Expert Commentary

Private Aviation: The VLJ Arrival

Whether we put our heads in the sand or not, the VLJs (that is Very Light Jet) will arrive. The debate is strong as to whether these aircraft will become ubiquitous or not, but one thing is for sure: These new aerial hot rods will open up a kettle of worms for the risk manager.


Corporate Aviation
May 2006

The debate around whether the air taxi business will blossom or not is rife with data supporting both sides. On the one hand the U.S. Federal Aviation Administration (FAA) claims that the skies will be dark with these new light jets and that National Aeronautics and Space Administration's (NASA's) vaunted Small Aircraft Transportation System R&D will spawn entrepreneurial pursuits that will truly cheapen ad hoc air taxi use.

The dissenters focus on one primary factor: demographics. The cost to buy, operate, and maintain a fleet of super efficient air taxis is large, never mind the viability of manufacturing these new fangled toys at a profit. The cost to be attractive and the cost to break even may yet prove to be the dissenters winning argument, but either way, the risk manager will face this call: "Hey, can I take the management team for a ride in our new jet? It's fully insured, etc. etc."

First: The Bad News

Now is the time I suggest you bookmark this page in order to get easy reference to the arguments you'll need.

  • Lawn darts: Most new jets, especially more affordable ones that fall into the hands of those who are not professional full-time pilots, invariably go through this phase. This is the phase that scares insurers the most.
  • New equipment: New equipment typically has a period of getting the kinks out. Hence the term "shakedown" cruise for new craft. With aircraft, this can take years. While not necessarily an issue that automatically raises danger, it sure is nice to get those "boy that was nice to know" things out of the way before you become an owner/user.
  • "Type A" personalities: These types are the most successful in corporations, and usually live at the top of the corporate hierarchy. They also are the most prone to cause accidents since they have a "can do" attitude whereby nothing gets in their way—not a little mechanical irregularity, inclement weather, or a really tough flight at the end of a long day.

While it may seem absurd to caution the risk manager today about an issue that is coming tomorrow, the reality is this: The manufacturer's marketing message is that these jets will be plentiful, they will be inexpensive compared with their industry predecessors (A range of $0.9MM to $1.4.MM U.S.), and they will fall into hands of those who are more accident prone.

General aviation already faces accident rates (and corresponding insurance premiums) that reflect a category of more risk. The owner flown private jet is certainly something that is getting a hard look from underwriters.

Second: The Good News

The good news is that most pilots are quite intelligent, and owner-flown high performance aircraft do not need to be the source of the greatest exposure at your firm. Follow some basic guidelines that your underwriter will give you and be sure that you comb through the policy in force on the aircraft to be sure that it covers all eventualities that the pilot is likely to encounter. Here are some classic trouble spots that can easily be mitigated in advance by open and frank conversations:

  1. Too much on mind and too much packed in: If the pilot must operate this aircraft, try to structure it so that the time is less compressed. For example, flying in the morning and then having a long day on site? Spend the night. If he or she does not want to spend the night, talk to them about the reality of getting a professional pilot to ride along. Nothing is worse on a pilot's mind and body than the long day followed by the night (potentially inclement weather) flight home. When a day is compressed (due to the wonderful convenience of this new toy!) nothing is more tempting than the "get home-it is," which is very common in accident post-mortems. The convenience of the aircraft should not be mistaken for just using the extra time it affords to get more done on site and to relax and rest before coming home.
  2. Training: Just because they are not professional pilots (rarely do CEOs have such a fantasy) does not mean they should not act like one. Obtain the most certification and obtain the most training possible. While getting a commercial or airline transport pilot license might sound like a big chore, it will seem quite minor when you see the savings on the insurance bill. Also, conducting oneself professionally allows the pilot to begin to learn what life is really like for those who fly daily for a living. The training that goes with professional life, if followed properly, is a risk mitigation specialist's dream, since every flight is approached with the forethought of how important each and every aspect of flight preparation is.
  3. Policy: Be crystal clear on who and who cannot blindly jump in the aircraft, no matter how convenient, simple, or benign the situation may appear. While many corporations have well defined rules of who can get into what private aircraft, the perspective may change once "private" begins to include small jets—i.e., seemingly more safe and serious than piston/propeller engine planes. Just remember, it is still an airplane, it is just now a bit faster and a bit more expensive than others from the past. The lure of the turbine engines and pressurization may cause many to say, "It is different this time," but the good risk manager will see that it is not. It is still an owner-flown aircraft, and it still carries all the related risks.

Timing

So what is the timing on all of this? The first light jets will, in theory, be delivered to customers by the end of the 2006. Whether the air charter or air taxi dreams pan out or not for the manufacturers, you can be rest assured that many a private operator will feed these manufacturers with initial sales, since nothing is more appealing than saying "you now have your own jet."

Just remember, those future proud new owners are walking the hallways of your company today. As their fantasy becomes reality, be sure you are ready to with the basics of aviation risk mitigation. Traditionally, going higher and faster has translated into 'safer,' but to ensure this is true with the new breed of aircraft, pilots need to step up and understand that pressurized and turbine powered aircraft are a whole new ball game, training and currency wise.


Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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