MARCH / APRIL 2017
Are You “Safe”? Risk Management Is Your Responsibility
FBO Briefings
Top three criteria for choosing an FBO WIN THE TALENT WAR MANAGING YOUR MAINTENANCE BUDGET HIDDEN DAMAGE TURBULENT TIMES DON’T END UP GROUNDED 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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M a r c h / A p r i l 2 0 17
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• Volume 4 / I s sue 2
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Hidden Damage
Are You “Safe”?
by PE TE AGUR
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Don’t End Up Grounded
F E AT U R E S Risk management is your responsibility
FBO Briefings
14
The market stigma of a damaged aircraft by J OS E PH T. ZULU E TA
Comply now with the ADS-B mandate by M AT T N E L SON
Top three criteria for choosing an FBO
by J OHN E NTI C K N AP & RON JAC KSON
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Win the Talent War
Hire and retain a great flight department
by G EORG E K Y THR EOTIS
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Managing Your Maintenance Budget Better cost control and asset protection by N E IL BOOK
C OVER PH OTO GR APH C OURTESY OF FLIGHTSAFE T Y INTERNATIONAL
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D E PA R T M E N T S Publisher’s Message
Safety Conscious – a Way of Life
by G IL WOLIN
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Washington Report
by DAVI D COLLOG AN
Turbulent Times
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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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Ma r c h /A p r i l 2 017 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 Pete Agur The VanAllen Group pagur@vanallen.com Neil Book Jet Support Services, Inc. info@jetsupport.com John Enticknap Aviation Business Strategies Group jenticknap@bellsouth.net Ron Jackson Aviation Business Strategies Group ronjacksongroup@gmail.com George Kythreotis Jet Professionals george.kythreotis@jet-professionals.com Matt Nelson Duncan Aviation matt.nelson@duncanaviation.com Joseph T. Zulueta Aeronautical Systems Inc. joe.zulueta@planeman.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. 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 2017 by Business Aviation Media, Inc. All rights reserved Printed in the USA
Safety Conscious – a Way of Life “Clean your room!” “It’s my room, and I’m OK with it as is.” No matter – once a week until I left for college, I straightened, dusted, and swept until I’d checked every box on the list that defined a “Clean Room According to Mom.” The world changed freshman year, as a new motivation for cleanliness was added – a roommate, whose standards differed from mine, and whose parents were regular – and sometimes unscheduled – visitors. The checklist had changed, and the goal became more complex: meeting outsiders’ standards. And so, “picking up daily,” at least, became a routine. Fast forward to my entry into the Fixed Base Operations (FBO) segment of business aviation. And not just any FBO, but one recognized as the industry leader. Now I shared my workplace with my customers: you and your fellow business jet owners and flight crews. Cleanliness was no longer optional – it was mandatory. No more daily or weekly checklist – cleanliness now was a way of life. Spot something on the floor? Pick it up. Magazines and newspapers in disarray in the passenger lounge? Straighten them. See something on the ramp? Dispose of it, before it’s sucked into a customer’s jet engine. And don’t forget to wipe down the sink after washing your hands – the next one to use it likely will be your customer. Those FBO operations required yet another change of mindset, to one of constant vigilance, so our facility always was “company ready.” Aviation safety requires the same mindset. Operational safety requires more than a checklist – it demands constant vigilance. That vigilance is one of the goals of the International Standard for Business Aircraft Operations (IS-BAO), developed by the International Business Aviation Council (IBAC). As Pete Agur describes in “Are You ‘Safe’?” the IS-BAO Safety Management System (SMS) requires that your flight department audit its operation, define its tolerance for risk, and then tailor its SMS around that tolerance. And while FBO cleanliness certainly is important, its operational safety is critical, and often not visible. IBAC now has defined a safety standard for ground handling. Its International Standard for Business Aviation Handlers (IS-BAH) provides guidance for an FBO to develop and install its own SMS. While relatively new, the safety culture engendered by IS-BAH is becoming an important criterion in selecting a destination FBO, as noted in “Three Top Criteria for Choosing an FBO.” Safety consciousness is not just a “best practice” – it’s a way of life, and you are its leader and standard bearer. Thanks for reading! BAA
