Time was when a clear distinction existed between air transport and corporate aircraft operations. The airliners were (and still are) the workhorses that regularly carted passengers and cargo around, while the corporate aircraft were the thoroughbreds, used less frequently and with great care. Maintenance and support for the two aviation segments understandably varied.
Now we have a hybrid in the fractional share provider. These are companies that supply corporate aircraft transportation to firms and individuals who purchase a share (one-fourth, one-eighth, etc.) of an aircraft, rather than fully own an aircraft. Fractionally owned aircraft must appear and be equipped like a thoroughbred. But while they do not provide a scheduled service, they log hours that approach workhorse levels.
Therefore, the fractional share providers’ maintenance support must adopt methodology from both the airline industry and the traditional corporate aircraft market. And many of them maintain their aircraft comparably with charter (Part 135) requirements. By requiring constant readiness (like airlines) of aircraft fitted with state-of-the-art avionics and in-flight entertainment (IFE) gear (like traditional corporate aircraft), the fractional share providers veritably have raised the bar in maintenance and upgrade support requirements.
From interviews with major fractional share providers, maintenance and completion shops, avionics manufacturers and a consulting firm, Avionics Magazine has determined generally that the major fractional operators:
Fly quite new, well-equipped aircraft, that are almost completely compliant with Federal Aviation Administration (FAA) equipment requirements, such as reduced vertical separation minima (RVSM) and traffic alert collision avoidance systems (TCAS), and
Can demand top service at negotiable rates from vendors and equipment providers.
"Regarding materials and support, they ask for premium services," says Adrian Paull, vice president of customer services, Honeywell Aerospace Electronic Systems. The safety record of the fractionally owned aircraft market gives further evidence of high support standards. Despite the many hours the fractional fleet has logged, its fatal accident record remains whistle clean.
The fractional share operation’s hybrid status has prompted FAA to propose an amendment to the Part 91 regulation governing corporate air travel. A notice of proposed rulemaking (NPRM) has been issued, proposing Subpart K to Part 91, which, as this is written, has not taken effect. Much of Subpart K involves operational requirements, according to Mike Rigel, managing partner of the consulting firm, Fractional Insider. Essentially, it establishes a middle ground between Part 91 and the Part 135 standards for charter aircraft operators.
The Fractional Market
According to the National Business Aviation Association (NBAA), the number of fractional share owners mushroomed from three to 4,900 in just 15 years, ending in 2001. The market grew dramatically as a result of security issues since Sept. 11, 2001, and the resulting hassles and delays in commercial air travel. In just three years, 1999 through 2001, fractional share ownership skyrocketed by 88 percent. The number of aircraft in fractional share programs grew by 19.3 percent in 2001, from 560 to 668, according to NBAA. And the General Aviation Manufacturers Association (GAMA) claims that about 17 percent of total turbine deliveries in 2001 went to fractional share programs.
(NBAA membership includes 78 fractional share operators. Interestingly, all are U.S.-based except one: Korea Business Air Service World Aviation Corp., in Seoul.)
Although the most dramatic growth may be in the past, fractional share ownership remains a bright spot in civil aviation. Fractional Insider reports that the industry lost some 250 owners last year but took in 750, for a net gain of 500 owners. "The industry is still growing strongly, driven largely by security concerns," says Rigel.
A Little Upgrade Business
Does this market boom spell good news for avionics aftermarket service providers? Yes–somewhat.
The average age of fractionally owned aircraft is only 2.5 years, according to Rigel. That means much of the fractional share fleet remains under warranty.
Some operators won’t even allow their fleets to grow old. "When our aircraft reach the five-year point, we take them out of the program," says Steve Phillips, director of communications for Dallas-based FlexJet.
"We will add 17 new aircraft to our fleet this year," adds Bill Lyman, vice president of fleet management with Greenwich, Conn.-based CitationShares. "We average 14 to 17 new aircraft a year."
NetJets, the oldest and largest fractional operator, has more than 500 bizjets in its fleet and orders or options for more than 820 new aircraft over the next several years, according to Joe Bocsy, the firm’s manager of avionics.
A young fleet often means many of the aircraft don’t require much upgrade work. "Every one of our aircraft has TCAS [traffic alert collision avoidance system] and EGPWS [enhanced ground proximity warning system]," says Phillips, commenting on FlexJet’s fleet of about 100 bizjets. "And all of our aircraft are RVSM-compliant."
"We have TAWS [terrain awareness warning system] on all our aircraft," adds Lyman. "All of our 30 aircraft, except for four Citation Bravos, are RVSM-compliant, and those four will be compliant this year."
"The NetJets fleet is 98 percent compliant to the Class A TAWS requirement," says Bocsy. "The entire fleet will be compliant six to eight months prior to the FAA deadline." Two-thirds of the NetJets fleet is RVSM-compliant, and all of its bizjets will be compliant "once the FAA publishes a final rule for domestic RVSM," he adds.
