Business Aviation Advisor March/April 2016

MARCH / APRIL 2016

W W W.BIZ AVADVISOR .COMA Business Aviation Media, Inc. Publication

OPERATING YOUR FIRST AIRCRAFT?

BETTER AUDIT, BETTER ODDS

THE REAL 411 ON 4441

THE AIRLINES VS. BUSINESS AVIATION

W W W.BIZ AVADVISOR .COMA Business Aviation Media, Inc. Publication

Four Steps to Help Your Aviation Manager Thrive

Set Up forSuccess

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FE ATURE S

06 Set Up for Success Four steps to help your aviation manager thrive by PETE AGUR

08 The Real 411 on 4441 Privatization proposal poor for bizav by REPRESENTATIVE MIKE POMPEO

10 Calling the Captain The critical art of cabin-to-cockpit communication by AMY NELSON

12 Better Audit, Better Odds Do everything you can to keep your risks low by J IM CANNON

18

DE PARTME NTS

05 Publisher’s Message Facing Changes by GIL WOLIN

18 Washington Report The Airlines vs. Business Aviation by DAVID COLLOGAN

14 Operating Your First Aircraft? Four decisions you need to make now by DAVE WEIL

16 Economic Policy Making the most of your aircraft insurance dollars by JOHN BROGAN

The Business of Business AviationThe Information You Need, From Experts You Can Trust

Aircraft owners and charterers now have a resource to help you make the most effective use of your investments in business aviation. Business Aviation Advisor provides the information you need, without technical jargon, on the business of owning and flying

business aircraft – from operations to acquisition, to management and finance.

Business Aviation Advisor: the Business of Business Aviation

Subscribe to our digital edition at www.bizavadvisor.com/subscribe

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Ma r c h /A p r i l 2 0 16 B U S I N E S S AV I AT I O N A D V I S O R 5

PUBLISHERGil Wolin

[email protected]

CREATIVE DIRECTORRaymond F. Ringston

[email protected]

MANAGING EDITORG.R. Shapiro

[email protected]

EDITORIAL ASSISTANTMichael B. Murphy

[email protected]

WASHINGTON EDITORDavid Collogan

[email protected]

CONTRIBUTORSJohn Brogan

United States Aircraft Insurance [email protected]

Dave WeilFlight Dept Solutions

[email protected]

Jim CannonSundog Aviation

[email protected]

Amy NelsonCabin Manager Specialist

[email protected]

Rep. Mike PompeoU.S. House of [email protected]

Pete AgurThe VanAllen Group

[email protected]

BUSINESS MANAGERJoAnn O’Keefe

[email protected]

BUSINESS AVIATION MEDIA, INC.PO Box 5512 • Wayland, MA 01778

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All rights reserved Printed in the USA

In 1964, Sean Connery made his third appearance as James Bond in Ian Fleming’s Goldfinger. We watched Bond board Goldfin-ger’s Lockheed JetStar, at that time the largest and longest-

range business jet available. Fifty two years and seven actors later, we’ve moved from Connery’s high voltage confrontation with Oddjob, to Daniel Craig’s Bond running a virtual parkour obstacle course in 2006’s remake of Casino Royale.

In those 52 years, business aviation has evolved as well, from piston to turboprops to jets – in the process more than doubling the airspeed and quadrupling the range. But bi-zav’s goal hasn’t changed. It’s still to make the most efficient and effective use of your time, whether that’s increasing face-to-face communications with clients and custom-ers, visiting your distant plants and facilities, or overseeing your key investments.

Today’s communications no longer require extended air travel. Conference calls, emails, smart phone apps, and ’round-the-clock Internet connectivity replace many reg-ular onsite regional and divisional meetings, as well as client and customer visits.

A recent Forbes study bears this out. Thirty-four percent of executives surveyed re-ported that their business travel was down dramatically since the 2008 recession, thanks in large measure to cost savings provided by the technologically-enabled lower cost alternatives.

But words, whether written or spoken, are only part of communications. It’s tough to read body language and other social cues in texts, emails, or phone calls – even on 53-inch flat screens or Skype. We may not be quite sure if the moment’s hesitation before answer-ing is preparation for a thoughtful response, a technical glitch – or resistance to the mes-sage. In that same Forbes survey, 87% of executives echoed these concerns, preferring in-person connection to sterile Internet interaction.