Gil Wolin — Publisher gwolin@bizavadvisor.com Ma r c h /A p r i l 2 017 B U S I N E S S AV I AT I O N A DV I S O R 5
■ AIRCRAFT SAFETY
Are You “Safe”? Risk Management is Your Responsibility
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re you safe? Just because you arrive at your destination with no damage to you, your passengers, or your aircraft, does not necessarily mean that you are “safe.” To be more direct, do you really know whether the outcome of your next takeoff or landing is more reliant on being safe or being lucky? At first, it might seem that “safety” is binary: either you are or you are not “safe.” But the distinction lies in a much more effective definition: understanding, measuring, and managing “risk.” After all, your core business succeeds or fails on managing risks (market risk, financial risk, production risk, etc.). Aviation services incur risks during the key processes of maintenance, ground movement, and flight. The business aviation community is not uniform in its management of those operational risks. That is, the quality of the control of all the various risks differs from operator to operator, be they an internal aviation department or a management company. That places the onus for risk management on you in two ways: 1. As the customer, it is your responsibility to define, agree to, and support the risk standards and outcomes you expect to be delivered. The operator’s duty is to perform to your expectations, if he or she wants to retain your business. 6 B U S I N E S S AV I AT I O N A DV I S O R
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2. It is up to you, even as a non-aviation professional, to know how your operator is performing. To gain a very good understanding of how well your aviation services’ risks are being managed, follow these four steps:
STEP ONE:
Define Your Tolerance for Operational Risk
Whether your aviation services are provided by an internal aviation department or outsourced to a management company, it is up to you to define and declare your tolerance for risk. One client defined his risk tolerance in graphic, effective, and personal terms: “I want our aviation services such that I wouldn’t hesitate to have my children or grandchildren aboard on any given day.” Further discussion confirmed that he wanted major airline levels of risk management, or better. As stated before (see “Safety Guards,” BAA Nov/Dec 2016), a clearer way to look at risk tolerance standards is to define them in practical terms: ■■ World Class – Guaranteed risk management (no limits on budget and effort). ■■ Best Practices – Assured risk management (proactive and anticipatory). ■■ Standard Practices – Prevent failure (compliance with rules and regulations). w w w. B i z AvA d v i s o r. c o m
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BY PETE AGUR The VanAllen Group / pagur@vanallen.com
Practices – Accepts modest risks (bending the rules and regulations). ■■ Unacceptable Practices – Induces substantial risks (“rampant rhino” behaviors). From conversations with hundreds of aircraft owners and key passengers, one universal theme emerges: they expect or assume their aviation services are performed to a Best Practices standard, or better. They perceive that standard to be the best bang for the buck. They correctly perceive that Best Practices is a significant improvement over Standard Practices, requiring only the modest added investment in higher standards and performance. Action: Be clear and direct with your aviation service provider about your risk tolerance and your expectations for their performance.
sole reliance on compliance through the use of rules and regulations derived from the experience gained from previous failures: a hindsight perspective. You want your aviation service provider to use SMS as a daily tool, rigorously implementing their SMS’s processes and recordkeeping. That discipline allows them to track the impact of their SMS efforts as well as to identify trends or areas that need specific focus for countermeasures. Action: Schedule meetings with your aviation service provider no less than quarterly to review their SMS scores. You should gain an understanding of the operator’s highest level concerns and issues. Then you can support their efforts to manage their operational risks as you collaborate with them to establish future goals that will further reduce risks and lower scores in critical areas.
