Contract pilots: square pegs or

 - October 4, 2007, 6:23 AM

The subject of contract pilots always seems to come up with little warning, like five minutes after someone in the company books a trip in the middle of a regular pilot’s vacation or training. A department manager’s reaction to this kind of crisis ranges from a look of deep confusion to a smile because the solution is already in hand. The solution usually means finding a qualified pilot–now.

Contract piloting has evolved to fill this kind of immediate need for temporary help in the cockpit and is continuing to grow into a group of highly experienced professional aviators who can deliver on-demand pilot services. Fledgling flight departments use contract pilots to bring their own pilots up to speed on a new aircraft type, and even as new managers still trying to get a flight department organized. The full-time pilots receive the help they need to deliver the lift the company demands, at significantly lower cost than hiring another full-time pilot.

As the economy slows a bit and companies tighten their belts, flight departments are still expected to fulfill their missions. Contract pilots can be a key solution here as well. There’s also no need to add full-time staff when a contract pilot can solve the problem. The rash of corporate mergers and department downsizings has also created a need for pilots to fill in because, according to Jan Barden, president of Aviation Personnel International, “a shortage of qualified pilots can cause a lot of grief.”

“Hiring contract pilots has alleviated much of the anxiety about having to grab anyone we can to meet an unexpected need,” said Bill Jeffries, manager and chief pilot of flight operations and safety for the Virginia Department of Aviation. Target Corp.’s manager and chief pilot of flight services in Minneapolis, David Maib, agreed. “I think there is a definite business need for contract pilots.” Bill Quinn, president of Aviation Management Systems of Portsmouth, Mass., finds contract pilots to “be an excellent training tool and they will often tell me about areas where we can improve our operations.”

There are also opportunities for pilots as more of them begin looking at contracting as a serious career option, especially since it offers pilots a perk most have never had–some control over their lives.

Mason Hargreaves, a Falcon 900 contract pilot in Tampa, Fla., likes “the time I get to spend with my children. It’s lots of quality time. I like the freedom and the flexibility. But being self-employed carries a risk. The sweetest fruit is at the end of the vine.”
Val Trent, president of National Charter in Seattle added, “An independent contract pilot sees freedom as a higher priority than the security of a regular paycheck. But that mentality is often difficult for the rest of us to grasp, which might explain why some managers don’t think of contract pilots right away.”

Perceptions and Expectations
But while hiring temporary help offers a number of immediate cost-saving benefits, it can also open a huge can of worms for managers. The rather cloudy reputation of contract pilots is often the first issue to be tackled.

Hargreaves offered his perspective: “The perceived image of contract pilots is a very complex issue. Many today are still viewed as unemployable misfits. In the early days there were contract pilots who simply didn’t care how they appeared to customers, as well as those who did not take contracting seriously as a business.”

Charlie Watson, moderator of the independent contract pilot forum and president of California Jet, said, “They’ve always been viewed as mavericks, people who couldn’t hold a job, the black sheep of corporate aviation. It is untrue. This is a very professional segment of the industry without much recognition.”

Others are changing their perceptions and expectations as well. Maib said, “There are a number of professional contractors now who do this exclusively. I expect independent contract pilots to operate as though they are a regular business,” which he interpreted as meaning a pilot who is also current in the aircraft flown.

Contract pilots can deliver value in other ways not often given much consideration by aviation managers. By using contract pilots, who often function as de facto consultants, managers can gain valuable feedback about how their operation matches up against other similar departments in areas such as training techniques or even the organization of the operations manual.

As they search for a contractor, aviation department managers should understand that contract pilots come from a variety of backgrounds and with varying motivations, from full-timers looking for extra cash to pilots in search of a new job to someone running a pilot-services company.

Technically, the name for the latter is “dedicated independent contract pilot.” Avcrew.com, an online service that connects contract pilots with flight department managers, defines them this way: full-time contractors are pilots who are completely self-employed independent pilots, while part-timers are pilots supplementing their primary flying jobs.

Pilot Marketing
In an anecdotal survey, AIN learned that most aviation department managers and pilots found each other by the oldest and relatively least-expensive method of marketing–word of mouth. Maib said, “I talk to other managers and my own pilots when we need help. I also regularly keep the lines of communication open in our community. I’d also use the aircraft manufacturers or FlightSafety as a source of pilots if I needed them.”

Hargreaves said contract pilots must “be proactive. Word of mouth is the best marketing.” Watson said, “I gave out 87 days of work over the past year posting on our forum and on the NBAA forums.”

