Plane Conversations

Yesterday I spent time with clients considering the upgrade of their turboprop aircraft, a King Air 200, to a business jet. Their travel needs are growing and the trips they do are reaching farther out from their home base, so a jet is in consideration.

As we talked a few questions were asked: Have the values of used aircraft hit bottom? Is it a good time to buy, and if we decide to buy what would be the best investment? These questions sound much like the questions Jim Cramer might hear on Mad Money about which stock to buy.

I have also had conversations this week with two representatives from manufacturers of business jet aircraft.

Discussions centered on the current state of the market for new and used business aircraft. One of the problems the manufacturers of new aircraft are facing is the competition with their own late model used aircraft on the open market.

Starting in late 2008, and throughout all of 2009, the prices of used business jet aircraft fell in some cases as much as 50-60%. In an uncertain economy no one was buying and sellers could not get an established value without buyers.  

A four-year-old low time jet in like new condition today may be selling for half of its new price when delivered in 2006. Compare this to 2007, and the ten years prior, when a four-year-old aircraft could sell for 85% to 105% of its new price, depending on the manufacturers backlog of orders in production for the same model.

The brokers in our industry would probably confirm that the market of used aircraft has started to move, and the first aircraft to sell are those late model low time aircraft that took a huge hit in a “no buyer” market. As worldwide buyers absorb this inventory the prices have and will continue to firm up. 

Aircraft older than ten years, although still in excellent condition, may be slow to recover their value of two years ago, if ever. The supply of older used aircraft for sale is still greater than demand and will stay that way for a few more years. Prices may not go down much more, but will most likely not recover anytime soon.

Back to the original question:  Is it a good time to buy? If you have established the need and defined the mission of business aviation for your company, then it is a good time to buy. If you are ready to upgrade to an aircraft that better fits the mission, or a newer aircraft that will provide more capability, lower maintenance costs, and better reliability, then it is a great time to buy. 

Talk to people in our industry including manufacturer sales reps and reputable brokers of used aircraft. Wheels Up contributor Jeremy Cox  is one of those guys.  

Talk to other business jet operators, flight department managers, and aircraft management companies for insight. Do the analysis that determines what aircraft best suits the mission. Look at new versus used and the pros and cons of each.

There is a lot of knowledge in our industry and most everyone I know is willing to talk to you to share what they know.

If you have the need to travel to grow your business there has never been a better time to buy. It is a buyers market and there is good value in both new and used business jets.

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Airlines versus the Private Aircraft

Comparing travel by airlines to travel on private aircraft is like comparing travel by train or bus to travel by automobile.

One mode of travel can not meet all the needs in this country.

Travel by train and metro rail systems works great in and between major cities in densely populated areas of the country.  However, for the majority of the United States landmass, it is non-existent since population  density and the geographical distances between cities make it impractical to build and operate.

So we have the personal automobile and we always will. It may be in a different form one day – all electric or a hybrid of different energy sources – but we will still have it. Even in the cities with mass transit, the personal automobile or the communal automobile (taxi) still serves an important function of on-demand point-to point-travel.  

What is so different about the use of private aircraft for business or personal travel and using the airlines? The airlines seem to be migrating towards a form of mass transit system that primarily serves the travel demand between dense population centers domestically and internationally. Today, there are fewer, not more, cities served by airlines than just a few years ago.  

As airlines have shown no desire to fly in small market cities in this country, the void of scheduled air service to and between small cities grows.

We all fly because it gains us time that we can use on one end of the trip or the other. In the absence of air mass transit between cities, the air travel solution for small markets is private and business aviation. There are currently no other solutions.  

Will we ever give up the automobile totally in favor of the train? Probably not anytime soon, if ever. We will, however, get more efficient versions of the automobile.

And so it should be with private aircraft. Let’s make them more efficient and use them more efficiently.

Those in this country who see the private aircraft as a luxury mode of travel need to understand that, just like the automobile, the private aircraft, in all its variants, is an efficient mode of transportation in this economy – especially for those of us who have chosen not to live in the big city. Because we don’t have access to the metro rail and the 500 scheduled flights a day at an airport nearby, we need our cars and small planes to connect both locally and globally.