As reliable as technology is today, we still value the human touch. It’s required to build trust and strong business relationships – and to close the deal. During the peak of the ’70s business jet boom, Learjet delivered that message loud and clear via a billboard that ar-riving commercial airline passengers saw as they headed into the city. It read:

Welcome to Dallas.Your competitor arrived this morning on his Learjet.He closed the deal, and is on his way home to have dinner with his family.Welcome to Dallas.That just about said it all when it came to business jet travel in those days – and it ap-

pears that you agree. According to Argus’ TRAQ Pak 2015 flight activity data, business jet and turboprop flying is up for the second straight year.

Back in 1964, the old Bell System advertised its direct-dial, long-distance telephone service with the catchy phrase, “It’s the next best thing to being together.”

Next best.Being there is best.That’s why you use business aircraft.

Facing Changes

Gil Wolin — Publisher [email protected]

PUBLISHER’S MESSAGE ■

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BY PETE AGURThe VanAllen Group / [email protected]

“You set Bill up to fail. Without some significant changes, your next Aviation Manager will fail, too.”

Having to deliver these harsh words to a recent client was not a pleasant task. As an organization consultant and talent acquisi-tion specialist, I was asked to find a new Aviation Manager for a billion dollar technology company. After meeting with the HR folks, I asked to meet with the entrepreneur founder and CEO, who I will call “John.” Here’s the gist of the conversation we had about how to create a new and different path for the leadership of his aviation department.

After hearing this bomb, John stared across the conference ta-ble at me for a few seconds, leaned back in his chair, took a deep breath and challenged, “What do you mean?”

“When you bought your jet, you hired Bill as your co-captain. From what I hear, he is an excellent pilot.”

“Yes, he’s the best I’ve ever been around. That’s why, when Harry left two years ago, I promoted Bill to Aviation Manager. He seemed to do fine at first. But, for the past year he has not done well at all.”

“What has been the problem?”“Well, our recent hangar construction project stalled because

of his micro-management. And he managed his people the same way, so we had high turnover.”

“Those are fairly common problems. John, how often have you seen a doctor succeed at running a hospital? Aviation profession-als are a lot like medical professionals. They pursue their careers because they love the practice: the application of their art and sci-ence. There is little in their educational and professional develop-ment that prepares them to lead or manage a business. Using those criteria, fewer than 5% of aviation managers qualify for those aspects of their jobs – so you are not alone.”

“I see your point. But, how did I set him up to fail? And, more importantly, how do we set his successor up to succeed?”

“Bill’s tenure is a perfect example of the Peter Principle in ac-tion: you promoted him beyond the limits of his competencies. If you had stayed with a single aircraft, he might have been able to learn and mature in his role. But, your business grew rapidly and you added two aircraft, the hangar, and eight more people. The complexities of that change are exponentially more challenging. They overwhelmed him. Additionally, Bill reports directly to you. Please pardon my directness, but from the perspective of the needs of the enterprise, it’s inappropriate for you to oversee the aviation department. Your time and focus are better invested elsewhere.” iS

TOC

KP

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Set Up for Success

Four Steps to Help Your Aviation Manager Thrive

■ AIRCRAFT MANAGEMENT

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John leaned forward, listening intently.“John, what happened here is very common among organiza-

tions with aviation services. An aviation department is not part of your core business. As a result, it is often treated differently. In some organizations, that may be appropriate. In most, it is not.

“Let me put it into perspective. Your aviation department is not a profit center because it does not create revenue. Nor is it just a cost center. It does not maximize its benefit to the company sim-ply by managing costs. An aviation department is a multi-million dollar service center. It generates value by providing the service of creating time/place mobility for your key travelers while also greatly enhancing their productivity and the quality of their work lives. It requires highly refined leadership and management skills. Anything less is not an option. After all, you put your most critical assets into their hands: yourself and your people. You must be able to trust your pilot to fly you safely. But it does not necessarily follow that he or she will be a good manager – unless you see to it.”

