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Esso-branded products available only outside the U.S. 4tthh QQuarteruarter 20092009 Aviation IISSUESSUE 4 | VOLUMEVOLUME 7 Business Journal Offi cial Publication of the National Air Transportation Association
Chairman of the Board President Kurt F. Sutterer James K. Coyne Midcoast Aviation, Inc. NATA Cahokia, Illinois Alexandria, Virginia Protect Your FBO Investment; Know Your Rights By Leonard Kirsch and Mike France 13 Vice Chairman Treasurer James Miller When their operations are threatened, FBO owners and operators Bruce Van Allen Flight Options have many legal rights and remedies and several means to protect BBA Aviation Flight Support Cleveland, Ohio these rights and seek these remedies. FBO owners that fully Orlando, Florida understand their rights can better protect their investments, serve Immediate Past Chairman their customers, and protect the fl ying public. Dennis Keith Jet Solutions LLC Richardson, Texas Duncan Aviation Rolls with the Recession and Readies for Recovery By Paul Seidenman and David J. Spanovich 19 Board of Directors Originally founded at Omaha’s Eppley Field in 1956, Duncan Charles Cox Frank Milian Aviation, headquartered in Lincoln, Nebr., grew to become one of Northern Air Inc. ACM Aviation the country’s premier turbine aircraft maintenance and service Grand Rapids, Michigan San Jose, California companies. This article discusses the company and the volatile economic times with company Chairman Todd Duncan. Todd Duncan Chairman Emeritus Duncan Aviation Reed Pigman Lincoln, Nebraska Texas Jet, Inc. The K.I.S.S. Method of GA Facility Security Fort Worth, Texas By Lindsey C. McFarren 27 Ken Forester Even in this diffi cult economy, a business case can be made to Meridian Ann Pollard justify the cost of security measures. GA security doesn’t have to Teterboro, New Jersey Shoreline Aviation be complicated or expensive to be effective. This article focuses on Marshfi eld, Massachusetts FBOs and airports but also includes guidance for aircraft operators. Immediate Past Treasurer John Lotz Mark Willey All solutions discussed abide by the K.I.S.S. theory: Keep It Simple, Monterey Bay Aviation Bridgeford Flying Service Stupid! Monterey, California Napa, California Charter Company vs. the IRS: Can Operators Win This Battle? By Nel Stubbs 36 An industry tax expert takes a look at the application of Federal Publisher Contributing Editors Excise Taxes to the aviation industry and the IRS enforcement James K. Coyne Michael Ancell of these taxes. She explains how with the proper assistance and Linda Pylant preparation, charter companies can convince the IRS that owner Editor Shannon Chambers Art Direction/Design fl ights and management fees are not subject to these taxes. Tim Wagner Editorial Director Alan Darrow Advertising Sales President’s Message | By James K. Coyne Cheryl Stratos 7 Victoria Geis Inside Washington | By Eric R. Byer 9 Advertising For advertising information, call 703/212-4967 Your Rights When the FAA Comes Knocking | By Paul A. Lange 24 or e-mail [email protected]. NATA Event Calendar Produced by 30 Charter Marketing Requires Recessionary Rethinking 103 Oronoco Street, Suite 200 • Alexandria, VA 22314 By Paul Seidenman and David J. Spanovich 31 703/212-4967 • www.ias-online.net NATA Safety 1st News 41 2009 Commercial Operators Tax Seminar 42 NATA Compliance Services 47 Advertiser Index 4226 King Street • Alexandria, VA 22302 48 800/808-6282 • Fax 703/845-8176 www.nata.aero New NATA Members 50 SabrSab e Airlinne SoSSoluolutilututions andan the Sabre Airline Solutions logo are trademarks and/and orr serviice marksarkks of ann a ffiliffiffiliafill ateatte off Sabrea Holdings CoC rporation. ©2008 Sabre Inc. All rights reserved.. 1101 8 events management air traffic weather and view realtime ® aircraft situationalawareness. service throughcomplete unmatcheddeliver customer www.flightexplorer.com Demo events happen airport status aircraft and changes in alerts for email receive Flight Explorer today! information contact and FBO text weather time airport access real on time destination to their passengers get your PRESIDENT’S MESSAGE
70 Years of Change— and Much More to Come By James K. Coyne
nniversaries are very special opportuni- the concept of ties: a chance to refl ect on past achieve- a private avia- ment, a time to give thanks for good tion industry. fortune and great friends, and an occasion In much of the for thoughtful analysis of a past span of world, aviation time that can help us uncover lessons had already Aabout the future. As NATA celebrates our 70th year been national- of service in 2010, we should do all three. ized. Many gov- Back in 1940 at NATA’s inaugural meeting in ernments had Kansas City, private aviation businesses in America decided to oper- were under unprecedented attack from all sides. ate a monopo- The White House and the U.S. Army were making listic “national plans to ban all private aviation for the duration fl ag” airline and of “the national emergency” and abolish the popu- found it easy to lar Civilian Pilot Training Program. The Battle of ban or constrain Britain brought news reports of unbelievable terror private aviation. in the skies over London. Ferry fl ights were being As the world organized to send newly built warplanes from the was headed toward global war, the task of preserv- U.S. to England, and many in Congress felt that ing private aviation in American was not going to only Uncle Sam should be allowed to fl y in Ameri- be easy. can airspace. Had it been up to the political elite in Washing- The public, though fascinated with aviation, was ton, D.C., the federal bureaucracy, or the media in very apprehensive about air safety, infl amed by the big eastern cities, Uncle Sam would have com- nearly hysterical coverage of aviation disasters mandeered the skies. Fortunately, NATA members in the press. A DC-3 accident in a Virginia thun- had a network of supporters across the country, derstorm that summer was the worst air disaster especially in rural states in the Midwest and South. in U.S. history up to that point (the 25 fatalities They established a Washington offi ce and began included a U.S. Senator), and Americans expected connecting the political dots needed to save an to read about a deadly plane crash almost every day industry. Within six months, the Army reversed in the pages of their local papers. course and hundreds of small airports sprang up Though war preparations were boosting federal across the land—and each of them fostered and sup- spending, the unemployment rate was still over ported essential aviation businesses like they still 14 percent, tax rates had climbed to record highs, do today. and business investment and consumer purchasing The leaders, like Bill Ong who helped win that power remained depressed. While some economists fi rst battle, have all passed on, but we still need hoped that the depression was coming to an end, men and women with the same dedication to our most businesses were still losing money. It was industry to fi ght the battles to come. Fortunately, hardly the right time, those early NATA members over the years, NATA was blessed with visionaries felt, for the federal government to force them to who knew that the sky has no real limits. Thanks close their doors. to them, private aviation in America is the fi nest in NATA was formed late that year to literally save Continued on page 10
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Jet Aviation l Basel l Dubai l Dusseldorf l Geneva l Hannover Hong Kong | Jeddah l Kassel l Kuala Lumpur | London Biggin Hill Moscow Vnukovo l Singapore l Zurich l Midcoast Aviation l St. Louis Boston/Bedford l Chicago | Palm Beach l Savannah (SAC) l Teterboro INSIDE WASHINGTON
When Charter Safety Becomes Politicized By Eric R. Byer
n recent months, there has Infrastructure and the Subcommit- been a misguided sense of tee on Aviation asked the DOT IG panic in some entities within to conduct this review. the federal government The fact that the report fails to and the mainstream media highlight many of the shortcom- about Part 135 on-demand ings of some Part 121 carriers that Iair charter safety. The commotion have been fl ying aircraft with seri- started when the Department of ous structural integrity problems Transportation’s Inspector General and makes broad unexplained (DOT IG) issued a report titled generalizations about 135, while “On-Demand Operators Have Less making post-accident regulatory Stringent Safety Requirements suggestions that are not deemed and Oversight than Large Com- necessary by the NTSB, clearly mercial Carriers.” Sadly, the title demonstrates the DOT IG’s in- alone has led some members of ability to review and report from a Congress and federal regulators to broad overview on FAA oversight. translate “less stringent” into “less The report set off media specu- safe” and incorporate that into lation questioning the Part 135 political speeches and statements, industry’s safety record, as seen in in Alaska, the Part 135 operating frightening the fl ying public and recent articles published in USA community fl ies almost anywhere instilling a sense that charter is Today as well as local news outlets and at practically a moment’s indeed unsafe. in the New York City metropolitan notice, frequently to some place But anyone taking the time to area, which has only muddied the the crew has never before been. actually read the report would facts about Part 135 safety. These levels of diversity and fi nd a number of fl aws with it, unpredictability are not present outside of the title. First, the DOT at the airlines, which is why they IG’s offi ce is far outside its area The True Picture of expertise in evaluating safety NATA and the Air Charter Safety are a wholly unsuitable measuring oversight. That job is for the Na- Foundation (ACSF) have been stick to use for our industry. Yet tional Transportation Safety Board busy with the challenging task of when you compare the regula- (NTSB) and the Federal Aviation setting the record straight with tions of Part 121 and Part 135, you Administration (FAA). The pur- Capitol Hill, the DOT, the FAA, fi nd very little difference. Most pose of the DOT IG is to “promote the NTSB, and the media. One of differences are to account for the effectiveness and head off, or the great unknowns to the fl y- smaller aircraft typically fl own stop, waste, fraud and abuse in de- ing public is the vast diversity of (you sure don’t see many pistons partmental programs.” The NTSB operations that take place under fl ying 121 these days!) and the was established to investigate Part 135 rules. Many are familiar varied types of operations. When accidents and produce recommen- with business, leisure, or cargo considering the vast array of loca- dations as to how to improve air charters, but there is so much tions, with their associated higher safety. The FAA’s responsibility is more. From EMS helicopter and risk factors, into which Part 135 to act on these recommendations. fi xed-wing fl ights to oil rig opera- operators fl y, it is not surprising Nonetheless the chairmen of the tions in the Gulf of Mexico and that accidents and incidents are U.S. House of Representatives from air tour operations in the marginally higher. Committee on Transportation and Grand Canyon or NYC to fl ights Continued on page 10
Aviation Business Journal | 4th Quarter 2009 9 President’s Message Continued from page 7
the world, with levels of performance, accessibility, somed into an unimaginable web of security regula- affordability, and safety that literally no one back in tions. Putting armed guards onto private planes as 1940 could ever have imagined. they fl y into Washington with distinguished Ameri- But here we are about to enter an equally daunt- can VIPs as the only passengers seems too bizarre ing period in aviation. 2010 has many of the same even to be imagined, but not too bizarre for security perilous elements that NATA’s founders had to con- “professionals” who know the political benefi ts of front: a weak economy, the prospect of new taxes, carefully managed fear mongering. irrational global threats, demands for more federal The obvious lesson to take as we celebrate NATA’s control, and media mavens who argue that more 70th birthday is that we are all deeply indebted to regulations mean more safety, that small planes are those who worked on our behalf for all these years. not as worthy as airliners, and that rural America is Because of their efforts, thousands of profi table, job- just “fl yover” country that doesn’t deserve its little producing member companies serve every corner airports. of America. Over those 70 years those companies But we also have problems that no one might have created the fi nest transportation system have foreseen in 1940. Business use of aviation, known to man, and over the next 70 years it will for example, was only an embryonic idea at a time grow and change in ways none of us can possibly when few companies dreamed of the expansive predict. reach that aviation could one day provide. Who One thing is sure, though: We need to work could have imagined that the business airplane together to succeed, we need to confront every would one day be slandered as a populist target by challenge with energy, confi dence, and imagina- the class warriors of the 21st century? Or consider tion, and we will need to keep fi ghting for at least the public terrorism fears since 9/11 that have blos- another 70 years.
