA) is fighting this privatization effort on behalf of all corporate flight departments, working with the U.S. Chamber of Commerce and others to preserve one of the safest and most efficient aviation infrastructures in the world. It wouldn’t hurt to add an aircraft owner’s voice or two to the chorus. For details, contact NBAA (www.nbaa.org) at (202) 783-9000. Best wishes for a happy new year.

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 2016 by Business Aviation Media, Inc. All rights reserved

Gil Wolin — Publisher gwolin@bizavadvisor.com

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■ INDUSTRY UPDATE

Climate’s Changing In

Business Aviation BY ROLLAND VINCENT Rolland Vincent Associates /rvincent@rollandvincent.com

id you notice? In 2015, business aviation became more affordable – read: more accessible – to many, a trend that will continue in 2016. Where are we headed?

A Smorgasbord of Choice

Today, as never before, business aircraft buyers have a virtual smorgasbord of choice in front of them. With strong competitive forces at play, and upwards of 10 turboprop and 40 jet models in production or in development, the worldwide marketplace has never been more diverse. In an industry that was barely in its infancy 50 years ago, there are now more than 35,000 fixed wing turbine business aircraft in the world fleet – and about 10% of them are for sale. Remarkably, 87% of all business aircraft ever built are considered to be in operation today, according to JETNET records. Preowned transactions, although never easy, are happening nevertheless, and oftentimes at prices that raise eyebrows. In 6 B U S I N E S S AV I AT I O N A DV I S O R Ja n u a r y/ Fe b r u a r y 2 016

2016, we expect prices to remain soft, as the Original Equipment Manufacturers (OEMs) battle to sell their available new production positions, and as a proliferation of new and improved models, including the Gulfstreams 500 and 600, Falcon Jet 5X and 8X, and the recently introduced Cessna Citation Hemisphere and Embraer Legacy 450, takes some of the shine off of out-of-production aircraft. Current and prospective owners are taking notice of their enhanced buying power, especially in the relatively robust U.S. market where uniquely spec’d late-model aircraft, some recently arrived from European shores, are the latest in what must seem like a never-ending feast of choice. Rational buyers are evaluating low-time, nearly new models with the sharp eyes of a savvy appraiser, and are asking questions such as: Why wouldn’t I consider a pre-owned purchase? Why would I take the downside residual risk of a new aircraft, knowing the value hit that will occur as soon as it is flown away from the delivery center? In some cases, we hear that Year One depreciation can reach 15% or more for a model with limited order backlog and near-term (within the year) availability. w w w. B i z AvA d v i s o r. c o m

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STAGE SET FOR 2016 SELLING TO SOAR

Who’s Gonna Blink Next?

Industry-volume leader Bombardier, easily one of the most innovative competitors in business aviation, enters the New Year in 2016 in a “get back to health” mode. Unfortunately for stakeholders, the wounds from multiple missteps and overextensions will take much more than this year to heal. Under the watch of a new executive management team, the company made several painful acknowledgements in 2015, particularly regarding new development programs, with the cancellation of the Learjet 85, deferral of the Global 7000/8000, all linked to the long overdue/over-budget C Series commercial airliner. In what was no doubt another very difficult decision, the company is sharply reducing Global 5000/6000 production in 2016 and beyond, further limiting much-needed cash flow and margins in its elusive search for profitability at least in line with its peers. By many accounts, Bombardier has led the industry charge down the slippery slope of price discounting, offering unprecedented “deals” to encourage buyers to sign on the dotted line. Sharply discounted new Globals and Challengers are challenging other OEMs to step up to the same game table, especially to protect themselves from losing a deal with one of their key accounts. In this marketplace of deflating prices, OEMs are (perhaps unwittingly) participating in a process of transferring power in a transaction to the buyer. Suddenly, in a marketplace where most transactions involve only one or two aircraft at a time, pricing

and other investments underway, and consolidation occurring in the aerospace OEM, supply chain, Fixed Base Operator (FBO)/ Maintenance-Repair-Overhaul (MRO), as well as the fractional, charter, and management operator communities, this capital is providing a powerful growth momentum, like a tide raising all boats. We continue to note that industry growth rates are well above those experienced in the general economy, a clear sign of many more good times – and good years – to come. Pre-owned jets that otherwise might have been uneconomic to fly have been given a reprieve from the gallows by low fuel prices and the recognition that they offer remarkable value for the dollar to some buyers. Such aircraft literally can be flown for several years until they reach a budget-busting major inspection, overhaul or FAA-mandated upgrade, and then simply discarded (see “Will You Be the Last Owner of Your Aircraft,” BAA, Nov/Dec 2014).