STEP TWO:
Trust and Verify
■■ Substandard
Implement a Holistic Safety Management System (SMS)
Using your own defined risk tolerance as a foundation, the next step is for the operator to identify, assess, and mitigate operational risks. This is a process done systematically and comprehensively: day-by-day, activity-by-activity, staff member-by-staff member. Most operators have some form of a Safety Management System (SMS) in place. Yet few attain the extensive benefits of a fully implemented and mastered SMS. This is because most SMS applications either are too narrow (flight operations only) or are not comprehensive enough to achieve their full potential. Financially, your greatest aircraft-related risks are on the ground during parking and maintenance operations. Even so, few operators’ SMSs include those higher risk arenas. Require your operator to have a “holistic” SMS: one that includes all aircraft ground, maintenance, and flight operations. Action: Ask to see your aviation service provider’s SMS reports for ground, maintenance, and flight operations. If their reports do not cover all operations, challenge them to complete their SMS implementation as quickly and thoroughly as is practical. A comprehensive SMS will greatly benefit them and you.
STEP THREE:
Measure and Manage SMS’s Results
The critical elements of SMS are: ■■ The identification of risks, ■■ Their assessment (the severity of the threat compounded by its probability of occurring), ■■ The selection of appropriate mitigations, and ■■ Reassessment to confirm the effect of those mitigations. The identification-assessment-change-reassessment of risks is the bread and butter of SMS. This process allows your aviation professionals to look forward and to be proactive as they anticipate and deal with potential threats. The old approach was the w w w. B i z AvA d v i s o r. c o m
STEP FOUR:
Two metrics that you, the non-aviation professional, easily can review to determine the quality of your aviation service’s use of SMS are: 1. The frequency of reports of significant anomalies (e.g. Hazard and Incident Reports). Rarely is a trip leg flown during which nothing unusual happens (an unexpected risk is experienced and mitigated, spontaneously). Most business aircraft fly 300+ legs per year. Yet, the average number of hazard reports per aircraft, per VanAllen’s research, is about six per year. That means a lot of risk data are not being recorded or used for the greater good. 2. The speed with which a hazard is addressed. When a staff member makes the effort to document a risk, it is incumbent upon his or her management team to assure the risk is addressed in a timely manner. The speed of response tells your aviation professionals how serious their leaders are about their SMS. Manageable risks that are written up and quickly resolved tell you and the team the SMS is working and worthwhile. Action: Since there is always room for improvement, direct your service provider to (1) increase the rate of filed hazard reports for maintenance, ground, and flight operations, and (2) reduce the time between the filing of a risk report and its resolution. These two measurable and reportable actions will significantly enhance the impact of your SMS. By using these four steps, you should have a very good understanding of how well your operator’s risk management conforms to your expectations. If not, dig deeper or get help. Otherwise, the risks are yours. BAA
PETE AGUR is the chairman and founder of The VanAllen Group,
a management consulting firm that specializes in the business of business aviation.
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■ GROUND SERVICES
FBO Briefings Top Three Criteria for Choosing an FBO BY JOHN ENTICKNAP & RON JACKSON Aviation Business Strategies Group jenticknap@bellsouth.net / ronjacksongroup@gmail.com
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s an aircraft owner and/or operator, you often have options when selecting an FBO at your destination. Although fair and reasonable fuel prices and fees are key, loyalty to an FBO goes much deeper, and usually is based on three criteria:
Your Pilot’s First Impression
Your Customer Experience
When visiting an FBO for the first time, you want to see physical proof that taking good care of you and your aircraft is its number one concern. Notice: ■■ Are you greeted warmly, and your baggage off-loaded quickly? ■■ Is your ground transportation ready and waiting when you arrive, with the interior cooled down or warmed up, as required by current weather conditions? ■■ Is the ramp and terminal area safe? Is appropriate security in place to insure that only your crew and authorized FBO personnel have access to your aircraft? ■■ Upon arrival, is the FBO also able to meet your crew’s interim requirements, such as a complimentary crew car and crew rest area in the terminal? ■■ Is the Executive Terminal clean and well-maintained? ■■ If you are meeting business associates or guests at the FBO, have they been properly greeted and kept informed of your expected arrival time? ■■ When you return to the FBO for departure: • Is your ground transportation able to gain access to the ramp? • Has your aircraft been properly serviced and positioned for embarking in a timely manner? • Is your catering order ready and accurate? 8 B U S I N E S S AV I AT I O N A DV I S O R
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A Safety-Minded Culture
