Management
May 31, 2011 | Posted by John W. Tucker
SAN JOSE, California (May 31, 2011) — TWC Aviation, Inc., a worldwide leader in private aviation, and its wholly owned subsidiary ACM Aviation Services, Inc., today announced the addition of a brand new Embraer Legacy 650 to the firm’s managed fleet. TWC Aviation becomes the first company to manage a U.S. registered Legacy 650, and the first to add a Legacy 650 to its Air Carrier Certificate. The jet is based at the company’s facility in Singapore.
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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December 9, 2010 | Posted by Scott Cutshall
Aircraft management is an often misused and misunderstood term. What does it mean when a company says they will “manage” your aircraft? What will they do, exactly? And, more importantly, how will you know if they are really doing it well, and with your best interests in mind?
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
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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 | Tags: | 2 Comments »
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 »
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