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 (Part 5 of 5)

What to Expect in the Purchase Process

Here is a step-by-step general outline of what you can expect in the acquisition of an aircraft.  The order sometimes changes depending on the situation.

1. Ask yourself questions: What do you want?  What do you want to spend? What is your mission? etc.
2. Interview buyer’s agents to represent you, then make a decision and hire one.
3. Expect to sign an agency agreement giving the agent the exclusive right to represent you for a period of time and establishing the fee you will pay as well as any expenses that will be your responsibility.  In the agreement, agents should also list their responsibilities and capabilities.
4. Ask your agent what to expect and when the process will begin to move forward.  Give your agent time to do the job but insist on receiving progress updates.
5. Place a refundable deposit into escrow.  This gives your agent the power to negotiate on your behalf and conveys the seriousness of your intent.
6. Refer anyone who calls you directly to your agent for the duration of the purchase process. You could easily and unknowingly undermine the groundwork your agent has laid.
7. Allow your agent to contact sellers.  Don’t call any aircraft seller during the process but discuss available aircraft with your agent and which sellers your agent should call.  I’ve seen feeding frenzies over a single buyer who got all of the sellers stirred up.  Often the sellers see this as a sign of increased market strength, so they will hold firm on the price your agent is trying to bring down for your benefit.  Your agent should treat you as a partner in the process and should not hesitate to make recommendations to you on aircraft, negotiation tactics, and offers.
8. Look for comparison reports.  Your agent will research the worldwide market and narrow the options to the very best three or four aircraft, usually putting a description of the aircraft on a spreadsheet.
9. Prioritize your preferences.  Based on your individual requirements and discussions with your agent, you will decide which aircraft to pursue first, second, etc., and come up with an offer. 
10. Make an offer.  An offer letter or letter of intent (LOI) will be prepared and submitted to the seller.
11. Expect negotiations.  A counteroffer or other response should be expected within the period outlined in your offer.  Negotiations will lead to an agreement or a decision to move on to another aircraft.
12. Be prepared for one to get away.  Don’t be surprised if an aircraft or two on your top three-or-four list sells.  Often the aircraft you are most interested in is going to be sold quickly … and you may not be the buyer. 
13. Title research.  Once an agreement is reached or looks favorable, your agent will order a title search, chain of title, and an IR and 337 search.  A 337 is a required FAA form for any major repair or alteration of an aircraft. The IR requirements can cause a delay in closing; so, the search should be performed early in the process.
14. Initial inspection.  Prior to the execution of the formal sale and purchase agreement, your agent may send a technical representative to visually inspect the aircraft and conduct a cursory logbook review.  Doing this is much less expensive than putting the aircraft into pre-purchase and then rejecting the aircraft for a reason that could have been easily identified beforehand.
15. Formal agreement.  A formal sale and purchase agreement is executed if the technical rep does not find any major issues and the title search, chain of title, and the IR and 337 searches lead to a positive assessment.
16. Demonstation flight.  A demonstration flight may be in order if you’ve never flown in the aircraft make and model.  The flight would be at the buyer’s expense.
17. Expect a test flight.  A test flight, including a check of the avionics, is performed in-flight prior to the pre-purchase inspection.
18. Prepurchase inspection performance.  While there is more than one way to handle “squawks” – the aircraft items in need of repair or adjustment - typically the seller will pay to remedy the “airworthiness, major systems, and safety of flight” items.  Anything falling outside that definition is the buyer’s responsibility.  Again, each deal is different; so, work with your agent.
19. Post maintenance test flight.  After the repair of the maintenance items, a post-maintenance test flight is performed for the benefit of the buyer and at the buyer’s expense.  This flight will verify that the aircraft is in proper working order prior to your acceptance of and payment for the aircraft.
20. Aircraft acceptance.  You will accept the aircraft upon in-flight verification of operation and confirmation that the logbooks properly reflect the agreed upon inspections.
21. Insurance bonding.  Insurance should be bound on the aircraft at this point or sooner but certainly should be arranged and activated with a call to your agent.
22. Initiate closing.  Both parties must give authorization to the escrow agent to initiate closing (filing of the documents and disbursement of the funds).
23. Aircraft delivery.  Delivery will often occur after closing.  This is a very important tax issue and both parties typically are sensitive to it during the initial negotiations.