You or your crew also will choose an FBO based on its safety culture. This means that the operation has set and adheres to industry safety standards, and operates in a culture that mitigates risk. Protecting you, your crew and passengers, and your aircraft – a significant and costly capital asset – should be paramount. Many aircraft operators, especially those who fly internationally, adhere to the International Standard for Business Aircraft Operations (IS-BAO). They find that the process of adopting this standard, which includes incorporating a safety management system (SMS), changes the internal culture of a flight department to become more safety conscious (see “Are You ‘Safe’?” in this issue). Your flight operation likely will have vetted the FBO’s safety commitment before your arrival, to determine whether it has adopted a program like Safety 1st, developed by the National Air Transportation Association. This program helps create a safety standard for line operations, provides consistent safety training throughout the enterprise, and enables the FBO to operate with a “safety first” mindset. Those FBOs striving for the next level of safety will implement the International Standard for Business Aviation Handlers (ISBAH), the equivalent to aircraft operators’ IS-BAO program. This new program incorporates a strong SMS component, which helps enhance an internal safety culture, and mitigates risk. Being mindful of these factors can help you and your crew choose the best FBO for your needs, every stop, every time. BAA JOHN ENTICKNAP and RON JACKSON are principals of
Aviation Business Strategies Group, an aviation services consulting firm providing assistance in successful FBO Operations, Customer Service Training, and IS-BAH registration compliance and auditing.
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Although a modern and attractive facility is nice, upon arrival your pilot first will see and evaluate: ■■ Whether or not there is a line technician waiting on the FBO ramp when your aircraft arrives, and if he or she gives authoritative parking guidance. ■■ If the ground handling equipment (aircraft tugs, ground power units, de-icing trucks) looks cared for, stored, and organized. ■■ Whether the line service technician or customer service rep greets your aircraft with your service order (including fuel, catering, and any maintenance service requirements) in hand, which your pilot has sent ahead. The first words of greeting never should be: “How can I help you?” They already should know, unless yours is a last-minute, unscheduled stop.
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■ FLIGHT OPERATIONS
Win the Talent War Hire and Retain a Great Flight Department BY GEORGE KYTHREOTIS Jet Professionals / george.kythreotis@jet-professionals.com
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Finding Talent
Develop a pipeline – Do you have enough key talent in that pipeline for the foreseeable future? If your answer is “no,” you are not alone. In addition to the military not minting experienced aviators and technicians as before, several other factors have an impact on the dearth of good potential crew members. The initial investment required today to discover or create a comparable pipeline is very high in aviation, even higher in business aviation. Business aviation continues to lose key employees to other segments of aviation. Many flight operations have shifted to parttime staffing to control costs, and in so doing, make the reliable full-time opportunities provided by scheduled carriers more attractive. Be an “Employer of Choice” – Is your organization providing the right cultural and personality fit to entice the “best of the best” to join your team? This is a huge frustration for many owners and operators in their challenge to hire key talent. In today’s environment, candidates are interviewing potential employers, not the other way around. As recently as five years ago, this practice was unheard of in business aviation. Know what – and whom – you want – What is your company really seeking in a new employee? Is it someone who simply can fly or maintain your airplane? Or are you seeking someone to manage your aviation and human assets? Best practices dictate using a “long term investment” approach. 10 B U S I N E S S AV I AT I O N A DV I S O R
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Retaining Talent
Retaining your key contributors and best employees not only reduces your costs and time lost dealing with excessive turnover, it also sends a clear message to the industry – and to your customers – that your organization is an “Employer of Choice.” First, what does not work? The top five reasons your best aviation talent will leave you or your company are: 1. Quality of life concerns (scheduling, family, commute). 2. Excessive hierarchy (too much bureaucracy, company politics, red tape). 3. Lack of trust (“Boss failed to keep commitments”). 4. Inadequate compensation. 5. Being overlooked for a promotion. How can you develop your new hires into loyal, long-time employees? Re-read the list above – Then do the opposite. Respect your aviation department – Does your company foster a culture of respect for your aviation department? Is it viewed as a perquisite of the C-suite, or as an integral part of your company’s success? Giving the department more visibility, and creating an attractive workplace, increases employee retention. Provide supportive mentoring – Help people grow in their jobs, and if possible, promote from within. Be a role model. Reinforce continual learning and company values. Allow them to flourish, do not micromanage, and foster a cohesive team atmosphere. Taking these steps will help you develop the “Wow!” factor, which is key to your flight department’s long-term success. BAA GEORGE K Y THREOTIS is VP and General Manager of Jet
Professionals, a wholly owned subsidiary of Jet Aviation, a General Dynamics company. Before joining the company in 2000, he held multiple senior positions in human resources and operations.
