Management Company

[JJET44]

no, its Pete out of New Jersey.

Believe it or not I'm seeing good salaries out there. Bennies are another story.

 

[gret]

I think you may be misunderstanding a little bit of how EJM works. The salaries will just be passed thru to the owner as a line item. Your owner has to agree to pay the crewmembers more...not EJM. Not that it happens very often, but if the mgmt company says they will take care of a lot of duties that the crewmembers have been doing, it could result in a cut in pay if the owner is a bad guy. EJM isn't going to go out of pocket for anything, especially because you are simply going to fly Part 91.

The earlier post about mgtm fees is valid...here again...especially if you are just going to fly part 91.

BTW...I know Pete and he is a good client guy. He does run into situations where mgmt doesn't always back him as much as they should.

 

[JJET44]

Actually it's exactly how I understood it but I had someone try and tell me differently.
The good salaries I was referring to was due to the fact that I heard folks were getting paid crap at some of these companies in the past.
I used to work for a charter company that had a combination of owned and managed aircraft. They had a pay scale based on what size equipment you were flying. Those pilots that came with the airplane made whatever, but if they were replace down the road, they were replaced with pilots from the charter company and they were paid the same as the rest of the group.
Thx gret and rice

 

[gret]

Actually it's exactly how I understood it but I had someone try and tell me differently.
The good salaries I was referring to was due to the fact that I heard folks were getting paid crap at some of these companies in the past.
I used to work for a charter company that had a combination of owned and managed aircraft. They had a pay scale based on what size equipment you were flying. Those pilots that came with the airplane made whatever, but if they were replace down the road, they were replaced with pilots from the charter company and they were paid the same as the rest of the group.
Thx gret and rice

OK...you got it!

Some charter/mgmt firms like to pool their pilots and use this as a selling point to prospective clients as a cost saving's benefit. A lot of owners don't like this as they want to see the same face in the left seat. Pilots don't like it because they normally get paid less as the mgmt company is using them as a profit center by contracting them out the pilots to the owners. In years past, this was a popular business model on the West Coast and to a lesser extent in smaller markets and the East coast.

My guess would be that your owner won't go for this type of arrangement as he's had a flight department and is probably more loyal to his crew members.
Bottom fisher owners are a different story.

 

[GCAP]

JJET44
Do a bit of research on the IRS lawsuit against Berkshire Hathaway (NetJets)
The IRS is claiming that Part 91 managed planes are in some way giving operational control to the Management company, and therefore must pay the 7.5% FET.
If the IRS should prevail, the FET could add $150,000 per year to the cost of operation of your 601.
If anyone else here has thoughts on this, please chime in. We are considering self management because of this potential liability

 

[JJET44]

7.5% on our total budget? That can't be right. Maybe on the management fee. The only thing they're selling us are their services. This will never pass, it has no merit.

 

[gret]

7.5% on our total budget? That can't be right. Maybe on the management fee. The only thing they're selling us are their services. This will never pass, it has no merit.

Sorry…GCPA is right on. Below is an excerpt from a piece in AIN in May. If you read the “IRS Memo”, you will see they want to tax everything, including reimbursements for fuel, pilot salaries, hangar, insurance…the works. This is what NetJets is tax court for and the total is approaching $1 billion for taxes, penalties, and interest.

The good news for NetJets is they lobbied hard and just got a change in the tax laws passed on a prospective basis for “fractional owners”. Still up in the air for Part 91 a/c managed by a mgmt company, or even a wholly owned subsidiary. Guidance should be forthcoming in the next few months as it is a mess right now.


IRS Memo Triggers Federal Excise Tax Fears

The IRS memo is not an official revenue ruling; however, it seeks clarification of issues that support previous revenue rulings and thus, according to one aviation charter/management expert with a background in accounting, justification for IRS auditors to impose the FET on the fees paid to management companies.

The memo responds to the IRS’s chief of the excise tax program regarding three scenarios at aircraft management companies. A key issue to which the chief seeks an answer is: “Are the monthly management fees paid to the aircraft management company in each of the three scenarios…‘amounts paid for taxable air transportation of persons,’ and thus taxable…?” The memo concludes that taxable air transportation of persons is occurring and thus “The monthly management fees, as well as the separately reimbursed amounts, paid to Management…are taxable.”​

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http://www.ainonline.com/aviation-n...04/irs-memo-triggers-federal-excise-tax-fears