The Ins and Outs of Aircraft Ownership Consult an Expert – Pre-buy, Operations Manual & Management Companies

Note – Todd Crowley of CrowleyAMA contributed to this article, which appeared in CAMP InSight magazine, October 2009.

Todd Crowley was featured in this article in CAMP InSight, October 2009.

IndustryInsights

By Adam M. Darnell, JTM Records

So, you’ve found the perfect airplane to suit your company’s needs. The seating arrangement is great, and the paint scheme even matches your company’s logo. The best part is the price, because it is actually below your budget. Pause now and realize that the world of corporate aviation can be a tricky one to navigate without the right team in place. If you do not have expert help, and are not a business aviation expert yourself, you may end up spending hundreds of thousands of dollars that you don’t have to. Now is the time to get some expert assistance.

While this article focuses primarily on the operational issues of ownership, we must first mention that it is in your best interest to use a buyer’s agent or trusted broker to locate your aircraft. They will confirm whether the one you are looking at really is the perfect plane or just one that looks like it. Also, we recommend retaining an experienced business aviation attorney and a tax and regulatory expert. The attorney may act as the tax and regulatory expert as well.

Three experts will be critical to your early success:

1. A Pre-buy mechanical expert
2. An operations manual expert
3. A management company expert

Pre-buy

Let’s start with the Pre-buy. A Pre-buy is a critical pre-purchase inspection that allows the buyer to identify any mechanical or paperwork problems that may need to be corrected now or in the future. As you might imagine, a properly performed Pre-buy inspection by a trained, certified expert mechanic is crucial – the benefits cannot be overstated. A Pre-buy performed by a less knowledgeable individual might wind up
creating tremendous headaches down the road.

Not only will a good Pre-buy team member identify and correct potential problem areas, but they will explain parts of the purchase strategy to you, such as why you may want to choose the maintenance shop where the inspection is performed, rather than agreeing to where the seller’s broker suggests. Th e Pre-buy is a
maintenance intensive event that, if performed well, could save you hundreds of thousands of dollars. A great Pre-buy agent will have years of mechanical experience, and just as importantly, the confidence to stand up for your interests as a buyer.

They will know the ins and outs of maintenance and all of the paperwork that comes with it. They will have auditing skills and an attention to detail that is second to none. Richard Dadasiewicz, President of Jets West, explained it best when he said, “The client is looking for the best airplane for their money; a good pre-buy agent makes sure they get what they are looking for. The pre-buy agent is essentially a bodyguard for their bottom line.”

Operations Manual

Once the aircraft is in your hands, you will need to develop a manual suite for the FAA that allows you to operate your aircraft in compliance with the ever-changing world of FARs (Federal Aviation Regulations). One typo or form filled out incorrectly can cause months of delays before you can fly. Th ere are companies that provide specifi c manual publishing and revision services, but first you must know what you need. Do you need an entire operational suite or do you just need a Minimum Equipment List? What about a maintenance and inspection program?

If you are in uncharted territory, be cautious of unscrupulous businesses and overbuying. Ask questions and do your research.

Adam Darnell, Owner of JTM Records, commented “Not every client has been involved in aviation and many don’t know what’s necessary and what really is not; a creditable operations manual expert will give clients exactly what they need to stay in compliance, nothing more or less.” Darnell also noted that the process of developing a manual suite should not be disruptive. His organization, for one, prides itself on being able to “walk a client through the whole process, and get their plane in the air with minimal disturbance to their daily business.” Because any small mistake could mean weeks of delay and an inability to fly, expertise here is critical. After all, you are buying the aircraft to fly, not to watch it sit on the tarmac!