Are there any other considerations?  Absolutely.  They include Certificate of Airworthiness (C of A) issues, import/export matters, holdbacks, documentation, engine/parts/avionics programs, aircraft rejection, deposit disposition, and on and on.  Each deal requires flexibility and experience to smoothly navigate through the aircraft purchase process and calmly handle any surprises that may occur.

Buying an aircraft should be an enjoyable experience.  By getting the help of a great agent and by knowing what to expect, it can be.

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(Part 4 of 5)

Pitfalls of Acquiring an Aircraft

You’re chosen your broker, set up your team and chosen an aircraft.  You’re well on your way, but you’re not out of the woods, yet.  Certainly there are many pitfalls in acquiring an aircraft, but these are some of the most common:

Pre-purchase inspection
Just having a pre-purchase inspection performed is not enough.  You need to be certain that the inspection facility understands the make and model of the aircraft that you are buying and is on the cutting edge of current and pending airworthiness directives (ADs) and maintenance issues.  How would you like to buy the only aircraft in your category without an engine program?  Once you’ve bought the aircraft, keep it well-maintained by a first-rate maintenance facility. 

Pending equipment mandates
You purchase an aircraft only to find out that the Federal Aviation Administration (FAA) has mandated additional avionics that will cost a significant percentage of what you just paid for your aircraft, which has happened to aircraft buyers. For instance, there have been FAA mandates on the reduced vertical separation minimum (RVSM), terrain awareness and warning system (TAWS), traffic collision avoidance system (TCAS), and emergency locator transmitter (ELT).  It’s important to learn about pending equipment mandates before you close the deal on your aircraft purchase.

Title issues
More than once I’ve heard buyers or sellers state that they really don’t want to mess with that “IR thing.”  If the FAA reports no liens or encumbrances on your aircraft and engines, but the International Registry (IR) does show an encumbrance, the good ole USA wins the day right?  Wrong!  Not all aircraft require an IR filing, but if your aircraft qualifies, you need to ensure filings are done for the aircraft and engines.  Trust an experience escrow company and agent, like Insured Aircraft Title Service, Inc.

Damage history
If two people sit down and read a log book entry, one might say, “Seems OK to me,” while the other might say, “Something is not right about this.”  The difference?   Experience!  Many sellers have sold their aircraft after representing it as “no damage” or “no known damage” (notice the litigation safeguard difference in the wording…we use it too!) and honestly believed they were telling the truth.  Damage is not always as easy to find as a log entry stating, “Aircraft rolled into a ball.  Repaired in compliance with factory maintenance manual.”   After a first reading of damage entries and several subsequent readings, I’ve sometimes asked myself, “So, was it damaged or …”  Damage can affect the value of an aircraft substantially (10 to 25 percent), so it’s important to determine the aircraft’s damage history.

Possibly the biggest mistake of all
I believe it is absolutely appropriate to aggressively negotiate the price of your aircraft. Pennies add up to dollars if you can save enough of them.  And you can save enough of them on your purchase price; however, if you take this approach in hiring your pilot, you are making a mistake.  You should be prepared to pay top dollar for a first-rate pilot. Aircraft occasionally break, systems fail, and the weather sometimes closes in, but none of these should be life-threatening when you are in the hands of a professional pilot.

Ask your insurance agent what underwriters require as far as a pilot’s minimum qualifications and training.  Then ask what your agent personally recommends.  The answer may be the same, but it may not be; so, ask.  Train your pilot(s) well.  It will cost you more to send your pilot to simulator training twice a year rather than once a year; but, if all hell breaks loose in the aircraft, who do you want in the cockpit?  A pilot who meets your underwriter’s “minimum standard?” Or one who may be over-trained? 