But these are certainly not the only methods available to locate temporary pilots. Any pilot with Web access can advertise his or her services with a number of placement agencies and on Web sites that cater to temporary help (see sidebar).
Susan Anderson, a West Palm Beach, Fla.-based Learjet contractor, said, “I sent a picture-postcard with my Web site address to NBAA members, and also to every Learjet 60 owner I could find.” Avcrew’s Harris added, “Pilots need to look at all forms of marketing, from cold calls to direct marketing sales letters.”

Though placement agencies, such as Jet Professionals, an affiliate of Jet Aviation, reduce a contract pilot’s marketing expenses, they also take a large chunk of a pilot’s daily proceeds. Many of the contract pilots AIN spoke to were fiercely independent, conducting their own marketing and maintaining their own distinct business relationships with client companies. They viewed agencies as the competition. If an independent contractor working through an agency is treated as an employee of that agency, the deductibility of the contractor’s business expenses could be open to question as well.

For pilots–even those with an entrepreneurial drive–the concept of running their own business can be a daunting one, especially if their mission is to make money first and get repeat business second. The problem is that diverse personal goals deliver diverse results to customers.

While aviation managers may or may not care whether a contract pilot arrives as an individual, a sole proprietor or a Sub-chapter S corporation from a business standpoint, they do want business-focused pilots who can help solve a temporary staffing problem. Learjet 60 pilot Anderson said, “I see myself as a small business owner providing qualified contract pilot services.”

Aviation Management Systems’ Quinn said, “Only a small percentage of the pilots we work with have a true business presence. In the last 10 years it seems the contract pilot community has become more dedicated. Not even the best full-time job offer will lure them away [from their own business].”

Small Business or a Gun for Hire?
Maib raised the point that contractors must consider in their presentation whether they are operating as a business entity or not. “I think about the same issues when I recruit a contract pilot that I do when I look for a full-time employee. Finding a contract pilot that someone else has already used is always my first choice.”
Brion Hart, a contract pilot in Dallas, agreed: “Candidates should be screened in much the same fashion that a full-time applicant would be, not as a last-minute need arises.”

Richard Harris, president of avcrew.com, said, “The majority of contract pilots I run into don’t think they are running a small business and don’t realize the scope of what is involved. Pilots need to ask themselves whether they have the necessary skills to run a business–and where they’ll find those skills if they don’t. It takes some solid financial footing and perseverance to make this work full time. If you know you can’t make it past three months without some money, you’re setting yourself up for failure.”

According to Hargreaves, “It is important to have a conceptual idea of what your costs are and how to market your business. You must think of the downside as well as the upside, such as putting $12,000 on your personal credit card for a company that takes 30 to 45 days to pay you back. You have to be ready for that.”

Although many contract pilots prefer word of mouth as their only advertising medium, many said they also regularly engaged in conversations online through NBAA’s Air Mail and California Jet’s independent contract pilot forum. While the latter offers contract pilots free access to the almost daily debate of contracting issues, the NBAA’s Air Mail system is for members only. 

Anderson believes she has “learned a lot about the contract business from the independent contract pilot forum.”

Culture Shock
Inviting any temporary pilot into a flight department also opens the door to the possibility of culture shock for everyone. Hargreaves said, “The only difference a passenger should see between me and their regular pilot is a new face. My attitude is the same, I dress the same and I blend in,” reinforcing the chameleon-like nature of a successful contract pilot. A good contract pilot must also be resilient, perhaps humble in the face of constantly changing demands from various aviation managers and their pilots.

Many managers told AIN they would use contract pilots only in the right seat, with a few rare exceptions. Consequently, pilots who are unable to check their egos at the hangar door may find this situation difficult to live with. But attitudes can change. “Although most companies call me for right-seat duties, many will alternate legs once they see how I fly,” said Anderson.

Target’s Maib added another perspective to the culture shock issue that limits his department’s use of contract pilots to only two or three times per year. “We used to be more aggressive about the use of contract pilots to give our own people more time off,” he said. But our pilots agreed together that the extra work required to fly with a contractor far outweighed the benefits. Since contract pilots don’t know our operation, they require more of the captain’s attention, something that can be difficult to offer when a crew is tired.”

Ron Overholt, former chief pilot with Trump Hotels and now working for Pfizer, said he discusses “contractual details, insurance coverage by the company–including a blanket worker’s compensation policy–and our agreement to their rate and terms of service” long before the first flight. “The pilot’s resumé and documentation are faxed to our insurance carrier so the pilot can be added to the approved list of contract pilots as well.”

Employee or Independent Contractor?
The decision about whether to use a placement agency, word of mouth or simply to surf the ’net to locate a temporary pilot opens up a new set of issues for both aviation department managers and pilots to deal with. Some of these include a succinct determination of when a contractor may actually be considered an employee; who is responsible for various payroll taxes and insurance issues; and how effective a written contract can be to sort out problems that arise. While AIN offers no legal interpretation on these issues, a quick look at the most important topics is certainly in order.