Mid-1990s vintage Gulfstream G-IVSPs, for many the undisputed Queen of the Sky prior to the development of ultra-long range jets, can be purchased today for less than $5M. Seven- to eight-year old Bombardier Global Express XRS models currently are priced in the low $20M range, down in some cases by almost one-third from a year ago. Although it is no doubt a great time for current owners to upgrade to a more capable aircraft, knowledgeable buyers are aware that this is a depreciating market – they must perform their prebuy due diligence with a degree of professionalism that is unprec-

Arguably, nothing could be better news for business aviation than more affordable prices – encouraging more people to use business aircraft. power akin to fleet purchasing is shifting from the OEMs towards companies and individuals that historically have bought one-sies and two-sies. Fleet buyers like NetJets, VistaJet, Flexjet, and Wheels Up have taken note, and naturally are demanding even more lucrative terms in their purchase contracts.

Ending the Pricing Spiral

When does the downward price spiral end? Perhaps no time very soon. One thing we know for sure is that lower prices tend to increase demand, bringing more new buyers into the market, all other things being equal. Arguably, nothing could be better news for business aviation than more affordable prices – encouraging more people to use business aircraft. In the uphill battle to win the hearts and support of legislators on The Hill, doesn’t it make sense to increase the number of people (i.e. voters) who benefit from time savings, enjoy the comfort and privacy afforded by business aviation, and avoid the crowded hub airports and security gymnastics of the commercial aviation system? Unlike the mid-1980s, big-dollar capital is being invested in the industry. With so many new aircraft, engines, avionics systems, w w w. B i z AvA d v i s o r. c o m

edented. Never before has it been so important for buyers to work with trusted, savvy, straight-talking transaction and appraisal professionals to ensure a successful purchase outcome and experience. Despite unwelcome political rhetoric that emanates occasionally from Washington, D.C., this most American of industries is a shining example of private enterprise at its best – creating jobs, connecting communities, and enabling trade and commerce. And now, with lower aircraft prices and new business models under development, is the U.S.A. primed and ready for U.B.A. – Uber for Business Aviation? It is difficult to say with any precision, but what we do know is that the Year 2016 should be a year to remember – a year when more people take notice of – and benefit from – business aviation, than ever before. BAA ROLL AND VINCENT is President of Rolland Vincent

Associates, an aviation and aerospace market research, forecasting, and strategic planning firm. His 30+ years’ experience includes work with manufacturers, commercial operators, and international organizations.

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■ ALTERNATIVE LIFT

Questions to Ask Before Chartering Your Next Jet

BY ED WANDALL, ARGUS International / ed.wandall@argus.aero

WHEN YOU CHARTER A FLIGHT, YOUR QUESTIONS for the operator or broker usually focus on concerns about price, availability, catering, and transport to and from the airport: all quickly asked and answered. But you likely have other questions, such as “who is going to be doing the flying?” and “how qualified are they?” which may go unspoken because you don’t know exactly what to ask, or what the “right” answers should be. Any reputable operator or broker should be able to answer these five questions to your satisfaction – before you sign that charter agreement.

Is the operator audited by a third-party organization?

The FAA (or its equivalent in other countries) inspects each operator to make sure it is legal, but many good operators go an extra step and require an audit from an independent auditing firm. These third parties will evaluate an operator’s maintenance and operations processes, and look at how an operator compares to industry “Best Safety Practices,” safety culture, and whether it embraces continual improvement. It is strongly recommended that you require your charter operator to be evaluated regularly by a professional and independent audit firm, and ask them to confirm the outcome of their audit.

Who are the pilots and what are their qualifications?

Typically, pilot qualifications focus on experience (flight time), training (frequency, use of simulators, etc.), medical status (you want to see a “first class medical”), and their actual incident and accident history. A pilot may have 15,000 hours total time, but only 50 hours in the specific type of aircraft you are chartering. Focus on the Pilot-in-Command time in the specific make and model, often a good indicator of appropriate experience. When was the last time the crew was in a full motion simulator? (it should be every six months). Have the pilots had any accidents or enforcement violations in the past five years?

