Hangar Talk

Bad Math

2010-11-16T07:32:00.000-08:00

“Lots of folks have bought into the myth that raising $1 in taxes brings in $1 in revenue and that raising taxes on the rich will allow the government to pay down the deficit. People buy into this flawed [static analysis] naiveté because politicians that believe in big government, and benefit from it, make campaign speeches about it.” So writes Vaughn Cordle of AirlineForecasts, LLC. Vaughn is an airline analyst who frequently appears on CNBC and other TV business media, including in The Wall Street Journal. (Full disclosure, Vaughn is a member of The Aviation Group.) His recent newsletter to his clients, How Big Government Spending Impacts The Economy and Airlines explains why the current Administration is using bad math and gives an example explaining how the Administration’s tax policy will affect Delta Airlines – their bottom line and their ability to create jobs.

Vaughn occasionally strays from airline analysis but sticks with aviation. A few years ago he predicted the failures of the very light jet charter companies like Day Jet, and even the Eclipse, the aircraft upon which these failed companies’ business models were built. He went toe to toe with Bob Crandall, the celebrated retired CEO of American Airlines, debating the dubious outcome of his proposed very light jet air taxi startup Pogo. Bob had teamed up for this venture with Don Burr. Remember People Express?

In his newsletter he points out that. “As a group, progressives and liberals are great when it comes to helping the poor and working to improve the public safety net, but they don't do math very well and apparently don't consider [or understand] dynamic analysis, which takes into account how the economy is likely to respond to changes in tax policy.” He says the current White House's budget proposals would:
•    Reduce the rate of economic growth
•    Result in lower employment
•    Reduce personal savings
•    Reduce disposable income
•    Reduce consumer spending
•    Result in higher interest rates

He points out that “Bush came into office in 2001, the year of 9/11. Federal receipts, outlays and surpluses or deficits are a function of the economy. So, it's best to view these variables as a percentage of GDP.”

Average federal receipts / average outlays / deficits as a % of GDP:
Bush years [2001-2008]: 17.6% / 19.6% / -2%
Obama years [2009-2012]: 16.1% / 24.6% / -8.5%

As for Delta Airlines, Vaughn says, “If Obama's tax policies are allowed, it would reduce Delta's top line revenue around 1%, operating earnings 12%, but bottom line "net" earnings around 20%. This would result in a lower market value of equity, a higher cost of capital and a big hit to shareholder returns for all of those retirees, shareholder employees and other average Americans that hold stock in airlines. Effectively, Delta would have less capital to spend and hire new employees because it will be less profitable. This is the same for all other businesses, small and large, that will be negatively impacted by a foolish tax policy designed to support a size of government that the economy simply cannot afford.”

Before he buried his head in numbers, Vaughn could be found in the left pilot seat of a major airline flying international routes.

The Three Year Tsunami

2010-06-20T05:39:00.000-07:00

It was in the fall of 2007 when the worst case of prosecutorial excess struck the general aviation industry. But it was the week of June 7, 2010 that the final nail may have been driven into the coffin of one of the most bizarre and saddest stories in general aviation history.

In 2007 TAG Aviation, USA/AMIJC had become the largest, safest, and probably the most highly respected aircraft management/charter company in the United States if not the world. Aviation Methods, Inc. was founded by Roger McMullin, Duncan Higgins and Jim Markel some thirty plus years ago. Jake Cartwright, who later would become CEO of TAG Aviation, USA was an early partner of McMullin and company. In 1998 the company was sold to TAG Aviation, a Swiss company controlled by the Ojjeh brothers, who had been early clients of AMI. Therein lay the rub. The Ojjeh’s were Swiss citizens. An archaic U.S. law forbids foreign nationals from owning a controlling interest in a U.S. air carrier.

TAG Aviation USA was a division of TAG Aviation, a global company that today operates the London Farnborough Airport and is actively engaged in aircraft management in Europe and Asia. For almost ten years TAG Aviation, USA operated under an arrangement whereby AMI, which was majority owned and controlled by U.S. citizens, was the air carrier/charter operator for US-based TAG-managed clients seeking Part 135 charter. The FAA was fully aware of this arrangement and frequently audited the company’s operations, as did the DOT, which conducted their own audit in 2004. In 2007 an aggressive lawyer at the FAA, decided the arrangement was not legal, and despite TAG’s perfect safety and operations record, revoked their air carrier certificate, and assessed the company a $10 million fine, the largest FAA fine in history.

What was left of TAG Aviation, USA’s assets were sold in early 2008 to JetDirect Aviation, a charter/management roll-up which operated under the Sentient Jet card banner and was directed by Sentient executives. This new amalgamation could not handle the influx of more than 100 business jets to their operations, and sold the Sentient charter division in an attempt to salvage the management business under the JetDirect brand. But it was to no avail, as JetDirect declared bankruptcy in early 2009, stiffing employees, customers, and vendors. A third resurrection, under the name of Wayfarer Aviation, was attempted by Robert Pinkas of Brantley Partners. Wayfarer was the name of another highly regarded aircraft management company started by the Rockefeller family. (The original White Plains-based Wayfarer Aviation had been acquired by TAG in 1999.) This effort, too, failed, and Brantley investors removed Pinkas from any management of Wayfarer.

Most recently Arcadia Aviation, a relatively new company, has signed a binding letter of intent to acquire “certain assets”, which can only mean the “10 or more” Part 135 air carrier certificate of Wayfarer. Arcadia acquired two very small FBOs at, Martinsburg, VA, and Monticello, NY. Monticello is in the Catskill Mountains near the site of the infamous Woodstock Festival held during the summer of love. Neither of these are centers of business jet activity. But Wayfarer’s customers could use some love. We will have to wait and see if this deal closes. Is this the end of the story? Stay tuned.

For more on this disaster see General Aviation Tsunami and The Debacle Story Continues.

The Need for Speed

2010-06-07T13:24:00.000-07:00

We now live in the fast lane. Snail mail is now e-mail. Fast-lanes for commuters are becoming ubiquitous. High speed rail, if not yet a reality in the US, is on the tip of our tongues. But with advent of enhanced security and the scrapping of the Concorde, the speed of air travel has declined.

Bill Garvey in his, as usual excellent, editorial in the June issue of Business & Commercial Aviation, Studebaker Time, reminds us that it has been 63 years since Chuck Yeager pushed the Bell X-1 faster than the speed of sound and became celebrated as the first human to do so. Except for the Concorde, a technological triumph and an economic disaster, as Bill correctly describes this British and French bird, civilian air travel has been restricted to subsonic speed. He suggests that a business jet may be the first to make supersonic travel possible in the next ten years.

Behind Yeager’s well-known tale of his famous flight in the X-1, there is a little known story about a man who may have reached the other side of the “sound barrier” before Yeager. There is substantial evidence that George Welch, a civilian North American Aviation test pilot, exceeded the speed of sound in an XP-86 the week before Yeager did. My good friend Al Blackburn’s book, Aces Wild, the Race for Mach 1, tells the story of pilots who explored this unknown region of flight in the Mojave Desert in the fall of 1947.

George Welch was an Army Air Corps fighter pilot who shot down at least four Japanese aircraft as they attacked Pearl Harbor. Some records say that Welch should have gotten credit for six kills that awful morning, but there were no gun site cameras to record the action. George would have needed only one camera as one gun jammed. He decimated the enemy aircraft with only half of his weapons!

After the World War II, Welch joined North American Aviation, the company that designed and built 17,000 T-6 Texans. Almost all military pilots in the 40’s and early 50’s received basic training in the T-6. The two most successful combat aircraft developed by North America were the P-51 Mustang and the F-86 Sabre. The latter was the first swept wing jet fighter and dominated the sky during the Korean War.

While test flying the XP-86, Welch would routinely create a ba-boom over the famous, or infamous, desert watering hole, Pancho’s. All the while Bell engineers and Yeager were furiously trying to get the X-1 in flying condition. The X-1 was a single-purpose rocket ship that could not take off by itself, but was carried aloft by an Air Force B-29 bomber. The government had spent millions on the X-1 trying to prove supersonic flight was possible despite the fact that Nazi V-2 rockets exceeded Mach 5 thousands of times years before. Stuart Symington, Secretary of the Air Force, determined that the V-1 should be the first over the Mach 1 line, directed North American Aviation to keep the gear down on XP-86 test flights. Welch ignored the orders, proving there was no such thing as the Sound Barrier.

There’s a Trail for That

2010-04-17T14:17:00.000-07:00

The Department of Transportation’s mission is to "Serve the United States by ensuring a fast, safe, efficient, accessible and convenient transportation system that meets our vital national interests and enhances the quality of life of the American people, today and into the future." Under the DOT is the FAA, the Federal Highway Administration (FHWA), the Federal Railroad Administration (FRA), The Federal Transit Administration (FTA), and the Federal Maritime Administration (FMA). So now maybe we will have under the DOT: FAA, FHWA, FRA, FTA, FMA and be adding FBA, the Federal Bicycle Administration, to that alphabet soup.

