Archive for the ‘Industry anecdotes’ Category:
More On NetJets – Can they make it work?
A Saturday, February 27th article in the Columbus Dispatch, by Marla Matzer Rose covers the story on NetJets and Warrens Buffett’s letter to the stockholders regarding the company’s performance.
I posted on November 17 about the announcement of NetJets pilot layoff. At that point, revenues were off 41% and new aircraft sales were off 79%. Since that post, more layoffs have happened and in this article, the following is stated by Warren Buffett about the financial situation at NetJets:
“In the eleven years that we have owned the company (NetJets), it has recorded an aggregate pre-tax loss of $157,” Buffett said in his letter. “Moreover, the company’s debt has soared from $102 million at the time of purchase to $1.9 billion in April of last year. Without Berkshire’s guarantee of this debt, Net Jets would have been out of business. It’s clear that I have failed you in letting NetJets descend into this condition.”
Buffett said he had been “bailed out” by David Sokol, whom he appointed CEO of NetJets in August after the abrupt resignation of longtime CEO Richard Santulli.
Buffett praised Santulli for instituting “top-of-the-line standards for safety and service” at the company that are being continued, but said that the leadership of Sokol, who is chairman of Berkshire-owned MidAmerican Energy, and considered one of Buffett’s likely successors has been “transforming: Debt has already been reduced to $1.4 billion, and, after suffering a staggering loss of $711 million in 2009, the company is now solidly profitable.”
Buffett echoed what Sokol has said about NetJets, that it is “likely to operate at a profit in 2010, assuming there is no further deterioration in the U.S. economy or negative actions directed at the ownership of private aircraft.” For 2009, NetJets posted a $711 million loss. The losses were largely due to write-downs on the value of aircraft, with a smaller amount attributable to the cost of laying off workers.
Much like the financial performance of the airline industry, NetJets has not made a profit in aggregate for the past 11 years.
Something is wrong with a business model that has an aggregate loss over the long haul and we are plagued with it in both the airline and private aviation industries. More money has been lost than has been made, and because the industry is glamorous, more money will pour into bad business models in the future.
According to Mr. Buffett, the company is now solidly profitable since all of the cuts in both pilots and overhead. So what has changed about the business model to fix it? Do they shrink their way to profitability?
What created the situation in the first place? Was the model broken to start with and just needed a deep recession to make it obvious? How do you lose more in one year that you can make in 10 years?
On this site we talk about the airlines and their broken system but private aviation has its fair share of issues and financial problems. Something has to change if we are to sustain long term viability as an integral part of the national transportation system.
Tales From the Ticket Counter – Ice is Ice and Gravity Works
I read this article in the Chicago Tribune, Another East Coast storm grounds planes, although cancellations likely fewer than prior storm, and it made me glad that I’m not working at the ticket counter anymore.
It was 14 March 1993 and I was working in Lexington, KY. I remember the date because our flights were all full or oversold due to the sold out SEC Men’s Basketball Tournament, held that year at Rupp Arena downtown. We all anticipated a challenging Sunday with lots of passengers and bags. What we did not anticipate was the Storm of the Century. Because of the treacherous roads, most of our agents couldn’t even get to work that day; so, if I remember correctly, about seven of us worked from 5:30 in the morning until about 11 PM, working flight after flight with the occasional snowball fight in between. Because of conditions at the hubs, most other airlines were grounded. Nashville was operational; so, we loaded up our little Jetstreams and off they went, mostly on time.
On another day, tornadoes were in the area. The passengers were already on the aircraft when a tornado was actually spotted. Everyone deplaned and went to secure areas inside. One passenger complained the whole way in about missing her connection. In the list of our priorities, keeping her from harm came before making her connection.
One afternoon, we were about three minutes late pushing off the gate. The aircraft went out to the taxiway, then came right back to the gate. It seemed that a small aircraft was on final approach and was unable to extend their landing gear. They were coming in gear up, which meant that, at best, they’d slide along the runway, closing it for a period of time. That is what actually happened. The aircraft was severely damaged, but no one was hurt. The runway was closed for two or three hours. One passenger complained loudly that if we had left on-time, they would not have been help up be this delay. The truth of the matter is, that three minutes made no difference. The airport was already preparing for this emergency arrival.