Is my insurance adequate?

Every charter broker and operator should carry applicable and appropriate insurance coverages consistent with their actual role in the performance of your charter flight. Common coverages for aircraft operators include general liability and hull insurance, whereas a charter broker might carry non-owned aircraft insurance, professional liability, and more. Generally, you engage in chartering a business aircraft at your own risk. Since limits and/or amounts of coverage are not standardized, meet 8 B U S I N E S S AV I AT I O N A DV I S O R Ja n u a r y/ Fe b r u a r y 2 016

with your individual or corporate risk professionals to determine insurance coverages appropriate for you. Then, ask your charter broker or operator to show you how their coverages compare to your requirements.

If I follow the steps above and set very high standards, I will have a safe flight, correct?

No one can guarantee safety. With any flight, there are many variables which represent “risk factors” that can be managed and mitigated, but not necessarily eliminated entirely. Today’s best safety practices for commercial operators of business aircraft around the world – now either mandated or in process – are based on a core process known as a Safety Management System (SMS) (see “Six Sigma for Corporate Aviation,” BAA, April 2014). The core of most recognized audit standards is a strong requirement for a robust SMS, another good reason for an independent audit.

Since I’m booking my flight through a broker, I don’t have to worry about all this, right?

Actually, you do. Ask about your broker’s due diligence process. He or she should be able to detail it sufficiently so that you are satisfied that your questions have been asked and answered. Just like operators, brokers can be independently assessed by third parties. Before you charter, don’t be afraid to ask questions. Reputable operators and brokers answer these types of questions every day. If you run into someone who refuses to give you information, that should be considered an answer unto itself. BAA ED WANDALL , Director, Charter Evaluation and

Qualification at ARGUS International, has more than 20 years’ experience in operations, safety management, auditing, and brokering. A graduate of Embry-Riddle Aeronautical University, he is a commercial/multi-engine pilot.

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■ AIRCRAFT ACQUISITION

Options for Valuing Your Aircraft BY ANTHONY KIOUSSIS, Asset Insight, Inc. / akioussis@assetinsightinc.com When it comes to valuing an aircraft, whether for insurance purposes or for potential resale, you have several options. These can range from free valuation “guidance” to an onsite aircraft inspection, records review, and appraisal. Which option you choose depends on what level of precision you are seeking.

Valuation Option

Why Select This Option?

Why Consider Another Option?

Examine ask prices available in trade publications and online services.

To obtain a rudimentary understanding of competing asset quality, as well as what sellers believe their assets are worth.

Many aircraft are priced as “Make Offer.” Also, ask price is a “value” unlikely to be achieved in the current buyer’s market. Current transaction value figures are more useful.

Review aircraft price guides such as Aircraft Bluebook and Vref.

These guides publish historical transaction values, useful for determining market value trends.

Even recently printed historical data can be outdated. Online information is more timely.

Adjust ask price and/or price guide value by factoring in “maintenance equity” (total estimated cost of scheduled maintenance minus cost of future required maintenance, plus cost of already completed maintenance).

Maintenance represents an aircraft’s greatest “wild card.” Objectively accounting for maintenance equity ranks aircraft by their maintenance quality; helps justify aircrafts’ ask/offer price.

Maintenance status, while potentially the largest, is but one value determinant. Consider requiring maintenance equity analytics from any broker or appraiser you hire to justify their recommendations.

Consult an aircraft broker.

Brokers often specialize in particular aircraft make/models, providing accurate value guidance – and very quickly.

Broker experience and true market knowledge varies greatly. If selecting this option, choose an experienced, trusted firm.

Hire a National Aircraft Resale Association Certified Aircraft Broker (www.naraaircraft.com).

NARA is comprised of aircraft brokers/dealers who must pass a Certification Process and adhere to a Code of Ethics.

If you are “just looking,” other valuation options are less expensive.

Obtain a desktop appraisal.

Desktop appraisals can be obtained quickly and for substantially less cost than an onsite appraisal.

Desktop appraisals often rely only on the aircraft specification information you provide, plus the appraiser’s own recent transaction knowledge.

Obtain an onsite aircraft inspection, records review, and appraisal from an Accredited ASA Appraiser (www.appraisers.org).

An ASA Appraiser is likely to provide the most comprehensive and standardized/process-based, opinion of an aircraft’s value, based on experience, education, training, standardization, regulatory compliance, and a large support network.