Recently Transportation Secretary Ray LaHood, who likes to ride his bike in Washington’s Rock Creek Park on the weekends, has decided that the government is going to give bicycling the same importance as automobiles in transportation planning and the selection of projects for federal money. A manufacturers' blog called the policy "nonsensical." One congressman suggested LaHood was on drugs.

Shall we have runways or bike trails? You decide. You can vote now at Hangar Talk or next November when it really counts.

Go Girls

2010-03-06T09:40:00.000-08:00

I watched Angela Braly’s testimony before Congress and could not help drawing the contrast to the testimony two years ago by the automobile CEO’s trying to explain their corporate jets in a similar setting. Braly, CEO of WellPoint, a large health insurance company, was there to explain their recently announced rate increases. She was polite but took a firm position defending her company. When asked what her compensation was, she answered in detail explaining her salary, and all benefits, never looking at a note. Her inquisitors, the congressional members, as usual looked foolish trying to be tough and get sound bites for the home town media.

I grew up in an age when the sexes were separated almost from birth. After third grade and through college, I never had a class with a girl in it. Now it is hard to find a single sex school or college. My youngest daughter graduated two years ago from Washington & Lee University, which was all male until the 1980s. Now I am told there are so many bright girls (sorry, I guess I should be saying women) that apply that the boys/men feel disadvantaged.

So when I see a bright attractive woman, there I got it right, dishing it back to some cranky old men, I say “Go Girls!”

Golfers, Gentlemen, and Pilots

2010-03-02T06:54:00.000-08:00

I first met Russ Meyer 30 years ago when I was selling Cessna airplanes. Russ often gave me a ride to Wichita in a Citation when I was picking up a small Cessna to ferry back to Virginia. At one point he told me about his friend Arnold Palmer and how Arnold always bought the first of every new Citation model.

Russ met Arnold Palmer when he was a young lawyer at IMG, the powerhouse sports management firm. You can read more about this long Palmer/Meyer relationship in the February edition of Business Jet Traveler by clicking this link.

This is a great story, but what it doesn’t tell you is that Russ Meyer is a scratch golfer. Both of these men have been my heroes for years and I have dreamed of being on the golf course with them. That will never happen, but being in the cockpit with half the team has and is something I will never forget.

Note: I wrote about Russ Meyer in my Summer 2009 Newsletter when he was inducted into inducted into the National Aviation Hall of Fame along with Jimmy Stewart, and astronauts Ed White and Eileen Collins. Every living astronaut was there to honor Russ and the other inductees.

The Debacle Story Continues

2010-02-19T16:02:00.000-08:00

In November of 2007 I posted an article, The General Aviation Tsunami. That story was only the beginning of the disaster to come. Hundreds of jobs were lost and over $100 million of invested capital became worthless. Two highly regarded companies, TAG Aviation USA and AMI Jet Charter, were decimated by one of the best examples of over regulation and malicious prosecution by the Federal Government. Supposedly the revocation of the operating certificate of AMIJC, a company with a perfect safety record for 10 years, was done in the name of safety.

Recently, Bill Garvey, editor of Business & Commercial Aviation magazine, tells the story in an excellent article, Lessons From a Debacle. Bill says, “Now that emotions have calmed slightly, it’s time to consider what it all meant.”

I was reminded again this week about the injustice of the FAA when I read a story in the Wall Street Journal about the FAA’s plan to fine American Eagle, a unit of American Airlines, $2.9 million for a safety violation involving over 1,100 flights. The FAA fined AMIJC $10 million, the largest fine ever, for ceding operational control of their charter flights to a foreign corporation who was an AMIJC minority investor. That investor was TAG Aviation USA, a highly experienced aircraft management company owned by a Swiss organization. This fine was paid in full. It is highly unlikely American Eagle will pay anything close to $2.9 million as fines like this are always appealed and substantially reduced. AMIJC never had that chance – when they tried, the FAA simply revoked their certificate, laying waste to the company’s future.

My emotions haven’t calmed, even slightly.

Is NextGen Dead?

2010-02-13T10:21:00.000-08:00

Maybe Not

Those who know me well and those who follow this blog know that I have been a long-time advocate of moving the Air Traffic Control away from the operational control of the FAA and making it an independent self-sustaining organization. Today our large complicated and antiquated ATC system is dependent on the whims of Congress and the Administration. Four of more times Congress has failed to approve a budget for the FAA. In the State of the Union address the President proposed a budget freeze, which I initially thought NextGen, the long overdue remaking of ATC, would be pushed even further into eternity. However, just two weeks later the White House asked Congress for a $1.14 billion budget in Fiscal Year 2011 for NextGen, a 31-percent increase from the FY 2010 figure. There will be a lot of debate on the budget so stay tuned.

My friend Bob Poole recently asked me to review and comment on an article he has written on NextGen that will be published in the March issue of Professional Pilot magazine. Bob is the founder of the Reason Foundation, a public policy think tank, and has for many years advised Administration officials of both parties on transpiration issues, especially ATC and airport security

Bob makes the case for the many advantages of NextGen. But he also lays out the complications of making it happen. The technology is here today and in a perfect world every airplane could fly the best route and takeoff on and land on time. Fuel burns and carbon emission would be reduced. No one disagrees on these points, but on funding NextGen there is little agreement. Understandably the airlines and business aviation is not willing to pay for the expensive new equipment that is necessary to fly in a NextGen system until they are assured that NextGen will be in place on a date certain. Too often the aviation community has made the investment and seen some new FAA driven technology fail to be developed or pushed far into the future.

Over ten years ago Canada “depoliticized” their ATC system, which was a part of Transport Canada, the equivalent of our Department of Transportation. Unshackled from their government except for safety regulation, the independent and not-for-profit NavCanada jumped far ahead of the United States in ATC service and technology – not quite NextGen, but they are moving rapidly in that direction.

Is it possible that the debate over the budget freeze could finally push the unshackling of the U.S. ATC system forward and create for our country what every other non-third world nation has? An ATC system that pays for itself and operates as any high tech business should.

A Tale of Two Standards

2009-07-30T07:36:00.000-07:00

Remember VHS vs. Batamax? Business aircraft charter saw tremendous growth in the 1990s and received another boost after 9/11/2001 when airline travel was extremely restricted. Major corporations and fractional companies like NetJets, FlexJet and others needed to be confident that the companies operating the business jets they chartered had the highest level of safety.

Although the U.S. market had several quality auditing firms performing independent safety audits, the charter community and the buyers of charter, were desperately seeking a globally accepted solution to the myriad of audits and standards being utilized. With the support of International Civil Aviation Organization (ICAO), and in conjunction with numerous business aircraft operators and regulators around the globe, International Business Aviation Council (IBAC) developed the International Standard for Business Aircraft Operators (IS-BAO), and introduced it to the aviation community in 2002.

IS-BAO was designed to establish a professional safety code of practice for flight departments worldwide, developed by the industry, for the industry. This safety standard has applicability for domestic and international flight operations, private as well as charter, and scales from one aircraft operators to the largest fleets. Through tremendous efforts over the last 7 years, hundreds of business jet operators have gone through or are going through the IS-BAO registration process. Regulators around the world recognize the validity of the IS-BAO standard.

In 2009 a second standard was announced by the Air Charter Safety Foundation (ACSF), a new organization developed by the National Air Transportation Association (NATA). ACSF will limit audits under their standard to only members of ACSF.

ARG/US, Inc. has been a globally recognized and respected data collection, analysis and auditing firm of aircraft operators for over a decade. ARG/US has declined to endorse or join ACSF as they see no value in introducing another standard created by a U.S. trade association that has no acceptance outside of the United States. Furthermore they feel the ACSF plan dilutes the enormous efforts by IBAC in achieving global acceptance of IS-BAO.

The wounded (by the collapse of JetDirect) aircraft management/charter industry does not need a battle like this.

Business Aviation, Twittering the Recovery

2009-06-09T05:56:00.000-07:00

The cover of the June 15th edition of Time magazine is a picture of an iPhone, or a similar device, with a Tweet about the cover story on Twitter, the innovative fast growing social network. What could this possibly have to do with the recovery and growth of Business Aviation? Read on.

In my last article for Hangar Talk I wrote about Glenn Hutchins, founder of Silver Lake, and his prediction that innovation would lead us out of this recession. This week in the cover story for Time Magazine, author Steven Johnson writes about the amazing growth of Twitter, the social networking site that has grown using "end-user innovation," a concept that Johnson explains as, "where consumers actively modify a product to adapt it to their needs.”

Twitter was introduced to the Internet and the social networking community in 2006 and like blogging was picked up first by teenagers as a way to stay connected. They have a compelling need to know what their circles of friends are doing. In fact when you go to Twitter the first thing you see is a text box asking the question, “What are you doing?”