Inside Washington Continued from page 9
Of course, there is always room To be sure, the only way to issues exist. for improvement. We should keep this and future “studies” of 4. Stop talking about Safety Man- never accept our safety record as Part 135 from leading to draco- agement Systems (SMS) and the inevitable outcome of our op- nian congressional or FAA action actually implement them. Ev- erational environment, and most is if the industry is motivated to ery operator should begin the operators don’t. This industry engage actively in safety improve- process to establish SMS now. continuously strives toward safety ment. The following are just a few The ACSF has several educa- improvements that can positively steps that should be put in motion tional resources freely avail- impact our accident and incident to understand our industry’s risks able at www.acsf.aero/sms. rates. The fact that the accident better, educate consumers, and 5. Require the FAA to dedicate rate is not more than marginally improve safety. the appropriate manpower higher is because of the outstand- within the fi eld so operators 1. The FAA should issue pro- receive the guidance and over- ing efforts the vast majority of the posed rulemaking to adopt the community continues to make to sight needed, and at the same numerous changes proposed in time, establish as a priority the raise the safety bar in spite of the 2005 by the Part 135/125 Avia- lack of resources and support the detection and elimination of tion Rulemaking Committee. illegal activity. FAA provides and the agency’s 2. The FAA should make it easier inattentive oversight to the bot- for the industry and the public I sincerely hope we can squelch tom dwellers of the industry. And to know if an entity is certifi - the rhetoric, get back to a clear these bottom dwellers do exist, cated and what aircraft they understanding about Part 135 whether they be illegal operators are authorized to operate. safety and the legitimate issues that pose as having a Part 135 cer- 3. The FAA, NTSB, and industry that do exist, and stop focusing on tifi cate when they don’t or opera- must get their arms around a the blame game that runs ram- tors that do have a certifi cate but better data-collection process pant in this town. The industry are willing to overlook regulatory for the Part 135 community, deserves better, and so does the requirements or sacrifi ce safety thereby allowing for more thor- fl ying public. for revenue. ough analysis of where safety
10 Aviation Business Journal | 4th Quarter 2009 EJT RCINLJTONRHPPORM H AQI E AD XCTV E MANAGEMENT JET EXECUTIVE I CARD* JET MARQUIS THE I PROGRAMS OWNERSHIP JET FRACTIONAL NETJETS o h nuty hr r eti hnsOl eJt a do. can NetJets Only things certain are standards There industry. the the set for we Hathaway, Berkshire of backing and financial flight the every on aircraft, captains 800 type-rated With two since. availability, ever guaranteed leader market the concept been ownership we’ve jet and fractional the introduced we 1986, In ©2009 NetJets Inc. All rights reserved. NetJets Inc. is a Berkshire Hathaway company. NetJets and Executive Jet are registered trademarks. Total number of aircraft includes aircraft under management by Executive Jet Management. The Marquis Jet Card is a registered service mark. *Marquis Jet is an independent company not affiliated with NetJets and through its exclusive U.S. alliance sells the Marquis JetCard. LEADERSHIP oteprec.Lretfet ihs standards. Highest fleet. Largest experience. Most EJT.O 1.877.NETJETS NETJETS.COM sdfndb NetJets. by defined as THE MOST TRUSTED WINGS PRESENTS THE MOST TRUSTED
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By Leonard Kirsch, Esq., and Mike France
wning and operating an FBO can often in property without compensation. For example, if leave a person feeling alone on an island an FBO’s property interest is condemned or if its left to fend for themselves against threats property is otherwise taken, the airport sponsor to the viability of their operation. These must compensate the owner. threats can come from local government Key provisions of an FBO lease that owners or even airport management. FBO own- should be aware of include: ersO and operators must understand that they have 1. Term of the lease, many legal rights and remedies and several means 2. Provisions for extending the term (often tied to to protect these rights and seek these remedies. investment of additional capital into the facility), FBO owners that fully understand their rights can 3. Rent, better protect their investments, ensure their cus- 4. Provisions for rent increases, tomers receive quality services at reasonable rates, a. Usually the most preferential method involves and protect the fl ying public. 5-year incremental increases based on apprais- als of similar airport properties, The FBO Lease b.The least preferential is often an annual CPI increase that over time results in a compound The FBO lease provides FBOs with a fi rst level of increase in rental rates, protection from unfair and improper demands, 5. Aeronautical services the FBO is required and unexpected costs and fees, and interference with entitled to provide, day-to-day business activities. Because leases are 6. Future capital investment requirements, both contracts and grants of real property rights, an 7. Rights to assign the lease or sublease the prop- FBO lease provides FBO owners both contract and erty, and property rights. These rights allow FBOs to seek 8. Insurance and indemnifi cation requirements. enforcement of written terms and conditions and, where there is ambiguity, to obtain state court inter- No matter the airport, FBO leases are usually pretations of these ambiguous terms and conditions similar in form. Some are more comprehensive in accordance with common law (legal principles and more favorable to the airport sponsor, others based on precedent set by prior court cases) meth- are shorter and clearer, and some are fairer to the ods of interpreting contracts. FBO owner. When fi rst entering into or negotiating The main difference between a lease and a con- an extension of an FBO lease, remember that the tract is that a lease grants exclusive possession to lease is always negotiable. The most effective way the tenant and provides certain property rights that to negotiate favorable changes is to educate the air- protect a tenant’s fi nancial investment. Under com- port sponsor about terms and conditions offered by mon law property law, a party cannot lose its rights Continued on page 14
Aviation Business Journal | 4th Quarter 2009 13 Protect Your FBO Investment Continued from page 13
other airports, especially nearby airports (because ness operation (such as existing service provider) airports compete for revenues and passengers). may be interpreted as the grant of an exclusive right, therefore a potential violation of the airport Minimum Standards sponsor’s grant assurances and the FAA’s policy on exclusive rights. The FAA’s position is that “when Occasionally an FBO may be threatened by the the airport sponsor imposes reasonable and not appearance of on-airport or through-the-fence unjustly discriminatory minimum standards for operators that are allowed by the airport sponsor to airport operations through the use of reasonable provide similar services without being required to minimum standards, the FAA generally will not meet the same standards as the existing FBOs. Stan- fi nd the airport sponsor in violation of the federal dards that new operators may not be required to obligations.” meet can include similar investments in facilities or Many airport sponsors include their minimum land lease and service quality or availability. FBOs standards in their FBO leases. While minimum can receive a measure of protection from this type standards implemented in this manner can be ef- of activity by enforcement of an airport’s minimum fective, they also render the airport sponsor vulner- standards. able to the challenges of prospective aeronautical The FAA, in Advisory Circular (AC) No. 150/5190- service providers on the grounds that the minimum 7, dated August 28, 2006, suggests that airport spon- standards are too restrictive. For this reason, the sors establish reasonable minimum standards that FAA encourages airport sponsors to update and are relevant to their proposed aeronautical activity publish their minimum standards periodically.
Many airport sponsors include their minimum standards in Grant/Sponsor Assurances The least known but perhaps strongest protection their FBO leases. While minimum standards implemented for FBOs is found in the Grant/Sponsor Assurances. in this manner can be effective, they also render the The intent of Congress in passing the fi rst enabling airport sponsor vulnerable to the challenges of prospective legislation governing airport funding in 1938 (and in adopting revised statutory methods in 1958 and aeronautical service providers on the grounds that the again in 1982) was to improve safety and effi ciency minimum standards are too restrictive. by, among other things, promoting competition among aeronautical users. The statutory law behind the assurances is contained primarily in Section 511 (a) of the Air- with the goal of protecting the level and quality of port and Airway Improvement Act of 1982, 49 USC services offered to the public. The FAA points out 47107 (a), also referred to as Section 308 (a) of the that once the airport sponsor has established mini- Federal Aviation Act of 1982. The key language is, mum standards, it should apply them objectively “The Secretary of Transportation may approve a and uniformly to all similarly situated on-airport project grant only if the Secretary receives written aeronautical service providers and notes that the assurances...that (1) the airport will be available failure to do so may result in a violation of the for public use on reasonable conditions without prohibition against exclusive rights and/or a fi nding unjust discrimination and...(4) a person providing, of unjust economic discrimination for imposing or intending to provide, aeronautical services to the unreasonable terms and conditions for airport use. public will not be given an exclusive right to use the The FAA objective in recommending the develop- airport....” ment of minimum standards is to promote safety, In order to promote competition, the FAA re- protect airport users from unlicensed and unauthor- quires airports receiving federal funds to agree ized products and services, maintain and enhance to these “grant” or “sponsor assurances,” which, the availability of adequate services for all airport among other things, prohibit any party from obtain- users, promote the orderly development of airport ing or maintaining an exclusive right to perform land, and ensure effi ciency of operations. services at an airport and require sponsors (air- FBOs wishing to begin operations at an airport ports) to not unjustly discriminate against aeronau- also receive protection from the effective use of tical users of an airport. minimum standards. Any use of minimum stan- Regarding exclusive rights, the assurances require dards to protect the interests of an individual busi- Continued on page 16
14 Aviation Business Journal | 4th Quarter 2009
Protect Your FBO Investment Continued from page 14
the airport sponsor to, “permit no exclusive right subject to the same rates, fees, rentals, and charges for the use of the airport by any person providing, as are uniformly applicable to all other fi xed-based or intending to provide, aeronautical services to the operators making the same or similar uses of such public. For purposes of this paragraph, the provid- airport and utilizing the same or similar facilities.... ing of the services at an airport by a single fi xed- The sponsor may establish such reasonable, and based operator shall not be construed as an exclu- not unjustly discriminatory, conditions to be met sive right if both of the following apply: by all users of the airport as may be necessary for the safe and effi cient operation of the airport....” 1. It would be unreasonably costly, burdensome, or impractical for more than one fi xed-based opera- tor to provide such services, and FAA Publications 2. If allowing more than one fi xed-based opera- Perhaps the most useful guide to understanding the tor to provide such services would require the Assurances is the “Airports Compliance Manual,” reduction of space leased pursuant to an exist- revised this year and published by the FAA under ing agreement between such single fi xed-based Order 5190.6B. The manual contains guidance for operator and such airport. FAA inspectors on compliance with sponsor assur- ances and can be an excellent tool for FBO owners It further agrees that it will not, either directly in determining if airport actions comply with the or indirectly, grant or permit any person, fi rm, assurances. or corporation the exclusive right at the airport to In January 2007, the FAA published AC 150/5190- conduct any aeronautical activities, including, but 6, providing additional guidance on exclusive rights. not limited to, charter fl ights, pilot training, aircraft This AC provides basic information pertaining to rental and sightseeing, aerial photography, crop the FAA’s prohibition on the granting of exclusive dusting, aerial advertising and surveying, air carrier rights at federally obligated airports. The prohibi- operations, aircraft sales and services, sale of avia- tion on the granting of exclusive rights is one of the tion petroleum products whether or not conducted obligations assumed by the airport sponsors of pub- in conjunction with other aeronautical activity, lic airports that have accepted federal assistance, repair and maintenance of aircraft, parts, and any either in the form of grants or property conveyanc- other activities including the sale of aircraft which, es. This AC provides guidance on how an airport because of their direct relationship to the operation sponsor can comply with the statutory prohibition of aircraft, can be regarded as an aeronautical activ- on the granting of exclusive rights. ity, and that it will terminate any exclusive right to conduct an aeronautical activity now existing at such an airport before the grant of any assistance Too Many FBOs? under Title 49, United States Code.” Efforts to persuade an airport sponsor to deny entry The assurances also require airport sponsors to to a new FBO competitor begin and usually end practice economic nondiscrimination: with an economic argument based on fuel volumes. “In any agreement, contract, lease, or other ar- While Section 23 of the FAA’s Sponsor Assurances rangement under which a right or privilege at the prohibits the grant of an exclusive right, the prohibi- airport is granted to any person, fi rm, or corpora- tion does not apply if both of the following condi- tion to conduct or to engage in any aeronautical tions apply: activity for furnishing services to the public at the 1. It would be unreasonably costly, burdensome, or airport, the sponsor will insert and enforce provi- impractical for more than one fi xed-based opera- sions requiring the contractor to: tor to provide such services, and 1. Furnish services on a reasonable, and not un- 2. It would require the reduction of space leased justly discriminatory, basis to all users thereof, pursuant to an existing agreement between such and single fi xed-based operator and the airport. 2. Charge reasonable, and not unjustly discrimina- A recent NATA article, “How Many FBOs Are tory, prices for each unit or service, provided Enough?” discusses guidelines for evaluating airport that the contractor may be allowed to make competition. The article states, “(T)he FAA is often reasonable and nondiscriminatory discounts, quoted as saying, ‘Every FBO has the right to go rebates or other similar types of price reductions broke.’” This does not imply that the airport spon- to volume purchasers. sor must lease land and/or approve improvements Each fi xed-based operator at the airport shall be to an FBO that will, based upon the sponsor’s due
16 Aviation Business Journal | 4th Quarter 2009 diligence analysis, most likely be unsuccessful, as tive actions does not have a judicial right to appeal in being unable to fulfi ll the company’s lease obliga- the Part 13 decision but does have the option of tions. (For a copy of the full article, send an email fi ling a formal request for redress in the form of to [email protected].) a complaint under 14 CFR 16, aka a Part 16 com- The airport sponsor may also deny FBO status plaint. to aspiring entrants for reasons of safety and ef- A Part 16 complaint is fi led with the FAA of- fi ciency. A denial decided on safety issues must be fi ces in Washington D.C. If the complaint is not based on evidence demonstrating that airport safety dismissed for procedural or jurisdictional reasons, will be compromised if the applicant is allowed to a hearing offi cer (usually an attorney from the engage in the proposed aeronautical activity. But FAA) is appointed. Hearings may be held, or upon the FAA is the fi nal authority in determining what, agreement of the parties, the matter can be decided in fact, constitutes a compromise of safety. based on papers submitted by each side. An en- An airport sponsor can also deny FBO status to forceable decision is usually rendered within 120 an additional company if there is insuffi cient space days. The decision in a Part 16 complaint may be at an airport. However, the incumbent FBO may appealed to the assistant administrator of the FAA, expand as needed, even if its growth ultimately who then issues a fi nal order. Finally, the non-pre- results in the occupancy of all available space. But vailing party may appeal the fi nal order to the local an exclusive rights violation can occur through the U.S. Circuit Court of Appeals. use of leases where, for example, all the available It is important for FBO operators to remember airport land and/or facilities suitable for aeronauti- that they are not alone in fi ghting to maintain their cal activities are leased to a single aeronautical ser- operations. A wealth of resources and options are vice provider who cannot put it into productive use available when threats appear. All FBO operators within a reasonable period, thereby denying other are encouraged to realize and understand their qualifi ed parties the opportunity to compete to be rights when dealing with an airport sponsor. an aeronautical service provider at the airport.