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n today’s climate of lower supply and higher demand, how does a business aviation employer win the “war for talent”? Where will you find excellent crew members, and once you find them, how will you keep them? You’ve likely heard talk about the coming pilot shortage. Right now, supply and demand are about equal, but that situation is rapidly changing. For the past several decades, the outsized baby boom generation provided as many experienced pilots as our industry required, many with a strong military aviation background. That generation now is retiring in equally large numbers. Those retirements, coupled with more stringent certification regulations, and the renewed growth of commercial airlines, create a daunting challenge of finding not only qualified pilots, but to a lesser extent, mechanics, flight attendants, schedulers, and dispatchers as well. Once you find these key people, how can you ensure that they will develop into assets for your flight department? There is no magic solution; however, there are best practices.
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■ AIRCRAFT MAINTENANCE
Managing Your Maintenance Budget Better Cost Control and Asset Protection BY NEIL BOOK our aircraft definitely will incur substantial costs throughout its life cycle, whether through unplanned events or scheduled maintenance. For new aircraft, warranties may cover many of the unplanned events for some period of time, or some number of flight hours and/or landings, but once those warranties expire, you’re on your own. At that point, these costs may account for as much as 35% of your aircraft’s annual operating budget. You can opt to “pay as you go,” or to enroll your aircraft in an hourly cost maintenance program. An hourly cost maintenance program (HCMP) allows you to manage these expenses and minimize your operational and financial risk. With a budgeted and predictable maintenance program in place, you can avoid both unexpected cost spikes related to scheduled events, such as airframe maintenance or an engine or auxiliary power unit (APU) overhaul, and the unscheduled, often costly, maintenance events that may occur at any time. An HCMP offers budget stability by charging a set fee for every hour of operation to cover certain major components, such as the engines, avionics, and APU. You even can opt to cover virtually the entire aircraft, including the passenger cabin, on a per-hour-ofoperation basis, depending on your specific usage requirements. HCMPs may include additional features, among them: ■■ implementing manufacturer service bulletins and FAA Airworthiness Directives, ■■ providing engine leasing options, ■■ offering airframe component protection, ■■ extending coverage for life-limited components, and ■■ making available logistical and troubleshooting support. Should you experience an engine issue in a remote location, it is hard to overstate the importance and reassurance of being able to call one number at any time, day or night, and receive the service support and technical knowledge needed to get your aircraft flying again. And all this without receiving an unexpectedly large bill, one that can run to six figures or more. Just as large airlines frequently leverage economies of scale to achieve lower and more predictable aircraft maintenance costs across their fleets, your HCMP is able to develop similar agreements with maintenance facilities around the world. This means that your provider can buy maintenance services in bulk and can pass along those cost savings to you, thus reducing your overall cost of aircraft ownership. 12 B U S I N E S S AV I AT I O N A DV I S O R
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Enrolling your aircraft in an HCMP also may lead to more favorable leasing and finance terms. A well-maintained aircraft represents a far more attractive proposition to business aviation lenders and helps to streamline the financing process for all parties. And if you purchase a pre-owned aircraft which has no HCMP in place, you have the option to “buy in” to an applicable program. Your chosen HCMP provider will calculate a “catch-up” fee to cover hours accumulated on the aircraft or components prior to enrollment. HCMPs are available independently and from all the major airframe, engine, APU, and avionics OEMs. Whether your aircraft is enrolled in a program with a manufacturer or an independent provider, it can help maintain aircraft value and potentially aid in the sale of your aircraft – an especially important factor given current market conditions (See “Hourly Cost Maintenance Programs,” BAA Sept/Oct 2014).