When I first saw this my questions were, “Who cares, and why do I want to know?” But alas I am not a teen or even a 20 something, but believe me, they want to know. Not what I am doing, but what their circles of friends are doing. Then came The Campaign. Hundreds and maybe thousands of young campaign workers wanted to stay connected. With Twitter they could do so, and view the Tweets, which are limited to 140 characters, on cell phones and BlackBerries as text messages (SMS), and on computers. I have a feeling that the need for Twitter feedback, and not just email, might have been behind President Obama’s fight to keep his BlackBerry.

Johnson tells of attending a small private conference on the future of education attended by 40 educators, entrepreneurs, scholars, philanthropists and venture capitalists. At the beginning the organizers announced that anyone could record their comments and questions on Twitter. During the conference comments were being displayed on a screen. Before the end Tweets were pouring in from far beyond the confines of the room where the attendees were sitting.

This week I am attending the Air Charter Summit where over 100 business jet operators will be assembling at a hotel and discussing how to address and solve some of the very significant challenges facing the business jet industry. Will this group be Twittering their thoughts in real time along with many others not at the meeting? Maybe not, but think about how more productive the meeting might be with thoughts, not just from the 100 physically present, but from many others not able to attend in person.

(Full disclosure, Steven Johnson, the author of five best selling books, contributor to The Wall Street Journal, The New York Times, The Guardian, Wired Magazine, and a futurist much in demand on the lecture circuit, is my nephew.)

Will Innovation Lead the Way?

2009-06-06T15:37:00.000-07:00

Glenn Hutchins one of the founders of the highly successful private equity firm Silver Lake, after studying and outlining how we got into this mess, sees the way out - Innovation.

Hutchins says, "While at times rushed and incoherent, the public policy response to the crisis has been breathtaking in its scale. The approximately $10 trillion in resources shoveled at the problem dwarfs any prior undertaking in our history including World War II - which is estimated to have cost $5 trillion in today's dollars. This is the all-important difference between today and the '30s. In contrast to the passive and counterproductive actions taken then by the Hoover administration and the world's central bankers, today's leaders - having learned the lessons of the Depression and quickly grasping the ramifications of the Lehman failure - resolved to err on the side of doing too much rather than too little."

Hutchins is may be right about innovation but consider that ninety percent of new products fail. Venture Capitalists have shoveled billions at innovation for years yet only one in ten shows any return and most are returns are modest. The aviation is landscape is littered with the wrecks of the dreams of dreamers. The Eclipse Jet is only the most recent disaster.

Tony Ulwick developed a concept he calls Outcome-Driven Innovation® (ODI) and founded Strategyn, Inc., a global innovation management firm. ODI starts not with a product but by finding the answer to the question, “what does the customer want to accomplish? Or as Harvard professor Theodore Levitt often remarked, “People don’t want drills, they want holes.” DARPA didn’t want the Internet; they wanted a way to communicate.

I am concerned that throwing $10 trillion at our current problem might result in getting a lot of “drills” that don’t work very well. It may be too late to apply ODI concepts to what we need. But perhaps in a small way we can fund innovation in a different way. Ulwick and Jay Haynes have formed a new venture capital firm, Strategyn Ventures, to fund ODI proven products and services. If they can change the odds from 1:10 to something much less, perhaps innovation will lead the way out.

A Marvel, Misunderstood

2009-03-25T12:58:00.000-07:00

Why are we vilifying a $100 billion sector of our manufacturing economy? The business jet is an important tool that permits businesses to compete effectively in multiple locations domestically and internationally. It has been documented that the most profitable companies own business aircraft. Cessna Aircraft (Textron), Gulfstream (General Dynamics) and others are tightening their belts against the economic tsunami, but perception may be their greatest challenge.

Who is responsible for the economic mess we are in? We all are, says Steven Pearlstein in a column in the Washington Post, “Let’s Put Down the Pitchforks.” Today the villains are the AIG bonus recipients, the Treasury Secretary, members of Congress, and so on. For the last few months it has been almost anyone seen stepping on or off a business jet.

On Super Bowl Sunday the New York Times published an Op-Ed piece by Bill Garvey “The Mile High Office.” Bill gives the example of two competing companies. Both travel to a prospective client’s office. One company travels by a business aircraft that can fly directly to almost any airport. The other takes the commercial airlines. The latter suffered through security lines, perhaps changed planes and maybe missed a connection and arrived, well let’s just say hassled.

Guess which company has the best opportunity to close the sale? The business people with the corporate jet won’t just arrive faster; they’ll also show up better prepared, rested and alert. In their own airplane they were free to discuss confidential information or polish up a PowerPoint presentation. They were able to use phones, BlackBerries and the Internet en route. In other words, they were in their office while they were traveling.

Malcolm Forbes called his business jet, "The Capitalist Tool." Warren Buffett called his first business jet "The Indefensible," and then quickly renamed it "The Indispensable," and then bought NetJets, the largest operator of business jets in the world.

The business jet manufacturers are seeing orders canceled and backlogs shrink. Major suppliers like General Electric (engines), Honeywell (engines and avionics) and many others are feeling the effects of the slow down. This manufacturing industry is far different from the auto industry. Not one business jet manufacturer has asked for bailout funds, and I predict none will. The biggest threat is the negative public image inflicted by grandstanding members of Congress and a President who is trying to distract attention from a failing financial system, a broken economy, and mistakes by his own administration. CEOs do not disappear on business jets. They are off closing deals, fixing assembly lines, and yes, flying to Washington to raise funds to save the auto industry.

Miracle in the Pacific

2009-02-20T15:19:00.000-08:00

About 45 years before US Airways Captain Sully Sullenberger successful ditched an Airbus in the Hudson, a Pan Am crew, flying Flight 943, a Boeing 377 Stratocruiser, did the same in the Pacific halfway between Hawaii and California. The ABC Evening News ran the fascinating story, The Hero Pilot of 1956, in mid-February. The Boeing 377 was the last of the large commercial transcontinental/oceanic piston engine transport aircraft. It had private staterooms and a lower deck lounge. It was just a few years after this accident that the jets arrived – first the Douglas DC-8 and the Boeing 707.

My wife Nancy was a flight attendant for Pan Am in the 1970s. After leaving Pan Am, she worked as a safety specialist for the Association of Flight Attendants. Pat Pimsner, a flight attendant on Flight 943, tells of her experience that day, October 16, 1956. My wife says Pat reminds her of her boss, Del Mott. Bright, beautiful, and tough is how Nancy remembers her. Del is also a former flight attendant who became a safety hawk and is credited with many of the cabin safety procedures that are common today. Some no doubt helped bring about the more recent Miracle on the Hudson.

Note: After she read my original post, I received an e-mail from Del Mott explaining that Flight 943 was not a DC-7, but was a Boeing 377. After a little research, I discovered that of course she was correct and I made the change. Thanks Del.

Gliding to a Soft Landing

2009-01-30T12:21:00.000-08:00

Last year the words “soft landing” appeared frequently in the press. They were used to describe the economy. Today “crash” is the word we hear most often. For a few days in January, the media moved Wall Street and the economy to page 2. "The Miracle on the Hudson" became the lead story. A select few really understand how this could happen. The emergency landing of US Airways flight 1549 was not a miracle, but the result of a crew that remembered their training, and a pilot with a glider rating who understood and had experienced “off-field landings”.

For many years I flew gliders, or sailplanes as they are known to those in the sport. Racing sailplanes is very similar to sailboat racing but with a third dimension. I was a Naval Aviator for 5 years flying carrier-based jets. I have flow many different aircraft. Sailplanes have always been my favorite. It was in these aircraft I really developed my flying skills.

The article (click this link), “Training for that Moment When Every Second Counts”, explains how Captain “Sully” Sullenberger accomplished the amazing feat of saving his passengers and crew. In this article you will see a couple of pictures including one of a sailplane water landing.

My sailplane was a LS1-f (similar to the one below). I landed it often “off-field” but never in water.

New York, New York

2009-01-19T10:56:00.000-08:00

It would have been impossible for anyone to have missed the amazing story of US Air Flight 1549, and the heroes of this event – the crew and first responders. However, some may have missed a story in USA Today only a few days before, “Airlines Go Two Years With No Fatalities”. When a flock of Canadian geese tried to end this streak, New Yorkers saw to it that everyone aboard was safely on ferry boats that beat NY Fire Department rescue boats to the sinking plane. As a write this a New York City parade of heroes is being talked about.

One man, who should be in the parade and probably will not, is a former New York City cop. Nick Sabatini, the FAA’s Associate Administrator for Aviation Safety, retired at the end of 2008. Nick began civilian life by joining the NYC police department after completing a tour with the Army where he was a helicopter pilot. In 1979 he joined the FAA and he spent next 30 years with a safety bone in his teeth. No one person can lay claim to the outstanding safety record that all aviation enjoys, but no one doubts that Nick made a significant contribution.