“I’ve never heard it put that way. It makes sense. How are you going help us get to where we need to be?”

“Prior to starting the search, I will work with your HR folks to create some descriptions of new policies, practices, and critical criteria for performance for your approval. We should have them ready for you in a week.”

If a scenario like this applies to your company, these four steps will help you set up your Aviation Manager for success.

1 CREATE A VISION STATEMENT for your Aviation Depart-ment. It should clearly express how aviation services sup-

port the success of your core business and your travelers. Who does it serve, why, and how? Your vision statement is a fluid doc-ument: it can and should be amended any time a significant busi-ness change occurs. Without a well-conceived, well-written vision, Department members are apt to “make it up as they go,” individually or as a group, either intuitively or in reaction to un-planned input.

2 STATE THE PRIORITIES of the Aviation Department’s deliverables in unambiguous terms:

■■ Safety and Security: Identify and mitigate all significant risks.

■■ Service: “Take us where we want, when we want, in the style we want.”

■■ Efficiency: Run the department as efficiently as possible without sacrificing Safety, Security, and Service.

3 HIRE THE AVIATION MANAGER using many of the same criteria and standards used to hire other corporate busi-

ness unit leaders. He or she should be able to function as a peer among the other company managers and directors, which will

include mastery of specific strategic, tactical, operational, and soft (“people”) skills, such as:

■■ Organizational leadership, business leadership, and management

■■ Written and verbal communications at an executive level■■ Project management and change management■■ Relationship management with customers, vendors, staff,

and other key constituents.

4 APPOINT A RESPONSIBLE EXECUTIVE to oversee the Aviation Manager. The Responsible Executive should be a

senior corporate leader who has the capability, capacity, and will-ingness to mentor, coach, and lead the Aviation Manager. If the Aviation Department reports too far down your organization chart, decisions may be hampered by a lack of strategic perspec-tive or authority. The Responsible Executive will help the Avia-tion Manager learn how to:

■■ Assess the business and leadership skills and knowledge of each of the Department’s managers (scheduling, mainte-nance, flight operations, etc.)

■■ Create, implement, and oversee a professional development plan for each key manager

■■ Budget the time, dollars, and staff capacity needed to implement these plans.

The Responsible Executive can encourage the Aviation Man-ager to pursue professional development opportunities specific to business aviation. Some options might include leadership and management development programs, such as:

■■ Georgia State University: http://execed.robinson.gsu.edu/certificate-programs/leadership/business-aviation-leadership

■■ University of Virginia: http://www.darden.virginia.edu/executive-education/short-courses/corporate-aviation

■■ The National Business Aviation Association’s (NBAA) Certified Aviation Manager program: https://www.nbaa.org/prodev/cam

■■ An Executive MBA■■ Your company’s own Corporate Executive or Leadership

Development program.Most aviation managers are exceptionally bright and talented

people who want to do a great job. While they may be well equipped to manage a single aircraft in flight, they need effective guidance, development, and leadership to successfully manage an entire aviation department. Following these steps, you can help set up your Aviation Manager for success. BAA

PETE AGUR , Chairman of VanAllen, a business aviat ion management consult ing f irm, holds an MBA, ATP, CAM, and CFI-AIR. He chairs NBAA’s Safety Commit tee’s Safety Assurance Team, and serves on the Flight Safety Foundation’s Corporate Advisory Commit tee.

■ AIRCRAFT MANAGEMENT


BY REP. MIKE POMPEOU.S. House of Representatives / [email protected]

Recent efforts by the House Transportation and Infrastruc-ture Committee to overhaul the way our air traffic system is governed are bold, but misguided. Under the House bill H.R.

4441, air traffic control (ATC) would be separated from the FAA and given to a new ATC corporation, governed by a board of avia-tion stakeholders, most of whom would represent the interests of commercial aviation and its unions. (See “Washington Report,” page 18).

The board would have full authority to write its own regula-tions and assess user fees on all aircraft owners and operators. There would be no oversight to ensure its safe and equitable oper-ation, nor that funds are spent prudently for all users of the public airspace system. The bill would afford commercial airlines a dis-proportionate amount of control over America’s skies, at the ex-pense of owners and users of business aircraft.

