Owning a Flight School

[TXTBOOK]

Fellow JC'ers,

I'm smack in the middle of my Junior year of undergraduate, and I'm starting to really narrow down a profession. One thing is for sure: I won't be flying for a living. At least not right away. What I really want to do is own a flight school. Eventually.

I plan on going into finance after I graduate, specifically private equity. Sometime after finishing my MBA and/or CPA, I'd love to look into purchasing or starting a flight school in Central/Southern California.

I was wondering if anyone on JC has any insight on the following

1. Buying a flight school. Is there anything particular to purchasing a FS that is different that acquiring any other business?
2. Running a flight school. Chances are most people are familiar with instructing, but I'm interested in the financial aspects. What does it take to insure, rent, own/rent property on the airport/tarmac?
3. Does it run essentially like a car-rental company with instructors? Down to the most simple level, it seems like this analogy makes sense to me.
4. How exactly do lease-backs work and how common are they for training aircraft and flight schools?
5. Is it possible to be a flight instructor on the weekends only? Is this practical? Hire-able? As a professional in finance, I'd love to instruct on the weekends once I get my CFI, but wouldn't be able to fly on the weekdays for obvious reasons.
6. Finally, how to gain experience in the business aspect of a flight school. I'm still working on my private, and don't really plan to instruct until down the line. What non-CFI employees does a basic flight school have?

Just to be clear: We're talking atleast 5 years down the line before any action is taken towards making money off of aviation.... maybe as long as 20. I understand the situation with the economy now and I read from JCers the situation in the aviation industry.

To be honest, I'm just interested in learning everything about how a flight school works beyond the actual instructing. I'm sure many of you could tell me how they shouldn't work... that helps too

Thanks for any information!

 

[jhugz]

jrh is an excellent source...hopefully he will be around soon. I'm pretty sure he is just a CP so the biz stuff he may not know to much about. Good luck on your endeavors.

 

[Itchy]

Old Axiom.
"How to make a small fortune in aviation"
"Start with a large one"
Insurance alone will knock you out. In a struggling economy, it would be very tough to start one, let alone get finance for it.
I can think of better business plans with the same amount needed. Just about any of them outside of aviation would have a better shot. Imagine just getting started, and another "big event" happens and fuel doubles. Flight schools will be one of the first to be utterly quiet.

But maybe I'm a downer/ devils advocate.

 

[TXTBOOK]

Old Axiom.
"How to make a small fortune in aviation"
"Start with a large one"
Insurance alone will knock you out. In a struggling economy, it would be very tough to start one, let alone get finance for it.
I can think of better business plans with the same amount needed. Just about any of them outside of aviation would have a better shot. Imagine just getting started, and another "big event" happens and fuel doubles. Flight schools will be one of the first to be utterly quiet.

But maybe I'm a downer/ devils advocate.

I'm a huge fan of having a devil's advocate in conversations, so I appreciate your input.

I'm not really motivated by income to do this. It's all about the flying and having aviation in my life. My interests involve finance, investments, and general management and I would love to tie this into aviation best I can. I'm not convinced I would be happy working in aviation unless I was my own boss.

Brick and mortar may not be the way to go. Maybe eliminating as much overhead as possible can help free up funds for the high insurance costs. How would this effect visibility to potential customers? Are there any proven advertising instruments other than having a big sign on your building on the field?

 

[jrh]

Buying a flight school. Is there anything particular to purchasing a FS that is different that acquiring any other business?

No, it's just like acquiring any other business.

Running a flight school. Chances are most people are familiar with instructing, but I'm interested in the financial aspects. What does it take to insure, rent, own/rent property on the airport/tarmac?

Of course it all depends on the size and location of the facility, but it's usually like any other commercial property.

Does it run essentially like a car-rental company with instructors? Down to the most simple level, it seems like this analogy makes sense to me.

Well...more or less, I suppose. There are basically two possible streams of revenue--aircraft rental and instruction. Some schools design their operation to make more off one than the other, or make equal profit off of each.