I often talk about how much less stressful and efficient travel is on a private aircraft as opposed to an airliner, and, in most cases, that holds true. However, snow and ice hold the same problems for a Gulfstream wing that they hold for an Airbus wing. Runway closures park Cirrus SR-22s as surely as it does Boeing 747s.
Delays and cancellations because of field conditions or weather are almost as much a pain for airline employees as they are for stranded passengers. There is absolutely no way the agents can fix the situations, either. From behind the counter, we always understood the frustration of the passengers who had somewhere they needed to be. They often saw the gate or ticket agent as the impediment between them and their final destination. The natural reaction in a situation like that is to try to remove the impediment. However, verbally attacking or insulting the agent doesn’t work. In fact, it is likely to completely shut down an agent who might otherwise have helped you.
Has Airline Travel Turned into a Mass Production Manufacturing System
With the dawn of industrialization came mass production, and mass production lead to mass marketing. Mass marketing lead to the growth of mass media including Newspaper, Radio and TV.
Everything was driven by costs and profit and pushing stuff out to the consumer who also happened to be part of the mass of producers and marketers. If you make it cheap enough and market it to the masses, they will consume it.
With everything geared towards the masses, mass transit developed in the cities to move people to and from their jobs as workers in the large corporate factories that mass produced.
Mass transit started with the rail system and then added buses and eventually the airlines developed into the mass transit system of the air.
Mass transit is all about price and when price is the driving factor, the needs of individuals are sacrificed for the needs of the masses. Load everyone up like cattle, route them through the hubs, off load and reload on to the next flight that gets you somewhere near your destination, maybe not so quickly or in the most comfortable or sociable environment, but do it cheaply. It feels more and more like riding the metro rail?
So the airlines developed terms for describing productivity and efficiency that sound much like production manufacturing terms:
- CASM: Cost per available seat mile. A seat mile is one seat covering one mile.
- RASM: Revenue per available seat mile. The amount of revenue generated for every seat available covering a mile.
- RPM: Revenue per passenger mile. The revenue generated per passenger flown flying one mile.
All of this sounds like mass production. Are airlines in the business of providing transportation to the flying public or are they in the business of producing ASM’s and selling them at a profit generating RASM?
Is there a point where driving the CASM down to make a profit overrides best safety practices? That is a question being asked in the Frontline Documentary entitled “Cheap Flights”. I will leave that answer up to the safety experts for now.
Does the public merely want to get from origin to destination and back again for the lowest possible cost?
Will the public pay for something better than mass transit delivered at the lowest cost?
In the economy of the future, people will be more aware of the value of their time and they will have the tools to quantify its value. They will also value the experience of travel and quantify that experience in a social cost or benefit.
Just as people are longing for the personal touch and experience of buying their food at the farmers’ market versus buying mass produced food, they will long for and seek out solutions to every facet of their lives, including travel that gives back quality, experience and relationships.
And let’s not forget that people want their time back, spending it how they choose, and not how the systems of mass production forces them to spend it.
How ONE Person Can Make a Difference
We at Plane Conversations sometimes pick on the airlines because we hear all too often about the bad experiences people have when flying commercially. But sometimes we hear stories, like the one below, which lets us know that the airlines still have some great employees who get it right!
On a recent flight back to Montreal, a client and friend of ours, Serge Charron, of Pascan Aviation in Canada, had the following airline experience, and wanted us to share it on this site. This is how one person can make a difference to many.
I want to share an experience I recently had while travelling from the United States to Canada, which demonstrated how the proactive quality of an employee, versus a reactive attitude, can make a significant difference to a customer experience. This is an example where each and every employee – from a cleaner, to pilot, and even a CEO, must be dedicated to customer service to ensure a successful and healthy company.
This particular employee did her best to correct a problematic situation, when the cause was clearly out of her control. A reactive employee would have done their duty as usual (a normal turnaround within the normal turnaround time). This would have done nothing to resolve the delay to all subsequent flights.
Her initiative was safe, efficient and cost saving to the company. Her dedication to customer service is invaluable and she is clearly a person with a strong worth ethic and who is looking out for the company.
