The public has frowned upon the use of private jets for business since the chief executive officers of the United States’ “Big 3” automakers flew in theirs to tell Congress how broke their companies were.
In light of the nation’s continual struggle to get back on solid financial ground, those who still believe private jets demonstrate opulence and extravagance should face the facts: private jets are not only good for business, they’re good for the economy.
Contributions to the economy
Business aviation contributes $150 billion to the U.S. economy. The industry employs more than 1.2 million people in the way of pilots, dispatchers, engineers, manufacturers, mechanics, technicians, airport workers, FBO staff and more.
The benefits also extend to those who may not directly use business aviation. This includes communities with little or no airline service, recipients of humanitarian efforts, businesses that operate in more remote locations and others.
An organization dedicated to reinstate the honor and validity of using private jets for business, Noplanenogain.org, offers some facts about airplanes, airline travel and private aircraft.
Necessity, not luxury
For the companies that use private jets, the machines aren’t a luxury: they’re a necessity and often short on glamour. The most commonly used jet for business is the Cessna CJ1, which has an 11′ x 4’9″ cabin and seats five passengers. This small plane needs only 3,250 feet of runway to take off, so it can alight on any of the 5,000 public-use airports scattered throughout the nation’s suburbs, small towns and back country, as well as land at small city airports abandoned by airlines decades ago.
If two companies are competing for business, the one using a business aircraft can fly directly to one of those smaller airports and get to lunch with the client before the other guys taking the commercial airlines show up.
And the business people with the corporate jets won’t just arrive faster; they’ll also show up better prepared. After all, most companies send teams of people, and in their own airplane they’re free to discuss confidential information or polish up that PowerPoint presentation.
Business jets are also widely employed by the government for search and rescue missions, surveillance, medical evacuations and crew training. Such aircraft are also valued as speedy, secure executive transportation that is appreciated and used by high-ranking military and civilian officials, including many members of Congress and even the president.
iPads have pretty much swept the skies. Sure, other tablets are working on apps and usability, but right now, most pilots choose to use iPads in their cockpits. And with good reason. iPads are known for being intuitive, and that is just as true in the skies as it is in the airport bar.
iPads offer serious advantages to pilots:
- The FAA requires maps to be updated every 28 days; this is much faster with an iPad.
- The mandatory flight bag containing paper maps and charts weighs 45 pounds; an iPad weighs 1.44 pounds.
- Pilots have instant access to current, local weather and gate information as well as the flight data.
There are benefits for airlines and owners, too. After United Airlines adopted iPads in the cockpit, it saved 16 million sheets of paper a year and 326,000 gallons of fuel.
Flight students can get in on the goodness, too. If they’re in the U.S. Air Force, they will get on-the-job training: The USAF has purchased some 18,000 iPads to replace 200 pounds of paper on each flight in a six-month test of the technology. Additionally, students should use FlightLink to record the audio of their lessons.
Yay, innovation! Of course, there are some concerns about adopting Electronic Flight Bag systems, mainly involving complying with FAA regulations. The agency just released an updated Advisory Circular about EFBs in June. Make sure you stay up to date.
When you hire a crew to fly your business jet, you’re hiring more than a run-of-the-mill operator and flight attendant.
You are, in fact, hiring people who should have your company’s best interests at heart — from economy and efficiency to comfort and safety. They also represent your company, whether you or your customers are on board.
In effect, they are employees of your company, and you should take as much care in hiring them as any other employee or executive, according to Jeffrey Reich, principal of Elevon Consulting, in writing for Forbes.
Therefore, you should hire the best in the field: operators who understand your company’s goals, who bring value and can find ways to optimize your aviation use, and who know how their practices “tie in to added effectiveness, efficiency and risk minimization,” Reich says. They need to represent your business with “the appropriate finesse.”
That doesn’t mean that the right operator is the most experienced; rather, that you can train a sufficiently experienced aviator with high values and standards to fly your plane and bring the value you’re looking for to your company, Reich says.
However, pre-training is essential for a private jet’s flight crew.
Susan C. Friedenberg, founder of Corporate Flight Attendant Training and Consulting Services, stresses that if disaster were to strike while a jet was in flight, the passengers trust that the crew knows what to do. If the crew — including the corporate flight attendant — has not undergone emergency training, lives could be lost.
Ehow.com offers these tips in hiring a flight crew:
- Contact a flight crew leasing company through a local fixed base operator (FBO) or online, with your requirements to hire a flight crew. A leasing company will perform background checks, performance reviews and match the right crew for your needs. Ask for references from other current clients to make sure they are happy with the level of service the leasing company has provided.