Food for Thought

2009-01-04T19:25:00.000-08:00

Many years ago I met Wilbur Ross who was a college and business school classmate of a friend of mine. Since that meeting Ross has become a billionaire. He began his business career (he first aspired to be a writer) by gluing back the wrecks of Michael Milken's junk-bond financings. Last fall he was interviewed on National Public Radio. He talked about one of his newest investments, SpiceJet, a low-cost airline in India. During the interview he elaborated on one of the reasons for his investment in SpiceJet:

“India is a very large land mass, very large distances between the major population centers, but ground transportation is very, very difficult. They've not put enough into infrastructure for roads or even railroads to make that a very good means of transport. So air transport, we think, is uniquely important to India.”

I found this interesting because the same can be said about many other emerging economies, such as China, Russia, etc. And when you think about it - how easy is it to get to places like Spring Hill, Tennessee (the location of the original Saturn plant) or many other small factory towns in the United States? Driving, taking a train, or bus is not practical when speed is of the essence to restart a shut-down assembly line.

The three Detroit automobile CEOs should have taken a page from Lee Iacocca when he came begging for loan guarantees in he early 1980s. Iacocca replied to the grandstanding congressmen when they suggested he sell his company’s Gulfstream jet, “OK, I’ll sell it, but I will be damned if I know how I will run Chrysler’s plants in small towns all over the USA. I guess will just have to lease it back.” And that’s what he did, and he saved Chrysler.

How Iacocca got to Washington is not known, but it was not the public relations disaster of last fall. The Washington offices of the car companies advised the CEO not to fly to Washington in their companus’ jets. Thet ignored the advice and the rest is history.

And where is Iacocca when we need him. Well he is back and has written a new book, Where Have All the Leaders Gone? If you have an answer, post a comment below.

A Dysfunctional FAA

2008-05-19T09:31:00.000-07:00

Last year was not a good year for the FAA and 2008 is shaping up as even worse. How this important agency, which has a major role in not just aviation but a major impact on our economy, can reinvent itself is the $64 billion question. The FAA is mismanaged, not by the FAA leadership but by the micromanagement of Congress. (Left, Nicholas Sabatini, FAA Associate Administrator being grilled by Congress.) Until this problem is resolved there is risk to every aviation business and every business touched by aviation. The one bright light is that business aviation and business aviation service companies are booming at the expense of the airlines.

The problems at the FAA began with airline deregulation. Regulating a deregulated industry was an adjustment. However, most but not all of today’s issues are operations not regulation. All the FAA’s problems seem to be politically driven. Last fall the FAA shut down one of the largest business jet charter companies alleging safety violations. (See General Aviation Tsunami) This company had never had an accident since its founding over 20 years ago. It had never received a safety violation. Its independent operational auditors ranked the company as the best of the best. But several years ago a foreign entity purchased 51% of the company. For this sin the FAA shut down the company and levied a $100 million fine.

Next the FAA discovered a problem with Southwest Airlines inspection routine. As that was being dealt with, Congress began demanding tighter oversight on inspections. The FAA reacted by grounding the entire American Airlines MD80 fleet of over 300 aircraft. 700 to 1,000 flights a day were cancelled, disrupting tens of thousands of passengers. All this was over wiring bundle straps that were spaced a fraction of an inch out of tolerance. The FAA demanded one inch spacing, while Boeing delivered many aircraft with 4 to 8 inch spacing. There has never been a problem with these wiring bundles.

Airspace and airports have reached capacity. Again Congress has created both problems. The FAA has never been able to modernize Air Traffic Control. Closing and consolidating facilities is subject to Congressional review and almost never happens. Billions have been wasted on systems that were long delayed, far over budget, and eventually scrapped. The controllers union, which has strong support from the majority in Congress, has been a major deterrent of modernization.

Former House Speaker Newt Gingrich in a paper My Plea to Republicans: It’s Time for Real Change to Avoid Disaster, says, “The problems of the Federal Aviation Administration are symptoms of a union-dominated bureaucracy resisting change.”

General Aviation Tsunami

2007-11-08T14:37:00.000-08:00

On October 4th the FAA first suspended and eight days later revoked AMI Jet Charter’s air carrier certificate. Immediately a shock wave of tsunami proportions was felt in every sector of the general aviation industry. Until AMI Jet Charter was acquired by TAG Aviation USA in 1996, this company was known as Aviation Methods, a highly successful and highly regarded aircraft management company and charter operator.

Aviation Methods was founded by Roger McMullin and Jake Cartwright 30 years ago. One of the major customers of Aviation Methods was TAG Aviation USA, owned by TAG Aviation S.A., a Geneva-based holding company founded by Akram Ojjeh (1923-1991) and his sons, Mansour and Aziz.

Because of a law that prohibits a non-US entity from owning controlling interest in a U.S. air carrier (a company operating under FAA part 121 or part 134), TAG Aviation USA purchased only 49% of Aviation Methods. Fifty-one percent remained owned by two US citizens. All of Aviation Methods aircraft became management clients of TAG Aviation USA.

One of the reasons for the certificate revocation was the FAA's allegation that TAG, not AMI, was exercising operational control of flights, which would mean it was, in the words of the FAA, "under active control of foreign interests".

The Department of Transportation oversees the ownership issue of all air carriers operating within the United States. The DOT enforces an arcane law (49 U.S.C. § 41101), passed in the 1930s, that prohibits control of any U.S. air carrier by a foreign entity. In today’s global economy this law makes no sense and should be repealed. In September of 2005 the DOT issued an exemption to this law for air carriers providing “assistance in the carriage of freight and people affected by Hurricane Katrina”. Sam Skinner, who was Secretary of Transportation from 1989 to 1991, proposed repealing this law in the interest of bringing more capital into the U.S. airline market. Jeff Shane, Under Secretary of Transportation for Policy, and others have long been advocates of repealing or amending this law, but all such proposals have run into a buzz saw of special interest opposition on Capitol Hill.

At the recent Aviation Business Roundtable meeting I sat across from Mary Peters, the current DOT Secretary. I wanted to point out to her that the largest aviation service companies in the GA industry are 100% foreign owned. Directly on her left was the CEO of BBA Aviation, a British owned company and the parent of Signature Flight Support. Three chairs down on her left was Jet Aviation, owned by a German investment company. At the adjoining table was Landmark Aviation, owned by Dubai Aerospace. Not in the room was the largest (70 bases) FBO in U.S., Atlantic Aviation, owned by the Australian financial power house Macquarie Bank.

So where’s the beef and what harm is there in having foreign ownership of business jet charter companies? Mrs. Peters, or anyone else, please explain this to me.

Footnote:
In researching this article I consulted with my cousin Langhorne Bond. Langhorne’s father worked for Pan American World Airlines. In the 1930s and 40s he set up and operated China National Aviation Corporation which Pam Am controlled. You can read the whole story in “Wings for an Embattled China”. I also found an article, “30th Anniversary: TAG and Bombardier”. Much of this story was related by Bill Juvonen who along with Jim Taylor, Dave Hurley, and Barry Smith helped launch the Bombardier (then Canadair) Challenger. Today Bill Juvonen is a part of The Aviation Group.

Of Vacuum Tubes and Sealing Wax

2007-09-22T08:26:00.000-07:00

This week I was part of a six member panel of “elder statesmen” that held a press conference in the Capitol building. I my case they may have had the first part of the description correct but I was out-eldered by Alfred Kahn (above), who is about to turn 90. Kahn, a former Chairman of the CAB and known as the “father of airline deregulation”, is as sharp as a tack and full of P&V. Others on the panel were former DOT Secretary Jim Burnley, and former FAA Administrator Langhorne Bond. Jonathan Howe and yours truly represented the General Aviation industry. Jonathan was a former President of NBAA.

We were on the Hill touting a Statement we had signed onto. The statement called on Congress to look beyond the current squabble over user fees and controller contracts, and to begin the process of completely reorganizing Air Traffic Control. If you are wondering why traveling by air has become such a mess. Read two excellent pieces that appeared in the Wall Street Journal the same week I was on the Hill. The video interview with John Fund is a must watch, and Holman Jenkins’ Op-Ed article A Dream of Air Travel is a must read.

Jonathan Howe pointed out that the General Aviation trade associations, AOPA, NBAA, and NATA, were doing their members a disservice by not getting on the ATC reform bandwagon. He said that when the system reaches saturation, GA will be left waiting as aircraft with large passenger loads, the airlines, will be given priority in the airspace system. It has happened before. Jonathan reminded everyone of the GAR program during the controller strike of the 1980s.

I pointed out two success stories of two freed former government entities. Canada’s air traffic system became NavCanada ten years ago and is governed by a stakeholder Board and operated independently from the government. Costs are down and efficiency is up. My second example of freedom-from-government concerned Washington National and Dulles airports. These airports were once anachronisms - some called them dinosaurs. However, when freed from governance by Congress and management by the FAA, they became modern marvels. Jim Wilding was the manager both under the FAA and MWAA. Once empowered by a free market and with access to the capital markets, he was free to work his magic.