What Would Passage of This Bill Mean for You?

■■ Reduced Access Means Lost Time – By controlling the ATC budget, airlines could focus NextGen system improvements on the 500 U.S. airports served by commercial airlines (See “Next-

Gen – Why?” BAA, Jan/Feb 2015). Limited federal funds would be in-vested in updating and improving the other 4,500 U.S. airports used daily by business aircraft, such as Cessna Field and the Beech Factory in Wichita, Centennial (near Denver), Chicago Ex-ecutive, Teterboro, Capital City (Harrisburg, PA), Van Nuys (southern CA), and Dutchess County (Poughkeepsie, NY). So to take full advantage of NextGen’s improved operational safety, you’d have to use airports like O’Hare or Denver International, losing the time savings you currently achieve via business jet travel. And for many small or rural communities, these airports are the only means of transport for the goods and services on which your business may depend.

■■ New User Fees – Designed to overhaul the financing of air traffic operations, the bill would eliminate most airline ticket taxes, replacing them with a fee-based system. Given the airline-controlled Board and budget, airlines – not business aviation us-ers – are likely to be favored. New federal landing fees, increased registration fees, and increased annual or per-flight costs all are possible. The current Federal Excise Tax on fuel and tickets al-ready distributes costs proportionally among users. The bigger your aircraft, the more fuel it burns, and the more tax you pay.

■■ Safety Concerns – A recent Government Accountability Of-fice study stated that passage of H.R. 4441 likely would jeopardize

safety and create uninsurable liabilities. Though as stated, Next-Gen improvements first would be made at commercial airports, the bill does not specify when – if ever – the smaller airports that you use regularly would be improved.

■■ Another Bureaucratic Barrier – Slower than expected air traffic modernization efforts, new global emission standards, shifting political climates, and general economic uncertainties al-ready present challenges for business aviation users and manufac-turers. The impact of this bill would be yet one more hurdle which raises the cost of using your aircraft as a productive business tool.

As of this writing, the House bill has not made it out of Congress and onto the president’s desk, thanks largely to the concerted ef-forts of the general and business aviation community to educate Congress on its negative implications for bizav.

By the time you read this, this most current attempt to priva-tize our ATC system may well have been put to rest. But just as it’s not the first time such a bill has been proposed, it’s not likely to be the last.

To add your voice to the opposition and ensure that your access to the security, time savings, and management efficiencies pro-vided by business aviation remain unimpeded – and help forestall future such efforts – contact your Congressional representative personally, or use the “Contact Congress” form www.nbaa.org/advocacy/contact/ on the website of the National Business Avia-tion Association.” BAA

Privatization Proposal Poor for Bizav

The Real 411 on 4441

REP. MIKE POMPEO (R-Kan.), represents Kansas’

Fourth District, including Wichita, the Air Capital of the

World. Pompeo founded Thayer Aerospace, where he served

as CEO for more than a decade providing components for

commercial and military aircraft.

■ INDUSTRY UPDATE

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Calling the Captain

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■ CABIN OPERATIONS

BY AMY NELSONCabin Manager Specialist /[email protected]

It was a pleasant, relaxed flight, the aircraft sailing along at cruise altitude, when the oxygen masks suddenly dropped from the overhead. The flight attendant immediately followed pro-

cedures as trained: grabbing the closest mask, buckling up, and instructing the passengers to follow suit. Prepared for the aircraft to descend rapidly – the standard procedure during a decompres-sion – everyone in the cabin waited.

And waited. When, after a few minutes, the aircraft continued to fly straight

and level, the flight attendant cautiously opted to go to the cockpit to check on the pilots. Fortunately, they were fine, but unaware that the masks had been deployed accidently.

But what if there had been no flight attendant on board?How would you communicate with the cockpit in the event of

anything out of the ordinary in the cabin: masks dropping mid-flight, snow on the wings, smoke, an unusually foul odor (See “Every

Breath You Take,” BAA Nov/Dec 2015), or a fellow passenger losing consciousness?