An exception among the major fractional share operators is Cleveland-based Flight Options. About 50 percent of its 200 business jets are pre-owned, and these often require upgrade work. "Any aircraft we purchase, including pre-owned, must be equipped with TCAS, GPS and TAWS and be RVSM-compliant, says Stephen Maiden, Flight Options’ avionics supervisor.
This may provide little business for service vendors, however. As a subsidiary of Raytheon Beech, Flight Options has much of its upgrade work done at its parent company’s completion center.
About 5,500 aircraft in the United States reportedly are not RVSM-compliant, a number that worries some aftermarket observers who foresee, prior to the January 2005 deadline for compliance, a demand for upgrades that far exceeds capacity. It would appear, however, that the fractional ownership market will contribute little to that dilemma. "They do their equipment installations early," says Ron Hall, with Duncan Aviation’s modification sales, commenting on the major fractional share operators that do require upgrade work. "They’re proactive, and they’re going to make sure they are not grounded on Dec. 31, 2004."
While the fractional share market may not need many upgrades, it does require prompt service. A business aircraft on the ground (AOG) can cost an operator an average $18,000 a day in lost revenue. Fractional share owners want their aircraft when they want it, and if the operator doesn’t have one available, it must foot the bill for a replacement aircraft from a charter operator. (About 3 to 5 percent of fractional share owner flights are with charter aircraft, according to Rigel.)
Like airlines the major fractional share aircraft operators perform their inspections and troubleshooting at night, to assure their aircraft are always available during the day. "With support for a fractional, you typically are looking at third-shift activity," says Mike Anderson, Garrett Aviation’s director of avionics. "Scheduling is most critical to the success of their operations, so the fractionals generally require more maintenance support at 3 a.m. than at 3 p.m."
"About 75 percent of the maintenance is done over the weekend," adds Honeywell’s Paull.
The fractional share operators rely on service centers, such as Duncan and Garrett, for line maintenance but turn to the original equipment manufacturers (OEMs) for component maintenance, says Colin Mahoney, Rockwell Collins’ senior director of sales for business and regional systems. Because the fractional share operators demand a quick component turnaround, both Collins and Honeywell have established 7/24 (seven-days-a-week/24-hours-a-day) programs adapted from their airline support activity.
Both OEMs have long-term (about five-year) agreements with fractional share operators, in which they manage spares pools and have components strategically located for guaranteed, quick availability, generally within hours. The operators pay a per-flying-hour fee for the service.
"From the transactional support we provided in the past, it became clear to us what a long-term arrangement would cost," Paull explains. Collins has been able to do the same, with its Dispatch 100 program, which is managed by Intertrade, a parts distribution company Collins acquired in August 1999.
Both OEMs plan to expand their spares program for fractional share operators. Collins, for example, plans a more complete distribution service by also providing components made by other manufacturers, according to Mahoney. Also, along with the service centers that Collins has spares agreements with, the manufacturer is looking at adding "strategic locations"–such as Teterboro, N.J., a common bizjet destination–where components can be made readily available.
Meanwhile, Honeywell is considering extending its long-term, hourly fee arrangements with fractional share customers to include upgrades. "If their pilots want an enhancement to a system, that usually requires an internal capital appropriation on the part of the operator," Paull explains. "But what we would do is adjust their hourly fee for the period of the upgrade, say, to their EGPWS or TCAS, or to add a flight management function."
The amount of in-house support varies widely among the major fractional share operators. Two operators affiliated with airframe manufacturers have an extensive support organization at their disposal. FlexJet, for example, can employ the avionics technicians in Bombardier’s service center network. It even has available "quick-turn maintenance facilities," strategically located at Teterboro, Fort Lauderdale, Fla., and Dallas. "We’re opening a fourth center in Ontario, Calif.," says Phillips. Operators with fleets as large as FlexJet also justify on-site representatives from the avionics OEMs.
Flight Options, too, has the Raytheon Beech completion center available.
The exception to this rule is CitationShares, which is 50 percent-owned by Cessna Aircraft and 50 percent-owned by TAG Aviation. "We have just a maintenance coordination team–four technicians," says Lyman. "They coordinate with the outside vendors, and they don’t see the aircraft."
Lyman’s view is that most avionics maintenance is required away from the aircraft’s base. "The aircraft don’t break down where they’re meant to break down–at your maintenance center," he says. "We therefore have service arrangements with about 25 companies, with facilities at about 100 locations," he says.
The company does rely on the Cessna parts distribution network, however. "That way, we only need to make one phone call," says Lyman. "Cessna will have the part overnighted to a service center, such as Duncan, ready for installation."
NetJets maintains a FAR 145 repair station at its operations headquarters in Columbus, Ohio, in addition to Executive Jet Management, a NetJets charter and aircraft management company in Cincinnati. A total of 15 technicians are on hand at the two facilities. NetJets also has non-disclosure agreements with service centers and avionics manufacturers, and it has a large spare parts inventory in Columbus, with addtional, mission-critical spares prepositioned at key locations throughout the United States, according to Bocsy.