The thing with flight schools is that the individual vehicles are much more expensive than car rental companies. A Chevy Cobalt costs 1/10 of what a Cessna 172 costs. Therefore, the car rental companies are inherently more stable...take a car down for maintenance, a crash, or whatever, and only 10% of the business is shut down. Take a plane down and 100% of the flight school is shut down.

How exactly do lease-backs work and how common are they for training aircraft and flight schools?

Leasebacks are very common in the flight training world.

They basically work by the flight school renting an aircraft from a private individual, then turning around and renting it at a higher rate to the public. So, for instance, John Owner says Acme Air can use his 172 if they pay him $100/hour for every hour it flies. Then Acme Air puts it to work in a flight school setting and charge the public $110/hour to fly it, while pocketing the $10/hour difference.

Leasebacks are used for two main reasons...reducing risk and making an aircraft available that the school might not be able to own for itself. They reduce risk because if the aircraft never flies, the flight school does not lose any money...the owner loses the money because he's paying for the fixed costs. They make an aircraft available because a flight school might want to expand their fleet, but doesn't have the capital or credit to expand. A leaseback fills the void.

The downside for the flight school is that there is little risk, but also little reward. If they're taking a $10/hour cut on a leaseback, and it only flies 30 hours/month, the school only turns a $300 profit. That's hardly anything for the hassle of managing an aircraft for a month.

Is it possible to be a flight instructor on the weekends only? Is this practical? Hire-able? As a professional in finance, I'd love to instruct on the weekends once I get my CFI, but wouldn't be able to fly on the weekdays for obvious reasons.

Yes, you can do that. There are a lot of part time, weekend warrior instructors out there.

Finally, how to gain experience in the business aspect of a flight school. I'm still working on my private, and don't really plan to instruct until down the line. What non-CFI employees does a basic flight school have?

Not many. Big schools might have an office manager, recruiter, director of maintenance, etc. But most smaller schools might have a manager and that's about it.

To be honest, I'm just interested in learning everything about how a flight school works beyond the actual instructing. I'm sure many of you could tell me how they shouldn't work... that helps too

It's like running any small business. You have to deal with staffing, training, customer service, equipment, marketing, federal regulations, etc.

It can be a lot of work, but from my experience, I'd say it's worth it.

Let me know if you have any other questions.

 

[TXTBOOK]

Thanks for your response! I want to reply to each answer tomorrow after I take my midterm, but I wanted to add one more question:

What does it mean to be a Cessna Pilot Center? Is this like franchising, similar to Quizno's or some other restaurant chain?

 

[jrh]

What does it mean to be a Cessna Pilot Center? Is this like franchising, similar to Quizno's or some other restaurant chain?

Yes and no.

It's funny you should bring this up, as I was just talking to the owner tonight about franchised flight training. We were talking about the benefits for Cessna to truly franchise the CPC network.

As it stands now, CPCs are affiliated with Cessna and loosely follow the same standards as each other. Basically, all CPCs have at least one newer Cessna in their fleet, and usually train customers using the Cessna CPC curriculum (computer based training). As a result of this, CPCs are generally modern, good quality places, who believe in new aircraft and standardized training. That's as opposed to the shoddy mom and pop places flying old planes and not using syllabuses. However, there are no guarantees when it comes to CPCs.

The thing is, Cessna doesn't really provide much support to CPCs in the way of marketing, training, standardization, bulk discounts, or anything. It's a bunch of random flight schools that fly similar aircraft and have similar training programs. That's it. On the other side of the coin, the flight schools have no obligation to pay Cessna anything.

When you go to Quizno's and order a sub, you know exactly what you'll be getting because every store uses the same bread, same ingredients, same employee training, etc. In return for this support from the headquarters, each Quizno's store probably gives a portion of their profits to the headquarters. Plus the owner of the local store has to drop a large chunk of change initially to buy the franchise.


My boss and I were talking about how if Cessna wanted to, they could become known as a premium flight training provider in the same way Starbucks is known for good coffee. Cessna would need to dictate standards for the instructors, provide customer service training, discounts on aircraft parts and insurance, etc. in order to provide a top notch, competitive, customized flight training experience. In return, flight schools would share a percentage of their profits with Cessna. It seemed like a win-win situation when talking about it.