Obviously, cockpits do not have rearview mirrors to see what is taking place in the aircraft cabin. And depending on the size of the aircraft, the cockpit crew may have a significant blind spot and be unable to see the aircraft wings. The art of two-way communica-tion between cabin and cockpit is critical on an aircraft.

There is no one right way to communicate in the cabin – just make sure you have a plan that both the crew and passengers clearly understand before departure. The pilot normally will pro-vide brief updates on weather, route, and estimated arrival time, as well as inflight safety instructions.

Knowing when to say something – should you or a passenger notice something unusual or simply feel uneasy – can be a chal-lenge. The FAA regulation known as “sterile cockpit” governs Part 135 operators (charter) and is standard practice, though not required, for Part 91 operators (owner flying). It reads: “Crew-members shall not participate in activities or conversation during critical phases of flight (taxi, takeoff, landing, when climbing or descending within 1,000 feet of a level off altitude, and flight be-low 10,000 feet AGL [Above Ground Level], except for cruise flight) that are other than those required for the safe conduct of the flight.”

However, if there is any emergency situation, it is important to break this sterile cockpit requirement to address the concern, no matter the timing. Large cabin aircraft sometimes have a flight

attendant aboard, and he or she will know when that is appropri-ate. But midsize and light jets rarely do, and that responsibility will fall to you.

What tools do you have to communicate quickly with the cock-pit? Do you run to the front of the aircraft? Use the handset to dial up the cockpit? Push the “call” button or shout from your seat?

Those onboard often are the eyes and ears of the aircraft as cockpit crews are listening to their headsets and focused on what lies ahead. Larger aircraft may have a door between cockpit and cabin, which may be closed. On any aircraft, the distance between the passengers and cockpit could be so great that even yelling is not an effective option.

Before your next flight, initiate a conversation with your cock-pit crew and flight attendant about the communication style that best suits them – and your passengers. If there is no flight atten-dant, make sure the flight crew knows who the “lead passenger” will be, responsible for alerting them of any cabin safety issues that arise in flight.

And if you do see something amiss, always say something right away. Your safe and timely arrival may depend on it. BAA

ISTO

CK

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AMY NELSON , a Cabin Manager Specialist, was the Manager

of Cabin Services at TAG Aviation USA and most recently Flight

Attendant Supervisor at ConocoPhillips Alaska. She holds a master’s

degree from Embry Riddle Aeronautical University.

The Critical Art of Cabin-to-Cockpit Communication

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p r i e s t e r a v. c o mB A N G KO K • D A L L A S • C H AT TA N O O G A • P H I L A D E L P H I A • S T. LO U I S

W E S T PA L M B E A C H • C H I C A G O • N E W YO R K • O K L A H O M A C I T Y

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BY JIM CANNONSundog Aviation / [email protected]

Upon entering the Navy following graduation, I learned of the tradition of awarding the Battle “E” Award as recogni-tion of “Effectiveness”: sustained operational performance

and continuous readiness demonstrated by a ship and crew achieved during subsequent qualifying periods of review. This was my first in-troduction to the concepts of quality assurance and auditing.

All institutions seek recognition for excellence, competency, and service. Quality measures, industry best practices, bench-marking, standards, and regulatory requirements are integral to our working lives. An organization wishing to demonstrate its competence and effectiveness in meeting a particular standard of quality processes will be required, often voluntarily, to be mea-sured against the aspects of that standard.

Within the aviation industry, the FAA is mandated by Congress to ensure a minimum operating standard of safety for the travel-ing public. For charter operations, this means periodic opera-tional and maintenance inspections. Charter operations must, by regulation, adhere to a set of Operational Specifications (Ops Specs) in order to earn and maintain their charter certificate (FAR Part 135). But essentially, the FAA allows operational excel-lence beyond these minimum standards to be achieved at the dis-cretion of the operator.

How a charter operation functions within its Ops Specs is left to managerial decisions and the professionalism of the flight crews and maintenance professionals employed therein. While there are many outstanding charter operations in the aviation in-dustry, there are some whose financial and professional practices often are less rigorously implemented.

