Aircraft Management: Rising regulation drives aircraft owners under protective wings of experienced managers
European Business Air News - August 2010
Stability is the key
"If you are looking to place your aircraft with a management company," says George Galanopoulos, md of London Executive Aviation (LEA), "you need to start by thinking of 'stability'. You need to work with an established company with the proven capacity to survive hard times. You want to be confident that when times are hard again ‐ and every realist knows that times will always be hard again soon ‐ your management company will stand firm. After all, in challenging times, weaknesses in a business model that might be hidden by a booming economy are exposed. Cracks widen. Not everybody in executive aviation survived the last recession and not everybody will survive the next economic downturn. When you place your aircraft with a management company, you want convenience and peace of mind; you don't want the trouble that comes from dealing with an inexperienced, unstable start‐up that begins to struggle as soon as the economy dips."
Experience is clearly important, therefore, although Galanopoulos says it is not necessarily vital for the management company you choose to be experienced with your particular aircraft type. "It's more important," he says, "that the company understands aircraft in the same range as your jet ‐ say, mid‐size, long‐range or entry‐level. I would have no concerns,for example, placing an Embraer Phenom 100 with a company experienced in managing Cessna Citation Mustangs. An established relationship between the management company and the aircraft manufacturer is always helpful too."
Galanopoulos also stresses the importance of choosing a management company with a good overall infrastructure, including a 24‐7 operations room. "Aviation, by its very nature, is an international business. Time differences between, say, the UK and the Middle East can be very significant factors. If you need to make business jet arrangements when you wake at 07:30 in Dubai, that's 04:30 in London. You want a professional operations room to be handling your request; you don't want to be speaking to someone you have just woken up, on his mobile phone, in the middle of the night."
A good management company will therefore employ enough staff to offer a reliable service at all times, but Galanopoulos adds: "If a company becomes too large, customers no longer receive personal attention. As a customer, you want to feel you have access to the top management, day or night, if necessary."
Top engineering expertise is also essential, says Galanopoulos, but he offers a warning. "You need a management company with in‐house engineering expertise, able to identify problems, propose solutions and monitor the quality of any work carried out on the aircraft. But remember that if your management company is also a maintenance outfit, there may be a conflict of interest. You don't want to be encouraged to spend money on unnecessary work. You need a management company with objective, independent engineering expertise,
protecting your interests."
Galanopoulos points out that there have been significant changes taking place in executive aircraft management. Historically, pure management companies would often take care of an aircraft without an AOC. "An owner bringing an aircraft from the US to the UK, for example, might have been advised to keep the aircraft on the US register and not to worry about a UK AOC. If simply operating the aircraft privately in the UK, there would have been no need to spend money placing the aircraft on the UK register. But now, an aircraft can be put on the register at no cost, so it's a 'no‐brainer' decision.
"Firstly, charter income helps to offset operating overheads and finance costs, bringing economic benefits to the aircraft owner. And secondly, even if you are not chartering the aircraft, you can enjoy tax advantages if you place the aircraft on an AOC. There are still companies offering executive aircraft management without an AOC, but that business model makes no sense any more. Owners realise it is a lot more financially viable to add an aircraft to an AOC than to try to operate the jet privately themselves."
Galanopoulos concludes: "At LEA, we expect to continue adding aircraft to our managed fleet, particularly in these challenging times. More than ever before, owners are looking at what their aircraft actually cost them. The old days of having an aircraft sitting on the ground, waiting for the owner to fly once a week, are long gone. Owners now realise that an aircraft, like any other asset, needs to work to earn its keep. Adding a business jet to an operator's fleet makes financial sense and ensures the aircraft is operated safely and professionally."
When should an owner consider chartering his aircraft? Galanopoulos says: "As a rule, I would say that if the owner uses the aircraft for up to 400 hours a year, it is still worth chartering."
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