- Managing Director of Consulting Services for The VanAllen Group
- 25 years with KeyCorp (NYSE: KEY) as Captain, Training Captain, Chief Pilot, and Director of Aviation
- Chairman of the NBAA Corporate Aviation Management Committee
- Chairman of the NBAA’s Professional Development Program Approval Committee
- Certified IS-BAO auditor
- 11,000 hours - type-rated in the Falcon 900 and 2000, Learjet 45, Hawker 800
- All 7 Best Practices
- Pre-Call Discovery Process
- One-on-One Call with Expert
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- Post-Session Engagement
Business Aviation - Aircraft Use and Risk Management
- There is corporate brand sensitivity for public companies that doesn’t exist for private companies for on-demand transportation (corporate jet) use.
In the last six years, the use of "corporate jets" has been vilified in the public dialog. The stratification of wealth and the on-going public debate does not seem to be waning. This sensitivity is raised when the aircraft use is by a public company.
The introduction of Sarbanes-Oxley and then the growth of shareholder advocacy groups is at times highlighting the use of on-demand transportation.
The brand impact can be mitigated with a number of strategies:
- Prepared public statements that highlight the strategic role on-demand transportation plays in the business strategy.
- De-identifying travel information; both personal information as well as corporate.
- Internal controls that verify appropriate business use.
- Internal compliance, third party audit and/or board review of on-demand transportation policies.
- People are changing their aircraft applications more fluidly.
Formerly, individuals would purchase an aircraft and operate it. Today, there are many options for on-demand travel. As a company strategy changes, it can move fluidly through each business aviation platform.
A holistic approach to on-demand transportation should be developed that examines:
- Short- and long-term strategic goals.
- Internal and external branding benefits and risks.
- Aircraft ownership
- Fractional ownership
- Charter cards
- Aircraft partnerships
- Retail purchase of on-demand charter
- Block purchase of on-demand charter
- Individuals are separating the platforms of aircraft based on the type of use.
One of the biggest trends is using a separate platform for personal use than for business use. Companies that own an aircraft may now purchase charter or a separate fractional share to address personal use and not blend the uses on their own aircraft.
Separating platforms has a number of advantages for corporations, particularly public corporations:
- If the corporation owns part or all of an aircraft, it eliminates the risk of losing the deductibility of the depreciation expense. The IRS has been aggressive in recent years in its pursuit of this deduction.
- It allows the board to easily quantify the personal benefit as compensation.
- It mitigates the external brand risk for the corporation as the personal use is external to the corporate activity.
- Individuals are justifying the use of on-demand aircraft or on-demand transportation for personal security and information security.
Information and physical security risk is continuing to demand the use of on-demand transportation allowing corporations to move covertly. In larger corporations, on-demand transportation allows the movement of employees without their travel schedules being accessible to internal and external travel agencies. Additionally, the use of on-demand aircraft enables groups to travel and converse without concern of "who" is overhearing the conversation.
For individuals who have a physical security risk, the use of on-demand aircraft allows control of all aspects of the transportation event. Best practices that can be implemented in this form of travel that cannot be used on public transportation (airlines) include:
- Traveling under a pseudonym.
- Easily escorted by handlers.
- Random changes to travel patterns.
- Transportation providers can be vetted and known (for example, pilots and drivers)
Additionally, these best practices are often used for merger and acquisition activity or when covert business operations are needed.
- Charter "brokers" are offering access to charter aircraft which they do no operate themselves.
The growth of "resellers" of charter hours has spawned an industry that has injected a "broker" in the middle of the transaction between the charter provider and the customer. These are individuals who offer access to charter aircraft, but do not operate the aircraft themselves.
Their marketing approach gives the appearance that they are the actual operator, when, in fact, all they do is find a third party to provide the transportation and collect a commission from the transaction. Often, there is very little quality control or risk management in their selection of a charter provider.
The FAA is in the process to introduce regulations to address the growth of "charter brokers." Currently, the scope of these regulations is unknown.
- Movements of on-demand aircraft are subject to more aggressive public scrutiny.
Businesses as well as public advocacy groups are more aggressively observing on-demand aircraft movements in order to either determine strategic initiatives or to determine inappropriate use of shareholder access.
This is done by:
- Using public transportation tracking tools like FlightAware (http://flightaware.com).
- Using information provided by vendors (limo drivers, hotels, etc.).
- Using aircraft spotters. These are individuals that may sit near airports and record aircraft registration numbers. This is fairly common during large events (Superbowl, The Masters, Kentucky Derby, etc.) or at airports with high VIP activity (Aspen, Monterey, Jackson Hole, etc.).
- The observation of aircraft movement on public forums can be blocked under specific conditions.
- Use of known vendors.
- Avoiding high profile airports or events.
- Aviation providers are developing new, proactive risk management systems.
In the last 10 years, aviation has been moving from a reactive approach to risk to a system that identifies risk trends and attempts to be proactive and predictive.
Aircraft accident/incident rates are at very low levels and most likely can not be improved without a significant change in risk measurement. In the last decade, the concept of Safety Management Systems (SMS) has been codified. As SMS matures, it enables risks to be quantified and predictive and proactive methods have been developed to avoid those risks.
The on-demand segment of aviation has varying levels of implementation of SMS. While mandated by the FAA for commercial operators (charter), it is voluntary for internal flight operations. Additionally, an International Standard of Business Aviation Operations (IS-BAO) standard has been developed to monitor these processes, but less than 15 percent of the eligible operations have achieved IS-BAO registration.
Using providers that are proactively pursuing risk management should be a high priority for users of on-demand travel.