Some pilots are more interested in being able to occasionally use an aircraft than in receiving more pay.  Explore with them what keeps them happy and loyal.  I’ve met many pilots over the years, and the ones who are the most pleasant on the ground and in the air are typically the ones I like the best.  But even the most pleasant pilots may lose their calm if you try to convince them to do something outside of their best judgment.  You may be the boss on the ground; but, you should accept that when it comes to safety in the air, pilots are the boss.

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(Part 3 of 5)

Questions to Consider Before Purchasing an Aircraft
You’ve made the decision to buy and aircraft and you’ve found a great buyer’s agent / broker to help you.  Now, it’s time to ask yourself some questions; so, here’s a list to help you get started.  If you are a first-time aircraft buyer, you may not know the answers to some of these questions.  That’s okay, just use your best judgment.  Of course, these questions and your answers are just the start of the aircraft purchase process, but they will point you in the right direction, assisting you in your decision making and helping guide your agent toward the right aircraft. 

1. What is the primary purpose for the aircraft?
2. Do you have an aircraft in mind?
3. What is your mission (How many passengers will typically be on board? How far are you going? To which cities/airports are you flying? How long will you stay? How often will you fly? etc.) ?
4. Is the aircraft you’re considering suitable for 80 to 90 percent of your missions?
5. What is your budget?
6. Will you be the pilot or the passenger?
7. Will you hire your own crew and manage your own aircraft or hire a professional management firm to manage the aircraft for you?
8. If the aircraft will be used for both business and pleasure, what is the percentage for each use?
9. Are you trading an aircraft?
10. When would you like your new aircraft to be in service?

If you will typically need to carry eight to ten passengers with their bags, you can begin to narrow your purchase choices because you will require a larger aircraft.  Maybe you will need to visit three to four cities a day but stay in each for only one to two hours. In order to do that, you may require a faster aircraft.  If you plan to land at high-altitude or short runway airports, that will help narrow the field for you, as well.

It is not uncommon to get mentally stuck on the few trips per year that an aircraft cannot accommodate for one reason or another, which is why it’s important to remember that the aircraft you buy should be suitable for 80 to 90 percent of your trips.  Unless you have an unlimited budget, buying an aircraft is a trade-off between dollars and capability.

Out of the Box Thinking
Don’t get caught in the all or nothing mode of thinking.  Maybe two smaller aircraft make more sense for you than one large aircraft.  Maybe whole ownership along with fractional ownership of an aircraft is more appropriate.  Chartering the right aircraft for those few trips for which your aircraft isn’t suited may be just the ticket to a smooth-running flight operation.  Even the largest companies find that using an alternative aircraft for supplemental lift is more cost-effective than purchasing a big aircraft or expanding their fleets just to handle a few trips.  Booking flights on a scheduled air carrier should be considered in your decision making, as well.  Your buyer’s agent can help you determine the best options for you.

Assemble Your Team
While your agent can guide you in assembling a team to facilitate the purchase of your aircraft, you need to make sure this “mastermind alliance” is in place and working for your benefit: besides your agent, your team should include a certified public accountant (CPA) or skilled tax specialist, an attorney for limited liability company (LLC) formation and asset protection issues, an insurance professional, an escrow agent, a banker or lender, an inspection facility to conduct the pre-purchase, and possibly a pilot or pilots who can perform a thorough evaluation of the aircraft when it is in flight.

The Biggest Question of all
If you are purchasing a pre-owned plane, don’t expect it to be in the same condition as a new plane.  There will be squawks.  Just ensure your broker negotiates strongly on your behalf and guides you through the process.  However, if you discover that the plane’s condition is not as it was represented or that the costs to put it into quality condition are too high, are you willing to walk away from the deal?  Professional brokers and buyer’s agents rarely have deals fall apart after pre-purchase.  Trust them to guide you through the solutions but be willing to walk away if it is the best course of action for you.