To begin with, “The employee versus independent contractor distinction itself is murky,” said Nel Sanders, a partner at Conklin & de Decker. Most managers understand they are not required to pay taxes for an independent contractor’s compensation. That’s one of the main reasons for using a contractor–to keep things simple. But if the IRS should decide that a contractor really looks more like a full-time employee, the hiring company could find itself liable for back taxes and penalties. Sanders added, “If a contractor operates as an employee of their own company, the IRS may not challenge the contract pilot’s status as an independent contractor.”

One contract pilot AIN talked with has found “some clients insist on withholding taxes in the same manner as any other employee, some pay the full fee and issue an IRS Form 1099 and others choose to divert tax issues to a temporary placement agency.”

Sources told AIN that simply choosing the temporary agency route, however, does not offer full immunity from any future tax problems when using a contract pilot from that agency. Having a good CPA to discuss tax issues with before a contractor is brought on to the property would be a wise solution.

Does a contract pilot operate his business with a written contract in place or take his chances? Does his contract, if he chooses to use one, outline clearly what the contractor will and will not do? Does the contract from the hiring company, if it uses one, outline the same kind of issues to the contractor?

Val Trent doesn’t use a contract. “Originally, I hadn’t thought of it. Now it’s because I know all the operators I personally fly for and we each know what is expected of the other. There is a trust factor that would be breached if a contract were brought into the picture now.”

Hargreaves said, “he uses a written contract only when the flying is longer than four months in duration.”

Quinn countered, “We have a contract between us and our pilots. We are very careful with our client’s confidentiality and proprietary issues and non-disclosure agreements. I’m also a believer in putting on paper what you are going to do. This sets a level playing field.” 

Litigation Concerns
The issue of potential lawsuits from either a manager’s or a pilot’s perspective is one that neither side finds inviting and is the primary reason contracts in some cases are worth their weight. But Hargreaves explained the practical marketing side of contracts and the protection many people believe they offer. “The thought of suing a client would be like committing business suicide,” he said. “This is a small community. Who’s going to call you after you’ve sued?” If you don’t have a law degree, it is probably best to hire a good attorney who can help with these issues.

For contract pilots and managers, another often ambiguous topic is liability insurance and exactly when a contract pilot is or is not covered. “Being named as an additional insured means the insurance company will defend [the contract pilot] in case of a loss and is always the best choice,” said Wendy Wenk, of Wenk Aviation Insurance Agency of Highland Park, Ill.

Under an open-pilot clause, contract pilots are normally covered by a policy, but there are some gray areas. Pilots and aviation managers need to be certain they understand those exceptions.

“Underwriters closely scrutinize pilot qualifications, especially recent recurrent training in the specific aircraft type and attendance at an approved training facility, before they make their decision,” Wenk added.

From a pilot’s perspective, this means asking questions before the first flight, some of which could potentially jeopardize a specific piece of contract work entirely if not handled diplomatically. Anderson noted that the process of putting your experience in front of an insurance underwriter before the flight can be pretty simple. “I keep the USAIG form right on my computer so I can easily update it before I print out a copy,” she said. “It takes no time at all now.”

Contract pilots must also address the basics of getting one’s business presence organized. Valerie Dunbar Jones, an Illinois attorney, outlined them: “Setting up your own company means observing formalities. Generally you may form a sole proprietorship or simple partnership without filing anything, but state registration of your business name and other filings, such as obtaining a federal tax ID number, may be required. Keep good books, run all of your expenses, bank accounts, credit accounts and training contracts through the business entity and pay yourself as an employee. If you can’t get liability insurance, get indemnities and waivers of subrogation to reduce risk. Find a good accountant and a good local attorney to help set up your business structure and draft your contracts, and heed their advice.”

Pay Issues
No matter what the state of the economy, both managers and pilots are focused on pay issues. How much do you pay a Hawker pilot in Louisville? Should the rate be the same as for a Citation pilot in New York but less than that for a Los Angeles-based Challenger pilot? Although the compensation issue is always hot, data is sometimes only sketchy information interpolated from a variety of salary studies for full-time pilots.

Managers have a number of pay sources available to them. One can be found at
bizjetpilot.com, whose salary survey presents contract pilot rates organized by state and aircraft type (the reliability of the survey was not noted on the site).

Managers can also determine contract pay rates by asking other flight department managers what they charge for similar aircraft, something easily accomplished by posting a question on NBAA’s Air Mail or to the online contract pilot forum. Most contract pilots, especially those who view themselves as small business operators, are quite forthright about their rates.

