I recently attended the Southern California Aviation Association’s (SCAA) event at the Lyon Air Museum.  It is gorgeous new aviation museum with large glass hangar doors overlooking the runway at the John Wayne Airport. A speaker was trying to engage the crowd, but the audience was transfixed beyond the glass hangar doors at a developing situation on the runway. It was a large flock of birds, that gave the appearance of a dark cloud, flying perpendicularly over the runway at about 100ft. This wasn’t ten’s of birds or even hundreds; we’re talking about thousands of birds. At the midpoint of the runway, a Southwest 737 rolled underneath the flock, but when a Cessna 182 lifted off the runway, the whole audience saw the plane take an evasive banking maneuver to avoid the birds.

The FAA reports over 10,000 bird strikes a year across the country with the highest on record being a vulture at 37,000ft. Birds and other wildlife account for a small portion of the possible emergency situations that require pilots to make immediate judgments taking into consideration a large number of factors.  However emergencies such as bird strikes, engine failures, or loss of cabin pressure are not things you practice in the aircraft.   The proper decisions and reactions are a result of frequent practice in a flight simulator.   As an aircraft owner, the FAA only requires your pilots attend simulator training once every twelve months, however internationally accepted best safety practices suggest recurrent training every six months.  Why?  There are two primary reasons.  First is to practice emergency procedures and crew resource management, two key elements to ensuring the highest levels of safety.  Second is to learn from others.  Flight training centers compile large amounts of information from pilots flying similar aircraft and from the aircraft manufacturer who are constantly incorporating new elements into their recurrent training courses. These greatly enhance the safety of your aircraft’s operation in addition to reducing the cost of maintenance.

Q: OK, but that cost of training doubles and my flight schedule is too busy.
A: A key benefit of engaging a management company is access to knowledge and resources.  A management companies will provide a qualified and capable crew for any of your flying while your primary pilots are attending training.  In addition, the Chief Pilot and Director of Maintenance should have an open dialogue to coordinate maintenance and training dates to reduce the downtime of of your aircraft.  Finally, your management company should be passing along savings to you through their fleet purchasing power and agreements with the major flight training centers around the world.

Mr. Thompson has more than 17 years of aviation experience, spanning Part 91, 121, 135 and 145 operations. Before joining TWC, he was Vice President of the Technical Services Group for Aviation Management Systems. Previously he was President of MV Air Group and Director of Maintenance for various operators.

1. Where will you use the Wifi?

Coverage areas vary from product to product. For example, Aircell primarily utilizes land based towers which is ideal above 10,000ft and over the continental US. If flying outside the lower 48 States you would need a satellite system like the one offered by Swift Broadband. Satellite systems are significantly more expensive per minute than the land based systems but offer worldwide coverage.  Many of the large business jets today are installing both systems to take advantage of monthly unlimited use domestic plans, and just using the satellite system when traveling outside the U.S.

2. What’s a “ball park” price on installation?

Depending on the system and platform, options range from $100,000 to $500,000. The speed and accessibility of the Wifi will ultimately determine the price. There are a number of qualified repair centers capable of installing the equipment and 10 to 14 days is a typical down-time for installation.  Since most of the interior is removed for installation, this is a great time to consider installing new carpet, leather, or other soft goods upgrades.

3. Who do I contact to find options?

Depending on your flight organization, the manufacturer, director of maintenance, avionics specialist or local dealer can quote the installation and program for you. Most repair stations will have the resources and technicians to oversee and complete the installation. Some good resources would be to visit www.aircell.com or contact the completion center of the aircraft manufacturer.

Like with any other new technology Wifi will soon become the norm on most business jets as the components and support systems become more abundant. No matter how high and fast you’re flying, without connectivity to the world below, you’re in an information vacuum.

*NBAA provides a manual online which includes statistics that aided this calculation on the availability of crew with training, sick time, vacation and holidays.

Having two crew members will provide utilization of about 80% of one calendar year; however, with four pilots (as seen above), the availability increases to about 94% and adds nearly one month to the availability. Time is money. For instance, within one month a Falcon 2000LX can average fifty hours of charter. In the current market, revenue provided to the owner during that time would be approximately $202,500.00. With proactive management of maintenance schedules being aligned with crew and training events, an aircraft owner will see utilization that pays for itself.

1. Consult an aviation attorney who’s expertise is ownership and tax planning in the state you intend to base the aircraft.
2. Engage an aircraft management company who is familiar with the exemptions and will guide you through the process. There are a number of other factors when considering the best management for your aircraft, ask you aviation attorney for some recommendations.
3. Thorough documentation. State Boards of Equalization are looking for ways challenge exemptions to which clear and purposeful documentation will ensure success for you. Your attorney and aviation management company should work in sync with each other to ensure accurate and complete records.

