The Business of Aviation Part 3: Insurance. . . and a business plan develops

One of the first things I knew I needed for the plane was insurance. My experience with insurance has been only a step beyond anecdotal, because my husband happens to take care of most of our policies. It’s true. I’m one of those women – the one that just says “OK, dear,” and is happy she doesn’t have to deal with it. The one exception is health insurance, in which case I manage which company plan we choose, and any associated billing. But in that case, you aren’t really “shopping” for health insurance – you’re more making a choice between vanilla and chocolate for whatever your company provides (unless you’re like my family growing up – in which case we didn’t have health insurance. . . but that’s another story).

Why purchase insurance?

Apart from the obvious reasons:
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I found it interesting that you are not required to have insurance on aircraft that you own in most states. That’s right: you have to have insurance to drive a car, but not to fly a plane. (Ummm. Yeah). But in this case, the plane was a company asset, and I was going to rent it – so I need to get some insurance for my prized posession. It’s important to clarify just what the purpose of insurance is for an aviation business: it’s for the company’s protection in the event the aircraft is damaged during the course of doing business. Basically, I needed to protect the company from the customer: the renter.


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In the event of an accident in which my C-182 was damaged, Aerial Aviation would file a claim on the policy, the insurance company (we hope) would pay the claim, the aircraft would be repaired and go back into service.

Faced with needing to purchase insurance for such an critical asset as a plane, I was at a bit of a loss. Let me tell you what not to do first.

1. Do not google “plane insurance” – the result is a cacophony of results, all of which tell you they are the best, and none of which tell you how they are better than others.

Not that I did that.

2. Do not attempt to arbitrarily select different groups from said google search for quotes, just to get a variety of responses. This takes a lot of time, and you often end up talking to random, not terribly helpful people.

I mean, I would never do that either. . . (ahem).

Now let me tell you what to do.
Do get some suggestions from friends/colleagues

Do figure out the policy the plane used to be operating under, and start from there.
AOPA Insurance Agency. The policy was lapsed for over a year. Which means if a rock hit it, Aerial Aviation would be shelling out bocu bucks, instead of the insurer.

Do consider your business plan for the period of insurance.
Hmmmmmm.
Upon talking to Ray at AOPAIA, I quickly discovered I needed to think through how best to spend the company’s money. I wanted some type of policy that would cover the plane, and let it be flown, but a regular rental policy was expensive.

I suddenly realized why most companies develop business plans early on. Business plans help you, well, plan out your actions – how to incur expenses, off-set costs, develop revenue sources, and a timeframe for all of this. Of course, since there was no financing of the plane, I’d never had to justify my plan to anyone other than my supportive spouse. What, exactly, was my plan? I thought through how to make the business run the first few years at the lowest cost, while I attempted to get some cash flow. I quickly considered my assumptions for renting the plane (aka how much it would be flown).

Assumption 1: Full loss in 2010 = not much flying
Assumption 2: Partial loss/break-even in 2011 = some flying
Assumption 3: Make profit in 2012 = full flying potential

With these assumptions/goals in mind, I determined to develop a better notion for getting a customer base up and running in 2011. One option would be to develop some sort of a training program that was essentially an “intro to aviation” – more than the “Discovery Flight” most of us go on to get a feel for the plane, this would be a full day of understanding the airplane/flight environment – and perhaps I could figure out a way to have multiple students use the plane at a given time. If I was to go that route, I’d need a more comprehensive insurance policy at some point in 2011.

But, for 2010, I just needed something basic: I went with a limited policy that took the plane out of general use. I had just 4 names on the policy, with the possibility of adding one more, and AOPAIA knew the backgrounds of each pilot. We could use it for pleasure or business: personal use only – not for hire/services (e.g., an instructor couldn’t take students up in it, and someone couldn’t rent the plane to transport goods/passengers for fee). Considering how little I anticipated the plane being used in 2010, this made a lot of sense.

In 2011, I’ll have a chance to change the policy to something more comprehensive – but that will be based upon building the customer base.

Funny how a something as mundane as insurance should jumpstart the thought process. . . for now, I’m just happy that Aerial Aviation won’t have to pay for any damages to the aircraft.

The Business of Aviation Part 2: Getting set up, or, How to deal with the government and survive

“I fought the law, and the law won” is not the best mantra for beginning a business, but the mindset of girding one’s loins for a fight is more than apropos. Half-way through what seemed like the interminable FAA form process I had an epiphany for why so many people go into consulting or some other services-based line of business: doing business with a highly-regulated capital asset is tough. Though it might not be quite as grueling as “breakin’ rocks in the hot sun”.