Usually the most expensive, this option likely will be the most beneficial as you select a replacement aircraft.

Which Valuation Option Is Best For You?

■■ During the initial analysis phase, use a less expensive option.

■■ Combine options to increase valuation precision, such as hiring a NARA

Certified Broker and requesting a justification of valuation by accounting for each aircraft’s maintenance equity (www.naraaircraft.com). ■■ Using a NARA Certified Broker may reduce your cost for valuation services, as routine valuation estimates are included in his/her aircraft acquisition/sales fee. You also may secure certain ongoing valuation services, free or at a discounted cost, by using the “NARA Value + Program.” ■■ Variations exist for each option to help further your planning. Experienced brokers and appraisers can provide both residual value forecasts and market value trend information. ■■ Before making an offer on a pre-owned aircraft, obtain an onsite aircraft 10 B U S I N E S S AV I AT I O N A DV I S O R Ja n u a r y/ Fe b r u a r y 2 016

inspection, records review, and appraisal using an accredited ASA appraiser. Ask him/her to account for the aircraft’s anticipated maintenance quality and related maintenance equity at time of delivery to you. While reviewing the aircraft’s records during the pre-purchase inspection is useful, you can obtain the same information more cost effectively by first using one of the other options. Doing so saves time and enables you to decide whether to pursue that aircraft, or to look for another that is more suitable. BAA ANTHONY KIOUSSIS is president of Asset Insight, Inc.,

which developed an Asset Grading System Process for evaluating an aircraft’s maintenance condition. His 35+ years of aviation experience include positions at GE Capital Corporate Aircraft Finance, Jet Aviation, JSSI, and British Aerospace.

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DEDICATED TO HELPING BUSINESS ACHIEVE ITS HIGHEST GOALS.

C R O S S I N G T H E AT L A N T I C W A S E A S Y

C O M PA R E D T O N AV I G AT I N G C O N G R E S S . When “Lucky” Lindy made his transatlantic crossing, he didn’t have to deal with an ocean of congressional wrangling (maybe that’s why they called him “Lucky”). The prevailing winds blew in his favor. But today, those winds have changed. Flying for business is more scrutinized than ever. Luckily, there’s NBAA. We’ve made a home on the Hill, so that our members can make a living in the sky. Because business aviation enables economic growth. And at NBAA, we enable business aviation.

Join us at nbaa.org/join.

■ AVIATION LAW

Covering Your Tail 10 Steps to Moving Your N-Number

here are many reasons why you originally selected the NNumber for your current aircraft: to incorporate your or your company’s initials, the aircraft serial number, or other personal information; to comply with contractual requirements (the aircraft seller may have required a provision in the contract that the N-Number be returned so the seller could reassign it); or to enable the return of the N-Number of a new aircraft to the manufacturer so it can retain all N-Numbers indicative of the manufacturer (e.g. N100GA for a Gulfstream aircraft). So, when it comes time to purchase your next aircraft, you may wish to move the N-Number from your current aircraft to the new one. Doing so is a two-part process, each involving several steps. The first part of the process is to remove your current N-Number from your current aircraft:

Step 1:

File an N-Number Change Request with the FAA requesting that a new N-Number that you have selected be assigned to your current aircraft.

Step 2:

The FAA will issue Form 8050-64, authorizing the new N-Number to be painted on your current aircraft. Paint this N-Number on your current aircraft and cover it with a decal (this will not damage the paint) containing your current N-Number.

Step 3:

Within five days of painting the new N-Number on the aircraft, sign the Form 8050-64 confirming that you have done so, and file it with the FAA. A copy of the Form 8050-64 must be carried on board your current aircraft together with the old Certificate of Registration pending receipt of the new Certificate reflecting the new N-Number. If you have an international trip scheduled within four to six weeks following the 8050-64 filing, you may file a Declaration of International Operations to obtain an immediate “fly wire” (temporary certificate of registration) and expedited processing of the new permanent Certificate of Registration.

Step 4:

Submit a signed “Reservation of N-Number” letter to the FAA to reserve your current N-Number for your new aircraft, along with the executed 8050-64, and a letter from you relinquishing that N-Number to 12 B U S I N E S S AV I AT I O N A DV I S O R Ja n u a r y/ Fe b r u a r y 2 016

the current registered Owner of the aircraft (“Owner”). This enables the Owner to assign it to your new aircraft before you take delivery.