Part 13 and Part 16 Complaints In addition to relying on state rather than federal courts to enforce contract and property rights contained in an FBO lease, the Part 13 and Part 16 processes provide the means to challenge an airport sponsor on issues arising out of the Sponsor Assur- ances (as well as certain other regulatory issues). If the airport sponsor refuses to resolve an issue to a party’s satisfaction, the next step is to seek assistance from a regional airport certifi cation and compliance inspector at an FAA Regional Offi ce. The next step in the administrative process is for the aggrieved party to fi le a Part 13 complaint. The complaint can be in the form of a letter to the Airport Certifi cation and Compliance Inspector or Regional FAA Director. The airport sponsor is then given 30 days to fi le a written answer. At this point, the regional offi ce may seek legal clarifi cation from the local FAA counsel or, more likely, the FAA counsel in Washington, D.C. Meetings and hearings are sometimes set, and the local offi ce, if unable to negotiate a compromise, may issue an informal decision. Such Part 13 decisions may be issued in either letter or case decision format. Part 13 decisions are only advisory because there is no penalty if a party refuses to follow the deci- sion. The non-prevailing party in such administra-
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hen Todd Duncan assumed the tribution to its 401K plan. At the same time, plans chairmanship of Duncan Aviation to open a large, new operation in Utah at Provo from his father, Robert Duncan, in Municipal Airport were scaled back. 2007, aircraft OEMs had huge order Until the current recession, Duncan Aviation had backlogs, and a pre-owned, low- a long history of carefully measured and well-cali- time business aircraft, in decent brated development, even through past economic shape,W was scarce. For Duncan Aviation, one of the downturns. Originally founded as a Beechcraft country’s premier turbine aircraft maintenance distributorship at Omaha’s Eppley Field in 1956, the and service companies, times were never better. company initially opened its doors as Robert Graf, But within a year of becoming chairman, all of Inc. As Duncan explained, Robert Graf was the ma- that would change as the global economy cratered, jor shareholder, with Carl Lang and Donald Duncan and aircraft sales plunged across the board. For the (Todd’s grandfather) each holding a minority inter- Lincoln, Nebr.-headquartered company, that meant est. By the early 1960s, however, Donald Duncan fewer people booking new interiors and heavy became the principal owner with the retirement inspections as aircraft were either fl own less or sim- of Robert Graf and the death of Carl Lang. In 1963, ply parked. Donald Duncan moved the company, now Duncan “In 2009, we are projecting sales of $327 million, Aviation, to Lincoln Municipal Airport. a nearly 25 percent drop from the $415 million we “The airport authority wanted to grow the general generated in 2008,” said Duncan, who at 43 is one aviation side of the airport and offered excellent of the youngest chief executives of a major U.S.- incentives for building and leasing,” Duncan said. based aviation company. “Consequently, in March Duncan Aviation, which has remained under of this year, we made the painful decision to lay continuous family ownership throughout its his- off people for the fi rst time in our 53-year history.” tory, grew to become a multi-location fi rm, focusing That resulted in the elimination of 306 jobs as well exclusively on a broad spectrum of business jets as a company-wide cutback in hours and pay and (from entry-level light models, up through medium the temporary suspension of the company’s con- Continued on page 20
Aviation Business Journal | 4th Quarter 2009 19 Duncan Aviation Continued from page 19
and large cabin equipment) as well as turboprops. Despite its Beechcraft distributorship roots, the company does no piston aircraft work. Lincoln remains the company’s largest location, offering customers a complete menu of services, from line maintenance through major airframe inspections, modifi cations, and completions as well as avionics installations, component overhauls, and depot-level engine inspections. The work is car- ried out in a hangar complex of more than 430,000 square feet. Of the company’s 1,839-person work- force, Lincoln’s share is 1,184. Well-known for its high quality workmanship and dedicated staff, the facility has been voted the “Number One U.S. Maintenance Shop” by readers of Professional Pilot Magazine in the publication’s annual PRASE (Preferences Regarding Aviation Ser- vices and Equipment) survey for the past 22 years. The same survey has also named it the number one avionics shop in the United States annually since 1985. In 1998, Duncan Aviation acquired Michigan- based Kal-Aero, an FBO and turbine aircraft main- the three FBOs serve based and transient aircraft, tenance company located at Battle Creek’s W. K. maintenance has always been Duncan Aviation’s Kellogg Field. The Kal-Aero acquisition included mainstay business, accounting for 96 percent of a smaller facility at Kalamazoo-Battle Creek In- the company’s revenues for the past two years and ternational Airport. The two combined locations projected to be about the same for 2009. now employ 540 people, with most of the air- “Lincoln, Battle Creek, and Kalamazoo are small craft maintenance and servicing carried out in a communities where there is not a lot of demand 325,000-square-foot facility at W. K. Kellogg Field. for FBO services,” he said. “We inherited the FBO “Battle Creek has most of the same capabilities at Kalamazoo when we purchased Kal-Aero, and we that we have at Lincoln, although we tend to do a continue to offer fuel and hangar space there. But little more Gulfstream work there,” Duncan said. when you look at the FBOs at Battle Creek and Lin- All three locations include AvFuel-branded FBOs coln, their main business is to support our mainte- operated by Duncan Aviation. In 2008, the com- nance operations.” He added that Duncan Aviation pany’s combined fuel sales were 5,228,298 gal- is NATA Safety 1st line certifi ed at all of its locations. lons, which included 313,741 gallons of avgas and Along with the two nose-to-tail service centers 4,915,557 gallons of jet fuel. and the Kalamazoo FBO, Duncan Aviation main- “The jet fuel includes a small percentage sold as tains 23 satellite locations throughout the country into-plane air carrier fueling at both Lincoln and that specialize mainly in avionics and line service. Kalamazoo,” Duncan said. He stressed that while Each is staffed by airframe and powerplant me- chanics. Another seven locations serve as bases for quick-response teams specializing in 24/7, on-call AOG services with a focus on engines and auxiliary power units service. The satellite locations and the quick-response teams account for another 115 em- ployees. Factory authorizations for Duncan Aviation’s heavy maintenance operations read like a Who’s Who of high-end aerospace companies. Currently, they include Cessna Citation (Models 500, 550, 560, 650, and 680), Bombardier Challenger 300 and 600 Series, all models of Learjets, and all members of the Dassault Falcon Jet and Hawker Beechcraft’s
20 Aviation Business Journal | 4th Quarter 2009 the Lincoln and Battle Creek facilities, the capa- bilities were to include all levels of airframe and engine inspections and service as well as avionics, exterior painting, and interior completions. But by February 2009, the company decided to pursue a less ambitious short-term plan. “Given the economy, we opted for a plan B, which delayed building a new service center from scratch,” Duncan said. “Instead, we’ll begin by leas- ing an existing, 15,000-square-foot hangar from Mil- lion Air Provo, which we expect to occupy by the third quarter of 2010 with 24 employees.” Duncan said that under the revised plan, the Provo location will provide small to medium air- frame inspections, engine support, and avionics service. “Hopefully within 10 years, we’ll have the kind of facility, employing several hundred people, which we originally planned,” he said. “But even under our revised plan, Provo will still allow us to expand our customer base and will put us in a bet- ter position to support the maintenance and repair authorization agreements we have with Bombardier Hawker families. The company is also Embraer and Embraer by servicing their products in the far factory authorized for its Legacy business jet line. western U.S.” Engine factory authorizations include Honeywell, For right now, the company is positioning itself General Electric, Pratt & Whitney, and Williams for an eventual recovery through an aggressive, International. In avionics, Duncan Aviation is an multi-pronged stabilization process. One of the authorized Honeywell, Rockwell Collins, and Uni- measures taken in that respect was to address versal dealer. employee concerns, especially in the wake of the More recently, Embraer’s new line of Phenom past-year’s layoffs. 100 and 300 very light business jets have been “We are now providing weekly updates, which added to Duncan Aviation’s factory repair approval. we post on our Intranet site and email to our staff, In fact, the Lincoln facility just completed the about our sales and deliveries,” Duncan said. “Prior exterior striping for the fi rst Phenom 100 to go into to the layoffs, this information was published in our service in the U.S. Duncan said that as part of the monthly newsletter.” company’s strategy to build its business around jets, Duncan stated that with respect to staffi ng, he is the new very light, entry-level models present an confi dent that the company is correctly sized at this opportunity. time. “We were very careful to ensure that our best “My father just purchased a Citation Mustang, and and greatest technical expertise was retained, and I might even consider a type rating on that aircraft,” as a result I think we will be able to come out of he said. “The Mustang and the Phenom families are Continued on page 22 tremendous aircraft, and we are very excited about those products.” Duncan is a licensed pilot and currently fl ies a Beechcraft Bonanza and a King Air C90. In October 2008, Duncan Aviation’s manage- ment announced its decision to expand the com- pany’s operations geographically by developing a new maintenance facility at the Provo Municipal Airport. The company’s original plans for Provo called for the construction of a new $56-million, 360,000-square-foot service complex to be devel- oped in three phases and employing up to as many as 650 people over a 10- to 15-year period. As with
Aviation Business Journal | 4th Quarter 2009 21 Duncan Aviation Continued from page 21
this recession stronger and better positioned than ducing the need for rework by the detailing team. many of our competitors.” “In addition, members of our airframe team, in To develop the company’s technical expertise both Lincoln and Battle Creek, worked together to even more, technicians are being cross-trained in build standard tool kits and parts kits for the Falcon different skill areas more extensively. “We are try- 2000 winglet modifi cations,” he said. “We are among ing to give more of our employees the skills to go to the fi rst maintenance and modifi cation companies and from different areas, such as shop training, in- to install the winglets, which were developed by stallations, and completions,” he said. “The result is Aviation Partners. These kits have helped to reduce that we have been able to perform more work with the time it takes our technicians to accomplish this less staff, increase productivity, and still maintain task, which subsequently reduces the downtime for our high quality of workmanship.” our customers.” Duncan Aviation has also hired a production In general, Duncan is optimistic that there may process analyst who has evaluated processes and be some signs of economic recovery. “Since the be- helped to implement methods to make increased ginning of August, we have managed to come back gains in both production and quality. “Our manager to about 90 to 95 percent of our production work of business processes and continuous improve- (capacity) at both Lincoln and Battle Creek,” he ment has been focused on changing the (company) said. “Until a full economic recovery happens, we culture in terms of the way we look at opportunities expect to see a fl uctuating percentage for produc- for effi ciency gains,” Duncan said. “We are concen- tion, up some weeks and down others.” trating on all levels of the organization to identify Duncan has seen some modifi cation businesses waste and take the necessary steps to eliminate it.” returning. “In addition to the Falcon 2000 winglet One step implemented has been the establish- installations, we are seeing increased demand for ment of continuous-improvement teams in all of the installation of Aircell broadband communica- the shops, each comprised of a cross section of tions systems,” he said. “There has also been some technicians, management, and support personnel. increased activity in our installations shop, particu- “Ideas for improvement come from our team mem- larly involving avionics upgrades, including WAAS bers who do the work daily,” Duncan said. “History (Wide Area Augmentation Systems) installations has shown that this is the only way to create effec- and retrofi ts under our Glass Box Project, which tive and meaningful change.” offers the latest technology glass cockpit upgrade Duncan cited a paint department technician solutions for legacy aircraft.” whose suggestion enabled the elimination of some Nonetheless, Duncan said that engine work is steps in the painting process while drastically re- still somewhat weak and that the backlog of work orders are still not where they were the previous year. In fact, Duncan described that broader aircraft maintenance market as a “good news/bad news” situa- tion. “Between now and the end of the year, I think it will be very spotty, with some weeks being better than others, although there are at least some signs of stability,” he said. “We are no longer seeing the tremen- dous falloff in fl ight hours, and there seems to be some activ- ity in the used market since we are seeing an increase in our pre-buy inspections. When you couple that to the fact that people are holding onto their aircraft longer, that’s a positive sign for anybody in the MRO
22 Aviation Business Journal | 4th Quarter 2009 (maintenance, repair, and overhaul) business.” its wholly owned aircraft brokerage subsidiary. The positive trends, Duncan said, have prompted Duncan Aviation also holds a Part 135 charter cer- the company to recall some of its recently laid-off tifi cate, under which it is currently operating fi ve employees. “To date, we have been able to bring owned or managed jets, specifi cally Learjet 35s and back only a handful of people, at least on a part- Cessna Citation IIIs. A founding member of NATA’s time or contract basis,” he said. “We are also consid- Air Charter Safety Foundation, as well as an NATA ering some for jobs at the new Provo facility if they Board of Directors member, Duncan said that his want them.” company’s charter operation will adopt the NATA Always known for its reputation for individually Safety Management System in 2010. focused customer service, Duncan Aviation has Going forward, Duncan said that as more busi- pursued a policy aimed at using customer feedback ness aircraft are delivered outside the U.S., the to get a sense of where the market is going. Starting international market, which now accounts for about two years ago, the company began hosting dinners 25 percent of the company’s business, will become for customers every two weeks at restaurants in increasingly important. “Most of that business is Lincoln and Battle Creek, attended by senior man- coming from Canada and Mexico, but we are start- agement team members. ing to see some business from Western Europe and “Many of our customers will bring in their aircraft South America,” he said. and be on-site for weeks at a time until the job is He also stressed that Duncan Aviation will done,” Duncan said. “By getting them together with remain an independent, family-owned company. us, they get the opportunity to meet other operators “Being family owned and independent will encour- and to learn from each other. In addition, it gives age us to be more conservative in our business ap- us an opportunity to pick up some industry intelli- proach and to constantly look for ways to do better,” gence.” he said. “We will continue to invest in the company Duncan Aviation also has a formal customer and train people.” advisory board comprised of 12 individuals, mostly chief pilots or maintenance directors, mostly from small corporate fl ight depart- ments. Each member makes a two-year commitment to serve on the board, which meets once every six months. Duncan explained that about 80 percent of the company’s revenue comes from fl ight departments averaging one or two aircraft. The company’s largest single customer, fractional ownership provider NetJets, now accounts for 15 to 20 percent of the company’s revenue. “Our relationship with NetJets goes back some 10 years and in- volves mostly refurbishments and some heavy maintenance, specifi - cally on their Citations, Falcons, and Hawkers,” Duncan said. “We have partnered with them and our other customers to offer a high- value service, which is why the vast majority of our business is a repeat class of trade.” Duncan Aviation is also in- volved in business jet sales and acquisitions through JetResources,
Aviation Business Journal | 4th Quarter 2009 23 Your Rights When the FAA Comes Knocking By Paul A. Lange Editor’s note: This is part two of a two-part article on dealing with FAA inspections. Part one appeared in the 3rd quarter edition of Aviation Business Journal.