There were a number of moments during the course of 2010 when paperwork won, but by the end of the year, I won, and I am here to tell the story.

The corporation.

The IRS website for establishing a corporation has a brilliant step-by-step online system. The hardest thing for me to figure out was the company name. I considered a variety of options. I asked people’s opinions. A number of folks thought I should name it after myself: Ariel. As luck would have it, another company in New Jersey already had that name. Around 10 p.m., I decided to take a Shakespearian approach to choosing a name, and considering that “a rose by any other name. . .” I chose Aerial Aviation. Click, click, click through the website, and I had my EIN number via PDF. We wanted to set up an S-Corporation (essentially, a “pass-through” entity to the shareholders for all profits/losses). And I managed to file that additional S-Corporation paperwork within the appropriate window of 90 days.

The asset.

I can hardly believe this, even though (1) I know I did it, and (2) I am documenting it for posterity in this blog: I purchased an asset I had never seen. Momentary insanity? Perhaps. But if the company did turn a profit, then it would be considered a brilliant and bold move, based upon intuition. The FAA requires that you submit a bill of sale, as well as change the registration for the plane. Neither of the forms is particularly difficult to fill out. The wait, however, is somewhat arduous, particularly when they stamp and send the registration back to you, informing you that you signed in the wrong place/with the wrong color ink/etc. And, of course, you aren’t supposed to fly the plane without registration. So our lovely plane sat on the West Ramp at HEF throughout much of the first half of 2010.

Setting up the business took me about 4-6 months, total. I could have done it more quickly, perhaps in about 2 months, but I took longer. In the end, I won. I had a business ready to operate. The government’s reward to me? Now I get to pay taxes.

The Business of Aviation Part I: I buy a plane


DC experienced a terrific snowstorm in late December 2009. Around December 21st, four friends met for dinner, to discuss a plane, a business, and the possible return on investment. The two protagonists were Rick, whose idea had started the process, and Ariel, who would carry it out. The respective spouses were along to discuss the investment, and perhaps to add some points of reason.

The idea was rather simple: buy a plane (already in ownership through Rick), transfer to a company, get in rented/leased, make money. Oh, and I’d get to fly it.

A little earlier, Rick had invited me and my husband, Glen (aka GA), out for drinks at Champs, one of the few restaurants still operating during the snowstorm to discuss the possibility of starting a plane business. With about six months of experience in supporting the FAA, I had just started to get acclimated, and develop a sense for my new chosen field of aviation. As is my wont, as soon as I started experiencing a modicum of comfort, I was ready to take something more on. Frankly, I was already sold on the idea of starting my own company – and, perhaps more importantly, I desperately wanted to own a plane. My husband, ever the voice of caution, was in need of convincing. I’ll credit his desire to support my flight and business aspirations, with the resulting business prospects, more than any sound business case that I might have compiled. Some women covet shoes, or jewelry, and these become “splurge” purchases. Others develop plans for the grand house interior redesign. Me? I wanted a plane. And I wanted to be boss.

By the end of 2009, after I wrote a rather larger check, I filled out paperwork on the IRS website to establish Aerial Aviation as a corporation. I recall how easy I thought the process was for setting up a business. As a matter of fact, setting up a business with the IRS is rather simple – it’s dealing with the FAA, and running it that is difficult.

This series will document how to go about setting up a plane business, and the success (!?!) of running it.

Ground School

Today I am studying for a test. I swore up and down when I finished graduate studies that I would never take another exam. . .

You see that smile – there is a REASON I’m smiling. No more studying.

But to say that preparing for the FAA written exam is the same as some of the quizzes and tests I took on statistical modeling is a bit of a misrepresentation. Enrolling in a ground school course to assist in preparation for the written exam is more akin to enrolling in a course of study at a culinary institute. In both cooking and flying, even a few missteps could result in undesirable – perhaps dire – consequences. You really want to understand the material so as to properly execute.

As I mentioned in an earlier post:
The FAA “written” examination is a test on flight rules and regulations, as well as the details of a hypothetical flight. . . . The FAA provides some online resources for study and review.
But let’s face it. I needed a classroom environment to force me to study. So when a chance email floated into my inbox in May about GAMA offering a ground school course a few blocks from my office, I jumped on it. I even made my husband sign up with me. I reasoned that it would do him good (aren’t I a considerate wife), and bring us closer . . . and I really wanted a well-informed copilot.