But it will probably never happen, thanks to independent-minded flight school owners, budget cuts at Cessna, other flight schools rushing to undercut each other, and a number of other things. Too bad.

 

[Goonie]

My boss and I were talking about how if Cessna wanted to, they could become known as a premium flight training provider in the same way Starbucks is known for good coffee. Cessna would need to dictate standards for the instructors, provide customer service training, discounts on aircraft parts and insurance, etc. in order to provide a top notch, competitive, customized flight training experience. In return, flight schools would share a percentage of their profits with Cessna. It seemed like a win-win situation when talking about it.

But it will probably never happen, thanks to independent-minded flight school owners, budget cuts at Cessna, other flight schools rushing to undercut each other, and a number of other things. Too bad.

Why is that too bad?

Why would we (flight schools) need to pay some sorta franchise fee to Cessna? I could see that if Cessna were to supply aircraft to the flight schools, but other than that there would be no need to share profits with them. Especially if we buy $200K aircraft from them.

Other than that statement you provided a lot of good information. I know your lease back numbers were just an example, but I hope your flight school is not doing a 90/10 split. You should take 20% minimum right off the top.

One more thing to do is hire your own maintenance staff and rent hangar space. That way you can make money off parts and labor to the lease back owner as well.

Also, you should make every single customer that rents aircraft get their own renters insurance to cover any deductible for insurance claims. Its a small investment for them, and could save the school thousands.

 

[CoffeeIcePapers]

Also, to become a CPC, you have to purchase a new aircraft from Cessna every two years, so that can become pricey. There are also other standards, like having $1 million liability coverage, etc...

I managed an FBO/Flight School for two years and worked there 5 years. I also have been working as an assistant chief flight instructor for a few years now, so I have quite a bit of knowledge of the inner workings of a flight school. Your best bet would be to try to get more involved with the management side of things at a current flight school so you can learn all of the nuances of the business.

Different places have different business models. At my previous employer, they provided all of the FBO services like fuel, hangar, tie down, maintanence, as well as flight instruction/rental. At my current employer, we just do flight training/rental and have our own maintenance.

Pros/Cons to Leaseback Agreements from the flight school:

Pros:

• You make a predetermined amount of revenue for every flight. Usually 20%.
• If you provide fuel, you give them a discounted rate for fuel, but still make money.
• If you provided maintenance, you give them a discounted rate for maintenance, but still make money.
• No liabilities. If the airplane doesn't fly, you don't have to pay the insurance/loan note/tie down.

Cons:

• Since you have less risk, you have less reward. You don't make as much per flight hour as you would if you owned the aircraft.
• You have less control of your business. If a leaseback owner wants to pull his aircraft (you usually have a 30 day notice written into the agreement), you are powerless to stop them.
• Dealing with leaseback owners are sometimes a huge pain to deal with, others aren't.

When I took over as GM at my previous job, it was bleeding cash left and right. The biggest obstacles I had to overcome were to eliminate just about every fixed cost I could and minimize variable costs. For example, a maintenance person would bill the customer $65/hour as the shop rate, but in a 40 hour period, might try to bill 10 hours of admin for paperwork/logbooks/shop cleaning. I had to put an end to this, since I was paying the mechanic $20 an hour to sweep the floor. I hired a part time worker to inventory parts, bill the customers and do the admin work for $7/hr. I had the line guys sweep the hangar, since they were getting paid a set wage.

Costs like general liability insurance, hangar rent, admin costs, etc will eat you alive when the business gets slow. You have to be very flexible with your staffing and let them know up front that when the business gets slow, their hours may be limited.

Sorry for the long post. It is very hard to start a new aviation business without some clientèle. Good luck.