Practical Advice marked with a rubber or digital stamp, or an adhe- sive backed label, created in advance stating the fol- What can you do to help yourself during an FAA lowing: “Privileged and Confi dential: Not to be dis- investigation? Some suggestions follow. closed to anyone other than FAA personnel without written permission of XYZ Company.” What if the Sign-in Sheet inspectors bring their own scanners? Keep track of First, have a sign-in sheet that visitors to your everything that they are looking at and everything premises are required to sign, including the date that they are scanning. Keep a log. Send a letter im- and time of their visit as well as the time that the mediately following the inspection confi rming what visitor leaves your premises. In other words, use they scanned when they were at your premises. the same type of sign-in sheet that you’re required Specifi cally identify each document and ask if they to sign when you visit an FAA facility. Use it for scanned anything in addition to what you identify. all visitors, FAA included. This allows you to keep Remind them that you view these documents as track of which FAA inspector is on your premises, privileged and confi dential, and that they should how often, and for how long. not be disclosed to anyone outside the FAA without the company’s express written permission. Designated Management Representatives Next, it’s rather clear that if you don’t speak to an Video and Audio Recording inspector who comes knocking, you’re virtually Can you record an FAA inspection using video, au- guaranteed trouble. This is notwithstanding that dio, or both? There’s nothing in the FARs preclud- there’s no specifi c requirement in the FARs for you ing it. Should you? That’s a more diffi cult question. to speak to such an inspector. The way to address And the answer is, it depends. “On what,” you say? inspector inquiries, however, is to have a designated First, let’s start with video recording of your prem- management representative and/or counsel avail- ises generally. Many states have laws governing able to answer inspectors’ questions on behalf of employer’s conduct when it comes to video record- the company and to be present during interviews of ing. As a general matter, these laws preclude video employees. This allows you to provide correct and recording of private areas such as bathrooms, locker consistent responses. rooms, and designated employee break areas. While video surveillance in public areas is generally per- Designated Administrative Representative, missible, notice is typically required in the form of Stamp Your Documents As Confi dential, and Most signs or a signed acknowledgement from everyone Importantly, Keep Copies on the premises that they are aware surveillance is You should also have an administrative person taking place. Repair stations that perform a mix of assigned and available to be responsive to all the military and civilian work often have surveillance inspectors’ needs while on site—most especially systems on site and use them as a matter of course to gather documents requested and to make cop- for security purposes. FAA inspectors routinely ies of what is requested. That person should also show up for inspections of these facilities, are be charged with making a copy for the company of recorded on video, and the surveillance is typically anything that the inspectors take away with them. not an issue in those circumstances. All documents that leave the premises should be What happens, however, if your premises are not
24 Aviation Business Journal | 4th Quarter 2009 as secure as a military contractor and you have no where video surveillance of an inspector’s improper day-to-day need for video surveillance? Can you fol- and unprofessional behavior has actually acceler- low the inspectors around with a video camera and ated the pace of resolving the problem—and in fact also record everything that they discuss? That’s a provided FAA management the evidence that they tricky one. Engaging in such activity is not going to needed to properly discipline the inspector. endear you to anyone at the FAA—neither the folks performing the inspection on site nor FAA manage- Conclusion ment. If you choose this course, you need to have a Whether you’re a pilot who is the recipient of a very good reason for doing so. You must also make random ramp check or a large air carrier or a repair the conscious decision that having video and audio station facing what you believe to be the next Span- evidence of inspectors’ conduct outweighs the risk ish Inquisition, there are some basic rules to keep of antagonizing the FAA. If you antagonize the FAA, in mind during any FAA inspection. Be eminently you risk that they will exercise their discretion in a polite. Be truthful and honest. Be concise in your manner that is wholly contrary to your interests. answers. Don’t volunteer information. And by all Should you decide that it’s worth the risk, you’re means, protect the integrity of your data by know- likely already experiencing problems and expect- ing exactly what the FAA is taking away with them ing more problems in short order. In that case, and stamping each of those records as confi dential be prepared and have your counsel briefed and to make your privacy interests known. available—preferably in person, on site—but at the very least available by phone during the inspection. Paul A. Lange is an attorney practicing in the areas When gearing up for this battle, expect that the FAA of aviation regulatory matters and related commercial inspectors will be consulting their own lawyers and litigation. He is a member of NATA’s Air Charter Com- using everything in their arsenal to stop you from mittee and can be reached at [email protected]. recording their activities. There are no hard and fast rules here, but expect that the inspectors will tell you that you’re impeding and interfering with their investigation. And if you don’t stop, they will have no choice but to consider your business in noncompliance with the FARs until you can dem- onstrate that it is. Depending on the circumstances, the FAA might fi guratively blink and allow their activities to be recorded. If not, you should expect an emergency suspension or revocation of the company’s certifi cate within the next few days. In that case, plan for your business to be shut down completely and immediately whenever the emer- gency order is delivered. There are cases where following the inspector around with a video camera may well be warranted notwithstanding these risks. When you encounter the FAA’s latest rogue inspector and he or she has made the destruction of you and your company their sole mission in life, behaving badly and un- professionally in the process, that’s a good reason to seriously consider video and audio recording of the inspection. Before doing so, however, and if time permits, you should consider raising the issue in an appropriate fashion with FAA manage- ment, possibly through the FAA’s Customer Service Initiative (CSI). Though time consuming and often without timely feedback from FAA management, CSI has the benefi t of alerting FAA management to their rogue employee prior to you starting a war. Having said that, there have been circumstances
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Our newest free feature for advertisers! The K.I.S.S. Method of GA Facility Security By Lindsey C. McFarren
eneral aviation security was a hot topic these operators and other GA businesses even start for a while last winter when the TSA with facility security? published its proposed rule for the Large When I was the assistant general manager of Aircraft Security Program. Thousands general aviation programs at the TSA, GA operators, of industry and public comments and FBOs, and airports frequently lamented to me, “GA days of public hearings later, the agency security is a hard nut to crack.” No it’s not. People Gis back at the drawing board re-evaluating its make GA security hard. When it comes to security proposal. Did you breathe a sigh of relief and go for our industry, I subscribe to the K.I.S.S. theory. back to business as usual? Why wait for the federal And in this fi nancial environment, “simple” and “in- government to mandate GA security? Even in this expensive” can be synonymous. So let’s get started! diffi cult economy, a business case can be made to justify the cost of security measures. Just like build- Step One: Vulnerability ing construction or the pre-owned aircraft market, there are deals to be had for those who are willing and Threat Assessment to part with a few shekels. And get this: GA security The fi rst step to any good GA security program doesn’t have to be complicated or expensive to be is to determine the specifi c needs of the particu- effective! Most discussions of facility security are lar operator, FBO, or airport. You can’t develop a targeted at FBOs and airports. This article will focus reasonable program without knowing the current not just on FBOs and airports but will also include vulnerabilities of your operation. The fi rst step to guidance for aircraft operators. More importantly, developing a solid program is a vulnerability assess- this article will prescribe only solutions that abide ment. Take a look at the following two airports. Do by the K.I.S.S. theory: Keep It Simple, Stupid! you think they have the same vulnerabilities and GA security is often a misunderstood and unnec- risks? A little context will help you decide. essarily complicated issue. Even federally regulated The fi rst is Van Nuys Airport, just north of Los GA businesses tend to misunderstand GA security. Angeles, Calif. The second is Yoder Airport, sit- As a safety and security consultant, I regularly ting literally in the backyard of my hometown, a conduct audits and assessments for aircraft opera- small town in northeastern Ohio. Van Nuys sees tors. Most safety audits for aircraft operators, such thousands of fl ights a year in aircraft ranging from as the International Standard for Business Aircraft Piper Cubs to BBJs. In fact, Van Nuys hosts almost Operations and the Air Charter Safety Foundation as many operations in a single day as Yoder Airport Industry Audit Standard, include a security sec- does in an entire year! Yoder Airport is the home of tion. When I get to this security section during an about 20 aircraft—10 ultralights and 13 or so single- audit and start asking questions about an operator’s engine piston aircraft—and the happy recipient security program, most charter operators respond of many fl ights each year in aircraft ranging from with, “Yes, we have a security program. We have ultralights to Piper Cubs. It might see an occasional a Twelve-Five Standard Security Program.” Right, transient Cessna 152 if a local is practicing short/ that’s a start. That’s like saying, “We have a safety soft fi eld landings and takeoffs (with permission, of program. We follow Part 135.” Just like Part 135 is course; it is a private fi eld). Common sense based minimum standard for safety, the Twelve-Five pro- solely on these few details dictates that these two gram should be considered the minimum standard fi elds face extremely different vulnerabilities, but for security. Many measures of the Twelve-Five a detailed assessment of your particular facility is program really apply only to specifi c fl ights—only crucial. charter fl ights in aircraft over 12,500 pounds maxi- The vulnerabilities of a particular airport or op- mum takeoff weight. What do these operators do for eration depend on many variables: type of aircraft overall facility security? Many do little beyond lock- fl own, population size of nearby cities, powerplants ing offi ce doors and a few fi le cabinets. So where do Continued on page 28
Aviation Business Journal | 4th Quarter 2009 27 GA Facility Security Continued from page 27 or military facilities close by, and many others. The Step Three: Develop and TSA is working on an airport vulnerability assess- ment that should debut sometime this year. Use Implement a Security Plan that assessment, the vulnerability assessment in Repeat after me: “A GA security plan must be rea- the TSA’s “Security Guidelines for General Aviation sonable, scalable, and customized for each opera- Airports” published in 2004, or a third-party secu- tion.” Don’t get carried away here. Consider the two rity consultant to conduct an objective assessment airports we discussed earlier. Van Nuys Airport is relevant to your operation. a virtual fortress of fencing, key-carded gates, and The threats to your business might not be a major cameras. Yoder Airport could probably get by with terrorist plot. One small, rural GA airport reports locking aircraft doors, maybe splurging on throttle spending hundreds of dollars every year replacing locks for those single-engine pistons, and keeping lenses on runway lights. The local kids steal them a large dog. (Yoder is an unlikely scene for a major to use as beer coasters. Small GA aircraft in Belmar, terrorist event, but it is in a small town. Small-town N.J., were victims of vandalism, including paint kids get bored, and bored kids do dumb things.) By jobs ruined by spray-painted sad faces and parts considering a facility security plan without the limi- pulled off by trucks, in July 2008. These incidents tations of regulation, you have the luxury of fl ex- aren’t so nefarious as to affect national security, but ibility. Don’t waste time developing a security plan they do cost our industry, both in funds for repairs that won’t work for your operation. It will become and replacements and in overall public perception. yet another binder on your bookshelf. Look at the unique threats to your operation and Here are some very basic measures, following the costs associated with the consequences. our K.I.S.S. theory, that will improve the security of just about any GA facility. If any of these would Cost to perform your own security assessment: work for your operation and are appropriate based time, ranging from a few hours to a few days, on your vulnerability assessment, implement them depending on the depth of your assessment and now! complexity of your operations. Consulting rates • Employee badges. Assuming you aren’t in a range widely, but be sure to use a consultant that TSA-designated Security Identifi cation Display specializes in GA security and has experience in the Area, this badge can be made of plain card stock unique characteristics and needs of our industry. on your own printer. It doesn’t need to be fancy; it just needs to designate those who may enter Step Two: Gap Analysis sensitive areas like hangars and workrooms and Take a look at the security measures currently in those who must stay in lobbies or other common place at your facility. At the very least, you prob- areas. ably lock the offi ce and hangar doors at night and • Visitor sign-in, badges, and escorting. Require hopefully control the keys to each entrance. If you each non-employee to sign in upon entering your have a Twelve-Five program, you probably conduct building and issue the guest a badge. The idea background checks on most of your employees. is simply to identify individuals that must stay Compare your current security measures, how- in common areas or be escorted. Staff members ever humble, to industry best practices outlined must be instructed to challenge any individuals by NATA, the National Business Aviation Associa- not wearing a visitor badge and also any badged tion, the TSA, and other groups. Look closely at the individuals who have entered sensitive areas. security measures that could apply to your facility And keep in mind that any policy that is not based on the results of the vulnerability assessment strictly followed is a waste of the paper it is writ- in step one. ten on. If you implement a visitor sign-in policy, Cost to perform your own gap analysis: again, your spouse, important clients, and the vending your expense here is time. Take the time to re- machine representative must sign in and get a search industry best practices, attend a seminar, or badge each time they visit. talk with security experts. Better yet, have mem- • Key control. How many people have keys to bers of your staff pitch in on this section. Form a your offi ces, hangars, and other facilities? When security team and ask each member to research a an individual resigns or otherwise leaves the particular security plan or set of published guide- company, are the doors re-keyed? At the very lines. Bringing your team in early will help with the least, are the individual’s keys collected before overall buy-in on the security plan and serve as a their departure? great training opportunity for your staff. • Basic security training. Training for your staff