This is what happened:
We arrived at the terminal in Nashville for our flight back to Montreal. After checking the board, we saw that our flight had been announced 45 minutes late. We were concerned about our connecting flight, since this delay led to us having only 5 minutes to catch our connection in Philadelphia. As most people would, we just sat there. There’s nothing much we can do!
An airline employee came to the small counter at our gate and took the microphone. She announced the delay and explained that she will do her best to shorten the delay for those who have a connecting flight in Philadelphia. She then called for all passengers who had a tight connection to visit her; there were about 10 in total. She upgraded each passenger to the first rows in entrance of the plane, to enable us to exit the plane as quickly as possible in Philadelphia. That was smart!
When the plane arrived, she made another improvement. She called for boarding and made it per row, commencing with the last row in the back of plane. This made it so we were not stuck at the door waiting until everybody had finished stuffing their luggage in the overhead compartment, tightening belts etc before others can continue to the next seat. This was very smart! It facilitated a very quick turnaround. I wonder why it is not always like this?
The professionalism the woman demonstrated and her initiative and customer service skills made the situation bearable, and made my day. I said to my colleague “I wish all of my employees were like her”.
The time she saved in this turnaround gave us 20 minutes for a smooth connection in Philadelphia, and on home to Montreal.
Thanks to Serge Charron, President of Pascan Aviaion in Montreal for sharing this story. One person can make a difference!
Is EXIM Bank’s Program Good for Aviation?
Our company sells refurbished turboprop regional airlines all over the world. In the last 18 months, in the middle of the worst aviation recession in memory, we have sold and delivered aircraft to Nepal, Canada, Columbia, Venezuela, Haiti, Dominican Republic, Australia,and Zambia to name a few. All of this in a time when used aircraft sales in the United States came to a screeching halt and have yet to recover. And the sales could have been higher. Had small airlines who are looking to expand their fleets been able to get financing, we would have sold twice again what we were able to sell around the world. Albeit there is risk associated in financing aircraft for small airlines in other countries, most of the businesses we deal with are well run and not as highly leveraged as the big airlines in Europe and the United States. These small businesses have not had the luxury of obtaining financing for new aircraft and so they typically pay cash,after saving for years, or finance a very small portion of the purchase.
A December 10 article in The Wall Street Journaldiscusses ExIm bank’s effect on Boeing Commercial Airliner sales. The number quoted is that one in four of Boeing’s sales are funded though the ExIm Bank guaranties. Without this government-backed financing Boeing would not be where they are today.
Recently our company was introduced to the process of working through the ExIm program as an opportunity to get backing on the sale of aircraft to a small airline in Central America. ExIm works much like other US programs that guarantee loans for loan underwriters to induce the underwriter to make a loan they might not otherwise make.
In a theoretical sense I believe in the free market economy, but a free market economy needs a level playing field, with rule sets that apply to everyone in the market. In the case of most international trade, and especially in aviation, governments across the world intervene to the benefit of their national industries. So if Airbus gets help from the European Union and its home country of France, but Boeing gets no help in any form from the United States is that fair trade in a freemarket economy?
Let me take this back down to the small business level where most of the jobs in this country are created. In the case of our company a big percentage of the payroll is tied to buying, refurbishing and reselling these used regional airline turboprop aircraft. We have yet to receive any handouts from the government for anything. We haven’t asked for any handouts. We pay our taxes (hard to count how many different ones) like everyone else. So, is it wrong to go to ExIm and ask them to back loans to sell small aircraft to airlines in developing countries who will use these aircraft to develop their own transportation infrastructure?
I don’t know the default rate of the ExIm program’s backed loans. I am not sure it is published and I’m certainly not suggesting a process that encourages bad loans. I am simply suggesting a process that provides capital for transactions that are sound in business principle but outside the realm of traditional banking sources.
Without capital it is hard to grow the economy, both here in the US and abroad. For the case of our small business, when other small airlines around the world can obtain the capital to grow, jobs and profits are created here in the US.
Not a bad proposition?
Series 1 – Flight Training Beginnings
Randy Harmon is Owner of Wings of Eagles Flight School, in Nashville, Tennessee. He is a Certificated Flight Instructor CFII, CSIP, AGI, a retired Lieutenant Colonel with the United States Air Force and former Nashville Future 50 business owner.
