Management
July 2, 2010 | Posted by Scott Cutshall
A strong tunrout of over 1,900 Attendees made this year’s NBAA Regional Forum the best attended regional forum ever. The event feature 90 indor exhibitors and 30 aircraft on static disply. TWC Aviation had four people in attendence representing the Aircraft Sales, Acquisitions, Management, and Charter services divisions. Many attendees were suprised to see TWC Aviation exhibiting at the New York event, but TWC Aviation is activly expanding and is working on plans for new East coast locations later this year.
The next NBAA Regional Event will be held August 18th in Chicago, Illinois. TWC Aviation will be in attendence. If you would like more information or to make an appointment with a TWC Aviation representative to attend the Chicago event, contact Scott Cuthsall via email at scutshall@twcaviation.com
Categories: Charter, Industry Articles, Management | 
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January 28, 2010 | Posted by Scott Cutshall
“How many charter hours can you put on my plane?” That’s often the first question I’m asked by clients looking for an aircraft management company. While the answer is important, the number of charter hours is only part of the profit equation. It’s the type of charter trip—the quality of the hours, if you will—that matters most to your bottom line.
Why? Lets take the same plane, an eight-passenger Cessna Citation X super midsize jet, and fly it on two different charter journeys to see which is more profitable for the aircraft owner.
The Citation X has a range of 2,900 nm, or seven hours and burns 370 gallons of fuel for the first hour and 300 gallons for the second hour and beyond. For our comparison, we’ll make three basic assumptions when calculating the Direct Operating Cost (DOC) below: 1) fuel is $4.00/gallon; 2) the aircraft is on the standard engine program; and 3) you are allocating dollars for routine maintenance.
Charter Trip #1: LA to Chicago to LA
Flight Time: 7 hours
Average Fuel Burn: 320 g/hr
DOC: $2,160/hr
Charter Revenue: $3,485/hr
Profit: $1,325/hr (38% gross margin)
Charter Trip #2: LA to San Francisco to LA
Flight Time: 2 hours
Average Fuel Burn: 410 g/hr (lower-altitude flying burns more fuel)
DOC: $2,520/hr
Charter Revenue: $3,485/hr
Profit: $965/hr (27% gross margin)
The difference is striking. If you were the owner, you’d make $360 more per hour from Trip #1 than Trip #2, boosting your gross margin by eleven percent. This means that at 20 charter hours per month, you would make an additional $7,200 by flying charters similar to Trip #1. Moreover, the difference grows along with the number of charter hours. For example, at 40 charter hours per month the delta would be $14,400—enough to cover monthly management, hangar, and insurance fees, with a few thousand left over to go towards pilot salaries or other expense. Plus, these numbers don’t include the cost of additional wear and tear on the aircraft from flying so many short trips which increase maintenance costs and lower resale value.
What does all this have to do with choosing a management company? Simple. Although your profit fluctuates with the cycle length, the management company’s profit per charter hour stays constant, and that can create conflicting interests. If your management company is truly interested in helping you reduce your cost of ownership, treating your aircraft just as they would their own, they should be as concerned with the quality of charter hours as they are with the quantity..
So when a company tells you how many hours of charter you can expect, your follow up question should be: “What is the average cycle length for those hours?” Their answer will tell you a lot about what you can expect from that company in every aspect of managing your aircraft.
>>> What’s coming next week?: Fuel tax credits, lay-up provisions, and other financial benefits you should receive if your management company is acting on your behalf.
Categories: Management | Tags: aircraft management, private jet ownership | No Comments »
December 7, 2009 | Posted by Scott Cutshall
As an aircraft owner or someone considering buying a plane, you may have heard you can charter your aircraft to the public and earn revenue and potential tax benefits. But have you ever wondered if some aircraft are more successful in the charter market than others? Which models provide higher revenue margins, are more attractive to charter clients, and are easier and less expensive to maintain? In short, which aircraft have what I call a good “charterability” factor?
First, it’s important to know that chartering out your plane is not a profitable business venture. I am often asked, “How many hours does my aircraft need to charter to pay for itself?” The answer is that it can never pay for itself since charter rates are too low and supply greatly exceeds demand. So, what’s a realistic goal? In most instances, charter revenue can cover 30 percent to 70 percent of your fixed costs, not including the mortgage payment.
Now that we’ve addressed how charter revenue can reduce ownership costs, let’s review the key factors that contribute to an aircraft’s charterability. There are three key criteria: low direct operating cost, versatility, and current charter rates.
1. Direct Operating Cost (DOC). This is the variable hourly cost associated with the operation of the jet—in other words, the total of fuel plus maintenance. Fuel is the single largest variable cost, so the more fuel-efficient the aircraft the better. Let’s compare two popular large-cabin models, the Gulfstream III and the Gulfstream G450. The GIII burns 600gph compared with the G450, which burns 500/gph. Assuming an average fuel price of $4.00/gallon, that is a difference of $400 per hour.