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(Part 2 of 5)

The Key to Success
Before we get into some specific questions to ask yourself, and the steps to making an aircraft purchase, let me tell you the real key to a successful transaction…hire a competent and experienced broker with an excellent reputation.  You’ll most likely refer to the broker as your “agent” or “buyer’s agent,” but “broker” and “acquisition specialist” are also common monikers.  When hiring a broker, it’s important to do your homework.  Get referrals, check out the broker’s website, and interview them.  Ask why you should hire that particular broker instead of another.  The selection process is more difficult than it may seem.  Although most brokers tell you the same things, there are stark differences.
 
A Little Background on the Aircraft Sales and Brokerage Business
There are vast differences in experience, business practices, and ethics among brokers.  Why?   It’s because our industry is completely unregulated.  Anyone can claim to be an aircraft broker, acquisition specialist, mandate wizard, or all-around, good-guy aircraft salesperson.  Even though I know how to fly, I don’t claim to be competent to represent you as pilot-in-command of your aircraft.  Pilots, mechanics, real estate agents, or business people may claim to be competent to represent you because they once bought, sold or were involved in an aircraft transaction; but, they may not truly have the knowledge or skills needed to take you through the aircraft purchase process successfully.

Like all professions, the aircraft brokerage business has people who do their jobs well, those who do their jobs poorly, and others in between.  Some of the most reputable brokers I know do not own aircraft inventory themselves.  However, if a broker (someone selling somebone else’s aircraft) is also a dealer (someone who buys aircraft for his own inventory), then it stands to reason that they know a little something about purchasing an aircraft.  So, find out whether your buyer’s agent/broker is also a dealer. 

A quality broker may recommend tax-saving strategies like a 1031 exchange, putting an aircraft into a charter fleet, or capitalizing on recent tax laws or incentives.  State sales tax is a fact of life, but there are tax-saving strategies you should consider prior to your aircraft purchase.  Besides your broker, also consult with your tax professional to help you discover all of the applicable strategies.

I believe one of the most powerful functions of a buyer’s agent is to remove the emotion from an aircraft purchase decision.  I recently had a somewhat anxious client get upset with me because I rejected two aircraft on his behalf (one before the pre-buy inspection and one duringthe process), even though I had his permission to reject the aircraft.  Later, after I found the right aircraft for him, he thanked me for staying cool, standing up to him respectfully, and watching out for his best interests.  To me, the long-term relationship is what mattered.  To him, getting the aircraft is what mattered.  Since I was acting as a buffer, I helped him buy an aircraft he wouldn’t regret later, keeping both our priorities intact.   

One Last Thought on Brokers
There’s another reason you should be careful that you hire the right person as your broker.  If you get involved with a disreputable or incompetent broker, they could get you involved in a lawsuit that might drag on for years.  And that would certainly would spoil all the fun of buying an aircraft.

A reputable broker should be able to provide you with a list of satisfied clients and will probably urge you to research his reputation by calling people within the industry.  You may find that the broker you’re researching has one of the highest fees among the people you call; however, it’s important to remember that the fee is probably high for a reason.  Professionals will not sell their services to the lowest bidder.  And, you’ll find that hiring the right buyer’s agent/broker to represent you in the purchase of an aircraft will pay for itself in the long run. 

My pointers may not make it a certainty that you’re dealing with the right person, they’re a good road map for finding the right professional to represent you.

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(Part 1 of 5)

As a successful business person, you’ve no doubt been involved in countless complicated high-dollar acquisitions and business deals over the years.  You’ve contemplated the effect on your business, considered the upside and covered the downside.  You’ve also consulted with your tax adviser, banker, attorney, and internal management team.  With the facts in hand and a plan in place, you proceeded with cautious optimism.

When it came time to consider the purchase of an aircraft as a tool to expand your business, you proceeded with the same prudent approach and team of experts, right?  Well, maybe not.

Purchasing an aircraft in light of and compared to other business transactions just doesn’t seem like a complicated process.  Complicated or not, the process is replete with pitfalls.