Individuals and corporate entities may choose to purchase and operate business aircraft under the umbrella of a stand-alone “corporate flight department.” These operations function under the regulatory auspices of FAR Part 91 (General Aviation, not available for hire), whether operated by company personnel or by an aircraft management company. Other than specifically issued letters of authorization, the FAA allows this segment of business aviation to function under essentially the same limited require-ments as a small single engine recreational aircraft.

Understaffed and underfunded, the FAA relies upon the discre-tion and standards of business aviation professionals to provide safe and effective support to the corporations and individuals that employ their services.

Of the more than 4,000 business aviation flight operators in the U.S. alone, why do some chose not to participate in an audit pro-cess? The answer falls into three distinct categories:

1. “I’m on board with periodic reviews of our organization to continue to improve and learn how we measure up to industry accepted standards.”2. “Audits are expensive and create too much paperwork. We manage a safe operation; we’ve never had an accident.”3. “We run our operation our way and don’t need someone coming in to tell us what they think we are doing wrong.”

While accident rate statistics show that flight operations within all three of these categories are essentially safe and well managed, the real test should be: “Are you doing everything you can to keep the inherent risks as low as possible in your operation?”

The International Standard for Business Aviation Operations (IS-BAO), an industry safety and best practices program, intro-duced in 2002, now is used by more than 1,000 flight organiza-tions worldwide.

You may not agree with the philosophy behind its development, or may not use the services of an auditing and conformity over-sight service, such as ARGUS, Baldwin Aviation, the VanAllen Group, or Wyvern, among others. But the aviation insurance in-dustry is paying close attention to safety management within its client base, and adjusting its rates accordingly. Whether you oper-ate your own in-house flight department, or charter regularly or occasionally, you are likely to agree that an organization measur-ing itself against industry best practices, participating in quality improvement, and properly managing the inherent risks of its op-eration, is one with which you would want to be involved. BAA

ISTO

CK

PH

OTO

JIM CANNON , owner of Sundog Aviation, helps flight and

ground operations develop Safety Management Systems and

organizational goals. Formerly IBAC’s IS-BAO Program Director,

he was Home Depot’s Flight Operations Director, and an NBAA

Board member.

■ AIRCRAFT SAFETY

Do Everything You Can to Keep Your Risks Low

Better Audit, Better Odds

■ AIRCRAFT SAFETY

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BY DAVE WEILFlight Dept Solutions / [email protected]

You’ve taken the exciting step of purchasing your first aircraft, and have put a well-qualified team in place to make it happen. In addition to regulatory and tax issues, you need to address these four key questions in order to operate your new aircraft effectively:

1Management Company or Flight Department?While each option has pros and cons and each can work well to oversee your aircraft operations, first-time own-

ers often opt to use a management company. This choice allows you to ease into aircraft ownership, while depending on the man-agement company for most support services. Key to success is a

thoughtful selection process. As there is much variation in how management companies provide their services, it is critical that you first clearly identify your specific needs, and then incorporate them into the Request for Proposal (RFP) sent to candidates.

Since using a management company involves delegating many decisions, should you prefer a higher degree of control, forming a customized flight department is likely your better option. Again, it is imperative to identify your needs, in order to shape the selection process for the individual who will lead your flight department.

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self on the advantages and disadvantages of charter before decid-ing whether it is right for you. Depending on your aircraft’s

Four Decisions You Need to Make Now

Operating Your First Aircraft?■ AIRCRAFT OPERATIONS

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operating costs, the potential financial benefit from charter may not be as much as you think and thus not worth it. In short, while charter can help offset your costs, you will not make a profit. And sometimes charter is not a practical option. For example, if you in-tend to use the aircraft 400+ flight hours per year, there likely will be no available time to fit charter into the schedule. If you want your own airplane available for your own use all the time, charter is not a good idea.

3 Who Uses the Airplane and How to Control Use?If you are the only or primary user of your aircraft, then normally your executive administrator will help

coordinate your travel arrangements with your flight department or management company. However, if more than one owner or multiple executives will have access to the aircraft, or if the air-plane will be made available for charter, scheduling becomes more complicated. In such cases, create clearly defined rules as to how scheduling conflicts will be resolved, and designate just one per-son to schedule and coordinate any changes to the schedule. This person may be either a dedicated aircraft scheduler or your execu-tive administrator, depending on the level of travel activity, and whether you have engaged a management company.

