Plane Conversations

In an attempt to regulate the airlines on the issue of leaving passengers sitting on aircraft on the tarmac for extended periods of time it appears that the DOT may end up making things worse.

Michael Fabey of the Travel Weekly online magazine says in a recent article:

As a result of new federal rules limiting tarmac delays, airline officials and analysts predicted that in coming months, airlines are certain to cancel an increasing number of flights for bad weather or for a host of other reasons, rather than face heavy new federal fines for holding passengers too long on a tarmac.

The new Transportation Department regulations, which take effect April 29, subject U.S. airlines to fines of up to $27,500 per passenger in instances where the airlines fail to allow passengers to deplane after three hours on the tarmac or fail to provide those aboard with food, drink and other comforts.

“For us, that could be as much as $4.4 million for one flight,” said American spokesman Tim Smith. “No one’s going to play with that. There will be many more cancellations as a result. Everyone is gearing up for this.”

So did the “experts” in congress and the DOT solve the problem or create a new one that is worse than the old one?

Being more of a free-market capitalist, it seems to me that this is one they could have left alone. I mean, if the airlines mess things up badly enough, often enough for long enough, it costs them money and customers. They don’t want that with or without any intervention from the federal government.

A veteran airline dispatcher commented to the article by stating:

“The new regulations will demonstrate the Law of Unintended Consequences, and I say this as a 35+ year airline dispatcher. There have been a few past irregular ops events (NWA/DTW, JBU/JFK, CoEx/RST, and AAL/AUS) that generated huge delays (7+ hours) and were all admittedly intolerable and handled poorly. The lunacy of the new regs is that in the effort to preclude such rare 7+ hour delay events (apples), an “all delays are equally evil” tact has been taken, with the “solution” to now apply with more common 2-4 hr. delays (oranges) one sees when weather, and airport/airspace constraints occur. Pre-emptive cancellation for snow are one thing, but thunderstorm season is another, and no airline is going to let a flight blow the 3-hour limit and incur a $3M+ fine for each flight. Cancellations? Count on them, but don’t blame the airlines–all the non-airline “experts” drove them.”

I wonder if anyone at the DOT or in Congress asked any of the dispatchers and operations people at the airlines what they thought about the solution(s) to the problem prior to making a new rule. Probably not! What?  Go ask the people who deal with this every day? Heaven forbid! They probably had a hearing and heard from the senior management of the airlines (whom they don’t trust), then from a panel of experts (whom they do trust in spite of the fact that the experts may have no practical operational experience).  After hearing from both groups, but without talking to the people who make it happen day after day, Congress drafted and enacted a new rule.  

It was a parade-inducing headline for proponents of the measure, but the people in the operational trenches don’t see any parades in the practical applications.

All of this was done in an effort to appease the public who is fed up with the broken air mass-transit system.  So, instead of actually fixing the problem in cases of the rare, extreme delay, they’ve created the problem of cancelled flights in the case of the common delay.

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People regularly quiz us about FAA and self-imposed safety regulations, trying to define and understand them. And, now and then, they ask us to bend the rules “just a little bit” to accommodate an extra hour in their schedules or an extra couple of hundred pounds of payload.  With an eight ton aircraft, what’s a couple hundred pounds between friends?   After all, it won’t make much difference, right?  I am surprised at how often they are surprised when we say no.  Statistically, flying may be safer than driving, but bending the rules “just a little bit” isn’t how it stays that way.  We stick to the rules because they are there to keep us, our aircraft, our crew, our passengers and the people on the ground safe.  Bottom line – the cost of being wrong is just too high.

So, last night, when I was watching the news and I heard an adorable little exchange between a child in the air traffic control tower at New York’s JFK Airport and a JetBlue airliner full of passengers, I was absolutely dumbstruck, which you know is quite a feat if we’ve ever met.  Hundreds of people’s lives were involved in that little exchange between a child who had gone to work with a parent and an airliner in an ACTIVE FLIGHT!!!

The Associated Press’ Joan Lowy wrote about this incident and others that shine a rather harsh light on Air Traffic Control and raises the question: Who’s watching the watchers?

In the case of Tiny Tyke ATC, the FAA has suspended both the controller and his supervisor pending an investigation, and the NTSB is  holding a forum this spring to discuss pilot and air traffic controller professionalism.  Do I think that the aircraft was in danger?  No, the licensed controller was right there and the child was clearly repeating only what he was told to say.  Now, do I think that it was an instance of colossally poor judgement?  Absolutely.  And, in this industry, more than in many, instances of colossally poor judgement cannot be ignored.  The costs are simply too high.

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It looks like Congress may finally get back around to figuring out how to pass a bill that will fund the Next Generation Air Traffic System (NexGen). Hopefully, I will see this happen in my career, I still have 15 years left if all goes good.