Older aircraft also have higher maintenance costs. For a GIII, the sum of maintenance parts, labor, and engine costs averages $1,385/hr. Compare that to the G450 with its average cost of only $514/hr. That means a GIII costs $1,271/hr more per hour to operate then the G450. Worse, while the GIII charters for less per hour than a G450, due to its age and relative desirability. This makes it practically impossible to earn a reasonable return offering a GIII for charter.
2. Versatility. This most commonly applies to light and midsize jets. Most light jets offer seating for six passengers, accommodate four large and two small suitcases, and have a range of 1,000-1,700 nautical miles. The true versatility of a jet is judged by how far it can fly when full of passengers and luggage. Most aircraft must reduce the amount of fuel they carry in order to accommodate the weight of passengers and luggage. Some aircraft must begin reducing the amount of fuel they can carry with as little as three passengers on board, reducing the nonstop range. When deciding between aircraft, select the plane that can carry the most passengers and luggage while sacrificing the least amount of performance and range. This makes your aircraft a viable option for a wider variety of short- and longer-range flights. No one likes stopping for fuel when there is another like size aircraft capable of nonstop flight.
3. Charter Rates. Market forces determine charter rates. However, some aircraft models are more popular with charter clients and tend to command slightly higher rates. Presently, a 2009 Cessna CJ3 enjoys only a small premium, perhaps $100, over a 2000 Citation Bravo, even though the Bravo is nine years older.
Here are the main criteria that are important to charter clients. First, the newer the aircraft the better, many charter clients prefer an aircraft to be no older then 5-10 years. Second, a larger passenger cabin with individual seats is favored over a smaller one with divans, since everyone prefers having their own seat rather then three people sitting sideways on a couch. Third, a large luggage compartment and fully enclosed lavatory attract more customers. A fully enclosed lavatory is defined as having a hard door separating it from the rest of the cabin. Some aircraft have a soft-leather curtain affording very little privacy.
What’s the bottom line? You should purchase the aircraft that best fits your needs and use charter as a way to reduce at least some portion of the cost of ownership. If you are deciding between two or three different models, and charter is going to play a key role in reducing costs, these tips above can help you select an aircraft with a high charterability factor and put you on the right track to achieve your goals.
Categories: Management | Tags: aircraft charter, aircraft management | 1 Comment »
December 6, 2009 | Posted by Scott Cutshall
This email, published monthly and also available on my blog, is dedicated to helping aircraft owners gain more enjoyment and value out of their aircraft through a better understanding of the marketplace and topics related to the operation and maintenance of their jet.
Over the past nine years I have spoken with thousands of aircraft owners and people interested in buying a jet. Ninety percent of the conversations revolve around the same topics which led me to begin these email posts. My desire is to dispel many of the most common myths related to aircraft ownership. Second is to provide a continual update and commentary on the private jet industry. Third is to provide a forum where I can answer your questions related to aircraft acquisitions, sales, aircraft charter, aircraft management, etc.
So I hope you enjoy this first posting. I look forward to your questions and feedback.
Embraer, the Brazilian based aircraft maker, announced the Legacy 650 during the recent NBAA convention in Orlando, Florida. An upgrade to its popular large cabin aircraft, the Legacy 600, the Legacy 650 offers a greater range of 3,900 This makes possible such popular city pairs as London-New York, Beijing-Moscow, and London-New Delhi. The increase in range is achieved through greater fuel capacity and 10 percent more powerful engines. The 650 will also feature the Honeywell Primus Elite avionics and numerous other avionics and cabin improvements. The Legacy 650 is due to enter service by mid-2010.
Prior to NBAA, Gulfstream rolled out their two newest models: the ultra-long range G650 and the upgraded super midsize G250. Gulfstream conducted the first flight of the G650 on Wednesday, November 25th. Gulfstream’s flagship G650 is scheduled to enter service in 2012. The G250 rolled out under its own power October 6th, and is scheduled to fly before the end of 2009. Deliveries are expected in 2011.
In new and pre-owned business jet news, UBS (published by UBS Securities LLC) reported that their “November Business Jet Market Index came in at 45, slightly higher from our prior survey in September, indicative of continued slowing in the rate of market deterioration. However, our index continues to be weighed down by record high used inventory levels and weak pricing and does not yet reflect actual improvement in market conditions that has historically led meaningful upside for the stocks. Our straight up measure of absolute business conditions, while higher, continues to reflect a depressed market.”
In charter news, the last three months have shown the overall increase in activity typically seen this time of year. Business travel is very active once the school year begins, followed by the busy holiday travel season of Thanksgiving through New Years. Overall, pricing has flattened out as demand and the price of fuel has been on the rise. That said, pricing is still at eight to 10 year lows with overall flight activity down as much as 60-70 percent from 2007 peak levels. The outlook for 2010 is quite uncertain and will likely follow the trend in corporate profits by two to three months.
Categories: Management | Tags: aircraft management insider | No Comments »
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