““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”
The smart way to buy charter service
Corporate aviation has been hit particularly hard by the economic downturn. But the charter field may do relatively well, according to some industry insiders, as business jet travelers seek less costly alternatives to fractional jet shares and ownership of whole aircraft. If you or your company are among those taking a fresh look at charter, it's time to consider how to find the best provider for your needs from the more than 2,500 in operation.
The first step is to understand your mission and what it requires. This is vital because charter operators employ more than 300 makes and models of business aircraft, each with a different purpose, according to the National Business Aviation Association's Aircraft Charter Consumer Guide (available at www.nbaa.org).
Questions you should ask yourself before speaking with an operator include: What are the origin and destination points for my flight? Is my travel domestic or international? How many people will be traveling? Do I need an onboard lavatory, sleeping quarters, a telephone or services such as catering?
Answering these questions will help you narrow the choice of operators. One that specializes in large-cabin business jets would not be the best choice if you need to travel only 500 miles, for example.
Consult an Auditor
Once you know what you want, you need to find a safe charter operator to provide it. An excellent way to do that is to contact an aviation safety auditor, such as ARG/US or Wyvern. These organizations provide safety information about charter operators and can recommend the best ones for your mission.
ARG/US rates operators based on information about their pilot certificates, aircraft registrations, FAA operating certificates, accidents, incidents, enforcement actions, ownership and management. Using this information, the company assigns each operator a safety rating: Does Not Qualify (DNQ), Silver (U.S. only), Gold (U.S. only), Gold Plus or Platinum. Platinum, the highest rating, is reserved for operators that exceed FAA requirements, have passed an on-site safety audit at least once every two years and have implemented best safety practices.
"Having an FAA operating certificate is just the minimum," said Mark Fischer, ARG/US' executive vice president. "[It] simply means they haven't gotten so bad that the FAA has taken it away. It doesn't mean excellence."
Unlike ARG/US, Wyvern doesn't assign a series of ratings. Instead, it indicates whether companies meet its Wyvern Standard in their flight and maintenance operations. To do so, operators must pass annual on-site inspections conducted by a Wyvern auditor, who typically holds an ATP (airline) flight rating and has thousands of hours of flight time, in addition to experience in management and quality assurance.
In the past year, Wyvern launched www.WeFlySafe.com, a Web site listing operators that meet the Wyvern Standard. "This Web site highlights operators and brokers who have subscribed to the Wyvern philosophy on what a safe and legitimate charter flight is," said CEO Jim Betlyon, who added that statistics prove the effectiveness of the Wyvern Standard. Of the 1,161 charter fatalities from January 1991 to September 2008, he said, none involved a Wyvern-recommended aircraft or aircrew.
Ask about Pilot Experience
ARG/US and Wyvern can provide details about an operator's pilots. The ARG/US TripCHEQ report evaluates specific flights-not the company itself-and assigns a Green, Yellow or Red rating. To achieve the Green rating, the pilot-in-command (captain) must have 3,000 hours of flying experience and the copilot must have 1,000 hours. Combined, the two pilots must have 250 hours in the specific make and model of airplane used for a flight. "You might have a pilot with 10,000 hours flying military aircraft, but very little experience in a Hawker or a Learjet," Fischer said. "They know how to fly, but you have to ask whether everything in that cockpit would be second nature to them in an emergency situation."
The Wyvern Pilot & Aircraft Safety Survey (PASS) report also rates individual flights and in many ways is even more stringent than ARG/US' TripCHEQ. For example, captains and copilots must have a combined total of 6,000 hours of flight time (compared with a total of 4,000 hours to receive a Green TripCHEQ rating). Like the TripCHEQ report, PASS requires pilots and copilots to have 250 hours of flight time in the specific make and model of aircraft employed for a flight.
The PASS report also verifies that the crew has recent flight experience in that make and model. "It is imperative to ensure that the plane and crew are current," said Betlyon. "Because of the economy's weakness, operators aren't flying as much to ensure the pilots are staying current. When things get rusty, that's when things go south."
Do Your Own Research
If you don't use a safety auditor such as ARG/US or Wyvern, you should do your own research to whittle down the list of operators. It's perfectly acceptable to question a charter company about its safety record, but the NBAA recommends that new customers also contact their local FAA Flight Standards District Office to verify an operator's good standing. The FSDO will not only provide safety and accident records, but will also let you know whether the FAA has ever taken an enforcement action against the operator.
Be sure to get information about the age and condition of the company's fleet. "A customer has to look one or two levels behind the clean, shiny airplane," Fischer said. "The cheapest thing to do is paint the airplane and clean the interior."