The rules and regulations vary widely from state to state. So it’s important to engage an attorney and management company at least a month or two prior to assuming title to the aircraft.  The location where you take title, first flight, and overall use of the aircraft play important roles in the sales & use tax exemptions.

Feel free to contact me with more questions.

The Legacy 650 is the successor to Embraer’s Legacy 600 model. The Legacy 650 offers new Rolls-Royce engines and enhanced aerodynamics that boost fuel efficiency. With its range extended to 3,900 nautical miles, the 650 can fly nonstop from New York to London or Dubai to Singapore.

“We currently operate four Legacy 600’s and are excited to help introduce the Legacy 650” said Greg Johnson, Vice President of Business Development.  “The Embraer products have incredible reliability, superb operating costs and we are delighted to being adding it to our fleet of over 65 aircraft, especially in the rapidly growing international markets”

Coming Together: TWC Aviation and ACM Aviation Services

In 2010, TWC Aviation acquired ACM Aviation, uniting two of the country’s leading management and charter companies to deliver even greater service and savings to customers worldwide. Together this organization manages one of the largest fleets in North America, with aircraft across the U.S. and abroad, including the San Francisco Bay Area, Los Angeles and Orange Counties, the Greater New York Area, London, and Singapore. The charter fleet offers jets from Bombardier, Dassault, Cessna, Embraer, Gulfstream, Boeing, and Hawker Beechcraft.

About TWC Aviation, Inc.

TWC Aviation is a privately-owned, international company that provides aircraft management, private jet charter, aircraft sales and acquisition services. TWC Aviation is IS-BAO Stage II and ACSF registered, and Wyvern Wingman and ARG/US certified. Aircraft are operated by ACM Aviation Services (FAA Certificate BZUA712C) and TWC Aviation (FAA Certificate T19A419I). Additional information is online at www.twcaviation.com.

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These are not easy questions to answer, so here are a few check-up questions to ask any management company. Depending on their answers, it will give you insight into whether you need to dig deeper and address even larger topics or begin a search for a new management company relationship.

Fuel Tax Credit Reimbursement

Does your management company reimburse you for the federal excise tax you pay on jet fuel? If not, they should! You qualify for a $0.175 cents per gallon excise tax credit on fuel for Part 135 charter flights on your aircraft. That is over $15,000 a year if you are flying 300 hours. If you are paying for the fuel, your management company should apply for and return this credit back to you directly, and over time it can amount to a considerable chunk of change.

Fuel Price

Does your monthly utilization report include copies of every fuel purchase from the fuel vendor? Markups on anything purchased on your behalf are rampant. Management companies either hide the markups or call them “service fees,” but that is what your monthly management fee should cover. Ask to see the receipts from each fuel vendor—you should be getting them anyway.

Get the Best Insurance Coverage

Here’s one where the savings are not up front, but could be very large. Request a detailed breakdown of coverages afforded under the management company’s fleet insurance program. It is impossible to compare rates without analyzing the coverages. Here are two key provisions you should look for:

1. Lay-up Premium Reimbursement

If your jet is laid up for necessary, unscheduled maintenance, does the policy allow reimbursement of a portion of your premiums? A 75 percent premium return is reasonable for the days the aircraft is not in service after a brief grace period.

2. Loss of Use/Replacement Aircraft

If your jet incurs damage preventing use, does your insurance cover the use of a replacement aircraft? A common coverage provides up to 60 days for the use of a replacement charter aircraft of equal or lesser size. The insurance company covers the difference between the charter rate and direct operating cost of your aircraft.

3. Liability Limits

If you are not carrying $100 million in liability, you are leaving yourself unnecessarily exposed. The difference between $25 million and $100 million in coverage is less then two thousand dollars per year. Not to mention, most clients and corporations will only charter aircraft with $100 million in coverage or higher.

Small Savings Add Up

Case in point: the tax credit on fuel consumed by the aircraft’s Auxiliary Power Unit (APU). This small jet fuel-powered generator used to power electronics and air conditioning before starting the main engines. The tax code says that fuel used by an engine for the purposes of propulsion is taxable. On behalf of our clients, we argued that the APU is not used for propulsion. We won, and so did our customer. Again, a small savings, but an example of how a diligent, detail-focused management company can help you lower your ownership costs and get the most out of your investment.

Have questions or comments. Call or email anytime. scutshall@twcaviation.com – 888-923-1001

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

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.

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.