5 Critical Questions to Ask Before Choosing an Aircraft Management Company
June 21, 2024
As an aircraft owner, your role in choosing the right aircraft management company is crucial. It’s a decision that requires research and careful consideration, comparable to when you initially purchased your plane. In this blog post, we present five essential questions to ask each aircraft management company that you’re considering. These questions will help safeguard your aircraft’s care, maintenance, and return on investment. By following this guideline, you’ll be equipped with the necessary information you need to ask the right questions so that you can find the aircraft management company that best aligns with your objectives and is best suited to meet your aircraft management needs.
- Q1. How well does my aircraft fit into your program, and can you provide comprehensive support?
When assessing an aircraft management company, prioritize this question as it encompasses several crucial aspects. First, look for a management company that has a solid track record of managing aircrafts similar to yours and has a proven ability to generate charter revenue for your specific aircraft type. Inquire about the average number of booking hours per year and whether they have an internal sales team and established relationships with charter brokers, as these can contribute to consistent revenue generation.
Additionally, explore whether the aircraft management company employs trained pilots proficient in operating your aircraft type or if they need to hire or train pilots specifically to fly your plane. If recruitment or training is required, be aware that it may take several months before your aircraft can start generating revenue. Inquire about the management company’s contingency plans if a trained pilot leaves and what steps they take to ensure your charter revenue is not compromised. Again, finding an aircraft management company that is known for managing your type of aircraft means that they likely have pilots already trained to fly your aircraft so that you can start generating revenue right away.
Lastly, don’t overlook the maintenance aspect of your aircraft and the management company’s experience servicing your specific aircraft type. Seek information about the management company’s experience in handling your aircraft type and their approach to its care. Like specialty vehicles, each aircraft type is uniquely designed and manufactured, and having fleet-specific knowledge is vital for maintaining the highest standards of upkeep and optimal performance. It’s also important for the management company to have strong relationships with training centers and manufacturers. This ensures that their flight crews, operations personnel, and maintenance teams receive top-quality training directly from your aircraft’s manufacturer. By asking the right questions, you can be assured that your aircraft will receive the expert care and attention it deserves.
- Q2. Who assumes the financial risks?
Having a thorough understanding of the cost and risk allocation within a charter program is of utmost importance. Many charter management programs prioritize the profitability of the management company over the aircraft owner’s ability to break even within a given year. Consequently, it’s crucial to ask detailed questions during the interview process to ensure proper expectations are set. For instance, inquire about who’s responsible for covering scheduled and unscheduled maintenance, crew salaries and benefits, travel expenses, crew training, aircraft insurance, and other out-of-pocket expenses associated with aircraft ownership. If you bear the responsibility for fixed costs and maintenance, it’s essential to ask the management company what their incentive is to meet or surpass chartering and revenue goals.
For example, if your revenue split is 85/15, what is the management company’s incentive to maximize the rate given that the impact on their earnings is only $0.15 on the dollar? Not to mention, the sole risk falls on you. To avoid surprises, it’s imperative that you get a full understanding of the fee structure, including income, costs and fees, when payments will be made, what charges will be applied to you as the owner, what fees will be deducted, etc. Demanding transparency upfront will help prevent scenarios where you actually lose money on your charters while the aircraft management company earns profit on the first flight hour and every hour thereafter.
It’s a good idea to discuss the contingency plan or ramifications if the management company fails to fulfill its commitment to the agreed-upon number of flight hours or revenue per month. By addressing these concerns upfront, you can establish realistic expectations and avoid unpleasant surprises in case goals are not met.
- Q3. How financially stable is your company?
In addition to the previous questions, it’s critical to assess the financial stability and staying power of the aircraft management companies you’re considering. Conduct online research to determine how long they’ve been in business and investigate whether or not they’ve faced any legal or safety issues in the past – even under a previous name.
To further gauge their financial stability, you may even request a letter of good standing from the company’s bank. Your online research will also give you a good picture of the management company’s overall reputation, as you will likely come across customer reviews that may uncover common issues to be aware of. Ensuring that the management companies that you’re considering have a long history of financial stability and a positive overall reputation will provide you with peace of mind and confidence in your partnership.
- Q4. What are your safety ratings?
Working with an aircraft management company that prioritizes passenger and crew safety is paramount. In fact, according to the Federal Aviation Regulations, all charter companies are held to the same safety standards and requirements; however, some management companies hold themselves to even higher standards that go above and beyond what’s required by the FAA. There are a number of third-party auditors that provide their own independent and rigorous safety rating systems, such as the ARGUS Gold and Platinum certification, which compare safety history data of aircraft operators using the most stringent requirements. Similarly, look for certifications from WYVERN, another respected third-party organization that focuses on safety and regulatory compliance. Be sure to ask detailed questions about the specific measures that the management company takes to ensure the highest level of safety, including the presence of a Safety Management System (SMS) process or Emergency Response Planning (ERP) and regular training. Asking the right questions will help you determine whether the management company is truly committed to the highest safety standards.
- Q5. How much industry experience do you have, and can you provide references?
The experience of the management team, pilots, and crew significantly impacts your overall experience as an owner, as well as the experience of charter customers. Take the time to research the management company’s executive leadership team and their track record and reputation within the industry. Pay attention to the experience and tenure of key positions within the leadership team. High turnover in these positions could be a red flag.
Once you’ve narrowed down your list of management company candidates, request at least three references from current aircraft owners working with those companies. Prepare a set of questions to measure the overall satisfaction, consistency, and reliability of charter revenue, as well as the average revenue generated. Gathering these insights from existing clients will provide valuable information to make an informed decision. As an added measure, you can interview partners such as brokers that the management company works with to gain additional insights from different perspectives.
Conclusion
By asking these five essential questions, you will gain a deeper understanding of the aircraft management companies you’re considering and whether they’re a good fit for your needs. As important a decision as this is, invest the time to thoroughly evaluate each company’s responses and consider their alignment with your specific requirements and expectations as an owner. Making an informed decision on this critical component of aircraft ownership will contribute to a successful and rewarding ownership experience, both personally and financially.