A singular benefit of an independent maintenance program is that you can transfer unused maintenance funds across any make and model of aircraft. The program simply moves to your replacement aircraft, or you could choose to sell it with the aircraft to enhance the aircraft’s value. The business jet market has evolved significantly in recent years. Aircraft owners and operators who historically have “selfreserved” funds for maintenance increasingly are migrating to HCMPs. These programs now have become an essential component of aircraft ownership, as owners and operators recognize the benefits of maintenance budget stability, asset preservation, and having a dedicated financial and technical safety net in place. BAA NEIL BOOK is the President and CEO of Jet Support Services,
Inc. (JSSI), which for nearly 30 years has been the largest independent provider of maintenance programs for business aircraft, engines, and APUs.
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Jet Support Services, Inc. / info@jetsupport.com
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■ AIRCRAFT FINANCE
Hidden Damage The Market Stigma of a Damaged Aircraft BY JOSEPH T. ZULUETA Aeronautical Systems Inc. / joe.zulueta@planeman.com
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“an experienced appraiser” when assessing the fair market value of a damaged aircraft. No two damage events ever have the same impact on an aircraft’s market value. When damage occurs, the amount of value diminution suffered by a damaged aircraft must be determined case-by-case. While all aircraft appraisers must meet standards set by the American Society of Appraisers, some exceed those standards. In performing a formal fair market value appraisal report, 35 specific categories of damage assessment must be evaluated. The careful appraiser, specializing in diminution assessments, will take into consideration more than 175 additional individual points, such as: ■■ Severity of Damage and Plan for Repair ■■ Capability of the Repair Facility ■■ Manufacture’s Authorization of the Facility ■■ Time, Flight Hours/Cycles Since Repairs Completed ■■ Level of Detailed Documentation of Repairs (Historical Records). In addition to these analysis factors, current market conditions – that is, the inventory of comparable make/model aircraft for sale – always must be considered for an additional value adjustment based on the current supply versus demand. A damage event is not something that any aircraft owner wants or expects. However, understanding the impact to the aircraft’s fair market value after the smoke clears and the dust settles will be critical to its future resale value. BAA JOSEPH T. ZULUETA , ASA, Senior Appraiser and Managing
Partner, Aeronautical Systems Inc., for 25+ years has executed aircraft appraisals, audited records, forecasted future values, provided expert witness testimony, and consulted with financiers on equipment returns.