- Ask for references from other private jet owners you may personally know or have run into at the airport where you store your airplane. They may have operators and crew that can meet your needs.
- Place an ad in professional operator or airplane-owners magazines or visit Airline Pilot Central’s Web site for a private flight crew. This method would take the most effort since most likely you will have to screen and interview the crew yourself.
- Select a pool of operators and crew you want to interview. Ask for each of them to provide a resume for your review.
- Ask to see candidates’ current operators’ logs. This will tell you how current their flight hours are. Based on your level of comfort, you can hire an operator with 250 hours or up to 10,000 miles. Regional airlines hire their pilots with just over 250 hours, whereas larger legacy carriers hire operators with more than 5,000 hours.
- Ask for each operator and crew member to provide a criminal background check. They can receive these from their local sheriff or law enforcement agency. This will prevent you from hiring someone with a criminal history.
- Ask for a copy of operators’ passport photos. (They will need a current passport for international travel.) Inquire if they have international experience if you plan to travel to a global destination.
The Latin American Business Aviation Conference and Exhibition (LABACE) is gearing up for its 9th annual event. This conference is a huge international business aviation fair, second only to the European Business Aviation Conference and Exhibition (EBACE).
The Latin American private aircraft segment is a steadily growing market. In the region, analysts predict delivery of nearly 1,000 business aircraft over the next decade as part of a total 2,285 deliveries between 2012 and 2031. To meet this demand, Blackhawk is adding staff and will introduce them at this year’s LABACE. Also, Brazil has become the second largest market for Hawker-Beechcraft outside U.S.
The Latin American business jet market doesn’t get the recognition it deserves according to some industry watchers. Brian Foley, an aviation analyst, asserts that the Latin American market “will continue to play a key role in sustaining what has been a troubled industry, hopefully until the U.S. market regains its strength.”
LABACE 2012 takes place next week, Aug. 15-17 in São Paulo, Brazil. There is already a lot of buzz about it. Here are some of the highlights to expect:
- Bombardier showcasing its Vision Flight Deck.
- Hawker-Beechcraft displaying 6 aircraft
- 4th annual Business Aviation in Latin America (BALA) Summit on Thursday called “A Vision for the Future”
Let us know what you’re excited to see at this year’s LABACE!
Do you have clear title to your aircraft? If not, you may not be able to sell it, and you may not want to buy one without clear title.
According to Greg Cirillo and Gary I. Horowitz of Wiley Rein LLP, in writing for The Metropolitan Corporate Counsel, clear title is the “single most important element in an aircraft transaction. It is the one objective that cannot be compromised and the one condition to closing that, if unsatisfied, will end a transaction.”
A clear title has gained even more prominence in a time in which repossession, voluntary surrender and distressed aircraft sales are more common, and buyers should use heightened caution, they write.
Cirillo and Horowitz define a clear title as “an expression reflecting that ownership of the aircraft is transferred free and clear of all mortgages, liens, leases or encumbrances, and that there are no legal questions or ambiguities as to the aircraft’s ownership.”
For the buyer, this means that he or she owns the aircraft completely and exclusively, without risk of a third party claiming ownership or a lien interest, according to Cirillo and Horowitz. For the seller, the clear title is “the essence” of what he or she is selling for the agreed upon amount. But even after selling the aircraft despite title problems, he or she may still be responsible to defend the buyer’s title to the aircraft at his or her own expense.
For a buyer to obtain a clear title, the seller must have originally acquired a clear title, resolved any existing impairments on the title and lawfully conveyed the clear title, Horowitz and Cirillo say.
Buyers must be aware that although titles and liens are filed with the Federal Aviation Administration(FAA), national and international registries do not create or prove clear title. Rather, they merely provide a place to register title and liens and find notice of filings affecting title, Cirillo and Horowitz report.
That means the parties of an aircraft transaction must rely on local law to determine whether a title was properly conveyed. The FAA is ineffective in cases of defective title transfer, defective lien creation, or termination and liens created without filing, they write.
To avoid the quagmire that post-closing title ambiguity and lien claims create, buyers and sellers alike should perform due diligence to ensure that the transaction involves a clear title.
Doing so is part of the “pre-buy” evaluation, and it is best to involve a professional broker such as L & L International, who can help not only with confirming that an aircraft will come with a clear title but will also scrutinize the jet with a trained eye. A broker will confirm the aircraft is right for the buyer, its physical condition, that it has a clean history and its papers are in order, and if it has been well maintained.