28 Aviation Business Journal | 4th Quarter 2009 members doesn’t need to be complicated or ex- employees and valuable records. You probably have pensive. If funds permit, send select members of a security system for your computers and servers your staff to security training sessions conducted to protect your employees’ and clients’ confi dential by aviation trade associations or commercial information. Do you exercise equally prudent mea- training providers. Then have those individu- sures with your paper records? The loss or theft of als share their new knowledge with other team employee information like social security numbers members. If training funds are tight, contact a can have time-consuming and costly consequences GA security expert and ask for on-site security for both your company and your employees. Loss training. This is perhaps the easiest and least or theft of confi dential client information can be a expensive option for training your entire staff devastating blow to your company’s reputation. in a relatively short time. For charter operators, although your pilots probably undergo security Funding Implementation training specifi c to the Twelve-Five program or Maybe GA security isn’t as diffi cult to achieve other government-required program, you should as some people think, but in this economy most still require them to complete a basic facility se- people ask, “How am I going to pay for this?” If curity training course. you followed the K.I.S.S. theory, how much money These are just a few of the security initiatives that is this program really going to cost? You can print could be included in your security plan. Remember up visitor badges and a sign-in sheet for about $5. to keep your plan reasonable, scalable, and custom- (I’m even including the cost of a few badge clips or ized to your operation. An “off-the-shelf” plan is not magnets.) Re-keying doors after an employee leaves likely to be an effi cient and effective solution. the company will cost you a little more, though far less than the aggravation of damage to your facil- Making a Business Case for Security ity or loss of important records at the hands of a disgruntled former employee. In this economy, presenting your boss, tenants, or If you want (or your vulnerabilities demand) to clients with fees for a new initiative is not high on invest in a sophisticated system, there could be most people’s list of exciting things to do. How do several options for funding. First, look for grants you make a business case for security? Bob Jande- or other public money. Be creative here. Although beur, president and CEO of Navigance Technologies the TSA doesn’t yet have a grant program like the Group, a security systems integrator that focuses on Airport Improvement Program (AIP), some states developing and implementing technology solutions have funds available to GA operators for improving for GA security, believes solutions such as web- security. Give your state aviation authority a call based camera and recording systems can be benefi - and explain your desire to increase security at your cial in many ways. “The right security solution can facility. If your state doesn’t have an established help mitigate the risk of aircraft damage or theft, funding mechanism, perhaps the state aviation reduce worker’s compensation claims, provide a authority would consider partnering with you on a marketing advantage over GA businesses that do pilot project, making you a guinea pig for GA secu- not have systems, and also provide operational rity in your state. Is your airport owned or man- benefi ts,” he said. aged by a county or other municipality? Contact Chantilly Air, a mid-sized charter operator and the appropriate representative, explain your desire maintenance facility in Manassas, Va., recently to be a responsible member of the GA industry, and opened a new hangar and offi ce facility with a very inquire about maintenance or upkeep funds that sophisticated security system. Chief Operations might be used for security initiatives. Offi cer Tim Sullivan explained the rationale behind Speaking of AIP, might your security project also the decision to install this system. “Chantilly Air improve safety at your airport? Lighting, fencing, places a high value on security,” he said. “We have and some other measures can serve double duty, an obligation to protect our clients’ assets, and we and your airport might be able to use FAA funds to take that obligation very seriously. Our system cost implement them. in excess of $100,000, but we feel it is worth every Next, give your insurance agents a call, both the penny when compared to the value of the aircraft folks who cover your facility and those who cover we are trusted to manage and maintain.” your owned or managed aircraft. See if they will Even the most basic security system, like visitor help fund security improvements to your facility sign-in processes and controlled access to offi ces and hangars, can help ensure the security of your Continued on page 30
Aviation Business Journal | 4th Quarter 2009 29 GA Facility Security Continued from page 29
and/or aircraft or if they will give you a discount recently launched TenantShare, an initiative that for implementing specifi c security measures. Even allows tenants to access features of their FBO or air- my car insurance company gives me a discount port’s video surveillance program and benefi t from for having that annoying, omnipresent theft alarm. viewing live camera feeds of their aircraft from And call me crazy, but $60 or so for a throttle lock the internet or PDA phone. Jandebeur said there seems like a pretty sound investment for even the are several ways to fund this type of system at a smallest of piston aircraft. More sophisticated lock- fraction of the cost of purchasing separate systems. ing mechanisms are available for jet aircraft, includ- “An airport or FBO can pass on all or a portion of ing systems that track when an aircraft door was the cost through options like hangar lease fees, fuel opened and who opened it, for a higher price, and fl owage fees, or even a small security fee to tran- even these fancy systems cost a tiny fraction of the sient aircraft and make it affordable for everyone,” overall value of the aircraft. For aircraft security, he said. Regardless of the fee structure, sharing the as with facility security, be sure to consider your cost of security with all users could be the most ef- vulnerabilities. An aircraft with frequent fl ights to fi cient means of achieving an effective GA security high-risk areas, like parts of Africa or the Middle solution. East, could call for a more sophisticated system, Adequate protection for your employees and while an aircraft that seldom leaves the U.S. and physical assets doesn’t have to be expensive. Assess parks at secure facilities might need only a basic de- your vulnerabilities. Compare your current secu- terrent. You could see premium discounts or other rity measures to industry best practices. Develop underwriting benefi ts for implementing these or a reasonable, scalable, and customizable security other measures. plan unique to your company’s vulnerabilities and Finally, consider sharing your system with your operations. And remember, K.I.S.S. clients or tenants. Jandebeur believes sharing the system with all users, including tenants, transients, Lindsey C. McFarren is president of McFarren Aviation and others, is the best way to achieve a sound but Consulting. She can be reached at (703) 445-2450 or cost-effective program. Jandebeur’s Navigance [email protected].
NATA 2010 Events and Seminar Schedule As of September 17 January May • 25-26: FBO Leadership Conference, San Antonio, • 19-20: Line Service Supervisor Training (LSST) Tex. (preceding NBAA’s Schedulers & Seminar, Windsor Locks, Conn. Dispatchers) June March • 7-9: Air Charter Summit, Dulles, Va. NATA Spring Training Week Seminars at the Aviation Industry Expo (AIE), Las Vegas, Nev. September • 15: Environmental Compliance Seminar • TBD: Commercial Operator Tax Seminar • 15-17: FBO Success Seminar October • 15-16: Line Service Supervisor Training (LSST) • 18: Fall Committee Meetings, Atlanta, Ga. Seminar (preceding NBAA’s convention) • 17: NATA Safety 1st Trainer Seminar November April • 4-5: Aviation Business Roundtable, Washington, • 21: NATA Annual Meeting of Members and D.C. Election of Offi cers, Alexandria, Va. • 21: NATA Day on The Hill, Washington, D.C. • 20-22: Spring Committee Meetings, Alexandria, Va. 2010 Air Charter Safety Foundation Event • March 2-3: ACSF Symposium, Dulles, Va.
30 Aviation Business Journal | 4th Quarter 2009 CCharterharter MMarketingarketing RRequiresequires RRecessionaryecessionary RRethinkingethinking By Paul Seidenman and David J. Spanovich
he aircraft charter industry is in a tailspin, The tempest that has devastated charter, Ashton thanks mostly to the worst recession in re- explained, really began with the huge spike in fuel cent memory and to some extent to a media- costs in mid-2008, as charter quotes increased and driven image of business jets as another ex- began to impact the more price-sensitive segments ample of corporate hubris. The industry, in of the market. “Then, just as fuel decreased, the fact,T has seen operations drop off signifi cantly. Cit- credit market began to dry up, which hit the econ- ing FAA statistics, Brian Foley, president of Sparta, omy full force,” he said. “That cut travel all across N.J.,-based aviation consulting fi rm Brian Foley As- the board, especially as road shows—a major source sociates, reported that charter operations in March of demand for charter—dried up. Along with this, 2009 were down 35 percent in the U.S., compared there was the [unfavorable] public perception about to March of last year. During the same period, all using private aircraft, which made a lot of people business jet operations fell by 28 percent. pull back.” “Regionally, there were big swings in this (char- The industry may, in fact, have unwittingly ter) number with some operators being down 20 played a role in fostering that perception. Ashton percent or less while others claimed to have been pointed out that when the economy was still doing down as much as 80 percent,” Foley said. well in the 2006-2007 timeframe, aircraft charter Scott Ashton, vice president, business develop- was generally marketed as a high-end, luxury ser- ment for Gama Aviation, a large aircraft manage- vice. ment fi rm and charter operator based in Stratford, “What we forgot was that, fi rst and foremost, Conn., described the current situation as “a perfect general aviation is a business tool,” he said. “It’s storm.” not about some CEO fl ying some place to play golf; “The main difference in the drop in demand for it’s about a CEO going out to meet with bankers air charter in this recession compared to previous and customers and being more productive than he economic downturns was the speed at which the would be using other modes of transportation. It’s falloff happened,” he said. “It was absolutely breath- the productivity aspect of general aviation that we taking.” Continued on page 32
Aviation Business Journal | 4th Quarter 2009 31 Charter Marketing Continued from page 31
have to stress to our customers.” Given the current state of the charter industry, there are operators who believe that it may be time to reassess traditional marketing practices and seri- ously consider new approaches to pricing. In both respects, those contacted for this story agreed that it will no longer be business as usual, even after the worst of the recession has passed. “Right now, we are trying to understand the current dynamics of the charter market,” said Bill Mayo, president and CEO of Mayo Aviation, an air- craft management, charter, and repair fi rm in En- glewood, Colo. “To do that, we expect to implement a survey this year aimed at prospective customers to determine two things. How has the economy impacted their decision-making process regarding the use of charter? Also, are we asking the right questions and solving the right problems in terms of their travel needs? Once we fi nd this out, we’ll be in a better position to tailor our marketing so that it will stimulate business based on the customer’s perceptions and expectations of service, pricing, we do, and while I realize that they don’t sign up and overall value.” for charter trips as they leave to go home, at least Mayo said this initiative was prompted by a recog- they know that [charter] exists and there is some- nition that traditional marketing methods are no one they can call,” he said. “We want them to see longer working. “Under the old models, we made a our aircraft, talk to our pilots and the people in our lot of assumptions based on what we, as a charter charter department to see what we can offer that provider, thought would be important to the cus- the airlines can’t.” tomer,” he said. “We never did ask the customer, Jim Hopkins, vice president, logistics for Land- ‘What do you think is important?’ Today, we have to mark Aviation in Winston-Salem, N.C., reported focus on that.” that the Houston, Tex.,-based FBO, aircraft manage- Given the state of the economy, charter opera- ment, and charter company relies heavily on direct tors are also fi nding that expanding their market contact with current and prospective customers via to reach the new user is essential, but it is no easy phone and personal visits. task. “Attracting new customers to charter has “Personal, direct contact is one of the most ef- always been a challenging proposition,” said Kenny fective marketing tools in this business,” he said. Hepner, vice president, fl ight operations for Million “We emphasize that we are offering a greater value Air Salt Lake City, which has 11 aircraft on its Part due to the economy of scale and effi ciency, for any 135 certifi cate. “You begin by asking, ‘How do you given trip. Today, that is far more important than market a product that only a very small percentage telling customers that you are offering the latest of the population and businesses can afford and model aircraft. Using this approach, we’ve seen an justify?’” increase in business, especially from our current Hepner, who is also chairman of the NATA Air Charter Committee, said that traditional forms of customers whose travel had been in a cut-back advertising have not worked. “Instead, we are fi nd- mode.” ing that word of mouth is our best form of advertis- Andy Schweickert, director of marketing for DB ing,” he said. “To facilitate that, we try to participate Aviation in Waukegan, Ill., said that when reach- in community events and use those events to edu- ing out to potential clients, becoming familiar with cate the public and, most especially, specifi c target their travel planning and requirements is impor- groups, some of which have never used charter.” tant. “Then determine if your available fl eet is not For example, Million Air Salt Lake City has par- only located close to where the customers are, but ticipated in local Chamber of Commerce events is appropriate to the missions they fl y,” he said. and hosted charitable functions at its facilities. “The Schweickert, whose fi rm operates an FBO and a people who come to these events get to see what repair station and has some 30 managed aircraft on
32 Aviation Business Journal | 4th Quarter 2009 Sunset Aviation LLC’s primary market region is Northern California. However, Zirzow noted that other regions could be added as the fl eet, which is expected to reach 20 aircraft this year, expands. According to aviation consultant Brian Foley, marketing targeted to a specifi c region will also give the charter provider a better understanding of customer mission profi les. “Charter is a good mix of personal and business use, and varies greatly by region,” he said. “As an example, fi nancial institutions are heavy users of charter in the Northeast U.S., especially for IPO road shows. But providers in California may have customers chartering for more personal use, such as trips to Mexico, the Nevada gambling areas, and the Rocky Mountain ski resorts.” Along with marketing the product, charter opera- tors are rethinking their pricing structure. Holly Whitaker, president of Exclusive Air, a charter bro- ker based in Nashua, N.H., has noted a tendency in operators toward greater fl exibility when generating quotes. “They are defi nitely pricing more competi- its charter certifi cate, reported that the company is tively, looking more closely at their estimated fuel also concentrating its marketing resources on what costs, ramp fees, and other expenses,” she said. he called “brand reinforcement.” “That puts them in a better position to generate an “We defi ne our brand as a super regional, as invoice that will more closely refl ect what it is cost- opposed to a national operator,” he said. “On that ing them to provide the service, rather than esti- basis, we are targeting individuals and businesses mating on the basis of an arbitrary number, which near where our planes are based that we believe more operators tended to do at one time.” can afford to charter. That includes new people as Sunset Aviation LLC’s Craig Zirzow agrees. He well as our existing customers. Right now, our bases said that the industry will have to adopt a new, are in Northern California, Illinois, Texas, Minne- more simplifi ed pricing model. “It’s not only the sota, and Indiana.” economy, but the success of fractional ownership Craig Zirzow, vice president, business develop- plans and jet card programs that are pushing us in ment of Sunset Aviation LLC, a start-up charter and this direction,” he said. “Traditionally in charter, management fi rm based in Petaluma, Calif., also there are basic hourly costs along with a tremen- sees some defi nite advantages with a more region- dous number of other line item charges that go on ally focused brand development plan. “As a com- the fi nal invoice. This is where the jet card plans pany just starting out under the current economic have an advantage because their pricing model is conditions, we believe it is more practical to be a much more simplifi ed. To be more competitive with regional provider, although in a better economy, we them and fractional ownership, we have to reduce might have pursued a national focus initially,” he the (total) number of line items and include more said. of the remaining ones within a simple, basic price Concentrating on a regional market, with a heavy package. That will be more effective in bringing in emphasis on frequent, personal contact will help new customers, especially those who have never the new company “better understand the specifi c considered charter before.” needs of its clients,” and build stronger relation- Jason Salzwedel, charter department supervisor ships, Zirzow said. “And as you and your charter for Cutter Aviation in Phoenix, Ariz., confi rmed customers get to know each other, it’s more likely that the charter market is extremely price-driven. they will call you when they are ready to acquire “Today, everyone wants a quote based on a one-way an aircraft and need a management company. His- trip,” he said. “Before, they were more willing to torically, this is a relationship-building business,” he pay for roundtrips, including repositioning fees, the said. cost for overnighting, and other minimum charges, With two aircraft currently under management, Continued on page 34