4 How Will You Manage the Maintenance?The most important aspects of maintenance manage-ment are planning, accomplishing, and controlling the

cost of the actual maintenance work, and keeping accurate main-tenance records. Many new owners don’t realize until it’s too late that proper paperwork has a significant impact on the resale value of their aircraft. (See “For the Record,” BAA, Nov/Dec 2015). Designate one qualified individual to be responsible for both tasks, whether you use a management company or have your own flight depart-ment. If yours is a large aircraft, or flies more than 200 hours annu-ally, it’s wise to have a dedicated maintenance manager (See “There’s

No Place to Pull Over at 41,000 Feet,” BAA May/June 2014). If it is a smaller aircraft, or flies infrequently, then often only part of a maintenance manager’s time is required to get the job done properly.

Answering these key questions will help you enjoy all the ben-efits afforded by business jet ownership. BAA

DAVE WEIL , founder and CEO of Flight Dept Solutions,

previously served for 17 years at TAG Aviation USA. A past Chair of

NBAA’s Tax Committee, he now helps clients plan aircraft

acquisitions and utilize the best operating strategy.

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BY JOHN BROGANUnited States Aircraft Insurance Group / [email protected]

The aviation insurance market in the U.S. is a relatively small but potentially volatile place. Good news for aircraft owners is that the loss history has been very good in recent years,

keeping competition interested, and resulting in favorable terms from a growing number of aircraft insurance providers.

At this point in the market cycle, with pricing at all-time lows, aircraft owners should be thinking about two things: where you can get the best product, and how to continue to ensure that your risk is attractive to the insurance carriers.

Obtaining the best product for your dollar starts with choosing the right broker to represent you and advise you on the dizzying array of products available. Look for a broker who you feel under-stands your business and who you find responsive to your needs and requests. He or she also should be able to demonstrate access and relationships with the key insurance companies, and be able to make fact-based recommendations to you about the differ-ences among companies.

Start with the basics: Ask your broker and underwriter how you should establish the insurable value of your aircraft, and how much insurance you need to protect against potential liability arising from the aircraft’s use. (See “Appraising the Appraiser,” BAA

May/June 2015).Then find out from your broker and underwriter what stands

behind the policies that are being offered to you: 1. Is the proposed insurance company experienced in

handling risks similar to yours? 2. How large and available is its claims service and what is its

history of providing emergency response training and ongoing support?

3. How does the coverage offered compare with the policies offered by other underwriters?

4. What other services or product offerings does the prospec-tive carrier provide to help your flight operations team be safer, more efficient, and a more attractive risk?

5. Will you get to meet your underwriter and/or claims service team? There is absolutely no substitute for a personal connection with your underwriter.

Any potential aviation insurance carrier will want to know about all the safety and training programs your flight department uses to benchmark your operation against industry standards. The long-term established insurance carriers offer safety pro-grams, often at nominal cost, that allow your flight operations professionals to take advantage of specific training or loss control

courses, participate in emergency response drills, or even receive return premiums for participating in certain high level safety initiatives.

Participating in any of these offerings provides improved safety margins and demonstrates that your flight department is a safety leader, actively engaged in safety initiatives that many insurance carriers believe are important. Your underwriter also may recog-nize industry programs such as the IS-BAO’s SMS (International Standard for Business Aircraft Operations’ Safety Management System), which will enable you to meet international safety re-quirements as well as secure preferred rates.

The more information an insurance carrier has about your op-eration, the more attractive your risk, and the more comfortable it will be providing coverage. Be sure to invite your broker and carrier to visit your operation so they can see first-hand that your safety culture is more than a three-ring binder of procedures on the chief pilot’s book shelf.

Buying insurance simply can be a checklist item if you think you’ll never have a mishap. On the other hand, your purchase de-cision may become vital at a very stressful time if you do have a mishap. You can view buying aircraft insurance like buying a parachute – you certainly wouldn’t just grab the first or cheapest on the shelf. Your aircraft insurance will serve the same function as that parachute: it will be there when you need it the most. You should be confident that it will work the way you intended. BAA

Making the Most of Your Aircraft Insurance Dollars

Economic Policy

JOHN BROGAN, MBA , is President and COO of USAIG.