 

[deadstick]

Random thoughts:

1) Hull/Liability for a $120k C172 is about $12-13k per year. If you finance it, there is usually a 20% down payment and the balance is paid over 10 months. If the plane flies 5 hours or 70 hours, the note and insurance still must be made.
2) Fuel prices are very volatile and can turn your book red very quickly.
3) The CPC network exists to sell airplanes, not train pilots. The CBT is tailored to the 172S, and soon the 162. If you use other aircraft, it will not be as good. Cessna will never try and get too deep into the individual flight schools. Cessna/Textron is very adverse to risk and puts barriers in between the company and the pilot. Who makes the CBT? King. One of the requirements to be a CPC is to have a new Cessna that was delivered within the last 24 months OR have one on order, like a 162. The Nav II (round dial) 172 hasn't been made since 2005. You know where just froze over: the 2010 C172S is $301,500. That's about $2700-$3300 per month. Training aircraft are "high utilization" and the notes are amortized over a shorter term. Personal use, "low utilization," aircraft can get 20+ year notes.

 

[minitour]

Random thoughts:

1) Hull/Liability for a $120k C172 is about $12-13k per year.

You're getting ripped off.

Other than that, everything everyone has said is pretty accurate. It can be a lot of fun, a lot of work and very rewarding, or it can be awful, not rewarding at all and still a lot of work. It will be what you will allow it to be.

-mini

 

[deadstick]

You're getting ripped off.

Other than that, everything everyone has said is pretty accurate. It can be a lot of fun, a lot of work and very rewarding, or it can be awful, not rewarding at all and still a lot of work. It will be what you will allow it to be.

-mini

I forgot to add that that figure included the finance charge.

 

[minitour]

I forgot to add that that figure included the finance charge.

I still think you might be getting hosed, but I guess on $120k hull with a finance charge that could be close.

-mini

 

[jrh]

Why would we (flight schools) need to pay some sorta franchise fee to Cessna? I could see that if Cessna were to supply aircraft to the flight schools, but other than that there would be no need to share profits with them. Especially if we buy $200K aircraft from them.

If Cessna provided more support to flight schools, a franchise fee would be worth it. As it stands now, they don't provide much more than their good name as support.

If they were running large scale marketing campaigns that would drive business to CPCs, somehow ensure that CPCs always have top notch instructors, be selective about who they allow to be CPCs, etc....a franchise fee is reasonable. They could develop a culture of CPCs being synonymous with the absolutely best quality training available, which would allow CPCs to charge higher rental/instruction rates because everybody would want to train at a CPC rather than Billy Bob's School o' Flying across the field. Everybody would make more money in the end.

But it's a long way from here to there.

I know your lease back numbers were just an example, but I hope your flight school is not doing a 90/10 split. You should take 20% minimum right off the top.

We do. But it's too complicated to explain here.

 

[bronco21016]

Just a thought... Does it really have to be Cessna? Couldn't someone with enough capital or the ability to gain enough capital start 3 or 4 or more flight schools in a region and build a reputation for good quality instruction and then start selling that support to other schools. Basically the idea of franchising you want to do but by another group other than Cessna. Obviously Cessna is unwilling to do this so maybe it's in the hands of some savvy entrepreneurs. Would certainly take some money though!

My other big idea is maybe to buy an existing training program. For example, I'm a student at Western Michigan and I know we have a very thorough training curriculum utilizing an almost 50/50 combination of simulation and actual aircraft training. Perhaps some people could convince them to part with their training curriculum for a good sum of money and then a franchise of schools is started advertising they use the "WMU Top Notch Training Curriculum". Not saying it would be WMU just using that as an example. I have a feeling that a name like that behind a product though would convince the target market (potential personal aircraft owners) that the training is serious and it's not just Billy out back doing circuits in his old Cub.

Just kicking around late night thoughts...

Like one of the first posters said. If you want to make a small fortune in aviation you'd better start with a LARGE one!

 

[jrh]

Just a thought... Does it really have to be Cessna? Couldn't someone with enough capital or the ability to gain enough capital start 3 or 4 or more flight schools in a region and build a reputation for good quality instruction and then start selling that support to other schools. Basically the idea of franchising you want to do but by another group other than Cessna. Obviously Cessna is unwilling to do this so maybe it's in the hands of some savvy entrepreneurs. Would certainly take some money though!

Yeah, it would take both a huge amount of money, as well as an intimate understanding of the flight training industry. I just don't see many options for this combination outside of Cessna.

