Flight departments develop belt-tightening strategies

 - August 7, 2009, 7:59 AM

Pilots spend an extraordinary amount of time worrying about their jobs, and this is understandable, given the dramatic cutbacks in business aircraft travel during the current recession. The loss of pilot, mechanic and flight operation jobs is unprecedented, and thus it is not surprising that pilots often discuss ways to save their operations money.

While most pilots realize that their jobs don’t depend on saving a few cents a gallon on fuel, subconsciously, they may hang onto the hope that managing such expenses will endear them to their bosses. But there is a lot more to managing costs in a flight operation than just a pilot’s on-the-road expenses, according to David Wyndham, partner at aviation information provider Conklin & de Decker.

“If it’s a matter of keeping the doors open,” he said, “then it’s not about saving 20 cents on fuel and 50 bucks a night on a hotel. The company needs to make the value judgment on the airplane: is it worth it to have the airplane?”

If this is the issue, Wyndham said, then it’s important to remind the company leadership of the value of a business aircraft. This might include a trip that helped a customer in a crisis, “and the important customer was pleased that [your company] responded so quickly,” he said. “Or maybe it was a big sale that [your company] made.” Another important reason to keep the aircraft, he added, is that as more companies reduce staffs, leaving fewer employees to do more work, “the airplane can help keep those people productive.”

Manageable Costs
Maintenance is one of the biggest cost areas and one where the operator has the most control, Wyndham said. Maintenance is required, of course, but one can always ask whether a particular component needs to be inspected, repaired, overhauled immediately or if it can be deferred until the next maintenance visit.
Major maintenance events should be put out to bid, he emphasized. If a company isn’t flying its airplane much, then it might be worth putting up with a little extra downtime in exchange for a lower-cost maintenance event.

When it comes to expensive maintenance requirements, it is important to communicate with company accounting and financial personnel. “Sometimes it’s hard to get them to understand that required maintenance is really required, that you can’t not do it,” Wyndham said. It’s also best to make sure that company leaders know far in advance that a major engine overhaul or airframe heavy inspection is coming due, so the company can budget for it. Guaranteed maintenance cost-per-hour programs, he said, “can help smooth out those bumps.”

Flying less is an obvious way to reduce total costs, even though it reduces only variable costs and not fixed costs, such as salaries, hangar rent and insurance, which remain at the same level. Parking an aircraft and not flying it at all may seem like a way to reduce a flight department’s costs to the absolute minimum, but there are a few things that must be considered. Richard Schuller, founder of consultancy Sextant Advisory, warned that many engine manufacturers’ guaranteed maintenance plans include an abuse clause.

Unless the engines are maintained according to the requirements of the manufacturer’s maintenance manual, the abuse clause takes effect and the engines might not be covered under the engine program anymore. For example, one engine manufacturer requires periodic ground runs to maintain engine health. And once an engine is off the cost-per-hour program, putting it back on could cost hundreds of thousands of dollars. “Owners need to be alert to this situation,” Schuller said.

Meanwhile, Wyndham has also seen evidence of aircraft-operating companies reining in costs in some surprisingly small areas. “I’ve talked to folks from very large companies,” he said, “and they are switching from brand-name soft drinks to cheaper generic labels and also eliminating alcoholic drinks on the company airplanes. Some of these companies are also cutting catering costs, serving sandwiches instead of steak dinners and executives are buying off on that.”

Simple Ways To Keep Costs Down

For pilots and others who want to make sure they are doing the best job at managing aircraft expenses, there are many issues to consider, according to David Wyndham, partner at aviation information provider Conklin & de Decker. “A lot of it is common sense,” he said, “not spending money unnecessarily.” Consider:

- Does the boss care about arriving a few minutes earlier, or would it save fuel and wear and tear on the engines to throttle back?
- Can multiple trips be combined, eliminating dead-head legs?
- Will tankering fuel reduce overall fuel costs?
- Does a particular low-cost fuel destination really save money, if all the other costs are considered, including ground transport, the level of service, ramp fees, etc.?
- Are premature brake and tire replacements eating up the budget? “Do you have to take the first turnoff?” Wyndham asked. “Roll out to the end of the runway if possible. The last thing you want to do is jam on the brakes to show
the boss you can make the first turnoff.”
- Are you taking advantage of fuel-cost-saving opportunities like contract fuel companies, discount fuel price aggregators and simple negotiation with FBOs?
- Have you updated your company’s aircraft policies lately, especially in light of reductions in used aircraft values and increased competition among insurance underwriters? And does your insurance underwriter recognize your operation’s safety efforts with reduced premiums (safety management systems, regular professional training, participation in a flight operational quality assurance program)?

Resources for Travel Savings

Here are some resources that can help with flight operation cost-cutting:

Fuel
Although some contract fuel companies have disappeared, others have opened and many of the longtime providers remain in business.

- Fuelerlinx has finally cracked the code of how to help operators aggregate a great many contract fuel company prices, helping pilots and dispatchers save time in choosing the most economical fuel provider while planning a trip.
Fuelerlinx analyzes prices of more than two dozen contract fuel providers and offers a “least-cost-routing” service with the lowest-cost fuel locations for a particular trip. (http://fuelerlinx.com/)
- Globalair.com’s Max-Trax allows users to plan a trip with the best fuel prices at interim stops and the destination, plus easily evaluate alternate airports for better prices. (http://maxtrax.globalair.com)
- The Corporate Aircraft Association still offers members extremely favorable fuel prices at participating FBOs. Membership requirements remain fairly strict, and the association is open only to NBAA member flight departments with at least one jet that are not Part 135 operations. (www.corpaa.org)
- The potential savings from tankering fuel are hard to calculate, but Jim Deuvall, president of Cavu Companies, has developed aircraft-specific software that does all the work. See www.cavucompanies.com for more information.

Hotels
- While many FBOs have negotiated good deals with local hotels, travel Web sites usually can deliver much lower rates. The author uses Priceline.com and frequently has saved more than $100 a night with a few mouse clicks. Examples of his own Priceline.com hotel charges during the past year include (charge per night, taxes included):
- Hyatt Regency Orlando Airport: $63.98
- Stamford Marriott Hotel And Spa (Conn.): $72.84
- Aloft Dulles North: $47.08

Rental Cars
- Priceline.com is also an excellent source for rental cars, although savings recently have not been as good, possibly due to rental company consolidation and smaller fleets. During last year’s EAA AirVenture show in Oshkosh, Wis., the author scored a six-day (one-week) standard-size car from Budget Rent A Car for $181.83 (taxes included), 39-percent less than the lowest rate available from travel Web sites or Budget’s own system.