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hat’s the worst thing that can happen to your business jet in an accident or incident, assuming that you, the crew, and your passengers all are safe and unharmed? You might think that it’s a situation resulting in a total loss of the aircraft, but that’s not the case. For example, if a hangar roof collapses in a storm, destroying your aircraft and making repairs unfeasible, your insurance company most likely would declare it a total loss and issue replacement funds. However, if your airplane is only damaged, and not totally destroyed, your insurer may opt to repair it, leaving you with an aircraft that operates just fine but now has damage history. In a depressed used aircraft market, even one that now is showing signs of recovery, an aircraft that has sustained physical damage can be hard to sell. Despite the aircraft having been fully restored to an airworthy condition, and regardless of the quality and completeness of repairs, merely having had any damage will have a negative impact on the aircraft’s resale value. In today’s marketplace, with two aircraft sitting side-by-side, identical in every way except for damage history, the aircraft previously damaged will command a lower price. This difference in value between a damaged aircraft and an identical undamaged one is referred to as the “diminution of value.” And that is the “hidden damage” that cannot be mitigated or repaired. The amount of diminution of value that results from damage depends on many factors, including the type of aircraft, the extent of damage, the time since the damage, the method and quality of the repairs, and how the repairs were documented in the aircraft records and logbooks, among many others. And the marketplace is less accepting of damage history on certain classes of aircraft. For example, the perceived market stigma of damage is far greater to a corporate jet than it would be to a single-engine trainer aircraft or to a commercial airliner. Damage to any aircraft always is considered a serious matter, especially as it relates to diminution of value. Contrary to past practice, diminution of value resulting from damage cannot be determined easily by consulting accepted, published industry price guides. One cannot do so simply by looking at a chart’s columns stating light, moderate, or heavy damage, and then applying a simple sliding scale formula to be allocated as a deduction to the aircraft value. For that reason, most published price guides no longer include damage deduction charts. Instead, they advise readers to engage
■ FLIGHT OPERATIONS
Don’t End Up Grounded Comply Now With the ADS-B Mandate BY MATT NELSON Duncan Aviation / matt.nelson@duncanaviation.com
U
Jan/Feb 2015).
Already required in several foreign countries, ADS-B is a relatively new technology that provides Air Traffic Control (ATC) with precise, three-dimensional position data. ADS-B transmissions include the aircraft’s position, altitude, and velocity, identification, and other information, and are more accurate than ground-based radar. And, pilots in equipped aircraft have access to air traffic and weather services, providing a new level of safety, better situational awareness, and more efficient routing. The ADS-B Out mandate requires all aircraft operating in U.S. airspace to have a certified GPS position source paired with a transponder capable of transmitting data from the aircraft without prompting from the pilot or a request from ATC. What If You Miss The Deadline? If you plan to fly above 10,000 feet, and in FAA-designated Class A, B, or C airspace (which includes nearly every large and midsized, as well as many smaller, U.S. airports), you will be notified that your non-compliant aircraft is grounded. After the deadline, on a case-by-case basis, ATC may give specific permission to relocate your aircraft in order to have it modified for compliance with the mandate. The Myths About ADS-B Nearly 9,000 business aircraft need ADS-B. As of now, about onethird are in compliance, and 6,000 more need to upgrade. With the deadline just 34 months away, more than 175 aircraft on average will need upgrading each month. Those operators who continue to wait will face scheduling pressure and higher installation costs. Yet many believe one or more of these currently circulating myths: ■■ There’s plenty of time to upgrade. Look back to 2005 and the FAA’s Reduced Vertical Separation Minimum (RVSM) mandate, when capable avionics installation facilities were at capacity 24 months before the mandate deadline 16 B U S I N E S S AV I AT I O N A DV I S O R
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and for a full 12 months after. ADS-B installations are similar to RVSM in complexity and downtime. There simply isn’t enough industry capacity to complete the number of modifications still required. Aircraft will be sitting and waiting for modification after January 1, 2020. Don’t let yours be among them. ■■ The deadline will be extended. FAA Administrator Michael Huerta and other industry leaders have repeatedly stated that the mandate deadline will not change. It is prudent to expect that the deadline will not be extended. ■■ The prices will drop. Installation shops and aircraft manufacturers are collaborating to meet demand, and you now still enjoy a wide array of choices and price points for equipping your aircraft. With increased demand for equipment and labor, expect prices to rise as the deadline moves closer. ■■ I’m planning to sell my aircraft, so I don’t need to do this. For most models, the preowned business aircraft market is still very buyer-oriented. If you don’t upgrade to ADS-B before the sale, the price you will be able to ask for your aircraft will be significantly less than if it has ADS-B. Be Forewarned During the final RVSM-mandate days, many owners sought immediate appointments, and solidly booked facilities had no choice but to turn them away. Understand the risks you face by delaying ADS-B compliance, and plan now to meet the January 1, 2020 mandate. BAA MAT T NEL SON , Duncan Aviation’s Satellite Operations
Manager and an ADS-B and NextGen expert, has 30 years’ experience in avionics and 20 years working on business aircraft in some of the busiest airports in the U.S.