A Couple of Basics
Prior to launching the aircraft purchase process for a client, reputable aircraft sales firms spend a great deal of time acquiring an understanding a client’s needs, travel history, mission or missions, and budget.   After all, how can we advise you on the right aircraft purchase without first understanding your requirements?

It’s important to know why a client wants or needs an aircraft.  Of course, the reasons will vary depending on whether the client is buying the aircraft for personal use or business use.  In my years at CFM Jet, on more than one occasion I have been told, “I just want one.”  That is a perfectly acceptable answer if money is not a problem.  We’vesold aircraft to clients just twelve months after their last aircraft purchase because they had to have an aircraft that had a potty!

Sometimes a client is looking for an aircraft they’ll hire pilots to fly.  Other times, the client will be the pilot in command of the aircraft.  The purchase process formula will require some adjustment for those different scenarios.

Growing up a third-generation aircraft salesman and enjoying over 20 years in my profession, I have a unique insight into the world of the aircraft transaction.  In the coming weeks, I will post blogs on the process, pitfalls, keys to a successful transaction and the most important post-purchase move that you can make to ensure the ongoing safe operation of your aircraft.

To help you avoid the pitfalls, I’m going to guide you through the process.  While there may be more than one way to the goal, the basic principles of any aircraft purchase are the same.  I’ll cover the basics by explaining how you go about making the decision to choose one aircraft over another, what the considerations are when buying an aircraft, and how you can keep from stepping into one of the hundreds of holes surrounding an aircraft purchase.

The process can be nerve wracking, but it can also be exhilarating.  Join me Thursday to begin the aircraft acquisition adventure as we discuss how to find the right broker for you.

(next installment)

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I don’t make $3 million a year.  I’m nowhere close.  In fact, the very idea of it makes me feel faint and has me seeing visions of Nordstrom’s.  Regardless, we often fly passengers who do make that kind of money.  As an individual, I cannot negatively judge the expedience of using private aviation based on my own personal income and monetary touchstones.  Neither can anyone else outside that economic peer group.

I recently spoke with a client who, until the media hung a target on general aviation, was the scheduler for a corporate flight department.  The company let go of their pilots, sold their aircraft at a huge loss and now has their executives traveling on scheduled airlines.  Those travelers are recording about a 25% cancellation in their flights.  Twenty. Five. Percent.  And the flights aren’t cancelling before the business man leaves his home airport where he can just return to the office to put in a productive day.  They are cancelling when the executive is already on the road.  He’s sitting in Denver or Albuquerque or Kelowna, cooling his heels at a terminal, being as productive as he can be with a Bluetooth and a laptop.  Thankfully, those technologies have continued to advance at an amazing pace.  Otherwise, the guy would be balancing his briefcase on his knees, taking notes while on a call at a phone bank!

Reading the number of articles written about the Great Evil of Private Aviation that I do, I can’t help but see the writers metaphorically lining the jet-bridge clapping and jeering at the executives boarding air mass-transit, the writers gleefully claiming a victory for the proletariat.  This media witch hunt has the markings of an aviation version of the 1793 Reign of Terror.  Certainly we don’t see people dragged through the streets to Madame Guillotine, but we do see flight departments sacrificed on the altar of mob mentality.

I agree that the Big Three CEOs were thoughtless in their use of private aircraft to carry them and their begging bowls to Washington to request bailout funds; however, I think that for politicians who use government Gulfstreams for travel between the capitol and their constituencies to reprimand and condemn the CEOs is tantamount to a Maybach owner telling a BMW driver that he spends too much money on his car.   The major difference that I see is that the government can continue to operate with a trillion dollar deficit while the private sector cannot.

I don’t advocate that private aviation is a “one size fits all” travel solution; however, I realize that each trip must be analyzed to determine its value.  Over the years, I’ve had the opportunity to help manage aircraft for several companies.  Typically, those companies do just that: they examine the cost of each trip to determine the best use of their most expensive assets – their employees’ time.  Private aircraft, like any other asset, is a tool to be used to further the interests and maximize the profits of a company.

Aircraft ownership and flight departments did not put the automakers into bankruptcy.  Likewise, the forced closure of those departments did not allow General Motors to pay back the bailout funds five years early.  Smarter overall business decisions did that.