Step 5:

Obtain a new Certificate of Airworthiness for your existing aircraft reflecting the new

Step 6:

The FAA will issue a new Certificate of Registration for the new N-Number for your

N-Number.

current aircraft.

The second part is for the Owner to complete the process of assigning your current N-Number to your new aircraft:

Step 7:

The Owner files an N-Number Change Request with the FAA asking that your current N-Number be assigned to your new aircraft.

Step 8: aircraft.

The FAA will issue Form 8050-64, authorizing that N-Number to be painted on your new

Step 9: Step 10:

The Owner paints your reserved N-Number on the new aircraft and covers it with a decal.

The Owner then signs the 8050-64 confirming that he/she has done so, and files it with the FAA within five days. This form often is filed concurrently with the FAA Bill of Sale transferring the ownership to you. A copy of the 8050-64 must be carried on board your new aircraft together with the old Certificate of Registration and “pink slip” pending receipt of your new Certificate. Following these steps enables you to obtain a new Certificate of Airworthiness for your new aircraft with your reserved NNumber, as the FAA will issue a new Certificate of Registration reflecting that N-Number. While it may sound complicated, the process of moving an NNumber usually goes very smoothly, and generally can be completed in four to six weeks. BAA LISA HOLT, JD/LLM, Senior Attorney for Cooling &

Herbers, P.C., concentrates her practice in the areas of purchase, sale, leasing and financing, like-kind exchanges, and business and tax planning for corporate aircraft.

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BY LISA HOLT, JD/LLM Cooling & Herbers, P.C. / lholt@coolinglaw.com

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Avoid surprises – learn: ▲ The value of your aircraft’s Maintenance Equity ▲ How your aircraft’s Maintenance Equity compares to the fleet average ▲ The value of your aircraft’s Hourly Cost Maintenance Program coverage ▲ What aircraft Major Sectors are adding to, or detracting from, its value ▲ How to justify your aircraft’s value versus similar assets listed “for sale” ▲ Your aircraft’s scheduled maintenance expense over the next 60 months ▲ When a low aircraft purchase price may not represent good value

Call (540) 905-4555 info@assetinsightinc.com Manage your aircraft as you do your other Financial Assets.

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■ GROUND SERVICES

Crowds from the Clouds Flying to Special Events Requires Planning and Patience BY GIL WOLIN Business Aviation Media / gwolin@bizavadvisor.com

ill you be flying your key customers and/or executives to San Jose for Super Bowl 50? So will 800 of your fellow aircraft owners and charterers. Whether your travels take you to a premier sporting event such as the Indy 500 or Grand Prix de Monaco, an arts gala like the Cannes Film Festival or Art Basel, or to a business meeting like the World Economic Forum or your own company’s shareholders’ meeting, extra-high volume at such events means that you may not experience your usual level of convenience. While you depend on your flight crew for a safe, expeditious trip, what do you need to do to ensure a successful trip to a special event? ■■ Plan Ahead – “Three months is not too far ahead to call for events like Super Bowl,” said John Langevin, Jet Aviation’s VP FBO Operations. Without the bulk buying power of large fleet operators, you’ll want to reserve ramp and/or hangar space as early

as possible. If you are attending a one-day event, will you fly home the same day? If not, or if you encounter unexpected weather, where will you and your crew spend the night? High demand for hotels, ground transportation, and catering make early planning a must. ■■ Be Flexible – You’re used to flying into the airport nearest to your final destination. That’s the one sure to be the most crowded, and where you’re most likely to experience delays getting in and out. Your crew may determine that you’ll actually save time by landing at a secondary airport, geographically further away. ■■ Be On Time – Your crew will pick your FBO well in advance of the event, and will call ahead for a reservation. They also must make slot reservations with Air Traffic Control for both arrival and departure. You have to be on time, or you will lose your slot and have to go to the end of the line. ■■ Stay Safe – “The rise of social media has changed security requirements at large special events,” says Bob Sarazin, Vice President, FBO Operations for Pentastar Aviation in Michigan.