Believe it or not there are still vacuum tubes in ATC radar, and as John Fund points out in the video, there are only 6 programmers left who understand some critical ATC software code. It is indeed Alice in Wonderland.

Others signing the statement were Aaron Gelman, founder of GRA, Inc., Clint Oster, former research director of the Aviation Safety Commission, and James Wilding, former CEO of the Metropolitan Washington Airports Authority.

David vs. Goliath

2007-09-06T09:58:00.000-07:00

Over a year ago I wrote about the problem FAA certified repair station were having in obtaining maintenance manuals from aircraft manufacturers, Freedom of Maintenance Information. Instructions for Continued Airworthiness (ICA) in FAA parlance are the manuals required to maintain aircraft in an airworthy condition. The FAA requires anyone repairing an aircraft or an aircraft’s components do so in accordance with the ICA.

I just read the U.S. Southern District Court’s response to Gulfstream’s request to vacate the Court’s decision of a year ago in favor of CAMP Systems. It was amazing to me that Gulfstream would go back to the Court after reaching a settlement with CAMP following the Court’s earlier decision. Apparently the Court was just as taken back, writing in their opinion: If all vacatur does is slave a wounded ego, that would not advance the public’s interest. Granting Gulfstream’s motion here, for that mater would only create a precedent for more motions – thus wasting more judicial resources.

The court did not mention the wasting of company resources. Gulfstream apparently has plenty of resources to waste but almost all repair stations are small businesses that could never afford to take on giant Gulfstream and the other aircraft manufacturers. They all owe a vote of thanks to CAMP, which is also a small business, at least compared to General Dynamics, Gulfstream’s parent.

Incipient Panic

2007-08-19T17:32:00.000-07:00

"Incipient panic" is how Look Out, This Crunch Is Serious, an opinion piece in The Washington Post, began. Incipient means “beginning to appear”. From where I sit in Virginia, a long way from Wall Street, it would seem we are past the beginning of a panic. Panic in the credit markets has spilled into the equity markets with all the averages & indexes we use setting new record one-day declines and then record advances, then repeating this extreme up and down cycle a few days later as the next injection from the Central Banks or the collapse of the next hedge fund or mortgage lender is announced in the press. If not a panic, it is the lead story on the evening news and fodder for a full hour recently on Larry King live.

The first question from every analyst who has called me in the last week has been, “How is the meltdown in the credit markets affecting the business jet industry?" So I decided to give myself a refresher course, grabbed my dog-eared copy of the classic Extraordinary Popular Delusions and the Madness of Crowds, the more recent and in my mind classic, When Genius Failed, and sat down for a Sunday of reading. I also ordered Devil Take the Hindmost: A history of Financial Speculation, by Edward Chancellor, the author of the afore-mentioned Post article. I also have calls into some good friends whom I consider the best business jet marketers in the business. I looked through the program guide for the National Business Aircraft Association (NBAA) convention, only a month away, and could not find any seminar on the credit markets. Nevertheless, I will be listening for any tremors while I am at NBAA next month.

Last week I wrote about this industry surviving a perfect storm, and warned of a possible approaching tsunami that would test our industry’s ability to survive an even larger Perfect Storm.

I invite you to read along with me and share your thoughts on these interesting times. Remember as a wise man once said, “In Adversity there arises Opportunity”. My partners and I will be looking for those opportunities.

Irrational Exuberance

2007-08-11T14:30:00.000-07:00

Just over ten years ago in a speech to Congress Alan Greenspan proposed that the reason for the rising stock market was Irrational Exuberance.

I have watched the range of multiples paid for general aviation service companies double over the last seven years.

Most of the fundamentals for the GA industry have been strong. Business jet sales have reached new highs almost every year, backlogs are at record levels, and the number of hours flown has steadily increased. All this has occurred in the face of what I have called the perfect storm – the dot-com meltdown, 9-11, and record high fuel prices. More waves from this storm are reaching the shores of general aviation as I write this:

An antiquated Air Traffic Control System;
An FAA with no funds or direction from Congress to improve this situation;
Airlines increasing the size of their fleet with smaller aircraft;
An airport infrastructure unable to accommodate these changes;

And then there are the collapsing worldwide debt markets… Could all this mean a tsunami is approaching?

On the bright side, after 1996 when Greenspan tagged the stock market with Irrational Exuberance, the market set record highs for the next four years until the real irrational exuberance of the dot-com era burst that bubble.

The Barron Killer

2007-06-30T09:11:00.000-07:00

This week Cirrus Design announced their new Cirrus Jet. This was a closely guarded secret development project. I visited Cirrus’s headquarters and factory last year. No one would talk about the jet then, but you could just feel that it was there somewhere. Last fall at the NBAA trade show there was a scheduled press conference at the Cirrus booth where most expected the jet announcement, but again no mention of a jet. NBAA took place only days after the tragic accident when a Cirrus prop plane crashed into a building in Manhattan with New York Yankees pitcher Cory Lidle as one of the pilots. Cirrus Design was not looking for attention until they could sort out what happened. (It appears it was pilot error – a poorly planned 180 degree turn over the East River.)

Cirrus is a very credible company and builds great small single engine propeller air planes. In only a few years they out produced and out sold Cessna’s single engine line, which had dominated the industry for years. The Cirrus Jet should not be lumped into the class known as very light jets (VLJs) like the Eclipse, Honda Jet, Embraer Phenom, etc. We have written earlier about the VLJs – most recently Very Light Jets: A Reality Check for Eclipse, and last summer I posed the question, The Eclipse of the Eclipse?. However I predict the Cirrus jet will be a success; but there are bumps in the road ahead.

The Cirrus Jet is a personal airplane and will be owned and flown by individuals. It has a price point at $1 million that makes it comparable to a Beech Barron. If fact it might be the Barron killer. What red blooded pilot who can afford a Barron would not want to go higher, faster, and maybe father than the two engine version of the 60 year old Bonanza? More than 180 of these high testosterone pilots have stroked a check for a $100,000 deposit to make their dream come true.

Certification of a jet is different than certifying a non-pressurized piston engine powered aircraft. However, Cirrus Design has a lot of experience in certifying new and sometimes radical designs.

The silver lining or dark cloud, depending on where you stand, is the airline implosion this summer with delayed and cancelled flights. The traveling public is looking for any alternative to using the unreliable airlines. This mess will certainly sell more general aviation airplanes, and clog our highways and trains. Mix all this in with an antiquated air traffic control system, along with record high fuel prices, and we have a formula that spells trouble for all if corrections are not made.

Wait – User Fees Might Be Good For Us?

2007-06-18T13:22:00.000-07:00

Bob Poole, Director of Transportation Studies at nonprofit think-tank The Reason Foundation explained to an AVweb reporter why user fees might not be such a bad thing for general aviation after all. This is a 16 minute interview that is well worth your attention.
POD Click here to download and listen to the interview.

The Airline Alternative

2007-06-09T05:09:00.000-07:00

As business jet sales continue to set new records, the lay press is beginning to notice. This publicity is partially fueled by the airline industry. They discovered after 9/11 that their first class cabins were occupied by a large number of non-paying passengers. These seats were filled with frequent fliers who suddenly found that that their, here-to-fore seldom used miles, could be cashed in or used to upgrade. Full paying business passengers were hard to find. It seems they had discovered the advantages of business jet travel.

Now the business jet industry is being vilified by the airlines for the long delays, missed connections, and long waits on the ramp for a gate. The irony is that you can watch the charade in ads paid for by the airline trade association on the CNN airport channel as you wait, sometimes hours, for the flight that was delayed or missed because of the airlines’ own doing.

In the upside down airline marketing mentality the first class cabin is now hard to find – paid for or not. The airlines have downsized to fleets of regional jets holding 50 to 70 passengers. "Regional" is an oxymoron as flights on these stretched business jets often exceed 3 hours and cover well over a thousand miles. It now takes 3 planes or more to take the same number of passengers to the same destination. USA Today’s Business Travel column spoke on The Curse of the Regional Jet. No wonder there is seldom an empty gate when my flight arrives, or I sit in a que on the ramp waiting for takeoff. Heaven help me if my flight is cancelled. An empty seat anywhere is rare, except perhaps on a red eye flight.

The beauty of private jet travel has been discovered. Fractional ownership and jet cards, a debit card for private jet travel, makes it affordable for many more. If you want to own your own jet, major financial institutions have formed divisions ready to lend or lease. The Wall Street Journal recently ran a story, Interest In Private Jets Takes Off. The WSJ points out that large banks - including Bank of America Corp., Citigroup Inc., Merrill Lynch & Co., PNC Financial Services Group Inc., and Wachovia Corp. - have in-house departments dedicated to helping individuals and corporations acquire and finance private jets.

So while the airlines and their passengers suffer, the business jet industry and all the related support businesses flourish.