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nless you always fly only below 10,000 feet, and only between or among small rural airports, it’s time to finalize your Automatic Dependent Surveillance-Broadcast (ADS-B) compliance plans. The business aviation industry has been talking about ADS-B for the last decade, and the January 1, 2020, mandate deadline is fast approaching. Aircraft owners and operators who want to avoid being grounded as of that date need to act promptly. What is ADS-B? In May 2010, the FAA published its final rule mandating that aircraft be equipped with ADS-B Out, with the goal of making crowded skies safer and more efficient. (See “NextGen – Why?”, BAA
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■ WASHINGTON REPORT
Turbulent Times How will business aviation fare under the unconventional leadership of the Trump Administration? BY DAVID COLLOGAN ow, we have a businessman and long-time business aircraft owner/user as President of the United States. Do you suppose this turn of events is just what the business aviation industry needs to finally extract itself from the still-lingering miasma spawned by the Great Recession? Well, less than ten days into the Trump Administration, commercial aviation passengers around the world were trying to figure out what effect Trump’s “extreme vetting” executive order would have on them and their families, as hundreds of travelers were stranded. The widespread backlash over the new passenger vetting requirements – implemented with almost no notice – touched off angry protests and drew widespread condemnation. Decisions by federal courts soon forced the Trump Administration to suspend implementation. This appeared to be primarily an airline passenger problem initially. But it also could cause uncertainty and delays for business aviation travelers. In addition, the U.S. action could cause some governments to retaliate by changing long-standing and carefully crafted immigration, customs, and pre-clearance agreements with the U.S. That could pose new hurdles for business aviation operations and travelers on flights outside this country. The episode suggests many segments of the economy could be in for turbulent times if the Trump Administration continues to make top-down decisions without industry consultation or regard for the consequences. Another area being nervously watched by business aviation advocates is where the Trump Administration comes down on adoption of long-term FAA reauthorization legislation. Last year Congress was once again unable to resolve differences between House and Senate bills, resulting in yet another short-term extension of FAA’s authorization. That extension is scheduled to expire at the end of the fiscal year, September 30. Will Congress decide to maintain the status quo, keeping FAA part of the Department of Transportation and funded by a combination of ticket and fuel taxes and general fund appropriations? Or will it opt for the controversial alternative pushed by House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA)? His plan would privatize the U.S. air traffic control system and have it governed by an 11-member board of directors – dominated by the airlines – and funded by user fees. The high stakes in this debate had NBAA President Ed Bolen on the road in January, meeting with regional business aviation organizations based in Chicago, Colorado, and California. He implored 18 B U S I N E S S AV I AT I O N A DV I S O R
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members of those groups to oppose ATC privatization, and to urge their congressional representatives to retain the current governance and funding system for FAA. Bolen and other business aviation advocates say ATC privatization would represent a double whammy for business aviation. First, operating costs could rise sharply with a user fee system, making business aviation flying significantly more expensive. Secondly, officials warn an airline-controlled board of governors might attempt to restrict business aviation access to some congested airports to free up more operating slots for the large carriers. Another concern if the Shuster legislation is enacted into law: the massive complexities inherent in unraveling 65 percent of a government agency that’s been in business since 1958, and reinventing the ATC segment as a privatized entity. It would be a Herculean task, distracting FAA leaders and employees for years. What FAA really needs is rapid enactment of a five-year reauthorization bill that retains the agency’s current structure. That would enable FAA leaders and employees to stay focused on what should be their top priority: implementing the first phase of the NextGen ATC modernization program. But in a February 9 meeting with U.S. airline and airport officials, Trump was critical of the NextGen program, describing it as over-budget and behind schedule. Disparaging the current system as obsolete, Trump promised changes, but did not provide any specifics. Stay tuned, folks … and keep your seatbelts fastened! 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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