GAMA (General Aviation Manufacturers Association) has offices at 1400 and K Streets, NW in DC, and Bob Hepp, Chief Flight Instructor at Aviation Adventures, is teaching the course. The genius of this is that busy working professionals can take this course without having to leave work in DC at 3 p.m. to beat traffic out to the closest flight school. Here is a sampling of what we cover.

Discovering Aviation, Airplane Systems

Aerodynamic Principles

The Flight Environment

Communication and Flight Information

Stage I Exam Review, Meteorology, Weather Data

FARs Federal Aviation Regulations, Accident Reporting

Stage II Exam Review, Airplane Performance

Navigation

Human Factor Principles

Cross-Country Planning and Flight

Review and Comprehensive Final Exam

Reagan Airport Tower Tour
I know, I know. You probably can hardly contain your excitement. I know I can’t.

Frankly, I’ve really enjoyed the classes. Much to my surprise, we have an a pretty diverse mix within our class –a fairly even split of men and women, as well as an age range that spans early 20’s to early 70’s. We have a technician from Hanscomb, several folks from different association (AOPA, GAMA, NATA), and a Congressman serving his last term (Vern Ehlers). Of the group of about 18, only my husband and I have worked directly with the FAA. The mix of industry, legislation, and federal agency created some lively conversation during our discussion of the SFRA!

We have the coming week off, and I’m preparing for our mid-term test. First up, typing up notes, next reviewing my FAR/AIM (which we ripped through in a 3-hour class, and I know have culled into several necessary high-lighted sections), and finally creating flashcards. I hope my studies pay off!

Flying in the Caribbean

It’s true. I haven’t flown in months. Make that 6 months. It’s embarrassing and frustrating. The last time I went up was a cold and bright Saturday in December. I was going to learn about flying in cross-winds. Never mind that it was a perfect day, with limited wind, we were going to simulate maneuvers. Just as we took off, and prepared to enter the pattern, the tower called to us and reported not picking up our squawk (transponder signal). My instructor took the controls and tried moving the plane around (to try to catch the radar signal), as well as turning the transponder on and off. No luck: the transponder wasn’t functioning, and we had to return to the ground. And that’s where I’ve stayed.

Not that I haven’t tried. Several times I tried to get out to HEF for a lesson in April and May, but cancelled each time because I was too fatigued, and it was too difficult to get out to the airport because of traffic.

But my best attempts to fit in flying were probably in Saint Martin’s. My husband and I went on vacation the last week of May with a large group of friends. We spent a lot of time on the beach. It was tough, but we managed to fit time in the two pools of the gorgeous villas we rented.

And, of course, I visited the local airport, to try to get a flight lesson in.

St. Martin/St. Maarten is an island that is both French and Dutch. The Dutch side boasts the international arrivals airport. There is also a terrific beach (Sunset Beach), where you can see the plane’s final approach to the airport. Sunset Beach also has a bar where topless women drink free. Note: I didn’t drink free.

The French side has a small flight school. I tried emailing and calling the school to no avail, so drove there with my husband and two other aviation crazy friends. After parking in the smallish parking lot, we walked over to what appeared to be the general aviation area. Some chickens were wondering around. There was quite a bit of security (locked and gated). I was used to our FBOs and airstrips, where practically anyone can walk on.

I walked up to the small office and peered inside. There were a few Cessnas, and a couple bombed out aircraft. We yelled. No reply. We asked at some of the other offices, but no one knew when any of the flight instructors might be around. A beer ( for the boy)s and a diet soda (for me) later, we finally headed back. As I’ve said before, flying is not the most convenient hobby.

I’m featured as the Accidental Aviator

My company, Infina, recently began an online newsletter. Flying is an expensive enterprise, and Infina was kind enough to cover some of the costs associated with my program of study under FAR 141. I was flattered, to say the least, when they asked if I’d like to be the employee featured for the month of January.

I immediately wrote up a short piece. I called myself the Accidental Aviator, because it’s true I kind of fell into flying. Naturally, it was too long. I told them to cut it down as needed. But when the newsletter finally came out, they kept the piece in its entirety. Pretty cool.

Check the Infina Quarterly Newsletter or read below for what I wrote:

Call me the “accidental aviator.” After joining Infina to support the ATO-Finance, Business Development Directorate at the FAA, I spent most of my time figuring out the world of contracts, cost models, and international aviation business opportunities. As I learned more about the aviation field, I started to wonder how I could gain more of the “inside scoop” on aviation. A friend suggested flight lessons. The idea took hold in full force, and about two months ago, I sat behind the controls in a Cessna-152 for the first time as part of a “Discovery Flight.”