Here Randy tells us about the beginnings of flight training:
The phone call or the office visit goes like this:
New customer: “I’ve always wanted to know what it’s like to fly, but just as I was about to begin lessons, I moved away/got a job/began a family, etc, now I still don’t have much time. My children have moved out or I’m just tired of all the hassles of flying commercially and I still want to see if flying is something I can do.”
Two questions that everyone asks are: “How much does it cost?” and “How long does it take?”
Having trained pilots in the Nashville, Tennessee, area since 1997, and having flown both as a civilian and Air Force aviator since 1977, I can say with confidence that, in our market, it costs anywhere from $7,500 to over $19,000. Those costs depend on two things: 1. the type of airplane you chose to train in, and 2. the time each week you chose to train. I offer a spreadsheet that breaks down all the costs of training, including some that are often overlooked, such as the purchase price of a headset, kneeboard, and the cost of not only the flight examiner, but also the aircraft rental time for the check ride.
As for how long it takes, I tell new customers that if they train (both ground and flight) for six hours each week, then they can get their private pilot’s license in four to five months. If they devote nine hours each week to training, then they can have it in less than three months. If they train five days a week, they can have it within 30 days. And, as with learning any new skill, it requires consistency.
The next questions usually revolve around scheduling, training materials, and instructor-customer relationships. Any flight school or Certified Flight Instructor (CFI) should emphasize safety and customer-centered scheduling. Training should follow a written syllabus and every lesson should end with an assignment for the next lesson. Your instructor should ask you, the customer, how you learn best. Some people need to read and study via a text book, some rely upon computer-based applications, and others need the “tell me, show me” approach. We all learn differently and a good instructor should adapt to your style.
Most instructors I’ve dealt with are very dedicated, but even then, sometimes personalities clash. If you are in a flight school environment, you should let your instructor or the chief instructor know that you’d like to experience another training style. Your training should be enjoyable, after all, it is your money. Most of my personal students have flown with almost all of the instructors at my flight school. Each instructor brings a different teaching style to training, but we all teach to the same standards. It then just becomes a matter of what techniques best fit your learning style. At our school we share techniques frequently and formally at monthly CFI meetings.
For your next step, call a local flight school and schedule your introductory flight lesson. A great resource for finding one is www.aopa.org. Or you can contact us at www.jwnwings.comand we’d be glad to share the experience of flight with you and answer any questions you may have.
In my next post, we will discuss aircraft purchase or rental…..what’s right for you?
Lt Col Randy Harmon, USAF (Ret)
Snow Collapses Hangar at Dulles
This has to be every FBO and aviation insurance carrier’s worst nightmare to deal with. This week at Dulles Airport in Washington D.C., a hangar storing several large cabin business jets collapsed due to the weight of the snow from the blizzard that hit the area over the weekend.
There could easily be $150 million worth of aircraft totaled or damaged to the point they will be out of service for a long time. The hangar, which was a fairly new structure, is worth probably $5 million itself.
Whose insurance covers this one? The aircraft owners or the owner of the hangar?
I have asked our insurance agent Tom Chappell to keep an eye on this and write on the issue of insurance coverages and how this possibly could play out. For those of us in the aviation services businesses it will be an eye opener as to the amount and scope of the insurance coverage we have.
What a mess!
Make sure this doesn’t happen to you: http://www.chappellsmith.com/
How Much Time Does It Really Take to Get There by Air?
If you have time to spare go by air!
A February 4 article by Scott McCartney in the Wall Street Journal discusses the airlines’ changes in their published schedule. It seems that over the past years the jets have slowed down, or at least it looks that way if you are looking at scheduled departure and arrival times as published.
The title of his article is ‘Why a Six Hour Flight Now Takes Seven” and here are a few excerpts:
For some airlines, longer scheduled times for flights reflects the reality of inefficiency in the nation’s air travel system, which often can’t handle the volume of planes without delay, especially when bad weather hits. For others, lengthening scheduled arrival times boosts on-time rankings charted by the Department of Transportation: Those numbers can have a real effect on public perception. And in some cases, block times have grown simply because airlines have been making so many schedule changes as they have reduced capacity over the past two years. Flights that took off without a wait can now end up stuck waiting behind a line of jets because departure times have been changed.