Aviation Business Journal | 4th Quarter 2009 33 Charter Marketing Continued from page 33
but that is no longer true. As a result, we are trying similar deals, informing the customer that this is to market our charter services to refl ect the new a special price is imperative. “Let them know that pricing trends by dropping some fees. However, if this is not the kind of thing you will do every day, we can’t make money on the trip, we won’t fl y it.” unless the opportunity is there to do it,” she said. “I Salzwedel said charter customers are also doing can tell you we are doing this type of marketing a an extensive amount of price-based shopping for lot more aggressively than we used to.” every trip, and in many cases that means the trip Landmark Aviation’s Jim Hopkins said that will go to the lowest bidder. companies that are able to offer lower-cost fl ying “If asked, we will take the time to explain to a cus- options are in the best position to weather the cur- tomer how we arrived at the quote,” he said. “One rent recession and prosper beyond that. But that thing I think the industry needs to do is to make capability depends largely on what’s on the opera- people aware of the fact that a charter provider is tor’s certifi cate. more than just pilots, airplanes, and fuel. There are “If your fl eet is heavily weighted to larger jets, the people working behind the scenes that keep the demand for those aircraft has not returned, as yet,” operation going. All of this is fi gured into the price he said. “On the other hand, if you have lighter jet and has to be explained to customers so they will models, then you will see some upturn in the de- understand it.” mand. That’s why our charter numbers are begin- ning to return to more normal levels, because we Beware of Below-Cost Pricing have such a diversifi ed fl eet, especially in terms of For Cheli Morrison, director of charter for Bridge- light jets and turboprops.” ford Flying Services in Napa, Calif., the major hot- button issue with charter pricing concerns opera- Pricing Pressures Will Linger tors who fl y their aircraft below cost just to keep Keith Dickerson, president and director of opera- them active. “We will not fl y our aircraft for the cost tions of Addison, Tex.,-based North Dallas Aviation, of the fuel, and the industry just can’t go on doing which has fi ve aircraft on its charter certifi cate, this,” she stressed. warned that the industry may still face pricing pres- The primary danger with that, said Morrison, sures even after demand has returned. “There are whose operation includes nine aircraft, is that a lot of aircraft for sale, and the fact is that many customers will begin to take below-cost pricing for owners are putting them onto operators’ charter granted. “When the economy begins to recover and certifi cates, so they will generate some revenue,” he there is an increase in demand, customers who said. “This will increase competition even after de- have gotten used to paying very little for charter mand returns because there will be a lot of capacity will, once again, be charged for repositioning and out there.” dead legs,” she said. “When that happens, they will Dickerson said that charter operators are increas- walk away, and many providers who are now sell- ingly turning to high-tech marketing methods to ing trips for less than cost will go out of business. increase competitiveness. “More people today are That’s why it’s all a matter of educating the custom- using the internet to shop for charter, and as a er.” result, this is where more of the new customer base Part of the education process, Morrison said, will come from,” he said. “As operators, we have involves talking with customers about the services found that internet-based sites are now far more available and, where possible, presenting opportu- effective than print ads, which I believe will decline nities for them to use those services for a reason- in importance as a way to reach charter customers.” able one-time quote at a specifi ed time. Million Air Salt Lake City’s Kenny Hepner said “Let’s say I have a customer who [regularly] fl ies that the web should be part of what he called a “hy- to Los Angeles from the [San Francisco] Bay Area,” brid” solution to marketing in the current economy. she said. “I might phone that customer and tell him “With a hybrid approach, you have to look at both that I have an airplane in Los Angles that will be traditional chartering, which is where an end user fl ying empty back to Napa. If this customer plans to talks with a provider—directly or through a bro- be in Los Angeles on that date, I can offer the use ker—along with web-based systems that are essen- of the aircraft at a very reasonable rate. We make tially providing real-time information concerning money, and the user can take advantage of a price what aircraft are available and where they will fl y deal.” return legs,” he said. But Morrison was quick to note that when doing According to Hepner, four websites are now
34 Aviation Business Journal | 4th Quarter 2009 available, including Legfi nd.com (www.legfi nd. have much larger advertising and promotional bud- com), CharterX (charterX.com) and Avinode (www. gets,” she said. “Their marketing efforts will reach avinode.com). The fourth site is offered exclusively potential clients that we have not, including those to NBAA members as part of the organization’s Air who are just starting to realize that charter could be Mail Forum (see: www.nbaa.org/airmail/help/), a better value for them. I’m really piggybacking on which includes brokers and operators and is de- their efforts.” signed to help charter operators fi ll empty legs. Keith Dickerson at North Dallas Aviation, on the “The Air Mail Forum is becoming the Craigslist other hand, said that while brokers are an impor- of the charter market,” Hepner said. “It’s a game- tant part of the marketing mix, the retail market changer and is becoming a valuable industry tool. still matters. In his case, about 20 percent of his In our charter department, it has become para- sales are through brokers. mount because we know, in real time, when a “In mid-2008, about 40 percent of our business request comes in and we can submit a quote. The came from brokers, and 60 percent was retail, so web is where brokers and operators are rapidly mi- we are seeing a shift in the market,” he explained. grating to today.” “While brokers are important and do a good job, this Start-up company Sunset Aviation LLC is design- shows that it is still essential to cultivate the retail ing its website with that in mind, according to Craig market. Many customers who start out with bro- Zirzow. “We are planning to integrate new technol- kers, will eventually work directly with the charter ogy tools to help people book one-way charters and provider. Today, you have a more savvy group of offer special pricing on specifi c aircraft,” he said. consumers, and they have seen that they can deal directly with an operator, especially one that has Brokers Can Broaden the Customer Base provided them with good service.” Along with maximizing internet resources, charter Cutter Aviation’s Jason Salzwedel noted a similar operators are not overlooking brokers to broaden trend. “About 65 to 75 percent of the bookings we their customer base. “The economy has made the get from our website advertising comes from bro- broker community fi ercely competitive, and is kers, which is down from a good 90 percent before encouraging more of them to work with operators,” the economy melted down,” he said. “I think we said Rich Brennan, vice president, sales for Kinston, can attribute this to the fact that we are getting a N.C.,-based Segrave Aviation. “Now six or seven lot of retail customers from people who used other brokers call in to get a quote for a trip at any given operators that are no longer in business because of time. When the economy was doing better, we the economy.” might have gotten inquires from one or two.” He said that some of the customers, however, Brennan noted that Segrave Aviation works are coming in due to the fact that Cutter Aviation mostly as a wholesaler to charter brokers, which he is a large FBO chain serving the Southwest region. explained enables his fi rm to offer point-to-point “FBOs have always been a convenient form of refer- pricing for the end user, saving customers the cost ral to charter,” he said. of repositioning legs. “Point-to-point pricing is not The charter industry may have reached a bottom- just the future,” he said. “It’s here now.” ing out point in the May/June 2009 time frame, Brennan said that brokers are helping the charter if predictions by Brian Foley turn out to be right. industry by focusing on people who are looking “It will stabilize there for awhile and then experi- to exit fractional plans and those involved with jet ence a weak recovery during the second half of this card programs. year,” he said. “A more sustainable increase will not “I think that many people are learning that it’s be realized until mid-2010. The charter companies more expensive to use an aircraft under a fractional were the fi rst to be affected by the business aviation plan than on an ad hoc charter basis and that, slowdown and hopefully will be fi rst to recover as often, charter quotes under jet cards can be more business fl ying starts to increase.” costly than those outside of those programs, espe- But that recovery will be pushed along if the cially on long cross-country trips,” he said. “Those industry becomes more creative. “We are on the are market areas that are opening opportunities road more than ever today, getting out in front of that we can take advantage of through our brokers.” our clients as well as new prospects,” said Gama Bridgeford Flying Services’ Cheli Morrison Aviation’s Scott Ashton. “The industry as a whole reported that her company is working with seven needs to do this and move forward, especially when or eight different brokers and a couple of jet card it comes to offering new kinds of products to get plans. “Brokers are very important, because many people interested in charter again.”
Aviation Business Journal | 4th Quarter 2009 35 CCharterharter CCompanyompany vvs.s. tthehe IIRS:RS: CCanan OOperatorsperators WWinin ThisThis Battle?Battle?
By Nel Stubbs
or several years, many seminars and of the aircraft, including possession, command, and presentations have been given on the ap- control. plication of the Federal Excise Taxes (FET) To understand the logic or lack thereof, under- and the enforcement of these taxes by the standing where this came from might help. In the Internal Revenue Service (IRS). The IRS has 1990s, there were several IRS Technical Advice always taken an interest in the application Memorandums (TAM) and Private Letter Rulings Fof the FET to general aviation because it has felt for regarding the application of the commercial FET many years that there is a high degree of noncom- to owner aircraft operated under another’s Part 135 pliance within the air charter/business aviation certifi cate. Although they cannot be used or cited community. The reason for this is that IRS agents as precedent, they do give us the best sense of the do not necessarily understand the operation of the IRS’s view on these issues. Following are a couple industry; in fact, in many instances, they do not see and how the IRS ruled. any difference between an aircraft being operated under FAR Part 91 and one operated under FAR Part IRS Technical Advice 135. In the past, the audits have focused on how Memorandum 934300 the commercial FET applies to Part 91 operations, In this case, an aircraft charter company (Charter the correct application of FET exemptions, and the Company) owns, leases, and operates aircraft under application of the commercial FET to fractional FAR Part 135 (commercial transportation for FAA programs and aircraft. and IRS purposes). Company A, under an agree- However, in the past 18 to 24 months, the IRS ment with the Charter Company, operates an air- has sent out several letters to charter operators craft owned by Company A. The agreement stipu- that state that the commercial FET applies to the lates that the Charter Company, under its Air Taxi management fee that is paid by aircraft owners to Certifi cate, will operate and maintain Company the certifi cate holders for managing their aircraft. A’s aircraft and provide pilots, fuel, and insurance The IRS is saying that if the aircraft is placed on a for the aircraft. Company A will pay for all costs 135 certifi cate, the owner has given up all control attributable to the operation of the aircraft for its
36 Aviation Business Journal | 4th Quarter 2009 use. This includes salaries and standby charges for aircraft owner is entitled to use its aircraft provided the pilots and all expenses for fuel, insurance, and that the aircraft has not been scheduled for hire by overnight fees, as incurred. the taxpayer. Under Charter Company’s aircraft insurance The IRS determined in this case that the commer- policy, Company A is the designated payee on all cial federal excise tax applied to the amounts paid hull loss settlement payments for Company A’s by the owner to the Charter Corporation for fl ights aircraft. Also under the agreement, Company A has fl own on their own aircraft. the right to replace any of the certifi ed pilots and to So what is the difference between these two direct such pilots as to when and where to fl y, sub- scenarios? Well, two things really stand out. One, al- ject to safety considerations. The Charter Company though all three contracts provide that the Charter then has the option to use Company A’s aircraft for Corporation acts as managing agent for the owner charter service to unrelated third parties, provided with respect to the charter of the owner’s aircraft, such charters do not infringe on Company A’s right the owners have given the Charter Corporation not to the use of Company A’s aircraft. only all rights to charter the aircraft, but also full The IRS determined that Company A has retained operational control over the aircraft whether the possession, command, and control of its aircraft air transportation is provided via charter to a third and that the Charter Company is not required to party or to an owner. Two, an owner is entitled to collect the commercial FET on the payments made be transported in its own aircraft, but only if the by Company A for the fl ights it provides to the per- aircraft has not been scheduled for hire by the tax- sonnel of Company A on Company A’s aircraft. payer. Therefore, although the owners own the aircraft, IRS Technical Advice those owners have yielded possession, command, and control of the respective aircraft by virtue of Memorandum 9404007 their relinquishing virtually all decision making A Charter Corporation operates an aircraft charter/ with regard to the operation and maintenance of maintenance company. It entered into separate the aircraft, whether under charter or in regard to written agreements with X, Y, and Z companies the providing of air transportation to the owner. to operate and manage an aircraft owned by each Even though the owners bear the risk of loss when entity. In general, the contractors provide that the expenses exceed rental revenue, the fact that the Charter Corporation act as the managing agent for owners carry this potential burden does not alter the owner of the aircraft with respect to the charter the conclusion as to who has possession, command, and other rental of the aircraft. Pursuant to each and control of the aircraft. agreement, the Charter Corporation has the exclu- In addition to the above IRS rulings, there have sive right to rent, charter, and schedule the aircraft been several rulings regarding fractional ownership, and has full operational control over the aircraft. and in all of them the IRS has determined that the The Charter Corporation agrees to maintain the owners have relinquished possession, command, aircraft and arrange for pilots and other ancillary and control of their aircraft. Therefore, the com- personnel and is responsible, at its own expense, mercial FET is due on the hourly fee that is paid by for the salaries of the pilots used in connection with the owner for the use of an aircraft, and in the case the charter of the aircraft. of all the TAMs and PLRs, the IRS said that the com- Each owner appoints the Charter Corporation mercial FET was due on the management fee. as its agent in connection with the payment of the cost and expenses of operating and maintaining the IRS Technical Advice aircraft. Each owner agrees to maintain insurance, at its own expense, with respect to the aircraft. In Memorandum 200425048 the event that the amount of cost and expenses Fractional ownership is a relatively newer concept reasonably incurred in connection with the man- where registered co-owners of an aircraft employ a agement and operation of an aircraft exceeds the management company to manage the aircraft and rental revenue for a particular month, the owner allow the management company to dry lease ex- agrees to pay the Charter Corporation such excess. change the aircraft among its fl eet of aircraft. When The Charter Corporation receives as compensation owners purchase an interest in an aircraft, they are for its services a percentage of the gross revenue guaranteed a set number of hours of fl ight time per derived from the chartering of the aircraft. year based on the ownership interest. Under this Pursuant to the terms of the agreement, each Continued on page 38
Aviation Business Journal | 4th Quarter 2009 37 Charter vs. the IRS Continued from page 37