Summer of Discontent

2007-05-06T08:36:00.000-07:00

I just had an experience that I am afraid is what we will all be experiencing at an increasing rate. It was not fun.

On a trip back from the southeast I had to make a connection through Dallas. My flight on a regional jet departed on time, arriving at DFW a few minutes early. We were told that there had been some weather event the night before and planes were leaving the gates late so we waited on the ramp for 30 minutes before finally getting to a gate. I dashed to make my 50 minute connection and missed it by 1 minute.

I was rebooked on a flight leaving four hours later. That flight left the gate on time, but as we approached the takeoff runway, the pilot announced that there was weather to the east and the revised departure route would require departing planes to be placed in 25 mile trail instead of the normal 7 miles. I couldn’t count them all but my guess is that there were over 30 planes waiting ahead of us. We finally took off one hour after leaving the gate.

It is clear to me that these delays were not weather delays but rather a result of a broken ATC system. A system that separates aircraft by 25 miles at low altitudes is not only broken, but ridiculous. I am not sure what caused the late push back and jam up at the gate when I arrived, but I will bet it had nothing to do with weather the previous night. My guess is that regional jets were being held at the gate for the same reason we waited on my second leg. Regional jets can not burn fuel for and hour before taking off and fly 3 plus hours. (Hardly a regional trip but becoming more common as the airlines downsize equipment.)

Unfortunately I am finding this is the norm for airline travel. Sooner or later the flying public will stop believing the controller union’s spiel about the finest ATC system, and become tired of the airline and GA alphabet groups’ whining about user fees and who pays what. Eventually the public will wake up to the fact that it is the way ATC is governed that is causing their pain, and demand change.

I have co-authored, with Jonathan Howe, a guest editorial on this subject in the May issue of Professional Pilot magazine. Click here to read what we had to say.

The Buzz from Orlando

2007-04-07T15:59:00.000-07:00

Last month NATA and PAMA held their annual conventions during the Aviation Industry Expo in Orlando. NATA is the trade association representing FBOs and air charter companies, and PAMA is the mechanics’ association. The ground support equipment folks (fuel trucks, tugs and the like) were also part of the trade show. Most of the news worth reporting came from the NATA and PAMA groups.

Jim Christiansen, president of NetJets, the 100 pound gorilla of the fractional and charter industry, painted a very up beat picture. NetJet’s fleet flew 380,000 hours last year and is expecting to fly over 400,000 hours in 2007. NetJets US operations saw a big turn around in 2006 by earning $143 million compared to a loss of $80 million the year before. FBO operators' eyes opened when Jim told the audience that NetJets burned 120 million gallons of jet fuel last year and is expected to use 135 million gallons this year, and 150 million next year. DayJet, the not-yet-started-up VLJ air taxi company, in a futile attempt to sound important, announced that they would use 25 million gallons in their first year of operations. What they didn’t say was when that year would begin. I have a feeling the DayJet speaker was confusing gallons with dollars. I am sure that DayJet will easily burn though $25 million in the first year.

Europe and Asia seems to be the next-big-thing for business aviation. Warren Buffett, writing in the world’s most readable and most read annual report, talked mainly about Berkshire Hathaway’s NetJets increasing success in Europe. In the first five years of operating in Europe, beginning in 1996, NetJets acquired only 80 customers. He said recently that European demand for fractional shares has “exploded”. In the last two years NetJets Europe has added 586 customers each year with a total base of more than 1,300 today. Eastern Europe and the Far East is a vast untapped market with rapidly growing economies. It was reported that a 30 person delegation from Russia alone attended the event in Orlando.

On the PAMA side Jack Demeis, president and founder of Continuum Applied Technology, opened the most eyes. Jack has been a good friend for years and I consider him one of the brightest technologist and futurists I know in this industry. Jack sees major changes in the aviation industry in the next 15 years. He predicted that there would be 9,000 UAVs in civilian use in this time frame. He reminded the audience that civilian orbital and suborbital flight is a reality today with new spaceports in the planning stage in Singapore and elsewhere. Jack told me that software would continue to drive aircraft. It reminded me of the F-22 squadron that was "shot down" by the International Date Line. Everything mechanical is becoming digital. I just picked up my car from the shop and was told the problem was corrected by rebooting the system.

Very Light Jets: A Reality Check for Eclipse

2007-03-07T10:58:00.000-08:00

Vaughn Cordle, CFA / AirlineForecasts

The perception of easy (i.e., dumb) money and current anti-airline sentiments are fueling the entrepreneurial spirit to create a better mouse trap out of air transportation. New and improved engines, avionics, and manufacturing processes have resulted in new low-cost aircraft designs, thereby encouraging those who think they have a unique business plan to get in on the game.

Lots of people will try lots of things, most of which will fail, and those who do succeed will become very rich, which gets to the very heart of capitalism and the reason why mousetraps are being improved in the first place.

One of the most interesting experiments now in process is the Eclipse airplane being put together by Vern Raburn. Spurred by an understandable desire to bring jet travel to the masses, Raburn has built a very cheap, very small airplane. He has raised a prodigious amount of money and has overcome many obstacles. Now, even with certification in hand, red flags are popping up all over the place as he seeks a production certificate: reports of high altitude instability when fully loaded; design flaws in the windshield; and avionics problems, to name a few. Also, it doesn't help when reputable companies like United Airlines (pilot training) and Avidyne (avionics) have been replaced – or quit - as key suppliers.

Raburn has a long way to go if Eclipse is to become a credible manufacturer. However, if he can get through his troubles, his price point is going to make the Eclipse tough to beat for very short haul, regional flying of the kind that many air taxi companies are proposing and hoping to finance. Better airplanes will undoubtedly be available for other types of air taxi missions, but it will be very difficult for another manufacturer to approach Eclipse price and cost points. Success, however, is dependent, on getting the plane fully built and subsequently, proving that it can support the high utilization rates on which air taxi economics are dependent.

It is premature to predict the demise of Eclipse since there is no other aircraft that has the potential to lower the price point for private aviation as dramatically as it can. Moreover, as of yet, no VLJ manufacturer other than Eclipse has shown an understanding of the parts and support requirements of air taxi companies.

Embraer has an aircraft that may prove to be the default choice for air taxi use, even though it is heavier, more expensive and costs more to operate. The good news for Eclipse is that the Phenom 100 will not be ready until late 2008. The bad news for Eclipse is that the Phenom 100 is designed for comfort and robust utilization, with a cabin and baggage volume twice that of the Eclipse. More importantly perhaps, the Phenom 100 is designed for 35,000 cycles, which is 3.5 times that of the Eclipse, meaning that resale and residual values will be significantly lower for the Eclipse after a few years of heavy use unless it proves more durable than is now anticipated.

AirlineForecasts has examined the business plans of many of the new upstarts that will use the new, low-cost VLJs. Most are based on unrealistic assumptions of consumer demand and have significantly understated the true cost of providing on-demand air taxi service. Most should not be financed.

Several of the air taxi aspirants may actually get launched, but their success will depend on choosing aircraft that appropriately match demand in the markets they wish to serve, on good management skills, and on the ability to raise sufficient capital.

JetBird and Pogo are two examples of new VLJ air-taxi operators that have the right management capabilities. Moreover, both potentially have the kind of financial capability that will be required for survival of the “surge and shakeout” that AirlineForecasts expect to occur over the next several years.

Mao Tse Tung once described our attempts to innovate by saying “A hundred flowers will bloom,” pointing out that our potential is great but only if conditions are just right. Low cost and abundant capital, combined with a demand for low cost and hassle-free air transportation, results in a market ripe for innovation and entrepreneurship. However, only a lucky few will blossom fully, while others quickly wilt under the searing heat of competition and market realities. It is too soon to tell which type of flower Eclipse will be, but it is certain that Raburn’s ingenuity and doggedness will be sorely tested in the months to come.

Eclipse – Barely Breathing

2007-03-07T07:39:00.000-08:00

In the last few days we have seen a flurry of articles in the aviation press about the trouble Eclipse is having getting FAA production certification approval. Only one aircraft has actually been delivered since December when David Crowe took delivery of the first aircraft. Recent troubles became apparent when a week ago CEO Vern Raburn announced the end of Avidyne’s involvement in the program. Avidyne was a key supplier of almost the entire avionics suite. Avidyne is not the first respected subcontractor to be terminated. Williams International, whose engine the Eclipse was designed around, dropped out early in the program requiring a major redesign and delay of production. Last week Raburn said that serious problems have “plagued virtually every aspect of development, design and production.” Within hours United Airlines dropped the Eclipse training program. A type certificate is required to fly the airplane and to my knowledge the only pilots authorized to fly the Eclipse are production test pilots. With no training program, Eclipse typed pilots will be hard to find. I am sure this does not make the pioneering Mr. Crowe very happy, or any of the hundreds of others waiting for delivery. I wrote The Eclipse of the Eclipse? last August, but I did not foresee these problems, nor did I expect to see this company on life support so soon.