So, rather than attacking Private Aviation, branding it the root of all evil, how about journalists educate themselves on the topic before they jump on the bandwagon?  Perhaps they might start looking at overall business practices instead.

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Recently I was having a conversation with a Charter Operator’s team about possible ways to increase their visibility and market share.  I mentioned the use of customer testimonials as part of their advertising.  They responded, “But our customers won’t do it.  They feel like people will judge them negatively because they used a private charter.”

I haven’t been able to get that thought out of my head.

There is a stigma about general aviation- that somehow these planes are the wasteful toys of the “rich”.  To admit to flying one or utilizing one for business seems to be tantamount to admitting you have stock in Exxon, own a Hummer, or that you were involved in clear cutting a rainforest.  There’s a stigma.  And ironically it doesn’t matter if you’re flying a Cessna 172, a Cirrus, Baron, or a Phenom.  People will look sort of sideways at you and wonder if somehow you’re the clandestine “millionaire next door”

There are several things that we need to understand about “Plane Guilt” if we hope to overcome it:

The relative nature of the argument. When someone uses what is perceived as “rich toys” either for pleasure or as a part of their business, there is a judgment that happens in many people’s mind.   “Mr. Jones is so extravagant and wasteful to be using that business plane. ” And many clients/owners/operators are very aware of this stigma. The argument that aviation is simply an extravagant and wasteful tool for the wealthy is completely relative.  It’s relative based on one’s perception of affluence and wealth.  What is extravagant to one may not be to another.  In many ways Americans have blinders on and miss the fact we are, in general, an affluent people.  Consider the fact that Americans and Europeans  spend enough on ice cream and pet foods to provide  water, health, nutrition, and education for the entire planet.  Also, consider that 80% of the people on the planet live on less than $10 a day.1  Of course Americans are a generous people too.  Even in the economic hard times we are facing at home, over $200 million was raised in short order for the victims of the recent earthquake in Haiti. 2   But realize that this relief was only possible because we, as a people, are successful.  And never mind the crucial role, dare we mention it, that private aviation continues to play in that recovery effort.  Nonetheless, we need to understand the argument that somehow Aviation is more wasteful than something else is really to give in to a selective form of logic that ignores the larger picture.

In fact, most of the pilots I know are far from wealthy (including yours truly).   Most would fall into the middle-class.  They work hard, have families, and developed their flying hobby. Even professional pilots aren’t soaking up the dollars.  The  average salary for a new corporate pilot is $32,500.   Flight Instructors average about $25 per hour before taxes (at 30%).3  Of course these can increase with seniority, but very few are making anywhere near the six-figure income many people wrongly assume. Somehow people have gotten it into their heads that pilots and those involved in GA are wealthy (which equals ‘suspect’).   Those who work in the industry know better.  Flying has a wonderful cross-section of people.  Yes, there are celebrities and wealthy people, but by far most GA patrons and operators are not.

There are plenty of other expensive hobbies that consume thousands of dollars in discretionary income each year.  Is golf looked on with equal disdain?  What about bass-boat owners?  Or Harley-Davidson riders?  There was a time when it was a bit pretentious to have a cell phone (remember when they came in those gigantic brief-case-sized bags?)  Not that long ago to have more than one car or a flat-screen television was a sign of excess.  But times, and stigmas can change.

The Expense of Charter? Charter flying can be expensive.  But it can also be surprisingly affordable.  As I was working on this article I looked at what the cost difference was between airline and charter flights for a trip from Evansville, Indiana to Atlanta.  The average price for the airline ticket was $800.  The charter price was around $780 in a modest Cessna 310.  For a bit more speed, a King Air was $944.  Jet service in a  BeechJet was $1300.  This illustrates the idea that charter can be had for less than most people realize.  Perhaps that would be worth the cost to avoid the hassle and extra fees of today’s airline travel.

But it’s the perception, right?