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C OURTESY OF C OMB S G ATES ARCHIV E

“Regular fans and paparazzi monitor these sites, as well as aviation tracking sites like FlightAware, for high profile individuals traveling to major events.” To circumvent confrontation, you may require an additional level of security precautions than you are used to. Since special events tax FBO resources, most will bring in additional temporary staff. If you have any qualms, bring your own security personnel. Avoid the main terminal and go through the second gate. ■■ Manage Your Expectations – For security reasons, your limo or rent car isn’t likely to be allowed onto the ramp. The FBO may direct you to park at a relatively remote ramp location, and then provide a shuttle bus – maybe even a school bus – to bring you to its executive terminal where you’ll connect with ground transportation to your destination. ■■ Be Prepared to Pay – Now that airplanes are so fuel efficient, you may not have to fuel up onsite. So most FBOs now make up for lost fuel sales by charging fees for parking and landing, as well as for limited covered hangar space in locations with harsh weather. “This is particularly true at special events,” added Langevin. ■■ Be Patient – Between sheer volume, and the extra FBO temp staff’s learning curve, things won’t go as quickly as you are accustomed. While you may be in a hurry to leave, yours may be one of 200 airplanes departing at the same time. There is going to be a taxi line. In winter, deicing may be mandatory, and may have to

Crowding at special events has been a long standing challenge. (Indianapolis 500, 1978)

be performed more than once if you are required to wait on the tarmac for clearance to depart. Planning ahead – and most importantly, planning to be patient – will help ensure that you have a successful trip and enjoy the event. BAA GIL WOLIN’S 43-year career in business aviation includes

senior management positions in leading charter management and FBO companies. He served as publisher of B/CA prior to founding Wolin Aviation Consulting and Business Aviation Advisor.

Providing Aviation Legal Services Worldwide From the Heart of America James Cooling

Heidi Albers

Paul Herbers

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Kate Breckenridge

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James Glover

Photo courtesy of ONE Aviation Corp.

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■ AIRCRAFT ACQUISITION

Risky Business Avoid These Six Common Aircraft Acquisition Errors BY DAVE WEIL hen buying a business jet, mismanagement, insufficient professional oversight, and/or your erroneous assumptions can result in substantial financial loss. What are the most common risks prospective owners take, and how can they be avoided? ■■ Not Choosing the Right Advisors – You trust your corporate attorney and outside accounting firm to help you plan and negotiate the aircraft purchase. Unfortunately, they may not be familiar with the highly specialized FAA and IRS regulations that govern business aircraft. For example, the single-member LLC ownership structure they might devise likely will result in violating the FAA’s Part 91 regulations and incurring the 7.5% federal excise tax on the cost of operating your aircraft. And unless the letter of intent and purchase agreement are prepared by an experienced aviation attorney, you could end up in a dispute, and without proper contractual protection. The money you saved initially by not using an aviation attorney is dwarfed by what it costs to settle that dispute. ■■ Not Arranging for a Proper Pre-Buy Inspection – You’ve found a great airplane at a great price and you can’t wait to start flying. It’s suggested that the local maintenance shop assess the aircraft’s condition because it can do the job quickly. However, during the first major post-close inspection at a different facility, corrosion is detected. Your airplane is out of service for several weeks for costly repairs that should have been fixed before delivery at the seller’s expense, not yours! Only a maintenance facility authorized by that model’s manufacturer ensures a proper inspection. ■■ Making the Wrong Choice About How to Operate the Aircraft – Either you’ll create your own independent flight department, or you’ll hire an aircraft management company. Each has advantages and disadvantages specific to your mission, annual flight requirement, and budget. The wrong decision could be very costly. Hire an experienced aviation consultant to help you analyze which best fits your unique needs. ■■ Assuming Third-Party Charter Will Be Profitable – A disreputable management company might try to convince you that it can put enough charter hours on your aircraft to allow it to turn a profit. Managed aircraft never are profitable. At best, you can expect charter to defray part of the cost of your own flying. ■■ Hiring the Wrong Flight Department Manager – If you are considering setting up your own flight department, you may not know how to choose a well qualified aviation manager. The most experienced, proficient pilot may not have the management skills 16 B U S I N E S S AV I AT I O N A DV I S O R Ja n u a r y/ Fe b r u a r y 2 016

