How to choose management company?
Features, nuances, advices and criteria for assessing a management company to understand this issue better and to make the right choice.
Why do you need a management company?
A management company organizes the operation of a business jet. These processes are: crew management, mutual settlements with airports, ordering food, selling charter flights, if such a task is set by the owner, and much more.
What kinds of management companies exist?
There are few types of management companies.
- Large international management companies
- Local management companies, which are usually not as big as the first ones and some of them do not have their own air operator certificate.
What are the usual requirements for management companies?
There is no clearly defined list of requirements. Basically, when an owner hands the asset over for management, first of all, he or she insists that it is managed efficiently. The above applies to all aspects, from crew management, maintenance, business jet registration to commercial operation, ordering food and so on. Aviation is the business where any mistake can cost you a lot of money, and any method that, in some way, improves management efficiency is repeated many times. There is a well-known case with the CEO of American Airlines instructed his staff to take out one olive from the standard on-board lunch. Thanks to the repeating effect and the number of flights, the annual savings on food reached seven-digit figures. Such cases show the importance of paying close attention to the smallest details, and they prove yet again the necessity to efficiently build particular business processes.
Are there any additional requirements?
Each owner may have additional requirements related to taxes or financial aspects of the acquisition of an aircraft. For example, one such aspect is the choice of the country of registration of an aircraft. In this case, the management company must have an air operator certificate in the selected country.
How to check the effectiveness of the company?
There are several ways. If you do not want to carry out all the inspections on your own and keep a whole department for this purpose, it is worth resorting to a professional third-party audit, which looks into both the company's revenues and expenses, because experience of many companies in business aviation shows that the main business of some management companies is often overstated expenses in the invoices of counterparties, which causes direct economic damage to the aircraft's owner.
What are the pitfalls when working with management companies?
Unfortunately, there are so many of them. The biggest one is overstated invoices from counterparties. Obviously, after that, it could be anything: dishonest acts as falsification of records in the aircraft operation logs in order to influence the amount of fuel required and, consequently, the costs associated with it. It also happens that, according to the budget and expenses of some companies, there are three crews, but, in fact, a flight was carried out only by one and a half. Therefore, three pilots were paid a salary, but physically they did not exist. It may cause the owner an extra monthly expense of about 40 thousand euros. There are a number of other nuances related to aircraft maintenance, as well as the selection of maintenance contractors.
If you imagine that you are a regular client of reliable managing company, what would be the main advantages?
First of all, the management company's professionalism, which implies the ability to transport people from point A to B in a timely manner and in full accordance with the client's preferences. The second fundamental quality for a management company is the ability to be responsible for the budget or obligations that it took on before signing the contract.
At this stage, it is very important to adhere to agreements, first of all, on the budget and management rules. It often happens that the budget which is presented to the client after the conclusion of the contract on aircraft management significantly differs, and not in a favorable way, from the one that was presented before the conclusion of the contract. To avoid such situations, it is necessary to clearly specify the obligations of the management company, including the financial ones, in the contract on aircraft management. If the company refuses to specify these obligations, it is worth considering its integrity. In addition, there are other companies on the market that can agree to these conditions.
The above concerns both the revenue and the expenditure parts of the budget. We believe that a company should be able to solve both tasks: to make money as effectively as possible when the owner rents their aircraft out for a commercial charter flight, and, vice versa, to be able to effectively save funds, starting from expenses for commercial flights and ending with expenses for the owner's personal flights.
Also, a very important quality for a management company is the ability to provide an additional service, such as ground handling. It is about land transportation, the so-called transfers, at the destinations, as well as, if necessary, booking tickets for regular flights, the possibility of renting a yacht or a villa through the company and many other accompanying services.