It is frustrating to me that the lawmakers want to wrap up controversial provisions into a bill thats primary purpose is not controversial. Everyone in aviation agrees that the traffic control system needs to be modernized. It will save fuel and time in the air which is both green and more productive for our economy. It will also increase the margins of safety with better traffic management. Both general aviation and the airline industry support the development of NexGen.

So, what is the hold up?

Somehow congress can not seem to simplify things and get something done.

They have to add in provisions that we can’t all agree on so things get stalled and nothing happens. What can we not agree on?

• Who pays for it? GA versus Airlines
• Should we be auditing European Repair Stations? A Union Protectionist Issue
• Should we make it easier for FedEx employees to unionize? Another union issue. Big company against the union
• Passenger Rights? The People versus the Airlines
• Pilot Work Rules and the Oversight of the Airlines: Pilots versus the Airline Management and additional regulations 

In that list that I just mentioned, which of those issues, if any,has the first thing or, for that matter, anything at all to do with modernizing our air transportation system through the deployment of new technology? With the exception of who pays for it, none! And I will bet you that we can come to some solution on who pays for it.

Maybe I am simple-minded, but why can’t these guys in D.C. simplify this and pass a clean bill that funds what we all agree needs to happen and fight it out over the rest in separate bills? Is there some legislative rule against simplicity? If there is, then we need to change the rules.  Or maybe we just need to fire the rule-makers and vote in some new ones who understand how to get things done.

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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.

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In a recent article in the Wall Street Journal, Scott McCartney talked about security taking longer than the flight.

Ever since the December 25 bombing attempt, travelers heading to the United States have had to face much tighter security.  The federal government issued new rules which made inbound travelers have to go through a number of screening processes which include some pretty intrusive searches.  And the crazy thing is people adjust.  We have all become indoctrinated to this.  We don’t like it, but we just have to do it.  

I know this because I flew from Brisbane, Australia to Los Angeles a week after the attempted bombing.  I was told that I would have to be at the airport three hours prior to my flight.  I went through a number of searches, pat-downs, emptying out of personal belongings and carry-on luggage.  I removed my shoes about four times.  My teenaged son, who happened to be walking ahead of me alone, with his hands in his pockets, wearing a hoodie over his head, was approached by security to have an explosives test.

The article says:  “If you’re coming inbound to the U.S., it’s going to be a tough summer unless we get some creative change in the security rules,” said Steve Lott, a spokesman for the International Air Transport Association, a Geneva-based group that represents airlines around the world.

Airports, airlines and government agencies around the world have hired more screeners to perform the “enhanced” security that the U.S. now requires for any flight headed to or flying over the 50 states.

Airline officials said that government agencies and airports in North America, Europe and Asia have promised that they will staff up enough to prevent long lines and delays as travel picks up this spring and summer. “All we’ve got at this point is their word and we hope their word is good,” said an official at a U.S. airline. “It’s a concern.”

This affects not only those traveling to the US from overseas, but also domestic flights around the country.  So, what’s the alternative to removing your shoes and standing in long security lines?  You could always get a bunch of buddies, or other business travelers heading your way, to charter a private aircraft.  You’d be surprised at the price of dividing a charter flight by six or eight.  And you’d love the fact that you can drive to the FBO, grab a coffee and board the plane from the ramp 15 minutes before wheels up.  And I haven’t even started on the luxury of the experience yet.

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It is a little too early to tell how this situation, involving the use of a small single engine aircraft by a suicidal man who wanted to get back at the IRS, will affect general aviation.

Every time something happens with an aircraft the media jumps on the hype wagon and starts sensationalizing the event. The politicians soon follow with the idea they can create a new law or rule that will prevent what just happened from ever happening again. Let’s hold another congressional hearing and turn the TSA loose to solve the problem!

An Associated Press article headline says, ” Texas Plane Crash Exposes Gaps in Air Security.” Give me a break here! You could just as easily say, “Texas Car Crash Exposes Gaps in Ground Security.”

Some of the recommendations coming in from “the experts “say that we should not be able to fly small aircraft without filing a flight plan. In this case, that would have made no difference. If you understand the flight plan system, as  many in the press do not, you would know that.

This event is a sad and tragic for the families of those who have been affected but it does not deserve some new law or rule change that will affect general aviation.

General aviation and a small single engine Piper Cherokee (not a private jet as reported by many media sources) are not the cause.

The aircraft was the tool of the day that this man chose, sadly enough, to use to get revenge and kill. He was the owner of the aircraft and in that case no different than anyone who owns cars and trucks. No rule and no amount of security can get inside a man’s head to determine the day he will decide to use a personal means of transportation (or any other device or piece of machinery, for that matter)  as an instrument of destruction.  