I asked Vaughn Cordle, one of my partners in The Aviation Group, CEO and Chief Analyst of AirlineForecasts, and a B777 pilot for a major airline, for a reality check. I will be posting his reply here.

Too Much Money

2007-01-30T13:41:00.000-08:00

When too much money chases too few goods, prices rise – Economics 101 – and weak business plans get funded. It looks like that idea is being applied to the emerging VLJ industry. I count 14 manufacturers that have entered this space or have announced they will very soon. Seven air taxi business plans are being circulated amongst the investment community. There seems to be no shortage of capital waiting to be wasted away on this dream that has yet to fly a single commercial flight and, so far, has only one viable aircraft (the Cessna Mustang) capable of flying a paying passenger. I have no doubt that VLJs will be produced in quantity, but far lower than almost all forecasts. I feel equally strongly that the VLJ air taxi models will fail and the manufacturers that are basing their production plans on these models will be sadly disappointed. Most of these manufacturers will also fail.

2006 was the best year ever for business jet manufactures. Backlogs are high and the outlook for 2007 is very promising. But with the exception of Embraer, Cessna, and Honda, the VLJ companies are skating on very thin ice – ice being capital. The ice supporting the VLJ air taxi companies is even thinner. A hiccup in the economy or a VLJ accident could cause big problems for the under-capitalized companies.

At the moment there seems to be plenty of ice. It is 19 degrees outside my window. Watch out - warmer days are coming.

The Conundrum of GA Airports

2006-11-30T13:55:00.000-08:00

While the largest commercial service airports produce substantial operating surpluses and can finance their investment needs for capital expenses, this does not apply to all airports, especially general aviation airports. In fact, many smaller airports have an operating deficit and therefore generate no funds for capital projects. The FAA’s Airport Improvement Program (AIP) pays for at least 90% of capital investments (runways, taxiways, ramps, etc.) at GA airports, but they must rely on the local community’s tax revenues to cover operating deficits. The federal government supports GA airports because they connect smaller communities to the nation’s air transportation system. But the federal government does not fund operating expenses. School, public safety, roads, transportation, and social programs compete for these dollars at the local level. In times of economic uncertainty, local support for a GA airport wanes. Education, safety, etc. trumps attracting and maintaining an economic and employment base in the community.

Revenue at GA airports is generated by land and building leases, fuel flowage fees, and for a very few, landing fees. What can airports (and their local communities) do to improve the financial position of these smaller airports? Basically, the answer is the same as it is for any underperforming business:

Increase revenues

Decrease operating expenses

Make investments revenue-generating and self-financing

Now, let’s briefly look at each of these three options and how they might be accomplished.

Increasing Revenues
Small airports generally rely on lease income from land leased to aircraft service businesses (FBOs, maintenance providers, charter companies, etc.), and fuel flowage fees collected from anyone delivering fuel on the airport as their principal sources of revenues. Strategies to attract companies that operate business jets and turboprop aircraft should be pursued. These aircraft consume a large amount of fuel compared to small piston powered aircraft. Business jets require hangar space whereas the majority of small aircraft can simply be tied down on the ramp. Maintenance, part sales, and other services for these turbine powered aircraft are substantially higher than for the piston fleet. Attracting these types of aircraft depends on the facilities at the airfield both in terms of safety and amenities. On the safety side, precision instrument approach capability as well as runway length and runway safety areas are required.

Commercial service airports charge a landing fee, but very few GA airports charge a landing fee. This should change. A small fee of $5 to $10 per landing could put most GA airports in the black.

Controlling Costs
Many GA airports have public employees staffing the airport. A full-time airport manager and other public employees at the airport perform administrative, maintenance (grass cutting, snow removal, etc.) and other functions. A lower cost alternative might be for the fixed based operator to assume these responsibilities on a contract basis. For example, fuelers and other FBO personnel could be trained in airport maintenance duties. The cost reduction to the community could be substantial. The municipality that owns the airport could maintain governance of the airport including control of master leasing of land and buildings.

Investments
Local communities might consider converting land that is surplus to the operation of the airport, or land that might be restricted because of building height or other FAA horizontal surface limits, to commercial uses. A good example is a golf driving range in the runway protection zone (RPZ) that would not interfere with aircraft operations.

Solutions for this GA airport dilemma are not easy, but creative out-of-the box thinking is paramount.

Private Airports

2006-09-26T13:04:00.000-07:00

The majority of the 7,400 airports in the United State are publicly owned. The land, runways, taxiways, and other infrastructure are titled to municipalities and airport authorities that are often governed by boards of directors appointed by multiple jurisdictions. A good example and one I am very familiar with is the Washington Metropolitan Airports Authority or MWAA. While MWAA is typical of other airport authorities, its history is unique. The two major Washington, DC airports, Reagan National and Dulles International, were originally owned by the Federal Government and operated by the FAA for many years. For as long as I can remember (which is before World War II and I won’t disclose the year), National Airport, and beginning in 1962, Dulles Airport operations and development were subject to the whims of Congress. The most visible evidence of this was the dozens of parking spaces marked Reserved for Members of Congress a few steps from the airport’s front door.

The real and somewhat hidden problem was money. Congress controlled the purse stings. Dollars needed for operations, and capital improvements had to be appropriated by Congress and were expense lines in the Federal budget. Long range planning was one year. Airport employees were government employees. Hiring and firing practices were subject to Federal regulations. In the late 1980’s Congress saw the light and leased these airports to the newly formed MWAA. (Of course part of the deal was a continuation of the parking perks.) Overnight these airports were transformed into modern marvels of air transportation. The private capital markets provided billions in bond financing after carefully buying into long-term plans for the airports. The FAA airport employees left the Federal till and became private employees of MWAA. Freed of the chains of government, the cream, and there was a lot of it, rose to the top and more miracles happened. All this was led by my friend Jim Wilding who spent most of his career with the FAA beginning as an engineer. Jim was always a great leader and visionary, but MWAA gave him the opportunity to really shine.

Today we have yet another new airport model emerging. The FAA has a pilot program to privatize a few airports. The most notable is Chicago Midway. Chicago got a taste of what privatizing can do when they leased the Chicago Skyway toll bridge to Australia’s Macquarie Bank for $1.8 billion for 99 years. In many ways Midway reminds me of the old rundown National Airport. Hopefully privatization will shine a new light on Midway. As with highway funds, airport funding is finding stiff competition for a share of Federal dollars in the face of growing deficits, as well as disaster, terror, and war funding.

Let government regulate and private industry operate. It should be the American way.

For a history of airport privatization worldwide read Bob Poole’s 1998 address to AAAE, Why Airport Privatization's Time Has Come.
(Next the conundrum of general aviation airports.)

Terror Alert

2006-09-23T16:28:00.000-07:00

Those were the words that my daughter Inslee’s instructor flashed on the screen as she settled in for her final lecture at the London School of Economics in August. Two days later she was scheduled to fly from Heathrow back home to Virginia. I first learned of the London threat when the phone rang at 5 AM Virginia time. Inslee was on a short class break and she was calling from her cell phone asking what we knew, which was nothing. Over the next few hours, we learned of canceled flights, new security regulations, and eventually the arrest of suspects with others at large. My first concern was how to get my soon-to-be-21 baby home safely and quickly. Being in the trade, aviation that is, I quickly divided an international charter fare by ten, Inslee and her other college buddies, and decided a second mortgage was worth it to get her back safely and quickly. A call to a friend in a high place in the world of business jet charter resulted in, “I am sure I can find a plane” and a promise to get back to me.

I discovered later I was lucky to even get a hello as that day resulted in a record number of calls for charter aircraft. As after 9/11, the demand for air charter, both international and domestic, has seen a sharp up tick. Some press reports mention over 60%. As men forfeit their shaving cream and tooth paste and women $500 cosmetics at security gates, business jets travel is getting more and more attention. It’s too bad such awful events are giving this boost to our industry. We have always touted efficiency, speed, and comfort, but security was never first on the list. Unfortunately it now is.

Inslee’s Gulfstream turned into a United 777, the same one she was originally booked on. She spent 6 hour making new friends at Heathrow and flying home with the lightest carryon in her short traveling career – a baggie.

Eclipse of the Eclipse?

2006-08-13T14:52:00.000-07:00

Do you remember the BD5J, the mini-jet that every red-blooded aviator wanted in his personal hangar? Well the modern version may turn out to be the Eclipse. I cannot remember an aircraft that has received as much ink in the lay press as the Eclipse. The reality of the skies filled with micro jets, however, is premature. No Very Light Jet, “VLJ”, has yet been fully certified by the FAA. Since 1998 when Vern Rayburn first announced his vision for the Eclipse, the first of this new breed, there have been many setbacks. The most significant setback was the dissolution of the Eclipse/Williams joint venture. Every new aircraft is first designed around an engine. Eclipse picked an unproven and uncertified variant of the Williams engine that fell short of expected performance. Then other major vendors for the Eclipse could not meet delivery dates or performance criteria.

