Headlines, December 2017:
- A young Denver charter broker pleaded guilty to ID theft, fraud, and was sentenced for racking up more than $70,000 on a client’s credit card.
- Industry sources forecast changes in senior leadership at an aircraft manufacturer, to facilitate the chances of a settlement of corruption allegations.
- A Florida pilot and an aircraft maintenance technician were arraigned on charges of conspiracy to commit aircraft parts fraud, after allegedly removing and reselling usable components from an aircraft, reported to the FAA as destroyed.
In an effort to provide guidance for its membership, the National Business Aviation Association (NBAA) in December created a new document: “Ethical Business Aviation Transactions.”
It is designed to give NBAA members – flight departments, flight department management companies, vendors, Original Equipment Manufacturers (OEMs), charter aviation services and equipment providers, and corporate and individual owners and operators – the tools and best practices to use when conducting transactions in the business aviation industry. It seeks to provide all industry participants – whether representing the buyer or the seller of any products or services – guidance for conduct that seeks to avoid even the appearance of improper behavior when engaging in business transactions.
According to industry experts, some of the impetus behind the 70-year-old NBAA’s new effort may be the recent rise in unethical behavior in business aviation practices, informed by the 2008 economic downturn. What factors may be driving some of these shady actions?
- Plentiful late-model used aircraft now are on the market at bargain prices. That puts pressure on resale brokers AND on the OEMs, who must compete with low-time, almost-new aircraft.
- Less flying. For maintenance shops, that means fewer hours flown, so less-frequently-required maintenance work. And until the past six months or so, charter operators and charter brokers hadn’t been selling as many trips.
- New alternative lift programs, such as jet cards and shared ownership, entered the market, creating additional downward pricing pressure on other options.
- Today’s transactions are more complex and the industry is much larger, creating more options and opportunities for those willing to work in the shadows.
Recognizing these relatively recent unfortunate developments, NBAA’s ethics statement is designed to guide your flight operations and aviation advisors to be alert for these and other questionable behaviors:
- “Referral fees” to bring your aircraft to a particular maintenance facility.
- “Recommendation fees” or “finder’s fees” paid by an aircraft broker to your flight department for its support of the purchase of a particular new or preowned aircraft. Note that some OEMs and other companies find such payments acceptable IF and ONLY IF there is complete transparency with the owner/actual customer – a practice necessary to establish a long term, repeat business relationship with you, the owner or end user.
- Making illegal payments to government officials in any country for a preferred landing spot, customs clearance, or other favored treatment.
Review or Create Your Own Policies
As you review your own company’s practices, and – if you have not already done so – together with your flight department, create policies and procedures that will offer proper guidance to your employees, you will want to familiarize yourself with the five key areas identified by NBAA:
- Honest and ethical conduct
- Avoiding conflicts of interest, and the appearance of conflicts of interest
- Proper handling of company funds and other assets
- Maintenance of complete and accurate business and financial records
- Compliance with state, Federal, and international laws
The document (https://goo.gl/7cBVKf) suggests that your operation be able to properly answer this question: “How would my actions appear on the front page of a national newspaper?”
That is, would your actions and those of your flight department appear honest, professional, and ethical? Or could such exposure cast negative light on your reputation and that of your company and the industry? BAA
Phil Gibson, President of Crosswind Consulting, LLC, is an accredited business aviation auditor and AMS Senior Consultant. An Adjunct Professor at Embry-Riddle Aeronautical University, he holds its Corporate Aviation Management Certificate, as well as an MBA.