Thanks to some hackers, the protection offered by the BARR program will soon disappear. Since airplane registration numbers are a matter of public record, everyone will soon be able to find out who is flying where and when.
What is BARR?
The Block Aircraft Registration Request (BARR) program allows aircraft owners and operators to opt-out of having their flight information broadcast on the Internet in real time. Websites like flightaware.com make it easy to track commercial flights and private flights that haven’t registered with BARR.
What is openBARR.net?
The site openbarr.net enables anyone to track any flight in real time, even if it has requested to keep its flight information private. All you need is an Internet connection and the tail number to keep tabs on the location of a plane. This website was announced at DEF CON, a hacker’s conference, in Las Vegas at the end of July.
What are ramifications of openBARR.net?
I’m sure TMZ and other celebrity “news” sites think it’s about time they have access to this valuable information. However, tracking flights mid-air is an infringement on privacy, and that affects every U.S. citizen. So nobody really cares when and where I fly, but if I hop on a commercial flight, nobody is the wiser. I’m just one of dozens or hundreds of passengers. But a private jet with familiar tail number (can you guess who N236MJ belongs to?) will soon be trackable in real time for all the over-zealous fans and reporters to mob at the landing.
But enough about celebrities. The openBARR.net will have huge effects on business. Interested parties can see where CEOs fly and potentially break up a big business deal or merger. Forget about confidential negotiations.
So what can we do to combat openBARR.net? Share your thoughts with us.
If you’re not quite ready to take the plunge into aircraft ownership, leasing may be an option that works better for your needs.
In an aircraft leasing arrangement, the owner — or lessor — retains legal title to the aircraft but transfers possession of the aircraft to the lessee. Because of the broad range of options available, not all aircraft leases will meet the above definition.
A variety of leasing options, each with their advantages and disadvantages, is available.
Leasing benefits
The benefits to a lease structure rather than purchasing a private jet include:
- The lessor takes tax depreciation — a benefit passed along to a lessee through low payments and lower implicit interest rates.
- In most states, sales tax is paid over time through the stream of the low monthly payments instead of up-front, yielding a much lower sales tax liability.
- Custom leasing provides flexibility for upgrade or early buyout options.
- True operating leases qualify for off-balance-sheet accounting treatment, providing shareholder sensitivity benefits.
- Leases provide 100-percent financing in most cases.
Some kinds of leases, such as synthetic or capital leases, have considerably different features from the true operating lease described above, so please confer with your accounting or finance advisor to fully understand each lease product.
Lease financing
When leasing an aircraft, a typical loan term is five to seven years. However, the payments will typically amortize over a much longer schedule, such as 10 to 20 years. This loan structure is created on a mortgage-style note with an end-of-term balloon payment yielding a comfortable payment amortization.
A typical lease term is seven to 10 years. A sophisticated corporate aircraft lessor will be able to customize upgrade or early buyout provisions consistent with your thoughts, preferences and aircraft upgrade plans.
Both floating and fixed interest rates are available if you are considering leasing a private jet. In addition, at times hybrid rate structures are also available. Examples of alternative rate structures include:
- floating with changes in LIBOR every 30, 60 or 90 days
- floating with changes in the prime rate or commercial paper
- fixed for a predetermined time (e.g., five years) and then re-set
The best interest rate structure for you depends on the rate climate at the time of your closing as well as the length of time you plan to lease the aircraft. Your aviation lender can offer insight on the interest rate structure best suited to your specific transaction.
Early lease termination
If you decide to end your lease early, the early termination process must involve the cooperation of your lessor to determine:
- whether the lease offers a specific early termination option at that point in time
- Fair Market Value (FMV) of the aircraft relative to the Termination Value (TV) of the lease at that point
- whether an aircraft upgrade or replacement is fostering the early lease termination (which is often the case)
If the FMV is less than the lease TV when the lessee returns the aircraft, the lessee will likely have to make up the difference to the lessor with a lump-sum cash payment.
There’s also another option: Instead of returning the aircraft, the lessee may seek permission from the lessor to market the aircraft. In this case, the lessor agrees to facilitate the sale documentation and closing process. This process is typically used when the lessee is upgrading aircraft with the same lessor.