After that first take-off and landing, I knew that flying was for me. I am now enrolled in the FAR 141 Flight Program at Dulles Aviation in Manassas, VA. Besides the challenge and thrill of going up in the air, I’ve learned a lot about the world that my work at the FAA affects. I realized was that pilot fatigue is a very real concern. After a lesson, I tend to be fairly drained from all the concentration. I also have learned how new avionics and technologies are changing the world of flight – even for the general aviation community. Aviation truly is safe: but regulations aren’t enough – pilot training is key. My 3rd and 4th hours of flying included simulations of stalls and emergency landings.

Perhaps the best part of taking flying lessons is the ability to understand and talk about the world of aviation. Flying lessons definitely give me an insider’s perspective on aviation and the FAA. A year ago I would never have thought that I would be spending hours behind the controls of a Cessna-172. Now, my goal for 2010 is to obtain my private pilot’s license.

A Plan For Flight

Patience isn’t one of my strengths. I hate practicing it. I also hate being out of control or out of “the know.” The combination of these two personal characteristics results in potent incentive for mastering a new topic or area. The same combination also sets me up for periodic bouts of frustration and anxiety. I reached the end of December in just such a state with regard to flying. Not only was I running on empty between work, outside engagements, conferences, and what little time was left to be with my husband, I knew I was neglecting my flying. I sat staring at my computer monitor at work, and all I could think about was that I was in an office instead of in an airplane.

My high school history teacher used to say: “You need a plan of attack. The plan may change. But you gotta have a plan.” I scheduled a last-minute ground-school lesson, and left work early to head out to Dulles Aviation with the single-minded goal of figuring how I could get my pilot’s license.

I think that a lot of people give up on obtaining their private pilot’s license because they fail to acknowledge just how difficult it will be. I sat down with Luis, who could probably read some of the desperation on my face, ready to address my two main challenges:

1. Lack of daylight: Even though I was told my numerous people that flying during winter months was difficult, I didn’t really believe them. I simply did not realize how difficult it was to have good weather that corresponded with day-light hours November-March. I needed to figure out how I could schedule day-light flight time.
2. Lack of time: I have a job, a husband, social/work-related commitments, and a near-obsession with running. This translates into very limited time for flying and studying. I needed to figure out how to plan ahead to maximize the little time I have.

“Look, I just want to get my license, but I can’t figure out how to do it.” I confessed to Luis. Luis wasn’t a counselor, and he probably was several years younger than me, but he was able to answer some of my questions. He pointed out I really needed to fly twice a week to keep up with maneuvers, and ideally have a day between flights. Ouch. I decided to be honest with myself: that just wasn’t going to happen. He also asked how well I understood the charts and other aspects of flying, and kindly did not laugh at me as we went over all the symbols on the chart. I clearly needed more formal ground school training, but the formal twice-weekly classroom instruction wasn’t going to work.

Listening to Luis, I realized that his idea of how to obtain a license wasn’t realistic for me. A lot of the guys roaming around Dulles Aviation got their licenses during college, and even more of them aren’t married. This served to solidify my need to be clear with what would work for me. I can’t change the weather, nor can I make the days any longer. I can rearrange my schedule, and also change my anticipated end-date.

My POA (plan of attack) included taking off most of January and February. I would refocus on studying using a DVD, my textbooks, and a weekend hour of instruction with someone at Dulles Aviation. Starting in March, I could also begin flying again. I would focus in on flying in May, and would rearrange my schedule during May so that I could fit in 3 lessons/week. I would solo by June.

AOPA has a great feature for student pilots call My Flight Path . I’ve started documenting my progress.

An Aviation Christmas

Traditions are habits that you persist in following because of their sentimental significance. Operative word: sentimental. The DC Scheirer Christmas tradition involves a pilgrimage to every family member within driving distance. This means that we visit 5 family members in the course of 6 days spread throughout VA, PA and NJ. Although this is practicable, is not what I consider practical. The fortitude and insanity of youth.

In preparing for our travels, I tried to figure out how to fit in some kind of flight preparations (studying, like I did over Thanksgiving, or perhaps finding some place to squeeze in a lesson. . .). No luck. Unlike my other favorite pastime, running, flying is not a very portable hobby. I was disappointed, but took it in stride. I vaguely tried to calculate how much time we’d save in driving if I could fly us next year. . .

