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Sunday, June 1, 2008

Our Brothers’ Keepers?

James T. McKenna

Reader Robert Rendzio took us to task last month. Our recent Question of the Month about the impact of Silver State Helicopters’ shutdown on the U.S. industry was callous, he wrote in our May Feedback column, considering the many young victims of that outfit "whose lives are ruined."

"Your focus needs to be on the tragedy of the students and your insensitivity to their demise and ruined lives is simply unfortunate," Mr. Rendzio added.

What was most striking about his letter, I think, was the frustration that lay behind it. He vented that frustration at Rotor & Wing, but I’m certain we weren’t the source of it. Our question, after all, wasn’t much different from his concern about the welfare of Silver State’s victims. It was framed more broadly that Mr. Rendzio thought fitting. But Silver State’s more than 2,500 abandoned students logically were at the heart of our question.

Logic, though, doesn’t govern responses to the Silver State fiasco. Emotion does. The sudden collapse of that flight school operator and the price paid by its students, financially and otherwise, pose a troubling set of questions for us collectively as an industry: Could we have done more to prevent that fiasco, and can we do more now to help Silver State’s victims?

The first is one with which our individual consciences must wrestle, at least those of us who had reason to question Silver State’s business approach or practices. Many people fit that bill, including those of us here at R&W. In 2004, I covered the annual Heli-Expo show for the first time as editor-in-chief. At least two industry insiders there whispered in my ear that Silver State was a shady operation that begged closer examination. But investigating those rumors was eclipsed by more urgent editorial demands and stayed eclipsed right up until Feb. 3, when the company padlocked its doors and posted guards at its facilities as its owners prepared to liquidate its assets. The guards were a hint of the anger those owners knew their actions would provoke.

At Heli-Expo 2006, a representative of a New York investor group visited our booth. He and his partners were considering an investment in the helicopter industry and wanted to pick our brains. Specifically, he was interested in our view of the prospects of the training sector.

I raved. I told him I saw a strong and steady demand for pilots and for training to meet an expanding set of requirements. My enthusiasm was based on the pace of activity in every sector of the helicopter business, as well as a growing recognition throughout this industry of the need to improve the safety record of this business. Oil companies were insisting on more training for their contract flight crews, including greater use of simulators and training devices. The emergency medical sector in the United States remained under great pressure to boost its level of safety, and many operators were responding to that pressure. As the International Helicopter Safety Team made headway in its process of analyzing accident causes and recommending means of eliminating them, I told him, that team was likely to call for more and better training.

In short, I told this fellow from Eos Partners, helicopter training was a boom market. Unfortunately, he didn’t ask the one question he should have, which was what did I think of Silver State’s prospects in that market. For my part, I failed to include in my many volunteered opinions that Silver State was probably the last outfit in which I’d put my money. I had nothing firm to cite against the company at that time, in early 2006; but I’d rarely heard anyone compliment the company for anything other than its growth.

Eos went on later that year to plunk down $30 million for a 60 percent stake in Silver State. Its money helped Silver State expand its network of flight schools and lure thousands of students with its promises. Eos was among those left holding the bag when Silver State folded. It has said it expects to lose all of its $30 million.

That, of course, is the risk any investor runs, and there’s no reason we should feel sympathy for the Eos partners and those like them. Silver State’s students are another matter entirely, which brings us to that second question: Should we, as an industry, do something to help them, and if so what?

Several people in the past several months have commented to me that the industry should do more to aid Silver State’s victims. Yet no major efforts are under way.

There is a shared view that an industry facing a possible growing need for pilots shouldn’t look the other way as thousands of people, committed to that career field, are cast aside. Silver State’s victims, this school of thought argues, represent a precious resource we can’t afford to waste. The industry not only risks losing a large number of potential productive players by doing so, but also could end up breeding a new generation of antagonists among those who are left to suffer from Silver State’s deeds.

But this is a tough industry that doesn’t expend much time on those who fail, through their own fault or not. There are some who, of Silver State’s students, think: "Tough break. Hope you land on your feet."

If all of Silver State’s thousands of students were left holding the bag on their individual $70,000 tuition loans, that’s a collective hole of nearly $200 million. Four months after the shutdown, their payments are overdue, as are mortgage, car, and insurance payments by a lot of people who no longer have the prospect of the jobs on which they were banking. Is that our problem? Are we our brothers’ keepers?

Mr. Rendzio would seem to think so, and I’d tend to agree with him. But I can’t answer the next question, which is what do we do about it? I’d suggest that only you who build and operate helicopters and control the hiring of crews can answer. Perhaps the answer is some industry-backed debt-relief program, or apprenticeships for ex-Silver State students. Industry lobbyists might collaborate in pushing for a retroactive tax credit or federal debt-forgiveness program.

Or do we leave the victims of that company to suffer alone?

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