arrangement, the management company establish- of operating the aircraft and is adjusted to refl ect es the suitability requirements for the pilots and, changes in costs (variable rate fee). Owners are also in most instances, supplies pilots and pays their charged a monthly management fee, which covers salaries. The owner can provide his or her own the fi xed costs of maintaining, servicing and repair- pilots, however, with 24-hours notice. If an aircraft ing, overhauling, and storing the aircraft (monthly in which an owner has an interest is not available management fee). In addition, the owners are, for the owner’s use at a particular time, under the when necessary, charged additional charges, such dry lease exchange agreement, the management as costs of complying with any airworthiness direc- company will provide another aircraft from the tives or new FAA requirements, air space fees, or program. Under the management agreement, if no costs of fl ight phone use that are either included program aircraft are available, the management in the Variable Rate Fee or billed separately to the company will provide an aircraft from its charter owners (additional charges). fl eet. Also under the management agreement, fl ight Under this management agreement, the owners hours are allocated among the aircraft owners. In are charged an hourly rate based on actual usage. addition, the charter management company must The hourly rate is set in accordance with the costs provide professionally trained and qualifi ed pi- lots, hangar space, general storage space, tie-down as required, normal in-fl ight catering, and fl ight planning and weather services. Finally under the management agreement, an owner’s interest in an aircraft is transferable, but only to someone willing to enter into all of the foregoing agreements. Under these circumstances, even though the owners are the title-holders of the aircraft, the IRS has determined that the owners have relinquished possession, command, and control of their respec- tive aircraft to the management company that provides the air transportation Given all the circumstances, including the pre- conditioned mutual agreements and the respective responsibilities of the parties, the IRS concluded that the aircraft owners, although they are titlehold- ers to the aircraft, have relinquished possession, command, and control of their respective aircraft to the management company, who provides air trans- portation for hire. Therefore the IRS concluded that the amounts paid for taxable transportation provided by the management company include the monthly man- agement fee and the variable rate/hourly fee, as well as any additional fees paid to the management company. In 2008 the IRS released its “Air Transportation Excise Tax - Audit Technique Guide,” which is in- tended to help IRS auditors understand what to look for when auditing management companies, charter- management companies, fl ight departments, etc. This brings us to some audits of some charter- management companies and what the IRS is look- ing for, what they are seeing, and why it may be confusing. • The IRS is trying to assess the commercial FET on the management fees. • The IRS has a diffi cult time understanding how
38 Aviation Business Journal | 4th Quarter 2009 pilots can be on the payroll of the charter-man- 2. The right to have the examination process and agement company but the owner retains opera- your appeal rights explained to you, tional control and possession, command, and 3. The right to have any proposed adjustment control. explained to you, • The IRS thinks that operational control is the 4. The right to request an informal conference same as possession, command, and control. with the examiner’s supervisor, • The IRS thinks that fractional management 5. The right to have representation, companies and traditional charter-management 6. The right to claim additional credits not taken companies are the same. (A traditional charter on the original return, management company is a company that man- 7. The right to request technical advice from the ages, maintains, may provide pilot services for Offi ce of Chief Counsel, the owner, and places the owner’s aircraft on its 8. The right not to be subjected to unnecessary charter certifi cate to generate revenue for the examinations, owner.) 9. The right to request an appeals conference, • The IRS thinks that there are only two ways that 10. The right to propose a settlement to the Ap- the aircraft can be managed. peals Offi cer, 11. The right to fi le a claim, If you receive a letter from the IRS that chal- 12. The right to petition the U.S. Court of Claims or lenges how you have been collecting commercial the U.S. Appeals Court, and FET, what strategies should you employ? First and 13. The right to negotiate a payment schedule with foremost, I would not try to do this on your own. As the Collection Division. the charter-management company, you are emo- tionally involved in your operation, and it is best It may seem impossible to fi ght back against the to have someone who can talk to the IRS without IRS and win, but with the proper assistance and getting emotional and who understands all the is- preparation you can convince the IRS that owner sues and the ins and outs. Also when talking to the fl ights and management fees are not subject to IRS you must remember that you are talking to the the commercial FET. In just the past year, I have IRS and not the FAA as the IRS does not consider worked with two charter management companies the FAA’s defi nition of commercial determinative in who successfully defended their business against deciding which tax applies. preliminary IRS decisions that tried to impose the Once you have identifi ed this person, you should commercial FET to owner operations and the man- fi nd out from the IRS what exactly they are looking agement fees. The best advice is to identify those for and start pulling information together. If the IRS with IRS excise tax expertise who can assist you in determines that the commercial FET is due on your structuring your agreements to ensure clarity be- management fees, be sure to understand why they tween charter and management activities and who think this and then start pointing out things like the you can count on for aid in the event of an audit. following: 1. You are not a fractional program. Explain why Nel Stubbs is a co-owner with the aviation-consulting it is not a fractional program. Steer the audi- fi rm of Conklin and de Decker and specializes in tor away from any comparison to a fractional consulting on aviation tax issues (federal, state, and program. local) associated with the ownership and operation 2. The similarities between an in-house fl ight de- of corporate aircraft. She also assists aircraft owners partment and an external fl ight department. with cost and fi nancial analysis of various aircraft 3. When the aircraft goes onto the certifi cate the operations and the structuring of aircraft ownership. owner retains possession, command, and control Stubbs is a member of the NBAA Associate Member and how this is done. Advisory Council, the NATA Air Charter Committee, 4. Refer to Revenue Ruling 58-215 and TAM and the National Aircraft Finance Association board. 9343002. Prior to joining Conklin & de Decker, she worked for There are procedures that the IRS must follow the National Business Aviation Association. She has in conducting an audit. Importantly, you have the a Bachelor of Arts in Mathematics from California right to demand that your rights be explained to State University San Bernardino and her Master’s in you. Some of your other rights are: Aeronautical Science/Aircraft Operations from Embry- 1. The right to meet with the auditors’ supervisor Riddle Aeronautical University. She can be reached at and to have the things explained to you, [email protected].
Aviation Business Journal | 4th Quarter 2009 39 3HUKH[HU`:PNUH[\YLSVJH[PVUHUK`V\»SSMPUKYLUL^LK^HYT[OPU V\YOHUKZOHRLUL^LULYN`PUV\YKL[LYTPUH[PVU[VKLSP]LY[OLILZ[ WVZZPISLZLY]PJL6\Y7YVTPZL!@V\»SSHS^H`ZYLJLP]LH^LSJVTPUN NYLL[PUNZHMLYHTWYLHK`OHUKSPUNPU]P[PUNMHJPSP[PLZH[[LU[P]L WHZZLUNLYHUKJYL^ZLY]PJLHUKHX\PJR[\YU:V[H_PPUHUKYLSH_ RUV^PUN[OH[[OHURZ[VV\YHNNYLZZP]LS`MHPYJVTWL[P[P]LWYPJPUN`V\ KVU»[OH]L[VWH`L_[YHMVY:PNUH[\YLZLY]PJL
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Aircraft Ground Service Online Provides the Latest Aircraft Details ATA’s Safety 1st has rolled out phase two of the PLST Online. The popular Aircraft Ground Service Guide has been updated and expanded to include Nvital ground servicing details on the general aviation aircraft that visit your ramps. The best part is that these de- tails are available 24/7 online and will include the most up-to-date specifi ca- tions along with pictures and videos of critical refueling and towing details. The login page features aircraft manufacturer links to aircraft details and a robust search feature. More than 60 aircraft manufacturers with nearly 250 different models of aircraft are included. NATA’s Aircraft Ground Service Online (AGSO) has been released but the work continues as information is added. In particular, refueling panels and towing videos/pictures will be uploaded until the job is complete • Aircraft take-off and landing weights (if ever, as NATA plans to continually add aircraft • Aircraft performance details such as maximum when they become certifi ed). cruise, ceiling and range The AGSO will be available to NATA members • Aircraft seating capacity who sell fuel and/or participate in NATA’s Safety 1st • Line drawings that include servicing points and PLST Online. Eligible NATA members will receive vital aircraft dimensions notice by email and our newsletters. If you are not • Towing details that include disconnect as well as sure you have access, contact [email protected] connection instructions or (703) 845-9000 to ensure you have access to the • Towing information in pdf format for reference most up-to-date aircraft details possible. and printing The AGSO includes the following information on • Towing videos with specifi cs on disconnect/con- each aircraft: nect procedures • Fuel type and capacity (gallons, pounds, and • Refueling details including explicit pictures and liters) videos of fueling panels and other pertinent data • Oil type and capacity • Lavatory servicing information • Engine(s) type and quantity • Oxygen servicing details and procedures • Aircraft external dimensions such as wingspan, • Special notes and information to be used for fu- length, and height (for parking and hangar stack- ture member experience details ing purposes) • Ground power details Safety 1st News continued on page 43
Aviation Business Journal | 4th Quarter 2009 41 HHighlightsighlights ffromrom tthehe 22009009 CCommercialommercial OOperatorsperators TTaxax SSeminareminar
ATA and Conklin & Part 135 certifi cates for charter use. tainment use of an aircraft and deDecker co-hosted Edwards explained the applica- outlined IRS fringe benefi t rules. the 2009 Commercial tion of and exceptions to passive Stubbs’ fi nal presentation ex- Operators Tax Seminar activity loss with regards to an plained the incredible differences in San Antonio, Tex., in aircraft owner’s taxes. Aircraft among state tax requirements, September. The seminar owners frequently misunderstand including aircraft registration fees, Ncovered operators’ tax issues as this crucial tax consideration. personal property taxes, fuel taxes, well as several regulatory issues. Tax expert Nel Stubbs of Conk- operating fees, and sales/use tax- For those who missed the seminar, lin & deDecker explained current es. Maintenance activity is exempt here are a few highlights. Federal Excise Tax (FET) require- from sales taxes in some states. Attorneys Lori Edwards of Jack- ments. Several concerns regard- Stubbs emphasized that each state son and Wade and Eileen Gleimer ing emergency medical services, has different fees or taxes associat- of Crowell and Moring outlined which may be exempt from FET, ed with aviation. Don’t get caught critical issues to consider while and air ambulance fl ights, of up by one of the “gotcha” states! negotiating contracts between which only the medical services if Conklin & deDecker’s Bran- aircraft owners and charter or listed separately on invoices may don Battles discussed operating management companies. They be exempt from FET, were raised costs, particularly the important also discussed the ongoing tax by participants and addressed by differences between the costs of implications (and complications) Stubbs. operating Part 91 versus Part 135. of operational control for aircraft Stubbs also discussed the tax Critical differences are training owners who place their aircraft on implications of personal or enter- and maintenance costs. Many air-
Little Lessons Learned (with Big Impact!)
ttendees of this years’ Commercial Operators 100 percent pleased with a management con- Tax Seminar took home several lessons, and tract, there’s a good chance the aircraft owner is Ahere a few quick nuggets for those unable to not as pleased. Be prepared to negotiate. (This is attend: also why “standard” contracts just don’t work.) 1. Do not assume anything about the needs or 3. Tax planning is best done before the purchase of desires of an aircraft owner! Review all terms an aircraft. Worrying about tax implications after up front and involve legal counsel as appropri- a purchase is very ineffective and could lead ate. According to the experts at the seminar, to signifi cant tax liability. If you’re helping an too many charter operators and aircraft own- individual or company locate and purchase an ers use “standard” contracts or even—believe aircraft, encourage them to discuss the purchase it—handshake deals, and then end up arguing with a tax expert before signing on the line. about details of the contract months or years 4. IRS audits will happen. The audit will generally into the relationship. Early and frank discussion be of information many quarters (or years) ago. at the beginning of the relationship will provide Having detailed records of fl ights, number of a much better chance for an amicable and suc- passengers, and other relevant information will cessful outcome. help your case in an audit. Don’t rely on your 2. An agreement isn’t an agreement if it is one- memory of an individual fl ight from several sided. One speaker said that as a charter opera- months or years ago. In the words of one semi- tor you are likely to have to concede on some of nar speaker, “He who has the most paperwork your desires for a given management contract. If wins.” the charter operator or management company is
42 Aviation Business Journal | 4th Quarter 2009 craft owners are surprised to learn tional user fees assessed by Cus- your Cessna Caravan, assuming it that in addition to the costs of toms and Border Protection and was acquired and used as business initial conformance to the Part 135 Animal and Plant Health Inspec- property, may be deferred if a re- certifi cate requirements, keeping tion Services. The application of placement asset (say a Citation X) an aircraft on certifi cate requires these fees is dependent on type of is identifi ed within 45 days of the additional pilot training and often fl ight (passenger or cargo), desti- sale of the fi rst asset. It is similar a more in-depth maintenance nation or origination of fl ight, and to avoiding negative tax implica- program. Battles emphasized the several other variables. Attendees tions upon the sale of a home. responsibility charter companies were surprised to learn there is no The federal government gives you have to share this information statute of limitations on the failure time to apply that income to the with their aircraft owners and to fi le and pay these fees. In fact, purchase of a new home within a educate potential clients on these the federal agencies imposing set time frame before you are as- issues. these fees have been known to sessed a tax on the income. NATA’s Jacqueline Rosser told read industry publications, talk Attendees found this to be a attendees about the current status with other federal agencies, and highly educational, and occasion- of fuel fraud taxes and the nega- scan FAA databases to focus inves- ally even entertaining, two-day tive impact on the Airport and tigations and determine the need event. If you were unable to at- Airway Trust Fund of commer- for audits, fi nes, and penalties. tend, watch the calendar for next cial operators’ failure to fi le for Tobias Kleitman of TVPX 1031 year’s seminar. Also keep an eye refunds. Did you know that 2.5 Exchange Co. outlined the 1031 out for next quarter’s Aviation cents for every gallon of jet fuel Exchange allowances when re- Business Journal, where I’ll discuss you use might be going to the placing a business asset like an in detail one exciting issue from Highway Trust Fund? Our indus- aircraft with a similar type of asset this event: the ongoing and grow- try could be funding hundreds of (for example, upgrading from one ing concerns of aircraft brokering. highway projects nationwide! aircraft to another). Income tax Rosser also discussed interna- that could arise from the sale of
Safety 1st News Continued from page 41 What’s New with PLST Online? ATA wants to make the job of company trainers easier so that they spend less time managing student training online and more time out on their line. Trainers can view students’ training and see what is happening at a glance. NATA made changes to stu- Ndent training and have included terminology along with color coding to draw attention to training status as follows:
Student Status Key Student Status Key Defi nitions Certifi ed Student has been certifi ed and certifi cates have been shipped to you Training Student is currently training and/or has been assigned curriculum Recertify Student will need to recertify in 30 days or less Expired Student’s certifi cation has expired Applied Trainer applied for student certifi cation Unassigned Student has not been assigned curriculum for training Lapsed Student assignment /curriculum or access to PLST Online training modules has expired
Talk with your trainers and ask them what they think. Please let NATA know how they are doing by contact- ing [email protected] or (703) 845-9000.