You should also scrutinize the pilots' backgrounds. In addition to finding out whether they have the experience flying in a specific environment (such as into mountain airports if you're going to places like Aspen, Colo.), you should ask about their flight hours. The FAA requires charter pilots (captains) to have 1,500 hours of flight time, but as noted earlier, the ARG/US and Wyvern standards are much higher.
You should also verify that the company's management and maintenance technicians are certified and sufficiently experienced. "Who's running the company? What's their background? How long have they been doing this? That's usually a pretty good indicator," Fischer said.
Inquire About Training
Training is also a key factor to consider when choosing an operator, according to Mike Nichols, the NBAA's vice president of operations, education and economics. In today's economy, it's even more important than usual because some operators might be trying to save money by scaling back on the full-motion simulator training they would normally provide to pilots.
However, such training is crucial. "There are things you just cannot train for in an airplane, such as an engine fire," Fischer said. "So I would definitely ask if the pilots are full-motion simulator trained."
A good charter company should have a safety management system in place. One way to verify this would be to purchase a safety report from an auditor, but you can also ask an operator for written details of its safety standards.
You should inquire about the company's security measures as well. Are the building and aircraft secured at night? Are passenger-screening procedures in place? Do employees wear badges or ID cards?
Verify Insurance Coverage
Some factors probably deserve more attention than they received in the past, NBAA's Nichols said, explaining that operators might be tempted to cut costs as a result of reduced business. For example, he said, a company may have scaled back on its aviation insurance.
A charter company should have a minimum limit of $50 million of liability coverage, according to the NBAA. You should request that the operator name you as an "additional insured" on the policy and insist that you be notified in the event of the policy's cancellation. It is also smart to ask whether the policy has been changed in recent months.
Don't be swayed by low costs, Fischer said. Prices tend to drop when supply exceeds demand. "But if it's a really cheap flight, what isn't the operator paying for?" Fischer asked. "Simulator training? Have they let go of a safety officer?"
Finally, you should consider the atmosphere of the company. What is the retention rate for pilots, for example? Do employees receive customer-service training? What is the customer-satisfaction rating? Many customers rely on recommendations when selecting an operator.
"In these challenging economic times, it's all the more important that charter customers know who their charter operator is and how that operator is running the business," Nichols said. "Regulations outline what a charter operator needs to do to meet the FAA standard, but a charter customer should do a lot more investigation to make sure that operator meets their standard, not just the FAA's."
Booking Through a Broker
Using a charter broker to book your flights is often a good alternative to contacting a
charter operator directly. A broker can help arrange additional services, such as catering and ground transportation, and some will even book your hotel room and find tickets to theater or sporting events.
The downside, however, is that the broker industry is totally unregulated. Anyone with a phone and an Internet connection can advertise his or her services.
To avoid running into problems, you need to find a broker who understands the aviation industry and is willing to be transparent about all business transactions.
A good broker will have knowledge of FAA Part 135 regulations, which govern the air charter industry, and will have aviation experience or education. Getting written confirmation of this background is a good idea.
Although the FAA doesn't regulate brokers, the Department of Transportation has mandated that they be up front about the type of business they operate. A reputable brokerage will clearly state that it doesn't own airplanes or operate the flights it books. The contract and all advertising materials should verify this information. If not, you should find another broker, recommends the National Business Aviation Association.
Another important question, according to the NBAA, is whether the broker is serving as an agent of the charter operator or the customer. Since brokers charge 7-percent commissions, on average, it is important to know who will be paying that fee. Brokers should also be willing to give you a written statement that lists not only the hourly rate of the aircraft, but additional charges for catering, fuel, crew or landing fees.
A good broker will also be recognized by an aviation safety auditor such as ARG/US or Wyvern and will rely on the auditors to select the best operators. (See accompanying story for more on these auditors.) The broker should be willing to provide an ARG/US TripCHEQ or Wyvern PASS report for each flight to verify that the operator, flight crew and aircraft meet all federal safety requirements. It is important, however, to verify this information. "I want to know what standards are being met, and I want to see proof," said Mark Fischer, executive vice president of ARG/US. "If a broker says all the operators [he uses] are ARG/US Platinum rated, show me in writing that's true."
Wyvern provides a list of approved brokers on at www.WeFlySafe.com. According to Wyvern CEO Jim Betlyon, each operator on the list is willing to provide a PASS report to customers to verify that the operator, aircraft and crew meet the safety requirements of the Wyvern Standard.
The most important thing is to find a broker who will put your needs first. "While some charter brokers have aviation industry experience and understand all facets of the charter industry, others have limited aviation experience and place a priority on their profit, with the customer's needs secondary," according to the NBAA. "If the charter broker is unwilling or unable to provide you with the information [you need], you might consider working directly with a charter operator or another broker."