While the first business jet management company was founded in 1967, not until the economic crisis of the mid-1970s did the financial advantages of pooled aircraft begin to drive the growth of this industry segment. Today’s trend is another shift: from independent flight department to other options, including aircraft management companies.
While some independent operators still prefer the perceived greater privacy, physical security, and control (i.e. “no one else has access to my aircraft, and I know where my aircraft is at all times”), others cite several reasons for change:
- Need for revenue – Although the economy appears to be recovering, there’s a “lag effect” from the past several years when aircraft were underutilized. Many owners are moving their aircraft to management to generate some revenue from charter.
- Accountability – There’s a shift away from aircraft ownership by publically traded companies. Using alternative lift, the CFO can honestly answer, “No” to the shareholder who asks: “Are you wasting my money by owning a jet?”
- Regulatory pressures – Staying abreast of new mandates and increasingly complex regulations may be a challenge for a small operation.
- The continuing pilot shortage – Corporate flight departments are the unwilling targets of poaching by the airlines, which offer more stable schedules and often, better benefits. (see “Sudden Dearth” BAA July/August 2018). These quality-of-life issues are increasingly important to the next generation of pilots, even more so than higher salaries. Unwilling to undertake the challenges of replacing retiring or “raided” pilots, more operators are looking to independent aircraft management companies to do so for them.
- A change in aircraft or travel profile – Flying more overseas? The purchase of a long-range, large-cabin aircraft to handle international travel may require a change in operational structure to handle increased staffing, regulations, and more complex flight logistics (overflight permits, customs arrangements, etc.).
- A culture change – Whether a turnover in the executive ranks, a company location move, or a switch from private to public ownership or vice versa, change can inform the need to revisit how company aircraft are managed.
- More viable alternatives – Now, with the proliferation of alternative lift options, including charter, executive travel is not tied to ownership. In particular, younger customers are quite willing to share. (See “The ‘Access Economy’” BAA May/June 2018).
While seeking lower operating costs – via savings on fuel purchases, pilot training, and crew expenses – often is a driver for change, those opting for a management company may do so for other reasons:
- More time for senior management to focus on your company’s core competency and lines of business.
- Mitigating risk management – In the unfortunate case of incident or accident, the insurance company – and the press – will be looking closely at you. If your aircraft is managed by an independent company, it’s their name in the news, not yours.
- Access to a pool of supplemental aircraft operated to identical safety standards. Your aircraft may be appropriate for 80% of your travel. Chartering a smaller – or larger – aircraft to handle the balance can be easier when it’s managed by the same company that manages yours.
- Relieving your pilots and maintenance technicians of the need to supervise SMS, flight and ground operations, and logistics. A management company handles the administrative work, leaving your crew to do what they do best.
- You always have lift – When your crew is out for training, or your aircraft out for maintenance, a replacement is always available.
Flight departments wanting to remain independent can draw upon available industry resources (e.g. NBAA and flight-planning services), and can hire an independent consultant or management company for an impartial audit of their operations and spending. However you choose to manage your aircraft, a periodic review of your current operations is always in order. BAA
Thomas Connelly is President and CEO of Gama Aviation Signature. With 40 years in aviation, he is an NBAA Certified Aviation Manager, and holds Airframe and Powerplant licenses as well as a private pilot certificate.