Management Company

Now that your interests during the purchase are protected, let’s discuss the daily operation of the plane. We will assume you’ve decided to use a management company. Like an owner and their airplane, management companies come in all shapes and sizes, though a common misperception is that they are all essentially the same. For the majority of aircraft owners, and especially those who may want to charter their aircraft to third parties, identifying the company who off ers the best operational fit could mean big dollars. “Many times we’ll see a particular manager as the right fit for one client while not at all for another client, even though on the surface they look quite similar,” said Todd Crowley, CEO of Crowley Aircraft Management Advisors, a New York based advisory group specializing in this type of due diligence. Managers differ greatly in their abilities to garner discounts, generate charter revenue, perform maintenance, and accurately account for the significant cash flow, not to mention their payment and fee structures.

Perform your due diligence carefully. The wrong choice may mean hundreds of thousands of dollars in missed savings, revenue or flight efficiencies annually. The right manager for your friend’s aircraft doesn’t necessarily make it the right one for yours. It’s that simple. While private aviation creates lots of mysteries for aircraft owners, maintenance is probably one of the most expensive. Next to fuel, it is the greatest ongoing expense an owner will encounter, and sometimes the most confounding. Like writing your manual suite or performing your Pre-buy inspection, make sure your maintenance choice has the expertise and tenacity to make cost control a priority. There are options for everything out there and your maintenance provider has a lot of opportunities to either save or cost you a lot of money. Ask how they perform cost control, what their priorities are, and how much experience they have doing so. The answers to these questions should be just what you’d expect. Aircraft are complex machines, and only experts can perform cost control the way it should be performed.

Several management advisory firms provide maintenance cost control services. Outsourced experts can be of great assistance to those in charge of approving or disapproving large maintenance bills for which they have no training to decipher. Crowley’s firm, in particular, off ers a unique program allowing pilots, accountants, attorneys and owners to send in their maintenance bills for complimentary review for errors and overcharges. “Everyone makes mistakes, not intentionally, but when there are 340 line items covering 60 plus pages of invoice, you can’t be too surprised. Mistakes happen and we estimate they account for as much as 20% of some maintenance bills. That’s a lot of wasted money that could be recovered with the help of an expert,” said Crowley.

We’ve covered the fundamentals of what an expert can do for you. Let’s take it one more step since the range of aircraft in Corporate Service has broadened greatly in the last several years. There is an increasing use of aircraft traditionally considered “airline only.” Th e BBJ is an example, but there are also a number of B757, B767, and Airbus aircraft that are making their way into Corporate Fleets.

These corporate heavyweights bring with them a whole different realm of considerations that fall outside the expertise of many experienced advisors. Th ere are matters of certification that are not present in most corporate aircraft, like showers, beds, additional safety equipment, more complex entertainment systems, etc. Furthermore, these aircraft are operated under different rules; either FAR Part 125 or 121. The certification criterion for your operation is quite unique when it involves one of these aircraft.

The well-established and experienced “corporate” expert is likely to be unfamiliar with these aircraft and the nuances of their maintenance programs, certification requirements or how to decipher a voluminous maintenance history. The highly experienced “heavy iron” maintenance advisor is likely to be an ex-airline person who is out of his element when dealing with the corporate configurations and sophistication of the client’s expectations, like credenzas, electric window shades, flexwing headrests and SATCOM, etc

Joe Bates of Aurora Aviation Enterprises, LLC explained, “It is a narrow field of the corporate aviation marketplace, but a critical one. The complexity of the aircraft is so great and there are few people who are competent in both the technical aspects of heavy aircraft as well as being sensitive to the needs and expectations of a corporate interior and the corporate operation of the aircraft. There are serious matters of reconciling a maintenance program designed for airline utilization to that of a corporate operation where the aircraft may only see a couple hundred hours of operation per year.”

Corporate aviation is a complex and rewarding world, but if you don’t have the right help, it can also be a tremendous drain on your time and your company’s finances. In today’s economy, you can’t aff ord to waste your two most precious resources, time and money. Do your homework before buying a plane. Th ere are
thousands of professional companies out there to help you navigate the corporate aviation world.

Reach out to them; it’s what they do. Structured and utilized properly, a corporate jet can help both your company become an industry leader as well as get you home for that all-important sweet sixteen party, or “heavy-iron” party of sixteen.

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