needed to supervise your flight crew and maintenance personnel. Even 10,000 hours of flight time in your specific aircraft type does not guarantee superior interpersonal skills. As a result, you could experience a lot of expensive crew turnover and inefficient operations. ■■ Not Hiring a Dedicated Maintenance Technician – You may think you’ll save money by assigning a flight crew member to monitor maintenance, and having most work performed at various maintenance facilities. Two things can go wrong: the airplane may not be available when you want to fly, and gaps in maintenance records are likely to occur. When it comes time to sell the aircraft, its value is diminished due to insufficient maintenance documentation. Also, today’s aircraft are so complex that an inspection should be done after every flight. Engaging your own dedicated technician can help ensure your safety and aircraft availability, and avoid costly problems. Before beginning to shop for your new aircraft, choose advisors and vendors with the expertise and integrity to guide you properly through the process. Ask colleagues who own aircraft who they recommend and who to avoid. Consider using members of aviation trade associations (e.g. NBAA, NARA, NAFA, and NATA), who adhere to a professional code of ethics and conduct. You can avoid the most common risks in aircraft acquisition by assembling the right team at the start. BAA DAVE WEIL , founder and CEO of Flight Dept Solutions,

previously served for 17 years at TAG Aviation USA. A past Chair of NBAA’s Tax Committee, he now helps clients plan aircraft acquisitions and utilize the best operating strategy.

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Flight Dept Solutions / dweil@flightdeptsolutions.com

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■ WASHINGTON REPORT

Linking Owners To Drones A New Registration Requirement Aims to Make UAS Operators Accountable for Their Actions BY DAVID COLLOGAN aced with a locust-like invasion of remotely controlled drones into the National Airspace System, the FAA and Department of Transportation now require buyers of unmanned aerial systems (UAS) to register such devices with the federal government before flying them. The registration requirement, which became effective on December 20, is a small step toward curbing a worsening problem – the intrusion of drone flights into the flight paths of commercial and private aircraft. Announcing the formation of a task force in mid-October to develop drone registration recommendations, DOT said “pilot sightings of UAS doubled between 2014 and 2015.” Registering unmanned aircraft “will help build a culture of accountability and responsibility, especially with new users who have no experience operating in the U.S. aviation system,” said DOT Secretary Anthony Foxx. Well, that’s a dandy goal, but it should have been established a few years ago when drone sales began to soar. No one seems to have a handle on how many of these devices are already being operated. But there were estimates that as many as one million new UAS units would be sold during the 2015 holiday season. That’s more than five times the number of registered aircraft in the U.S. How did the federal government get so far behind the curve on this issue? Well, as we entered the 21st century, high-end drone manufacturers were making billions of dollars selling sophisticated UAS units for a range of military applications. Those manufacturers reasoned that the surveillance, tracking, and photo reconnaissance capabilities of drones would be highly useful in a wide range of private sector and law enforcement endeavors. So the manufacturers lobbied Congress heavily to get drone use approved in civilian airspace. In early 2012, Congress passed legislation telling the FAA to make that happen… by September 30, 2015. The primary thrust of the legislation was on opening up the skies to drones, not on the inherent conflict of having unmanned, remotely controlled drones sharing the same airspace with passenger-carrying aircraft. And the focus was on commercial users of drones, who would be required to adhere to certain operating restrictions. But access to precise GPS navigation receivers, powerful lithium batteries, and small but sophisticated cameras led entrepreneurs to develop a universe of UAS with price-points comparable to smart phones. There are scores of different drone models available in stores and online. The new registration requirement, albeit years late, is a small 18 B U S I N E S S AV I AT I O N A DV I S O R Ja n u a r y/ Fe b r u a r y 2 016

step in the right direction. Drone buyers now have to provide their names and home addresses, and obtain a registration certificate from the FAA. Owners must affix their government-issued registration number to each drone they have. Whenever a registered UAS is being flown, the operator should be prepared to produce the certificate of registration for inspection. The registration process also requires UAS owners to acknowledge receipt of information on how to safely operate those devices. “Registration will help make sure that operators know the rules and remain accountable to the public for flying their unmanned aircraft responsibly,” said FAA Administrator Michael Huerta. “When they don’t fly safely, they’ll know there will be consequences.” Those “consequences” should be a lot tougher than just making an errant operator hand over his drone, because the stakes are enormous. A drone striking the windshield of an aircraft could crack the windscreen and disable a pilot. A drone strike on an engine could disable the powerplant, or start a fire. A drone encounter without any contact also could pose serious danger, causing the pilot to make abrupt course changes at a critical phase of flight that could put the airplane on a collision course with other aircraft or terrain. Even though a quad-copter with a camera looks like a great toy, operators need to realize they could be deadly in the wrong airspace. 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

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