Key questions to ask
When leasing an aircraft, it is important to select a lessor who can demonstrate a successful history of assisting clients with creative early lease termination solutions. Lessors who have successfully managed corporate aviation assets over the last five to 10 years and are not burdened with multiple nonperforming corporate jets are the most creative, aggressive and helpful lessors.
If you are a first-time aircraft lessee, you should ask these questions about financing to make sure your approach to leasing a private jet is well-planned and strategic:
- Do you desire to structure aircraft ownership in the name of an operating corporation, a corporate subsidiary, an individual’s name or a special purpose LLC?
- What individual or company will provide the financial strength for this transaction?
- Will the aircraft operate according to FAR Part 91 (corporate) or 135 (charter)?
- How many hours of annual use do you expect?
- Will you use an internal flight department or an aircraft management company?
- Will you lease or charter the aircraft to related and/or unrelated parties?
For more information about leasing and financing options, visit www.l-lint.com.
At the upcoming NBAA convention in Orlando, Fla., Oct. 30-Nov. 1, Nexa will present its fourth and final installment in a study commissioned by the NBAA. These Business Aviation User Studies evaluate the success of businesses that use business aircraft and those that do not.
You can read the first three installments here:
So what do expect from this fourth installment? Nexa examined businesses and their performances throughout the recession.
“My expectation is that the companies that have survived and in some cases thrived during the downturn will probably be those that realize that [the business jet] was a critical tool in their tool chest and they used it wisely,” NBAA President Ed Bolen told AIN.
In Part 2, the researchers made three observations about companies that use business jets:
- They performed better financially.
- They weathered the Great Recession better.
- They had better access to customers and markets.
Tell us what you think. Justify your jet, and be proud of it!
Let’s be honest. Much of owning and operating a private jet can be time-consuming, tedious and, at times, stressful. With the convenience of flying privately and the resulting boost in productivity comes the responsibility of staying abreast of safety regulations, tracking and justifying costs, and overseeing myriad other complex details.
Still, it’s not all work and no play. One of the more pleasurable — and trendy — aspects of owning a private jet is outfitting the interior cabin to reflect the passengers’ tastes and the plane’s intended use.
Case in point: Steve Jobs. When Apple awarded him a private plane in 2000, the innovative CEO took a personal approach and spent more than a year customizing the aircraft’s interior, right down to the brushed nickel buttons.
Perhaps you’ll find your own inspiration from some of the most recent design trends:
- The explosive growth of the Asian aviation market has made onboard Feng Shui the latest rage. Designers install rotating furniture that converts into square or round shapes — functional for meetings or mahjong match-ups. For even more in-flight entertainment, add a karaoke machine.
- Beige and boring is out. Rounded corners, enhancement of natural light, and art deco fixtures are adorning the latest jet interiors.
- A design mock-up provided to BAE Systems for its Avro jets resembles something out of The Jetsons. A cargo door opens onto a patio area with a bar for relaxing and entertaining — on the ground, of course.
- Live ferns planted into an interior wall provide a natural, allergy-free wall covering. The plants are fed by a unique irrigation system, and natural light is directed from outside the cabin to keep them healthy.
Even if the design inspiration for your plane’s interior comes from more understated examples than these, take time to think through the look and feel of your plane’s cabin. After all, you’ll spend a fair amount of time inside your jet; you’ll want to enjoy it while you’re there.
On July 27, the 2012 Summer Olympic Games open in London, England. The international event always promises competition, heartfelt stories of hard work and endurance, and of course, extraordinarily intense travel scenarios. London will host 10,500 athletes from 205 countries and millions of spectators.
To add to the chaos, much has been made of the potential for security threats during the Olympic Games. According to John F. Burns of the New York Times, the problems and shortfalls in the training of security personnel are wide-reaching. In order to offer some peace of mind to athletes, attendees, and the general public, officials are looking to the skies:
“A strike force of supersonic Typhoon jet fighters and helicopters carrying snipers went operational at a Royal Air Force base 20 miles from the Olympic Park. The Typhoon pilots were placed on a 24-hour ‘readiness’ status that requires at least one crew member to be seated in their cockpit at all times,” reports Burns.
But there’s more to the Olympics than security issues. And there’s more to aviation than military planes and defensive tactics. So if you’re flying to the Olympics this year, here are a few things to keep in mind:
- At Heathrow, be prepared for long lines to get your passport checked. There is a strong likelihood that Border Force will strike.
- Southend Airport is the closest airport to the Olympic Park — a 45-minute ride on the train.
Travel safely, cheer loudly, and be sure to tell us about your epic Olympic flying adventures.