One contract pilot who flies Gulfstreams said he charges between $600 and $700 per day for the GII/III, while the GIV day rate runs about $700 to $800 and the GV rate runs $1,000 to $1,200 per day. He added, “The cost of training is what generally drives the rates.”

While some pilots reported a willingness to negotiate their rates, as in the case of a long-term contract, most would not, despite the slowing economy. Flight department managers interviewed for this article said they normally paid the contractor’s going rate as long as it fell within the predetermined guidelines they had in their heads. Trent added, “If we offer training or a long-term contract, we’d expect concessions. But there are several factors that bear on what we’re comfortable paying, including the cost of getting an out-of-state pilot to our airport as opposed to a more expensive local pilot.”

Harris said, “Pilots who have done their homework will name their price. The unfamiliar types may ask what they should be paid.” Quinn added that his company will cover contract pilots for workers’ comp issues, but expects a 10-percent rate reduction from the contractor for that service.

A contractor’s recency of experience and the type of training are always a concern. From a manager’s perspective, there is a consistent expectation that pilots presenting themselves–even for SIC duties–be type rated and current in the aircraft they intend to fly.

Jim Pasa, the aviation department manager for Odyssey Aviation in West Palm Beach, Fla., operates a GIV-SP and offers the right pilot a barter arrangement. “I will give non-current pilots a currency check in our aircraft if they will provide me with four days of cockpit duties in return.”

Safety Issues
Finally there is the issue of safety, a topic often viewed only from the flight department manager’s perspective, such as when a contractor hands over references and training records. But one Virginia-based contract pilot, who did not wish to be identified, mentioned a “good, bad and ugly” list of aircraft operators that contractors should steer clear of.

Besides the word of mouth that now moves as fast as the speed of light thanks to the Internet, other signs are there if an operator is scrutinized properly.

“Ninety percent of operators are fine,” this pilot said. “You learn to recognize certain signs about the rest. It could be the severity of the price negotiations or it could be the condition of the hangar or just the way the aircraft looks.” He recently refused to fly on a company’s GV due to safety and integrity issues.

Rit Higgins, a contractor who flies GIIs and GIIIs from Van Nuys, Calif., said, “A good preflight tells me a lot. There have been airplanes I told owners I would never fly over the water.”

But from some managers’ perspective, there will always be concerns about the use of contractors. Dave, a manager in Denver who requested that his real name not be used, said, “We no longer use short-term contract pilots at all. We do have one who is on a one-year contract and trains the same way our staff pilots do. But I believe nothing is safer than a full-time employee. The safest crews train together, share common values and philosophy and fly together regularly. Regardless of how you slice it, I think safety is compromised to some degree with contract pilots.”

Mixed Crews
The GIV crash at Palwaukee in 1998 involved mixed crews, a concept of constant concern to both contractors and managers. Two highly trained GIV pilots, each accustomed to a slightly different takeoff procedure, lost control of the aircraft in a strong crosswind, killing all aboard. In all fairness to contract pilots, it should be noted that the pilots in this accident were full-time employees, but from different companies that jointly operated the aircraft.

Said one contract pilot: “If two unfamiliar pilots get together, the preflight briefing should include specific differences in the aircraft or any procedures used at the host company, then fall back on the professional training we all receive in the simulator. It doesn’t matter who initiates the briefing either, as long as it is accomplished.”

John Williams, a Falcon 900 pilot in Houston, said, “The key to a successful and safe mixing of crews has little if anything to do with the individual’s employment status and everything to do with proper balancing of other personnel characteristics. I have never seen two professional pilots who were identical individuals in the cockpit.”

To use or not to use a contract pilot in one’s flight operation is as much an individual decision as how much fuel to carry for a long flight. It all comes down to personal tastes, balanced by reasonable access to the best information possible about the advantages and liabilities.

As the contract pilot segment of the aviation business expands–and it will as more departments try to balance the demands of a roller-coaster economy against their company’s demands–the focus will not simply be on whether to use a contract pilot or not, but on what the quickest methods available are to locate a reliable, qualified contractor when needed. For their part, the truly serious contractors must begin to organize themselves as a serious business entity if they expect aviation department managers to treat them seriously.

Any business depends on relationships to survive. Hargreaves offered this suggestion to aviation managers: “Take a look at the independent pilots rather than the placement services.”

John Sheehan, a contract pilot with Professional Aviation Inc. in Wilmington, N.C., suggested, “Why not cultivate contract pilots? Make sure they have the same minimum qualifications as the permanent crews, go to training as frequently and fly at least once every couple of months. This will take an investment of time and money, but the great majority of flight departments need contract pilots from time to time. Why not plan ahead and make them a real part of your operation?”

'Contract pilots: square pegs or all-around assets?' PDF