Airlines say they have to build in delays so schedules reflect reality, especially at congested airports in the Northeast and at big, crowded hub airports. Actual flight performance has gotten more unpredictable because of problems in the air-traffic control system. In addition, planes are flying about 2% slower to save fuel costs, airlines say. Also, carriers have switched many flights to smaller regional jets, which don’t fly as fast as bigger planes and can also force planes behind them to slow down. Some airlines have bunched up schedules at big airports to increase connecting opportunities, adding to congestion at peak hours.
And block time is only the time that you are spending inside the aircraft, either sitting at the gate, sitting at the end of the runway in line for take-off, flying, holding for landing, and then sitting on the tarmac waiting for a gate to be open and, :.
What about the time driving to the airport, finding parking, taking the shuttle bus to the terminal, in the queue for checking bags and security screening, and then sitting in one of those really comfy rows of seating at the gate because you got there early enough to make sure the previous three steps in the process did not cause you to miss your flight?
All of this process of airline travel kills time. Is time savings not the reason we travel by air? Or is it the sheer pleasure of the experience?
It seems to me that everything the airlines are doing is counter to the purpose or intent of why people fly in the first place.
Have you ever calculated the real time you spend traveling on an airline to get somewhere? What I mean by the real time is the time starting when you leave your house or office and ending when you arrive at your ultimate destination (not the airport unless that is where you are meeting).
On a 600 mile trip you might find you are not even averaging 100 miles per hour.
If you have a few minutes run the time and actual distance covered on a trip you have done. I would be interested in knowing what you find out.
No Spirit At Spirit
On 23 January, I published a blog relating my amazement and, frankly, my disgust at Delta Air Lines’ refusal to waive their excess baggage policy to Santa Domingo for passengers on verifiable humanitarian missions. This week, Ken Silverman, CEO of Infinity Aviation Group, related a similar experience with Spirit Airlines.
On 2 February, Mr. Silverman’s girlfriend, a nurse practitioner and midwife in New York City, left the city for Ft. Lauderdale on Spirit Airlines, bound for Port Au Prince. On the evening of 30 January, she booked her ticket online then called to discusss baggage arrangements since she would be carrying two suitcases filled with medical supplies for newborns and pregnant women. She informed the Spirit supervisor that she would be carrying the humanitarian supplies and requested that the airline waive the baggage fee. The supervisor suggested she to inform the agent when she checked in, “that they could help.” They helped her, alright - they helped her lighten her wallet. Checking in at New York’s LaGuardia Airport, Mr. Silverman says, “They not only charged her a standard luggage fee for each bag, but also for one bag being very overweight! Additional cost: $150.”
When he contacted Spirit Airlines, Fay McKellar at Spirit replied, “…while your girlfriend’s relief efforts in Haiti are admirable, and we would never stand in the way of humanitarian work, we must uphold our baggage allowance policies and fees. Baggage standards apply regardless of where our customers are traveling or what they’re traveling with. Baggage weight and size is an important component for our flight crew for accuracy in calculating weight and balance information. Items that are overweight or over-sized will continue to be weighed and sized at the airport, and fees collected at check-In. Our baggage guidelines are posted on our Contract of Carriage on our Web site, and it is the customer’s responsibility to read the Terms and Conditions they agree to upon purchasing a ticket. Thanks again for writing to Spirit Airlines.” Ms McKellar said later that the airline had raised over $250,000 and had completed three humanitarian flights. If those claims are true, then that’s terrific. But, it begs the question: why was $150 such a big deal?
Maybe it’s just me, but this is I what hear her saying: “Your girlfriend’s a real peach and while we aren’t on the ground, sleeping in a tent helping people, we won’t keep her from doing it. But, rules are rules and it’s much easier for me to tell you no than to actually effect a solution. Even though all of this about weight and balance is safety and operations related and completely irrelevant to the issue at hand, I’m going to include it so that maybe you’ll be confused. We’re going to squeeze every dime out of you that we can and, if you didn’t know about it or don’t like it, it’s your own fault. Bu-bye, now.”
