March 12, 2010 | Posted by Scott Cutshall
Signs of recovery for the business aviation industry are weak for 2010 but point to improvement in coming years, the head of the industry’s trade and advocacy group said March 11.
Speaking at the National Business Aviation Association Regional Forum at Van Nuys Airport, association President and CEO Ed Bolen said that aircraft deliveries will not be particularly strong in 2010 but that forecasters point to 2011 for when new plane purchases will pick up.
Andrew Richmond, TWC Aviation's President
Flight activity has picked up, sale prices of aircraft have stabilized and the inventory of pre-owned aircraft has dropped when compared to a year ago, Bolen said.
“We are beginning to see progress at the economic level,” Bolen said.
Industry analysts had evidence of slight improvements.
Takeoffs and landings in December were 5 percent higher than the year before, according to UBS Investment Research Business Jet Monthly.
While jet fuel sales dropped in 2009, Brian Foley Associates forecasts more than 21 billion gallons being consumed over the next decade. The firm also expects 9,000 business jets worth $170 billion to be delivered through 2019.
About 1,000 people were expected to attend the daylong event taking place at TWC Aviation. This is the first forum NBAA has had at Van Nuys in about five years.
The association returned because with its new 43,000-square-foot hangar and 22 acres of ramp space there was the room for the 70 exhibitors and the 17 static aircraft on display, said TWC President Andrew Richmond.
“It gives people a chance to see our new hangar and our new plane, a Falcon 2000 LX,” Richmond said.
TWC relocated to the Valley airfield from Bob Hope Airport in Burbank in 2008.
The aircraft management and charter service firm had a good 2009 and is seeing an increase in both charter flights and owners using their planes.
The company is in a hiring mode having added a new a management position, dispatchers and sales people, Richmond said.
Categories: Industry Articles | 
Tags: aircraft management, nbaa, private jet ownership | 
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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 8, 2009 | Posted by Ken Webster
S
cott Cutshall oversees TWC’s charter services division, and is responsible for the expansion of our diverse fleet of charter and privately managed aircraft. Mr. Cutshall brings outstanding customer relationship skills and wide-ranging experience to this key role in our company. Prior to assuming his current position, Mr. Cutshall managed operations at TWC’s Orange County Base, and earlier served as Manager of Business Operations. Before joining TWC Aviation in 2000, he was a flight instructor in Fullerton, CA, and worked in fixed-base operations management with Signature Flight Support. Mr. Cutshall holds aviation licenses as a Commercial Pilot and Certified Flight Instructor, Instrument and Multi-Engine (CFII, MEI), and has a B.S. in Business Management from Biola University.
Categories: About TWC | 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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