My other big idea is maybe to buy an existing training program. For example, I'm a student at Western Michigan and I know we have a very thorough training curriculum utilizing an almost 50/50 combination of simulation and actual aircraft training. Perhaps some people could convince them to part with their training curriculum for a good sum of money and then a franchise of schools is started advertising they use the "WMU Top Notch Training Curriculum". Not saying it would be WMU just using that as an example. I have a feeling that a name like that behind a product though would convince the target market (potential personal aircraft owners) that the training is serious and it's not just Billy out back doing circuits in his old Cub.

Well, that's the thing...the good money in flight training is made with aircraft owners/buyers and serious business people. I hate to say it, but it's enormously difficult to make money off of the career-track people like college programs do. At my school, I'd say only 10-20% of our customers want a career in aviation. The rest do it for business and/or pleasure.

When it comes to the wealthier clientèle, I've found that the strictness, standards, seriousness, etc. of a training program doesn't really attract them. They aren't interested in going to a Top Gun school, they just want to be safe, have fun, and get a job done. They respond better to personalized attention, customized training for their particular mission, etc. The problem is that to offer these things, a school needs really talented instructors and marketing people. It's all about people skills...at least much more so than traditional flight academies like ATP, WMU, etc. And it's hard to franchise people skills.

 

[CoffeeIcePapers]

As it stands now, they don't provide much more than their good name as support.

Speaking of which, what do you think about the new CPC stuff they came out with? It make me want to slit my wrists.

 

[Cessna414JJB]

Don't have time to respond in detail but this:

Of course it all depends on the size and location of the facility, but it's usually like any other commercial property.

is a statement worth GOLD, together with much else of what jrh writes.

I do have some choice words for considering being a CPC. Together with your students you are effectively putting the rope around your neck by being connected to Cessna. There is only a superficial commitment from Cessna towards your school - the rest is smoke and hot air. Letting 4 Regional Managers go shortly before announcing another freaky delay with the Ground Catcher, it is grotesque to see that Peltons Wife is flying one, while paying customers are outside in the rain.

While I have gained a lot of respect for the Kings after meeting them, I consider Cessna's Online School thingy a shot in the air. I do not expect it to work well anytime soon and cannot imagine they will do a good job with support and/ or customer service.

If you have a choice - steer clear.

Remember a few single points about running a flightschool:

• Your CFI's are your flag or advertising sign. Pay them well, but expect nothing but excellence, experience and commitment.
• A dumb receptionist can cost you thousands of dollars.
• Choosing the wrong location is the equivalent to actually pulling the trigger of the gun you just stuck in your mouth by thinking a flightschool could ever be really profitable.
• Choose what you specialize in carefully.

Cheers,

 

[TXTBOOK]

This is all great information. Thanks so much.

I realize that all these ideas and advice are great in theory, but it's tough to find good help and to actually retain some of the principles that you might set out to use throughout time.

 

[jrh]

Speaking of which, what do you think about the new CPC stuff they came out with? It make me want to slit my wrists.

Are you talking about the online training kits?

I think it's the best thing since sliced bread. Seriously, I'm not being sarcastic at all. I think it's fantastic.

It's the only system I've ever seen that *really* offers scenario based training, and it's in a package simplified enough for instructors who, I hate to say it, don't know what they're doing.

Good, experienced instructors have been doing scenario based training for a long time, whether they knew it or not. But most low-time instructors revert back to their robotic, flight academy-style, "This is how to perform a stall..." method of teaching to pass a checkride unless they have excellent mentorship...or now, the Cessna kit.

The Cessna system shows the low time instructor how to incorporate ADM, CRM, and a lot of other risk management stuff in to training from Day 1, rather than waiting until the day before a person's checkride to say, "Oh yeah, and you should make good decisions and stuff." It's much more "real world" than any other system I've seen.

Not to mention the learner-centered grading they're using. It forces an instructor who doesn't know how to do a good debrief, do a good debrief. I can't stand debriefs where the instructor rambles for 20 minutes about how the customer did, with the customer nodding and saying, "Uh-huh, uh-huh." The Cessna system for debriefing forces both parties to actually evaluate and discuss what went down during the flight.

Is there anything in particular you don't like about the Cessna kit? I can't say enough good about it.