We opened gifts for the 4th time on Boxing Day with my mother-in-law in NJ. I got to my last present. It was small, it was square, it wasn’t heavy – and it didn’t look like anything I had asked for. I shook it. No clue. Careful unwrapping disclosed a box with “David Clark” written on it. A vague sense of déjà vu ensued. “I should know what this is,” I thought to myself. Glen was grinning broadly.

I opened up the box, and stared down at a headset. For flying.

I tried it on. It fit great. It looked great. It was the best gift of the Christmas. Hands down.

I thought it was beautiful. Maybe it would help me with ATC communications. I thought about sleeping in it, it was so comfortable. Learning by osmosis.

I then was regaled by the story of how Glen had found the headset; how he had to call a family friend who worked as a technician on a control tower in Allentown, PA; how he and I had gone to the mall, but he snuck off for an hour to drive to an FBO (fixed base operator) to pick it up. It was not at all dissimilar to the story of him finagling my engagement ring purchase less than 24 hours before hopping on a plane to meet me in Russia.

All I can say is:

Best. Husband. Ever.

Flight Lesson 4: In which I lose my engine

“At some point, you will lose your engine,” Lucas told me in the pre-flight briefing.

I had already filed my flight plans, with one key difference from the usual: I filed for three passengers in the plane. Glen was with me. Not only would he get to be there with me practicing sharp turns (the type of turns you take when you realize another aircraft is much closer than it should be), but he would be there for my first forced landing. “Forced landing” = a potential crash that was turned into a landing. Just as you have no business flying a plane if you can’t handle slow flight, you shouldn’t be left alone at the controls if you can’t handled a forced landing.

I reasoned that Dulles Aviation wouldn’t want anything to happen to the plane, so my forced landing would turn into a touch and go, or somehow would happen on an airstrip. Scratch that. I wish I could say “I reasoned” – that enviable foresight I aspire to have as a pilot. What I really thought was: “What in the world is that going to be like?” I’m sure Glen thought the same thing, but being the supportive spouse that he is, he wisely didn’t say anything at all.

Did I mention that I took off on my own for the first time? It was wobbly, but successful. We headed out toward Culpeper.

Culpeper

Photo: Patrick J. Hendrickson

Culpeper is a small airstrip with no flight control tower. What this means for communication is that you must self-announce. I switched over to the designated common traffic advisory frequency (CTAF), in order to broadcast my position, and my intended activity (in this case, to land). You know in advance that you’ll have to self-broadcast, because when you look at your chart, the airport and related symbols are shown in magenta. Lucas had me land and take off a couple of times. “Try to avoid the snow,” he instructed, as I taxied along. It was a bright clear day, and landing was much easier in the daylight. Lucas had me slow down and take a look at some aircraft tied down outside. There was ice on the wings. “Never fly if there is ice or snow on the plane.” No kidding.

We took off and flew around again. “Take a look around you,” Lucas suggested. “Do you see any place to land in case of emergency?” I looked around. Nothing looked like any place I would want to land. I mean, I had trouble landing on the runway with assistance.

“How about that field over there?” No way, I thought.

“Uh, yes,” I said.

“You should always scan for places to land.” Right.

“You just lost your engine.” ______?

A split-second pause, for me to digest the slight action I saw Lucas make, and the slight lurch I felt. For some reason, however, I felt no sense of falling, as I had with the stall. I felt calm and collected. I recalled the steps for recovering we had gone over in the pre-flight briefing.

When you lose your engine, your goal is to achieve a stable glide speed.

Source: AMPLIFIED PROCEDURES

You also want to figure out what the cause might be. I pulled out my emergency checklist. The emergency checklist assumes you have enough time to achieve a suitable glide speed, as well as attempt to determine the cause of the engine failure. (Note: it does not list “certified flight instructor” as a possible cause). You want to give yourself as much time as possible to land – particularly if you want to get a good look at your field/area of choice – so maintaining the plane’s attitude is important. To do this, I promptly lowered the nose (maintain airspeed), and established a glide speed.

One thing you wait on until you are confident of a landing place, is turning off the avionics power and master switches. If you turn off the avionics equipment to soon, then you disable the encoding altimeter and electrical systems. In this case, I was conveniently pointed back toward the Culpeper runway. This is good, because turns tend to cause you to lose altitude. We glided in to Culpeper, settling rather heavily onto the runway. I put on the brakes, and then put them on even harder. We slowed down. Lucas let me have my engine back.

It wasn’t until we were back at Manassas that I remembered Glen in the back. He said he thought my take-off was fine. Good man.