This deranged man could have just as easily walked into the building with weapons or explosives and done more damage in terms of lives and property damage. It happened that way in Huntsville, Alabama, two weeks ago when a college professor shot and killed three colleagues and wounded three more. All it took was a pistol. It happens that way more times than we want to think about.  Mr. Stacks could have also used his car, a motorcycle, or a truck like Timothy McVeigh and caused massive damage.

So, as a society, we cannot say that the aircraft was the problem and that we can prevent this from happening again if we change all the rules to keep people from freely flying their aircraft. What next? I can no longer drive my car down the road because it might be used as a weapon by some crazy person bent on seeking revenge in a suicide attack?

Hopefully cooler heads will prevail and the ambulance-chasing media and “experts” with an opinion about the dangers of aviation will not take over the conversation.

As a society, we have to acknowledge that we are vulnerable and that we cannot totally protect ourselves from every possible danger.  We do the best we can do without destroying our liberties and freedom, and then go on with living our lives.  As Benjamin Franklin counseled over 200 years ago, “The man who trades freedom for security does not deserve nor will he ever receive either.”

In the meantime, those of us in the industry need to be prepared to defend ourselves and our freedom to fly in this country.

Thanks to AOPA for jumping in there to defend our industry. http://www.aopa.org/aircraft/articles/2010/100218crash.html

http://www.aopa.org/aopalive/?category=latestcontainer&watch=A0YnY3MTrDq8rUrycPqf1GLG7LjUMpPC

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This has got to be one of my favorite recent airline stories – Airlines’ On-Time Arrival Performance Best Since 2003.  Since 12 February, news outlets all over the country have carried the story and airlines all over the country are nearly breaking their arms patting themselves on the back.  Here’s the key word in all of that, though: arrival.  Nobody is getting all excited, crowing about on-time departure statistics.  Now why is that?

Flights still aren’t leaving on time and the space-time continuum seems to be intact; so, what accounts for the better performance?  On-time arrival numbers are up because block times have been padded with additional time.  As noted by Scott McCartney in the Wall Street Journal on 7 February: “Delta Air Lines Flight 715 from New York to Los Angeles now takes more than seven hours to fly across the country, according to the airline’s March schedule. That’s an hour longer than the same flight in the same type of aircraft took in 1996. A Phoenix-Las Vegas flight at Southwest Airlines that used to be scheduled at 60 minutes now gets 80 minutes. What was once a two-hour American Airlines trip from Chicago to Newark, N.J., now is two-and-a-half hours, according to the airline’s schedule.”

Aha!  The extra time wasn’t squeezed from the space-time continuum, it was squeezed from you!

Let’s add this up, shall we?  Your round-trip ticket on American Airlines between Chicago and Newark costs you $735.40.  Your one checked bag costs you another $50, round trip.  Estimating that you make $50 per hour (and that’s being WAY on the safe side), the increased flight time costs you $50.  Increased time to get through security costs you $100.  Now, let’s take that further.  Let’s say you live in Wheaton, Illinois, and the drive to Chicago’s O’Hare airport takes you at least 45 minutes, but you can get to the DuPage County Airport in only 20 minutes.  In terms of the value of your time, you’ve just spent another $42.  Add another $31 for parking in a main parking lot at O’Hare and the total for your travel is at $1008.40. Add additional meal, room, parking and wasted productive time costs if your meeting schedule requires that you stay the night. Now, add the aggravation factors: the toddler in 14B having a two-hour temper tantrum; for aisle seat passengers, the galley cart bumping your knees and getting up every 15 minutes to let your row mates up to use the lavatory; for window seat passengers, losing half of your seat to the person next to you who may not fit into their own; waiting to deplane; waiting for baggage; waiting for a taxi.  Multiply the aggravation factor by the number of days in a year you spend traveling.  How’s your blood pressure doing?  Mine is up and I’m just writing about it – you’re the one sitting in the seat.

Let’s compare this “improved performance” with business aircraft performance.  Arrive at the smaller airport of your choice 15 minutes prior to departure.  Park your car for no charge.  Walk directly to your aircraft and leave immediately. Barring air traffic and weather delays, the aircraft leaves when you tell it to; so, the departure is always on-time. Upon arrival, walk directly from your aircraft to an awaiting taxi or limo.  Today’s planning software is more accurate than ever; so, you’re arrival is always on-time.  Your fellow travelers are the ones you chose – no tantrums, no seat sharing.  Within federal guidelines, the length of stay is what you chose – no unnecessary wasted time or room and meal costs.  Now, how’s your blood pressure doing?

Does aircraft charter always make sense?  Not by a long shot.  But is it always the spoiled executive perk that many would have you believe?  Not by a longer shot.

