A Marvel, Misunderstood

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

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

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

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

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

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

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.