The air mass-transit machine promotes this kind of callous, automaton thinking on every level. “No” is the airline equivalent of the old TV robot response of, “Does not compute.” If your request or question isn’t within the script of too many agents, their inflexible answer is “no.” I’ve worked at the ticket counter. I’ve collected fees for overweight and excess baggage. I’ve also helped people repack to avoid the fees. I’ve helped them find other solutions and, sometimes, I’ve waived the fees. And since fee collection has nothing whatsoever to do with safety or the captain’s authority on the safe operation of the aircraft, there is latitude for humanitarian discretion. Or, at least there used to be. If there isn’t anymore, then we have a serious problem.
Some people have a naturally high degree of empathy. These people are the ones trying to save the world, lending a hand to anyone in need. We secretly envy them because most of us just aren’t that nice. Some of us earn it surviving some traumatic event – a house fire, a robbery, a tornado, or (in my case) losing everything to a hurricane like Katrina. Take it from me, realizing that everything you own will fit into your car will change your perspective in a hurry. Is that what it’s going to take to change the perspectives of Spirit, Delta and other carriers putting profits before humanity?
A Social Flight?
On a recent podcast interview with Max Flight and the guys who are regulars on the www.airplanegeeks.com pod cast, I made the statement that flying on business or private aircraft is “social.” One of the guys asked me to define what I meant by “social”.
Honestly speaking, I did not really even think about the definition of social when I made that remark - it just came out.
So here is a definition of social that I like: “marked by or passed in pleasant companionship with one’s friends or associates”.
My off the cuff response was that flying on a private jet is a pleasant and enjoyable experience. It is comfortable and the treatment the passenger receives from the flight crew is good. Compare this with the anti-social experience of riding the airlines.
Why shouldn’t travel by air be social? I mean it used to be when I was a kid. As I wrote on my very first post on this blog site – I remember that first airline flight in 1969 on American Airlines. We put on our best clothes like we were going to church. The flight attendant and pilots made us feel special and even gave us wings!
The one airline that engages in social flying today is Southwest Airlines. One of the last Southwest flights I took was coming out of New York’s LaGuardia Airport. While waiting for the passengers to finish boarding, the captain entertained us by playing ‘Oh, Susannah!’ on the harmonica. He jokingly said that he was not going to stop playing until everyone was seated. I love it! Taunting a bunch of New Yorkers with a song from the South on the harmonica. Truth is, even the New Yorkers loved it. Now, that is Social!
I hope Southwest never loses that social culture they have carefully created and nurtured over 30 plus years of operating.
Why can’t all airlines get the culture of making it fun and social. Even if we are crowded into seats a little too small, at least they could make it fun.
Having said all of that what is so ‘social’ about flying on a private jet?
First and foremost, it is a more personal experience. You are greeted by the pilots who help load your bags as you board the aircraft. They know your name and you will know theirs. They may tell you about the enroute and destination weather, if that is a factor, and they may ask if you are OK with proceeding. I usually say, “I am good if you are” but some folks would rather wait it out or go another day if the weather is too lousy. Wait a minute. You mean I can call it off? You bet you can.
Once on board, you get the feel of riding in the limousine instead of the subway. It is easy to ask the pilots a question like “where are we?” or” what is the name of that river?” Or you can just sit back with your friends or business associates and enjoy the ride in comfortable seating. Want to talk business with your travel mates? You don’t have to worry about the guy behind you listening in on the conversation since you already know who he is. When you arrive on the other end you are usually greeted by the smiling face of a person who parks the aircraft at the Fixed Based Operation (private air terminal) at the destination. Most roll out a red carpet even if you are not a rock star!
You then walk to the terminal (FBO) and someone has your rental car keys ready or the hired car is waiting close to the aircraft and you are off to your ultimate destination – the business meeting, dinner or vacation spot. If the business meeting runs a little long, the aircraft will not leave without you. A courtesy call to the pilots or company dispatch will update the crew so they can update the flight plan -emphasis here on “courtesy” since the pilots do have legal lmitations on their time and need to be rested to be safe to fly you home.
One of the most common feedback points we get from customers is how much they enjoyed flying with crew and frequently they request to fly with that same crew again. Flying is a comfortable experience when you get to know the crew upfront and they get to know you. People like to be treated with respect by the people they do business with. On a private jet, courteous treatment is the norm, not the exception.
If all of this sounds like an experience “marked by or passed in pleasant companionship with one’s friends or associates,” then it’s social.