If after considering our post entitled The Case for 3rd Party Aircraft Management you’ve determined it’s time to evaluate your options, begin by identifying the most critical categories with the greatest impact to your business. Based on our experience the most successful partnerships focus on 10 key areas. This list can and should be be expanded upon, however you’ll want to strike a comfortable balance between evaluating highly pertinent areas with functional relevance, and over-evaluating which could carry some unintended analytical consequences.
1. Financial Stability
While sometimes tedious, this category is extremely important as there are likely thousands of financially unstable suppliers in the aviation industry. Partnering with an unstable provider could end up impacting the value of your aircraft through sub-par maintenance and liens on your asset. Ask your prospective partner for 1-3 years of audited financial results, including a profit and loss statement and balance sheet. It may also be useful to determine what their Paydex or credit scores have been over the past few years. A Paydex score of 80 or better is considered healthy. Remember that even if financial statements look healthy, chronic patterns of delayed payments to suppliers are a sign of problems, especially if your aircraft generates Part 135 charter revenue.
2. Support/Operations Infrastructure
Many providers are true “mom and pop” organizations, where the pilots are also the legal team, IT support, accounting, HR, maintenance, and operations. What happens when the aircraft is in flight and needs ground support? Can one person carry enough employee relations experience and flight coordination experience to do both jobs? Is there a conflict of interest for the head of HR to also be the Director of Maintenance? It’s critical to evaluate ground and administrative support/operations infrastructure relative to your projected flight patterns and service level expectations. A good ratio of flight support personnel to managed aircraft is typically about 1:3 dependent on the complexity of your operation.
3. Technological Infrastructure
I recently read an article entitled 8 Core Beliefs of Extraordinary Bosses, where the author, Geoffrey James, states that technology offers empowerment, not automation. While simple, this struck me as surprisingly progressive. There are some providers that simply don’t use technology, which I’d highly advise against. On the other end of the spectrum are providers so large that they are forced, as the author of this article says, to view technology as a way to strengthen management control and increase overall predictability. This type of mentality crushes innovation and collaboration. The best providers view and implement technology as a means to automate low value tasks, promote personal growth and development, leverage the buying power of the organization as a whole, and build upon the personal and professional relationships required to run the operation. Make certain your aircraft manager uses technology to enable, not control.
4. Pilot Turnover
This category is always a tough one to benchmark against, as pilot turnover is typically much higher than many other non-aviation industries. Pilots typically want to fly the biggest, fastest, most modern aircraft available, thus they shift around quite a bit as larger aircraft become more easily accessible. In addition, compensation in our industry is on the rise as of 2015, signaling greater demand for highly skilled pilots. That being said it’s important to understand each providers turnover rate relative to one another. Generally speaking I’ve found the most smoothly run operators have had the same pilots for at least 3 years with very little turnover, if any at all. Any program you see with an average annual turnover of >30% should be a sign of challenges within the organization.
5. Flight Attendant Turnover
Similar to pilots, flight attendant turnover is also very important. Amongst all crew on an aircraft this role is typically on the lower end of the compensation range, and on the private side of aviation can be incredibly stressful. Many times this has more to do with the client than the management provider, thus is not necessarily as much of a key indicator as pilot turnover. That being said it’s important to evaluate this metric in relationship to the market and ask questions to your prospective management providers regarding why turnover is taking place. Consider inquiring on types and frequency of training and development programs to ensure flight attendant turnover is kept as low as possible, and job satisfaction remains high.
6. Hangar and Office Standards
If the provider you’re evaluating owns or rents a dedicated hangar or office space, take a look around to see how clean and tidy it is. If you have the opportunity to stop in unannounced, that’s even better. If you see trash, dirt, excessive oil/water puddles and other untidy areas, you can expect that’s how the provider will also maintain your aircraft. Ask to see the inside of the maintenance technician tool box; are the tools shadowed or just laying in the drawer unorganized? I’ve evaluated dozens of organizations using this litmus test and it’s surprisingly accurate!
7. Expertise/Experience on Similar Aircraft
If you fly a Gulfstream G550 and your management provider has no experience with this aircraft type, consider their ability to mentor your dedicated maintenance team and flight crews. In addition, providers with experience in your aircraft type will have meaningful relationships with the manufacturer and authorized service centers should major problems arise requiring immediate support. When evaluating this area be sure to inquire on the experience of individual staff and crew that are employed, not necessarily the management provider as a whole.
8. Quality of References
I’ve had management companies offer references of current or former clients that provided a negative reference, but only when prodded. Consider asking about the challenges or areas for improvement. The more you know about a providers challenges going into a relationship the fewer surprises you’ll see down the road. If your potential management partner can’t or won’t provide current and former client references you may want to consider an alternative.
9. Safety/Security History and Safety Management System (SMS)
Make sure to evaluate the safety/security history of each potential provider, including historical, current, and future plans for the development of their Safety Management System. Also, utilize the National Transportation Safety Board Accident Database, and use your findings as a discussion vehicle with your potential management provider. If you find an incident that your potential provider hasn’t independently brought to your attention, you should be concerned. Ask yourself if the provider you’re speaking with promotes a progressive and innovative safety culture. Is safety at the forefront? Does the organization have a designated Safety Officer or Director? How often are safety drills conducted? How often are independent audits conducted? Does the provider maintain an IS-BAO (International Standard for Business Aircraft Operation) designation?
10. Budgeting Competency
Surprisingly, many management providers today use a very simple, and often inaccurate, method for aircraft budgeting derived from various cost evaluators that use a simple hourly cost calculation. While this is a good standard to use as a starting point, every aircraft operation is different. Hourly cost calculations should never be used as a foundation for understanding expense structures. A quality management provider will take additional steps to target your fixed, variable, and combined expense budget, including evaluating your future projected travel, expense variations between regions/locations (ie: Narita, Tokyo is much more expensive than Peoria, Illinois), as well as your specific mix of contract vs. salaried crew members. They’ll also take into account trip/leg counts, crew swaps, and days between flights for lodging expense projections. If your prospective aircraft manager uses an hourly calculation as the primary means to develop the annual budget and quarterly forecasts, expect a significant variance at the end of the year.
Evaluating each of these 10 categories will allow you to fully understand each provider and most importantly whether their company culture and service offering is a good match for your organization.