A Certified Aviation Insurance Professional, he serves on the Business

Aircraft Committee of Flight Safety Foundation and The International

Union of Aerospace Insurers’ General Aviation Study Group.

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BY DAVID [email protected]

After nine months of behind-the-scenes horse-trading, Rep. Bill Shuster (R-PA), chairman of the House Trans-portation & Infrastructure Committee, on Feb. 3 intro-

duced his “transformational” legislation to remove the nation’s air traffic control system from FAA and hand it to a private cor-poration. As detailed in the 273 pages of H.R. 4441, the Aviation, Innovation, Reform and Reauthorization Act (AIRR) of 2016, the new ATC Corporation would be governed by an 11-member board.

In designating who could nominate members to that board, Shuster pre-selected winners and losers. The biggest winner is Airlines for America (A4A), the lobbying organization for major U.S. airlines, which would get four seats on the ATC Corp. board.

Another winner is the National Air Traffic Controllers Associ-ation, which would get to pick one board member, and apparently received assurances that the new ATC Corp. would be adding more controller jobs.

The CEO of the new corporation also would serve on the board. So, if the big airlines and the controllers union could get the CEO to vote with them, they would have six votes – and a majority – on any issue. Not surprisingly, A4A and NATCA leaders were among the first to embrace Shuster’s bill.

Hoping to blunt potential criticism from small aircraft owners, H.R. 4441 exempts operators of piston-powered aircraft and non-commercial (Part 91) turbine-powered aircraft from new fees ad-opted by the ATC Corp. board.

Commercial air charter flights conducted under Part 135 did not get such an exemption. In fact, commercial business aviation users and operators are in the bulls-eye for any ATC charges the new corporation might levy.

The Aircraft Electronics Association was “extremely dis-pleased,” warning of “unforeseen transition costs and increased operational costs.”AEA President Paula Derks labeled the ATC privatization effort “a power play by the airlines to dictate what fees the general aviation industry will pay in the future.”

National Business Aviation Association President and CEO Ed Bolen said the ATC privatization scheme “is modeled on foreign systems that can be – and in many cases have been – harmful to general aviation, including business aviation.”

Bolen said NBAA “believes that the public airspace belongs to the public, and should be run for the public’s interest. Putting our nation’s ATC system beyond the reach of elected officials has the

potential to not only harm general aviation, but also stifle inno-vation and new competition.”

The National Air Transportation Association cannot support the privatization proposal in H.R. 4441, said President and CEO Thomas Hendricks. He reaffirmed NATA’s opposition to “leap of faith proposals that place the fate of any segment of general avia-tion – in this case the air charter community – in the hands of a yet-to-be determined board of directors – especially given the fact that this segment of general aviation is denied a voice in the corporation’s governance.”

Hendricks warned, “A user-fee-funded ATC corporation, con-trolled in perpetuity by a board of industry insiders, will place general aviation in constant peril, starve rural America of access to cutting-edge technology, and saddle the traveling public with ever increasing fees.”

Delta Air Lines, a long-time member of A4A, is terminating its membership in that organization, in part because of differences over the ATC privatization issue. In addition to its worldwide scheduled airline service, Delta owns Delta Private Jets, a pro-vider of business jet charter and aircraft management services.

In a statement issued just two days before Shuster released H.R. 4441, Delta warned “air travelers could be on the hook for 20-29 percent higher costs if the U.S. moves to a private ATC or-ganization funded through user fees. Nations that have privatized ATC have seen operational costs increase at a much higher rate than has been seen in the U.S. under the FAA.” BAA

The Airlines vs. Business Aviation

DAVID COLLOGAN has covered aviation in Washington, DC

for more than four decades. This award-wining journalist is known

as one of the most knowledgeable, balanced, wary, and trusted

journalists in the aviation community.

Squaring Off in a Battle to Decide the Structure and Funding of FAA

■ WASHINGTON REPORT

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Documents

Business Aviation Advisor March/April 2016