Many fractional share operators have in-house support staffs, but often they do little more than troubleshooting, which is vital to assure aircraft dispatch. For these operators, as well as for the service centers that support fractional share operators, Honeywell has developed a computer-based, diagnostic tool called the Aircraft Maintenance Support System (AMSS). Like the long-term spares arrangements, it, too, has an airliner heritage. The AMSS is an integral part in the Boeing 777 and is used as a standalone tool by America West Airlines. The AMSS is designed to troubleshoot a system quickly in the field.
"We think it would serve the fractionals well," says Paull. The AMSS "would determine the likely-failed item and tell how much time would be required to resolve the issue. It could be tailored for various uses and to a particular aircraft," he adds.
As much as the fractional share operators seek expediency in their aftermarket, for limited aircraft down time, they also seek quality. The major operators that Avionics Magazine talked to have quality control or quality assurance personnel. And they audit the service centers and charter operators they most often patronize. The fractional share operators seeking support from Garrett "studied us quite a bit," says Anderson. "Establishing arrangements with them takes quite some time."
This coincides with their apparent zero-tolerance for the failure on a flight of even a small part. "We pay close attention to everything that happens on a flight," says FlexJet’s Phillips. "And if one thing goes wrong–even a light bulb–we give the flight a zero."
Such attention to detail also often places stringent demands on the service centers supporting the fractional share operators. "We have a quality control person conduct both telephone audits and on-site audits," says CitationShares’ Lyman. "We require copies of their drug program, their training records and their capabilities. We make sure the shops have the proper manuals and that they are up to date," he adds.
That amount of oversight also requires scrupulous record keeping, which most fractional share operators carry out and require from their vendors. "Our records [regarding fractional work] are double-checked," says Duncan’s Hall. "Our inspectors check our paperwork, and the operator looks at the records, too."
For some operators, this provides a valuable database. "We are planning to build a database, so we can start tracking failures," says CitationShares’ Lyman. "We’re looking for a software program to do this, and we think we’ve found one."
NetJets, too, seeks a new "more powerful program that will build upon our existing program and expand its capabilities to track aircraft maintenance history and components with greater ease and detail," says Bocsy. The company currently uses a proprietary software system for component tracking, maintenance scheduling and reporting cycles/hours on components.
In the case of FlexJet, "because we fly our aircraft so much, our record keeping has proven to be a tremendous source of information for Bombardier," FlexJet’s parent company, according to Phillips. "We send data to Bombardier’s engineering department. The avionics manufacturers also can benefit from this, as they get a chance to see how their systems keep up with this amount of [aircraft] use."
Likewise, NetJets furnishes data to the manufacturers, and its staff "meets on a regular basis to discuss reliability trends and product improvements" based on maintenance data, says Bocsy.
Since the performance of cabin entertainment systems is almost as essential as that of the avionics, some operators have placed IFE systems, virtually, on their minimum equipment lists (MELs). "We will ground an airplane if the entertainment system doesn’t work," says Flight Options’ Maiden. "We also inspect everything down to the light bulbs as least once a week."
The IFE Challenge
Another operator has taken a rather novel approach to assure IFE reliability. "The big challenge is the reliability of the video players," says FlexJet’s Phillips. "So we decided we wouldn’t deal with that. Instead, we put as many as four portable DVD players on board each aircraft. They’re like laptop computers, and they are well received by the fractional owners."
IFE support obviously challenges the fractional share operators. "It is a particularly troubling issue," says NetJets’ Bocsy. "Currently, in corporate aircraft, the equipment used is modified or commercial off-the-shelf [COTS] equipment, and as such, it is plagued with obsolescence problems and problems of getting it repaired.
"Due to regulatory interpretations and the scrutiny of IFE as potential contributors in several incidents and accidents, replacing this equipment no longer is easy," Bocsy adds. "NetJets is attempting to influence the IFE manufacturers to have better plans to support in-service equipment as quickly as possible, with considerations give to certification and the economics involved.
"From a safety standpoint, NetJets feels it is prudent to have certifiable installation with [IFE] equipment that will not impair, impact or otherwise interfere with the safety of flight on our aircraft," Bocsy concludes.
Seeking Economies of Scale
On top of component availability and reliability, fractional share operators also seek efficiency. With a flagging economy, they have become particularly price conscious.
"They feel they should get some economies of scale, and that’s as it should be," says Garrett’s Anderson.
"What we wrestle with is unscheduled labor costs," says CitationShares’ Lyman. "We’re trying to set up flat-rate programs with our high-utilization vendors. Our goal is to resolve that issue this year."
"Control of operating costs is a major trend today," says Collins’ Mahoney. "What we see is the fractional operators looking for guaranteed performance at guaranteed costs."