Aviation Business Journal | 4th Quarter 2009 43
Air BP Aviation Services Avfuel Corporation Chevron Global Aviation ExxonMobil Aviation FltPlan.com Midcoast Aviation NetJets Phillips 66 Aviation Sabre Flight Explorer Signature Flight Support Universal Weather and Aviation, Inc. USAIG
46 Aviation Business Journal | 4th Quarter 2009 NNATAATA CComplianceompliance SServiceservices IIss YourYour DrugDrug TestingTesting AllyAlly
By Colin Bane
n FAA audit of your company’s drug test- Random testing management fees ($2 per month, ing procedures can be an untidy reality of per employee) cover a C/TPA program manager, doing business in aviation, but it doesn’t mandatory reporting requirements, annual plan have to be a nightmare. The FAA and U.S. review, and audit assistance if a program is fl agged Department of Transportation drug and for audit inspection. The audit assistance is proving alcohol regulations help ensure safety and to be the most popular offering. Asecurity for all, and NATA Compliance Services can In one recent testimonial, a customer wrote, be an important ally in making sure you’re follow- “Upon being notifi ed of an audit, I immediately ing the letter of the law and protecting your own contacted NATA Compliance. Their knowledge and business. patience in planning for every aspect of the audit NATA Compliance Services provides a one-stop was reassuring, and the audit went fi ne because shop for FAA security compliance, from employee they had us 100 percent prepared. In the week background checks and TSA fi ngerprint processing before the audit, I spoke to customer service several and collecting to security badging, online record- times and they were knowledgeable, courteous, keeping, fl ight school training, and employee pro- grams for security and training. NATA Compliance Services also offers a full com- plement of DOT-compliant drug testing and pro- “It’s just a fact of doing business in this industry: gram services, including both DOT and non-DOT Any one of our clients that has a DOT testing employee testing, on-site services for reasonable suspicion and post-accident/incident testing, drug program could be inspected at any time by the and alcohol history checks, random testing program management, and employee and supervisory train- FAA.” ing in drug programs. “We keep track of all the new regulations that – Judy Boyle come out and notify all our customers to make sure that they are aware of any changes,” said Judy NATA Compliance Services Boyle, manager of NATA Compliance Services’ drug programs. “For instance, the new regulation that took effect August 31 requires all follow-up and professional in every way. The service that this tests or return-to-duty tests be done under direct company has received from NATA has been fl aw- observation. That means that another individual of less, and I would recommend this program to any the same sex has to be in the room with the donor operator. Before joining with NATA Compliance while they are providing the specimen.” Services, I was told by several aviation industry The $49.50-per-test cost to NATA members using contacts that they were the organization that set Compliance Services includes drug and alcohol test the highest standard. My experience with them has equipment, collection site and laboratory costs, validated that.” medical review offi cer costs, and results reporting. A drug program audit can be overwhelming—and “We set up our clients with a laboratory and a lab potentially catastrophic—without proper prepara- account, we set up all their collection sites, we set tion. them up with a medical review offi cer, we provide “It’s just a fact of doing business in this indus- our clients with a random selection list, and we pro- try: Any one of our clients that has a DOT testing vide a substance abuse referral service,” Boyle said. program could be inspected at any time by the “When you are testing under DOT, anyone who FAA,” Boyle said. “So in the event of an audit, we do tests positive or refuses to test has to go through an audit preparation with our clients, go over the a DOT-certifi ed substance abuse program before checklist provided to them by the FAA inspector, they’re allowed to return back to their positions.” Continued on page 48
Aviation Business Journal | 4th Quarter 2009 47 NATA Compliance Services Continued from page 47
and make sure that all of their fi les are in order and “Standard TPAs, their role is typically to just set up they are ready for their inspection. We fi nd that our a laboratory, set up the MRO, and provide random clients fi nd that very valuable. We explain to them selection lists, and that’s as far as they go. We go exactly what the inspectors are looking for, make the next step, and we talk to our clients to ensure sure that they have all the right paperwork, and that all requirements are being followed, everything make sure they understand the regulations behind from how they registered the program with the FAA the paperwork.” to how to respond after an inspection and how to The drug program training includes materials prepare drafts for the MIS reports. So really we are (booklets, videos, and web-based guides) for the more than just a TPA. Like our banner says, we’re required employee and supervisory training. In ‘one source, one stop, one solution.’ Our clients are instances where a member has questions or issues able to get all their compliance needs taken care of not clearly addressed in the regulations, NATA with one vendor.” Compliance Services works with the FAA Drug Abatement Division in Washington, D.C., to provide For more on NATA Compliance Services and its drug clarity and answers. and alcohol compliance programs, visit www.natacs. “We go over and above the standard third-party aero. administrator (TPA) requirements,” Boyle said.
Advertiser Index Air BP Aviation Services Back cover
Air-Sur, Inc. Inside front cover
Avfuel Corporation 3
Chevron Global Aviation Inside back cover
ExxonMobil Aviation 4
Fltplan.com 26
Horizon Business Concepts 23
KaiserAir 25
McBreen & Kopco 49
Midcoast Aviation 8
NATA Sustaining Members 46
NetJets 11
Phillips 66 Aviation 12
R. Dixon Speas Associates 17
Sabre Flight Explorer 6
Signature Flight Support 40
Universal Weather & Aviation 18
USAIG 15
48 Aviation Business Journal | 4th Quarter 2009 PPACAC CContributionsontributions MMakeake a DDifferenceifference inin WashingtonWashington
eing politically active in Washington, way to make a difference with policymakers. Oth- D.C., is a challenge for many aviation ers include writing to your members of Congress businesses. You own or operate full-time on issues important to you. When Congress is not businesses, and your time is limited. in session, your representative and senators are However, when an important issue arises usually at home visiting with constituents. This is that requires legislative action, many of a great time to schedule an appointment at their of- Byou fi nd the time to take action because you have fi ces or invite them to your operation for a tour and a cause. Whether in Washington or in your own a discussion of issues. hometown, you need to reach out. Each spring, NATA holds a Day on the Hill event To learn more about NATAPAC or to make a contribu- where approximately 80 association members meet tion, visit www.nata.aero/natapac. with members of the U.S. House of Representa- tives and the U.S. Senate and their staff to discuss IMPORTANT NOTE: Federal law requires all PAC important issues facing the industry, such as fi nal donations to be personal contributions only. passage of FAA reauthorization and the Large Air- Company/corporate contributions are prohib- craft Security Program. These face-to-face meetings ited. Do not use company or corporate checks to make are an important educational exercise to ensure donations. PAC donations are not tax deductible. that we reach as many elected offi cials as possible to make our position known on important issues facing our industry. NATA encourages all members to participate in NATA’s Day on the Hill; however, this educational exercise can also be accomplished AVIATION & AIRPORT LAW PRACTICE by meeting with your representatives and their staff in their district offi ces. While this is not an election year, representatives and senators are gearing up for the 2010 elections. With so much at stake politically for our country and our industry, it is important that we do what we can to ensure that our nation’s policymakers support the general aviation industry. For this ef- fort, NATA established NATAPAC. As the name indicates, a political action commit- tee, or PAC, is a group organized to elect candidates Our multi-state law offices represent Pilots, FBOs, Aircraft running for government offi ce who support issues Manufacturers, Part 91, Part 121, and Part 135 operators important to that group. Trade associations, corpo- with a wide range of aviation matters, including aircraft rations, unions, and other entities organize PACs to transactions, Part 13 and 16 complaints, corporate, insurance and enforcement matters, as well as, litigation. generate funds from their members or employees enabling them to contribute to these candidates’ OUR TEAM OF SEASONED ATTORNEYS HAS THE campaigns. NATA’s PAC, known as NATAPAC, was EXPERTISE YOU NEED. established to contribute to candidates who support the general aviation industry and the issues it faces. PACs are not without controversy. Some believe PACs corrupt politicians by bringing outside money into the political arena to buy favors from politi- cians. Regardless of one’s opinion about PACs, the Call today to arrange a consultation with the fact is that they are actively used by a number of AVIATION AND AIRPORT LAW PRACTICE GROUP: lobbying entities in Washington. They are valu- PH: (516) 364-1O95 FAX: (516) 364-O612 able tools to help ensure supportive politicians • www.mklawnyc.com remain in offi ce. Contributing to a PAC is just one
Aviation Business Journal | 4th Quarter 2009 49 NEW NATA MEMBERS
Affi liate • Aircraft Maintenance Services, Inc. • ProFlite LLC • Massachusetts Business Aviation Association Schumpert, Frank Baadsvik, Guttorm Grove, James 2203 Airline Drive 101 Charles A. Lindbergh Drive 60 Thoreau St., Ste. 208 Camden, SC 29020 Teterboro, NJ 07608 Concord, MA 01742 [email protected] dbaadsvik@profl ite.net [email protected] (803) 713-0200 (201) 288-5762 (413) 744-5050 fax: (803) 713-0017 fax: (201) 288-5741 fax: (617) 524-7189 www.amscamden.com www.profl ite.com • Aircraft Recycling Corporation • Santa Barbara Airlines Associate Scroggins, James Simon, Lesly • Aircraft Support Services LLC 5840 West Craig Road 220 Alhambra Cir., Suite 260 Bogdziewicz, Voytek Suite 120-262 Coral Gables, FL 33134 PO Box 190735 Las Vegas, NV 89130 [email protected] Anchorage, AK 99519-0735 [email protected] (786) 437-1808 [email protected] (702) 406-6085 fax: (786) 235-0904 (907) 272-2211 fax: (702) 953-7307 www.sbairlines.com fax: (907) 248-6993 www.aircraftrecycling.com • Snowlift LLC • Pet Airways • Avex, Inc. Rodriguez, Manuela Wiesel, Dan Eichberg, Guy 300 Henry Street 777 E. Atlantic Ave. #C2-264 205 Durley Ave. Inwood, NY 11096 Delray Beach, FL 33483 Camarillo, CA 93010-8586 [email protected] [email protected] [email protected] (516) 239-2123 (888) 738-2479 (805) 389-1188 fax: (516) 371-1763 www.petairways.com fax: (805) 389-3323 www.snowlift.com • Placerville Aviation www.Newavex.com • Soin International, LLC Bonak, Steven • Desert Jet Spatola, Robert 3501 Airport Rd., Suite 5 Wilson, Denise 3540 Hangar Drive Placerville, CA 95667 56850 Higgins Dr. Hangar 4 [email protected] Thermal, CA 92274-9484 Vandalia, OH 45377 (530) 622-1125 [email protected] [email protected] www.placervilleaviation.com (800) 381-5387 (937) 665-0742 • ST Mobile Aerospace Engineering, Inc. fax: (760) 406-9700 www.soinintl.com www.desertjet.com Tekel, Ed • Solairus Aviation 2100 9th Street • Florida Flyers European US Flight School, Inc. Petersen, Greg Brookley Complex Hueckels, Rainer 201 First Street, Suite 307 Mobile, AL 36615 4778 US 1 North Petaluma, CA 94952 [email protected] Airport KSGJ [email protected] (251) 438-8815 St. Augustine, FL 32095 (707) 775-2799 fax: (251) 438-8823 rainer@fl orida-fl yers.com fax: (415) 901-4869 www.staero.aero (904) 824-8434 www.solairusaviation.com fax: (904) 824-8458 Regular • Textar Aviation www.fl orida-fl yers.com Folkers, Andrew • 26 North Aviation, Inc. • Hickory Regional Airport Admin 3232 Love Field Dr. Lauber, Steve Sharpe, Tonya Dallas, TX 75235-2002 602 Hayden Circle 3101 9th Ave. NW [email protected] Allentown, PA 18109-9543 Hickory, NC 28601 (214) 654-0994 [email protected] [email protected] fax: (214) 654-9588 (813) 368-1810 (828) 323-7408 www.textaraviation.com • Aerial Photography, Inc. fax: (828) 323-8456 • TWC Aviation Inc. Smith, Peter www.hickorygov.com Joya, Alex 618 NE 26th St. • North Philadelphia Jet Center 16700C Roscoe Blvd. Wilton Manors, FL 33305-1208 Gasper, Kurt Van Nuys, CA 91406 [email protected] 11301A Norcom Rd. [email protected] (954) 568-0484 Philadelphia, PA 19154 (818) 441-0100 fax: (954) 561-0040 [email protected] fax: (818) 815-3117 (215) 673-9000 www.twcaviation.com fax: (215) 673-9184 www.npjetcenter.com
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