FLIGHT DEPARTMENT, MANAGEMENT COMPANY OR HYBRID?

FLIGHT DEPARTMENT, MANAGEMENT COMPANY OR HYBRID? — Originally published in BusinessAir Magazine, November 2016, Volume 26, No. 11.

I recommend that first-time aircraft owners hire a management company for a turn-key solution, at least during the first year of ownership. The owner will learn a great deal during that initial year and, in future years, may elect to handle some or all management functions within its existing organization. These tasks will be much easier to manage after experiencing the steep learning curve that takes place in the first year of ownership.

One example of the time-consuming work that comes with aircraft ownership is the paperwork. Aviation is a highly regulated industry that is very paper intensive. Many large corporate flight departments have a literal library of manuals, logbooks, invoices, payroll records, training records and handbooks. The person responsible for maintaining the library of documents that comes with aircraft ownership must be an expert in organization and regulatory compliance. Aircraft records that are not properly maintained can have a significant negative impact on the resale value of an aircraft. Engines and airframes that are on maintenance programs require monthly reporting. In a turn-key aircraft management solution, the aircraft manager handles all this and much more. The volume of paperwork can be overwhelming for a startup flight department.

If the aircraft owner is going to start a flight department, the first hire is usually the chief pilot. If the chief pilot has a strong management background, the flight department is more likely to be a successful operation. But if the chief pilot is busy flying a corporate jet, there will be a limit on the pilot’s available time for management tasks. Before making the first hire into the flight department, there should be a detailed plan that addresses how many hours the aircraft will be flown, hours of operation, maintenance support plan, alternative lift when owned aircraft is unavailable and alternative crew when crew is unavailable. Just like any other department in any corporation, the role, vision and expectations for a flight department should be established prior to staffing.

As an alternative, an aircraft management company can handle every aspect of aircraft ownership. Someone once told me “Do what you do well, and hire someone to do the rest.” While the cost of aircraft management may seem high, it certainly allows the aircraft owner to continue to focus on its core business. Furthermore, there should be no fear of compliance issues when a reputable management company is engaged. Selecting the right aircraft management company is key to a successful relationship. Does the management company have a similar corporate culture to the owner’s corporate culture? In the case of an individual owner, does the management staff have a high level of service standards dedicated to that owner’s priorities? Management companies come in all sizes and may specialize in all aircraft or just certain aircraft types. Some have plans for expansive growth and others don’t want to grow beyond a certain number of clients. Understanding the company today, and how they plan to evolve, will help determine if there is a good match.

For most first-time aircraft owners, outsourcing some, if not all, of the aircraft management for at least the first year or two, is the most likely recipe for success. After the initial year, everyone will know and better understand aircraft operations and the duties that come with it. At that point, an informed decision can be made as to whether the owner wants to staff a flight department or simply continue to do what he does well, and outsource the rest.

Please contact Amanda Applegate at 310-392-5200 or aapplegate@aerlex.com.