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Thursday was an ugly day in the skies.  Even if the weather was severe clear, ugly things happened in both general aviation and in air mass-transit.

By now, you’ve heard that Joseph A. Stack, III, of Austin, Texas, reportedly set fire to his home before going to the airport, climbing into his aircraft and flying it into an office building where there were IRS offices.  We all get sideways about taxes and how The Man is somehow sticking it to us.  And maybe He is, but surely climbing into an aircraft and crashing into a building full of innocent people is not the best way to handle that kind of frustration. The New York Times says that the event is not being treated like a terrorist attack.  I suppose that’s fair, given that his purpose wasn’t to terrorize anyone, just to murder them, regardless of their contribution or lack thereof to his complaint.  It’s unfortunate that he chose to take this action and it’s unfortunate that he chose to use his aircraft to do it.

You’ve also heard about the diversion of United flight 741 into Salt Lake City, Utah, after a flight attendant found a threatening note in the aircraft galley.  Passengers and crew were deplaned and detained as the FBI interviewed everyone to find the note’s origin.  When I worked at the airport, people standing at the ticket counter would sometimes start to joke about bombs and weapons.  I would have to cut them off and remind them that what they were saying was not a joke to airport security and that they could be detained and possibly even charged for what amounted to talking just to fill a silence.  It wasn’t funny then  and it isn’t funny now.  Remember, airline and security employees are required to take those threats seriously and interfering with a flight is a felony, a federal one.

Days like Thursday are disheartening to those of us who love aviation.  We work to create, sustain and grow aviation companies that serve our communities and economies, knowing that the old joke is true: the way to have a million dollars in aviation is to start with two million.  We’re not going to get rich, but we’re going to spend our careers in a field that we love and it hurts us all when our industry is tarnished.

So, let’s polish it up a little.  Be an advocate for aviation.  In the face of all of the bad reports, share your good ones here.  To quote one of our industry’s favorite (if a little over-quoted) movies: “Talk to me, Goose.”

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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?

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Over the past few years, as our  business has expanded our reach past the United States by selling refurbished  regional airliners, I have had the privilege of meeting some really smart people who are running small airlines around the world. I have also met some not so smart people starting or proposing to start airlines. Usually the “not so smart people” don’t make it too long in this business, if they ever do get started, because the tolerance in aviation for poor operations and bad business plans is virtually zero. In some cases the market also eats some of the smart ones who just happen to be at the wrong place at the wrong time.

One of the things I love most about my job is the privilege to become friends with people who I would never have the opportunity to meet if not for aviation. Recently, I was able to visit with friends we do business with in Montreal, Quebec, who fall into the “really smart” and “got it together” categories for small airline / charter operators. PASCAN, headquartered at the Saint-Hubert Airport fifteen minutes from downtown Montreal, offers travelers in Quebec an alternative to the big airline experience that feels much more like charter flight service.  This company celebrated their ten year anniversary in business this past year and in an economy where airlines are losing these guys are winning.

Serge Charron, Pascan Aviation President

They start by operating out of their own terminal building that also serves as a Fixed Based Operation (FBO) for transient traffic coming into Saint – Hubert. Passengers can literally show up ten to fifteen  minutes prior to departure, have a coffee and board the flight in a few minutes and be on their way. The time savings is at least an hour over the big airport experience we all enjoy that includes parking, riding a shuttle bus, waiting in at least two and sometimes three lines before we actually get to the gate of departure, at which point we sit in uncomfortable chairs for 30 -45 minutes waiting on the boarding call.

PASCAN operates more like Southwest Airlines in providing point-to-point service than the majority of air carriers in the US and Canada who utilize the hub and spoke system. This allows people to travel between Montreal and Quebec City and small markets in the northern parts of Quebec. The alternative airline travel on Air Canada / Jazz is to fly from a small market into the hub, only to turn around and possibly fly right over your departure city on the way to your destination. In some cases the only alternative is to drive.

In addition to scheduled service to 13 markets they also provide on demand charter flights for passengers and cargo to all of the airports in Quebec and surrounding provinces of Canada. Their Pilatus PC-12 aircraft have the ability to fly into smaller airports that cannot be served by jet and large regional turboprop airlines.

As I have looked at what PASCAN is doing to succeed I have learned a little more about our neighbors to the north. Canada and the province of Quebec is resource rich and they are doing pretty good in this economy. Better than we are right now. As oil and other commodities have gone up in price over the past two years the economy is growing. Travel by air is not a luxury, but a necessity, due to the vast distances between cities, extreme weather,and lack of interstate systems in the unpopulated areas which make driving a tough way to go.   

Serge Charron, President and CEO of PASCAN has done an excellent job of seeing the opportunities and then stepping into to meet them in a market friendly way. Other airlines and charter operators in the US and around the world would be well served to study this success story.

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