Overcoming the Stigma by Stories How can we overcome the stigma of Charter/Corporate flying?  We tend to argue from the statistical side, particularly the cost and relative affordability of flying.  But there’s one critical feature missing: emotion.  People often pay for a good or service because of emotion and perceived value.  One of the most effective means of doing this is through the use of stories.

Aviation needs a Jared.

When Jared Fogle was a junior in college he weighed a whopping 425 pounds.  His father, a doctor, warned him of his weight and the dangers it posed to his health.  After his roommate noticed signs of edema (fluid retention that can lead to diabetes) Jared decided to get serious about losing weight.  He discovered Subway’s new line of low-fat sandwiches and developed his own diet based on eating one veggie sub for lunch and a turkey sub for dinner.  The rest is history and marketing genius by storytelling.  Most of us have seen Jared’s commercials and know that dropped to 180lbs.  The story caught on, despite the initial resistance of Subway’s marketing firm.

In their book Made to Stick, Chip and Dan Heath make the point that this serendipitous campaign contains all the things necessary to be successful and “sticky”.  It is simple, unexpected, concrete, credible, emotional and given by a story.  They note, “Inspiration drives action, as does stimulation.” Later they note the surprise in the story, “[Jared's story] violates our schema of fast food…the guy who wore 60-inch pants is giving us diet advice!” (Heath and Heath, p222)

Can we find a story like Jared’s?  We need a story that violates the schema, the stigma, currently popular about flying.  Aviation has tended to depend on celebrities to make its case.  That has its advantages.  But perhaps a far more effective and change-inducing idea is to find the “ordinary person” who is utilizing and benefiting from charter aviation and has the courage to tell their story.

Because, we have a story worth telling.  Can we find our Jared?

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In an April 5 article in the LA Times, Hugo Martin reports that Dana Holding Corporation spent ” nearly $1.2 million in aircraft bills.”  The same article goes on to say that Williams-Sonoma Inc., spent “more than $675,000 in expenses for a jet leased.”  The implication is that we should be shocked and outraged at these expenditures.  But, before we grab the pitchforks and head to the castle, let’s look at a few other figures first.

In 2009, Dana Holding Corporation reported sales of $5.2 billion, makng those aviation expenditures account for about .023% of their sales revenue.  In that same year, Williams-Sonoma sales were nearly $3.1 billion, making their aviation expenditures account for about .022% of their sales revenue.  The article quotes Michelle Lame of the Corporate Library as saying that “(w)e  see these spending practices as a red flag,” she said. “We thought we would see more restraint.”  Obviously, I don’t operate a budget anywhere near what these companies see in a year; however, I don’t see .02% as a red flag.

No single person has exclusive use of these aircraft and the executives who use them are in charge of billions of dollars and thousands of jobs.  I don’t have any problem saying the words 5.2 billion, but, the truth is, I can’t really conceptualize that number.  It’s like trying to understand the size of the cosmos.  I know it’s big, but I have no reference point to truly grasp a distance that must be measured in the speed of light rather than in miles.  So, for me to make a judgement on whether or not it was expedient to use .022% of the revenue to pay for private aircraft to transport those people responsible for 100% of the company revenue, is preposterous, at best, presumptuous at worst.

There seem to be a surfit of reporters full of righteous indignation breaking the news of “corporate waste” over and over again.  But, when I read the reports, I find more effort to produce a story that is sensational than I find any evidence to present a story that is factual.  The sad truths of it are these: 1.  these sensational reports rarely, if ever, present the whole story, comparing the real costs of traveling via private aircraft with the costs of traveling via air mass-transit; 2.  condemning the  apparently over-compensated fat cats won’t ultimately hurt those used as targets, and 3. as in the case of the Yacht Tax, the ones who will suffer are the ones who build the planes, fuel them, repair them and manage them.  It won’t be the executive featured in the shareholders’ report: it will be your neighbor.

It would be really nice to read a story that presents all of the sides of the story.  So, for those of us who work in and have a passion for aviation, let’s issue an open invitation to the mainsteam media to tell them our side.  Or better yet, let’s speak up and tell it for ourselves.

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