NJA Contract Rumor

[NJAowner]

To be "well run" no division, department or subsidiary completely runs itself and does not not need guidance, oversight and interaction. Time is needed to hire and oversee the head of the flight department, review and approve budgets and make strategic decisions. This does not mean I would need to be involved in the decisions of where to buy fuel. And from the strategic decision standpoint, it would be the extremely rare flight department head (or head of any division) who would say the best strategic decision is to eliminate his department. Even if all of this would take 50 hours per year, on average that is about 49 hours more than I spend on issues relative to my fractional shares (other than reading this board for entertainment purposes as it is really a fractional pilot reality show).

 

[BoilerUP]

Yes, just like any other department/division within a company a flight department needs 'oversight'. That doesn't mean it has to be a headache or time sink.

An effective aviation department manager makes the ownership and travel experience as transparent as possible for management/owners, so that they can continue seeking the opportunities that allow the flight department to exist in the first place.

In the 4+ years I've managed our flight department, I probably spend less than 2 hours annually in the CEO's office discussing department matters. I shoot him emails keeping him in the loop on issues that arise, typically getting a reply that says 'Thanks'.

Obviously everyone's travel needs are different, with different values placed on different benefits. In 2007 we ran a pro forma on a quarter share of an Ultra ($2.2M share price for an out-of-production airframe!) and found for the cost of 200 hours at NJA we could operate our Citation II in-house for 375hrs. Obviously there are intangibles of fractional ownership, but the financial premium for those wasn't worth it given the way (and how much) our company operated the plane.

You know all this NJAowner, so I'm probably preaching to the choir. I'm not trying to sway you one way or the other, but simply want to make the point that while operating an in-house department requires time & effort at startup and for recurring oversight, it most certainly doesn't HAVE to be time consuming for the HMFIC...assuming one has a competent person running the department.

 

[acaTerry]

Disregard

 

[Rubber Ducky]

Better opportunity problem

Yes, just like any other department/division within a company a flight department needs 'oversight'. That doesn't mean it has to be a headache or time sink.

An effective aviation department manager makes the ownership and travel experience as transparent as possible for management/owners, so that they can continue seeking the opportunities that allow the flight department to exist in the first place.

In the 4+ years I've managed our flight department, I probably spend less than 2 hours annually in the CEO's office discussing department matters. I shoot him emails keeping him in the loop on issues that arise, typically getting a reply that says 'Thanks'.

Obviously everyone's travel needs are different, with different values placed on different benefits. In 2007 we ran a pro forma on a quarter share of an Ultra ($2.2M share price for an out-of-production airframe!) and found for the cost of 200 hours at NJA we could operate our Citation II in-house for 375hrs. Obviously there are intangibles of fractional ownership, but the financial premium for those wasn't worth it given the way (and how much) our company operated the plane.

You know all this NJAowner, so I'm probably preaching to the choir. I'm not trying to sway you one way or the other, but simply want to make the point that while operating an in-house department requires time & effort at startup and for recurring oversight, it most certainly doesn't HAVE to be time consuming for the HMFIC...assuming one has a competent person running the department.

Hiring a competent CP to run your flight department is possible and you might receive one or two emails per year, to which you might reply "thanks" until the third email says "I'm leaving for a better opportunity". At that moment you'll wish you opted for Fractional.

 

[gret]

Hiring a competent CP to run your flight department is possible and you might receive one or two emails per year, to which you might reply "thanks" until the third email says "I'm leaving for a better opportunity". At that moment you'll wish you opted for Fractional.

Couldn't you just just another flight department manager? If the CFO or head of human resources decides to pursue another opportunity, you just hire a replacement. You don't outsource the function and most CEOs won't give up the flying barge.

Question...besides a small or privately owned company...how many flight departments report directly to the CEO? My recollection has been none. The CEO doesn't want to screw with it and most other senior executives don't want it because it is a thankless job with no upside and a lot of headaches with the great possibility of disappointing people.

 

[Rubber Ducky]

Yes of course, you can spend a few weeks or months searching for a replacement CP, pull a CP from another operation or just hire your airport neighbors CP and let that CEO wish they chose Fractional. Every CEO I know cares how much is spent on the nice hangar on top of ground he/she doesn't own and the overhead associated with it. CFO's and HR folks are a dime a dozen; a CP that has accounting background and managerial skills necessary to run a flight department... Not that easy to find.

 

[BoilerUP]

a CP that has accounting background and managerial skills necessary to run a flight department... Not that easy to find.

Actually, its easier than you might think.

Sure there are plenty of crappy aviation managers/CPs out there, but there are also plenty who actually know WTF they are doing.

And like any 'critical' management position in any industry, you have to compensate appropriately for skilled, experienced talent...and that talent won't tolerate a crappy job when they can take their skills elsewhere - capitalism at its finest.

Or, an owner can outsource their flight department to a fractional for a "turnkey" setup and other fractional intangibles, paying a hefty premium compared to in-house (depending on how they utilize their aircraft) to rid themselves of that 'headache'.

This stuff ain't rocket science...

 

[gret]

...or they can place with a good aircraft management company and not worry at all.

Good CFOs and HR executives are a "dime a dozen"? Funny...they have the same view of aviation professionals...did you really mean to say that?

 

[BoilerUP]

...or they can place with a good aircraft management company and not worry at all.

With the new IRS interpretation of how excise taxes should be applied to business aviation, having a Part 91 airplane with a management company could cost an owner an extra 7.5% every year to Uncle Sam that they could have kept with an in-house department.

 

[gret]

With the new IRS interpretation of how excise taxes should be applied to business aviation, having a Part 91 airplane with a management company could cost an owner an extra 7.5% every year to Uncle Sam that they could have kept with an in-house department.

Excellent point, however the issue is being negotiated and I think they will work out a solution favorable to mgmt companies. The Congressional Committee Reports from several years ago (2004 or 2006, I don’t recall exactly) clearly indicate that the tax was not to apply to management companies. Congress is now involved and they’ll whip the IRS into shape.

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http://www.ainonline.com/aviation-n...fet-tax-plan-now-under-congressional-scrutiny

The $1 billion or so assessment for past FET taxes against NetJets is still being litigated and it appears the parties are trying to reach a settlement.

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http://www.ainonline.com/aviation-n...2012-06-02/netjets-irs-may-settle-tax-dispute

Going forward, fractional customers will be paying the additional taxes via the fuel tax assessments pursuant to the FAA Modernization and Reform Act of 2012.