Eclipse has an order backlog reported to be over 2,300. A significant number of these orders and options are from by two startup air taxi companies, DayJet and Linear. Linear’s founder, Al Herp, claims to have proven his model. Operationally maybe, but this company that operates Cessna Caravans between the Boston and New York markets, has reportedly stacked up huge losses. The Caravan is built like a truck and is the staple of the small package feeders for FedEx, UPS, etc. It has a proven operational history and a wide service network. The Eclipse has neither. DayJet has proven only that they can raise capital. So far they have raised $18 million from private investors. Raymond James is trying to raise another $135 million to fund the purchase of their first delivery of Eclipses and startup of operations.

Vaughn Cordle, a member of The Aviation Group team, CEO of Airline Forecasts, and a pilot for a major airline, believes most of the VLJ air taxi start-up companies will fail. He says these business models are not realistic. Residual values on the aircraft are overly optimistic as are the number of hours each plane can fly per year. Larger business jets fly 350 to 400 hours a year, not 2,000 or more as projected by Linear and DayJet. Vaughn also believes their business models are not realistic in forecasting demand and the percentage of seats they will fill. Vaughn has a pretty good crystal forecasting ball. Check out his 2002 condemnation of Avolar the failed United Airlines attempt to start a fractional company to compete with NetJets. For an in depth look at the VLJ market, read Vaughn’s paper, “Dot Coms with Wings: A Fun and Exciting Way to Lose Money”.

There is talk in the clubhouse of an Eclipse IPO. My father once told me that when his caddy gave him a stock tip he knew it was time to get out of the market. Unfortunately there are very few golf caddies today unless you play with Tiger’s crowd and this group owns real business jets. No room for a set of clubs in an Eclipse.

We will have more to say in future articles about who we believe will be the winners in the evolving light jet industry (yes, we believe there will some) and how this part of the business jet industry is evolving and creating new markets. Stay tuned.

Honda's Horse Enters the Race

2006-07-25T19:13:00.000-07:00

Today the Honda Motor Co. officially announced the commercialization of their new light business jet and a partnership with Piper Aircraft. The partnership will develop a certification program for the airplane and manufacture several test aircraft that will go through this program. It is a long process. Honda estimates three to four years. (I predict that Honda will find a way to compress this.) Last year at this time Honda unveiled a prototype aircraft. They flew it to the 2005 AirVenture for one day. As every aviator knows AirVenture is the huge Oshkosh, Wisconsin air show that attracts hundreds of thousands of pilots and everyone who ever dreamed of flying. Honda is back this year for a full week with a large exhibit.

I had the pleasure of watching this exciting new jet as it grew from an embryo to a full test aircraft. All the early design and testing work on the prototype was done in Skunk Works like secrecy. Just over a year ago two of my close associates and I were treated to a tour of this top secret facility.

(Keith Garner, Don Godwin, Michimasa Fujino, Al Blackburn, and yours truly enjoy the afterglow of our simulator flight.)

We were able to inspect and even touch the aircraft. I discussed the finer points on the hangar floor and during lunch with Michimasa Fujino, the plane's chief designer and engineer. Perhaps the highpoint of the day was when Fujino offered me an opportunity to fly the Honda Jet simulator in the hangar next to the airplane. The same group of engineers that designed the Honda Jet designed and built the simulator. The same building that housed the Honda Jet and the simulator was also home to a flight following arena that looked like what you see at NASA during the launch and recovery of the space shuttle. Telemetry transmits all the real time flight test data back to this room in Greensboro, NC, and to Japan.

Watch this aircraft carefully. It may not have been the first horse out of the gate in the VLJ race, but it is a serious contender. I will have much more to say about the VLJs and the many commercial ventures being built around this new class of aircraft. Stay tuned.

Freedom of Maintenance Information

2006-07-05T17:33:00.000-07:00

Anyone properly qualified and licensed to work on an aircraft should have, not just the training and tools, but also the up-to-date manuals for the aircraft in question. Aircraft manufactures have been very restrictive about making these maintenance manuals available to those who need them most. About four years ago the Aeronautical Repair Station Association (ARSA) attempted to get Congress to require the FAA to enforce their existing rules by enacting legislation to clarify and codify regulations relating to the availability of maintenance manuals. ARSA’s website explains the situation:

Instructions for Continued Airworthiness (ICA) are the manuals required to maintain aircraft in airworthy condition. The Federal Aviation Regulations require the holders of design approvals for aircraft, aircraft engines and propellers to prepare ICAs and make them available to persons required to comply with the terms of the instructions, including owners and repair stations that perform maintenance on the products. The FAA has been slow to enforce its regulations requiring aviation manufacturers to make this vital information available to repair stations and product owners.

Last April the U.S. District Court for the Southern District of Georgia in Savannah ruled in Summary Judgment in favor of CAMP Systems in a suit filed by Gulfstream. In a crushing blow to Gulfstream the court stated, “What Gulfstream seeks here is to use its claimed copyright in its manuals to gain a judicially-enforced monopoly in maintenance tracking services for Gulfstream aircraft. That outcome would be injurious to the free-market public policy advanced through antitrust and restrain-of-trade laws. It would be especially egregious since Gulfstream is required by federal regulations to produce the manuals anyway.” The court also ruled that Federal copyright law does not apply to maintenance manuals.

This decision could have a huge positive implication to the entire aviation MRO industry as many manufacturers have refused to make maintenance manuals available to independent maintenance providers who, like CAMP, borrowed the manuals from aircraft owners - an awkward and sometime complicated process.

In June the General Aviation Manufacturers Association (GAMA) asked the court to reconsider. I predict that GAMA’s very effective lobbying skills will have little effect on the court. Stay tuned, this could be a big win for everyone – aircraft owners, repair stations, and I believe eventually the OEMs who should be concerned about their customers’ ability to have their aircraft properly maintained.

Fixing a Failing ATC System

2006-06-30T05:37:00.000-07:00

Let me begin by saying I believe in the free market system. I also believe the Federal Government should be responsible for the security and safety of our citizens, our monetary system, and for helping those that can not help themselves. When our government tries to run a business it is usually a mess – expensive and inefficient. Air Traffic Control (ATC) is a perfect example. (I will save similar comments on general aviation airports for a later post.)

Despite the ads run by the controllers’ union, ATC in the United States is antiquated, expensive, and inefficient. The United States is the only non-third world country where air traffic control is both regulated and operated by the government. One only has to look north to find one of the most modern and efficient ATC systems in the world. NavCanada is a stakeholder owned non-profit corporation. Revenues come from user fees not taxes. Rates have declined since this private company was formed in the late 1990s to take over air traffic control operational responsibilities from the Canadian government, and efficiency has increased. NavCanada has developed equipment and technologies that they sell to other nations. They survived the shock of 9/11 and the bankruptcies in the airline industry. NavCanada controls not just traffic in Canada but traffic over the North Pole and the North Atlantic. They safely landed in Canada all inbound traffic from Europe and elsewhere to the United States on 9/11.

Our FAA-managed and regulated ATC was using vacuum tube equipment until a few years ago. Productivity is terrible today and has been for years. The FAA is short of money just to operate the system. Literally billion of dollars of taxpayer funds have been wasted on developmental programs that have later been cancelled. As opposed to private industry, government does not have to justify a return on investment or pay back funds that have been advanced by bond holders. Inefficient is not a strong enough word to describe this situation.

So why is our government still running this ATC service organization than can easily stand on its own?

First congress is unwilling to give up control of an organization with a large labor force that can bring jobs to a powerful Congressman’s district. For example, recently the House passed an amendment to the Transportation Appropriations Bill, H.R. 5576, by a vote of 261 to 166.

“None of the funds made available in this Act may be used to eliminate, consolidate, co-locate, or plan for the consolidation or co-location of a Terminal Radar Approach Control (TRACON).”

As a result several clear thinking members of Congress are proposing a commission or process similar to the military Base Realignment and Closure (BRAC) process to overcome the “not in my district” syndrome.

Secondly, the controllers union, NATCA, is strongly opposed to reform mainly because they feel it will be a threat to their jobs and pay scales. Controllers are among the highest paid government employees, even higher that most members of Congress. NATCA recently lost a battle with the FAA and Congress for even higher pay scales.

The third major road block is the major general aviation trade associations, particularly AOPA, NBAA, and NATA. Pilots are afraid of user fees, despite the fact that they are already paying a user fee in the form of a fuel tax. The problem with any tax is it first goes to the U. S. Treasury to which Congress holds the key – back to problem number one.

For much more on this subject click on this link to the Reason Foundation. I have provided links in the side bar to articles on ATC that I think are worth reading.

Subjects We Will Be Discussing:

2006-06-18T08:00:00.000-07:00

What are the new trends in General Aviation?

What is the case for changing the way ATC is organized and managed?

What impact will the new VLJs have?

What is the next trend in industry consolidation?

What are the issues that you feel are important to our industry?