Crystal clear
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Posted Date: 16/09/2008
Issue: Executive & VIP Aviation International October 2008
Publication: Executive & VIP Aviation International
Truth be told, the “crystal” in the name is nothing to do with economic crystal-ball gazing; rather it has more to do with “crystal clear management”, explains Robert Salvo. “We’re very transparent. We’re transparent with our managed aircraft owners; and we’re transparent with our charter clients.”
He continues: “We have a couple of big LA clients coming on board this year from the entertainment industry. One of their biggest challenges is for them to understand their invoices from their management companies at the end of the month. They need to know the mark-up the management company is receiving. They count on the people that manage the aircraft to be the experts.”
Salvo explains that, for a management company, there is potentially a conflict of interests. After all, the more the management company does for the client, the more the management company is likely to earn. If the management company is to supply the client with aircraft maintenance, then, the management company is expected to save the client money on maintenance; but, the higher the maintenance cost, the more the management company stands to benefit.
Salvo asks, “How does the aircraft owner know he is dealing with a management company that has integrity?” Salvo explains, “When we buy a part for a client, they get a copy of the invoice and, at the end of the month, they will get a package of information that shows everything that was purchased for their airplane. If there is a mark-up, everything is shown clearly,”
Crystal Air Aviation makes its revenue from charter revenue. For aircraft management clients, the company behaves like a tax accountant. A fee is payable to Crystal Air Aviation for its expertise, just as a tax accountant would do everything it can to save its client money. Salvo says, this is the behaviour he expects of Crystal Air Aviation.
Competition for management contracts in the US is fierce, because, nobody has stepped away from the old model of management yet,” Salvo comments. “But, Crystal Air Aviation will move away from the way in which management has evolved over the last 20-25 years; because, the market for aircraft ownership and operation in the US, has become stressed by economic conditions”.
Certification provider
Salvo has been in senior management of some of the largest air charter operations in the US. His consulting experience has led to the successful certification of domestic and international charter operations, including many “10 passenger or more” air carriers authorised for worldwide operations. “We’ve done 20-25 certifications,” states Salvo, adding that many of these were for large air carriers operating aircraft with 10 or more passenger seats and operating worldwide.
“We’ve taken the expertise that we’ve gained that over the last 15 years of doing certifications for other people and building relationships with the FAA in Arizona, and put that into our business,” comments Salvo. Having achieved all this certification expertise, just recently, Crystal Air Aviation decided to obtain its own certification for worldwide operations.
But the transparency issues are where Salvo focuses most of his attention – in every aspect of the business he runs. “Things are going to change,” Salvo insists, commenting on the way in which charter marketing activities are being absorbed back into charter companies with brokers left with a smaller role to play. “The charter business has had its ups and downs over the last 30 years – we all understand this and we can just ride it out – but companies are losing aircraft management contracts left, right and centre for doing less than honourable business. Invoices have been vague and there been some hidden costs that are not explained to their client. That is why; Crystal Air Aviation is a transparent company. Also, many aircraft owners don’t know that if you do not make a claim against your insurance policy, 15% of 70% of that policy may be returned to the policy-holder?”
Markets and crystal balls
The US market is throwing up some anomalies. “Even though there are some dollar challenges here, the waiting list for the sale of aircraft remains very strong,” states Salvo. “We are seeing a lot of lateral movement with aircraft. People who are holding airplane slots are selling their positions to take advantage of the current tax depreciation rules.”
Salvo says, “the US market is going to see a large influx of VLJs.” “I think we are going to have some growing pains with these aircraft,” he comments. He does not see values impacted by this large influx but, he does see the resale value of 5-10 year old aircraft starting to decrease. “The used aircraft market has not been moving in the last quarter nearly as much as it was the quarter before.”
Salvo states, “when we experience economic dips, the demand for private charter in the US dips.” He puts this dip at 40% across the board during the 2008 summer quarter compared with the same quarter the previous year. “But this is a very transitional dip,” he comments. The venture capitalists who have been gobbling up smaller charter operators are now trying to fill 200 plus aircraft in such an environment. They are particularly vulnerable in such circumstances.
“We deal primarily with large aircraft and our clientele for these aircraft are still holding the money. In the U.S. people that fly the Learjets and the Hawkers tend to be impacted the most during economic fluctuations, but again, I think it is transient. Additionally, where the domestic market has seen a dip, our international business has increased significantly” Salvo’s prognosis? “I think we’re going to come back strong at the end of the year. The holiday seasons have always been a profitable time for charter and based on our bookings to date there is no indication that this year will be any different.”
A nose for safety
After all these years, Salvo has developed a nose for safety. “Crystal Air Aviation is very sensitive to the safety issues,” says Salvo. “Years ago I established a relationship with Walt Lamon, the founder of Wyvern Consulting, and I became a Wyvern advocate for a number of reasons; one of which is that Wyvern produces a snapshot of your company ever year.”
Salvo comments that there will always be operators that are tempted to cut corners, especially in tricky economic circumstances. “If you’ve got a bargain charter, this is probably from a company that is having a cash flow issue,” warns Salvo. “And cash flow issues affect a charter company’s maintenance first.”
To further his commitment to safety Salvo is a board member of Arizona Business Aviation Association and on the Safety Committee.
He comments that one of the most positive actions in the private jet industry at present is that ICAO international air carriers will have to put in place a Safety Management System (SMS) by 2009. “This is a long time coming,” he stresses. “Many operators like ourselves have had a SMS in place for quite some time. Now it will become mandatory for all ICAO operators.”
“If I were a charter client looking for a company with whom to book a flight for my Chief Executive Officer, with regards to safety, in the past I would have assumed the FAA would have been my benchmark. While the FAA is attempting to increase its manpower roster, to date it does not have the resources to undertake a hard core audit – other than in regulatory terms – on a lot of operators. We have seen a sharp decline in accident rates over the past 20 years, due in no small part to the establishment of Wyvern and ARG/US which have delivered a new benchmark to charter customers which is above and beyond what even the Federal Government is looking for in terms of safety standards. They get more into your business than the FAA does.”
Talking fleet
Crystal Air Aviation’s core management aircraft consist of primarily Gulfstream and Bombardier aircraft. It is an operator of large aircraft types and Salvo says the company has the right team in place to ensure that this crystal clear thinking of which Salvo often speaks is achieved. “We all have grey hair,” he states proudly. “We have been around for a long time and we are still recruiting. We’re going global: we have business coming up in Jakarta very soon – and we already have managed aircraft there; we are opening up in Singapore and our next target is the European market.”
Salvo continues: “There’s stability in dealing with an international market as opposed to just a domestic US market. Our goal, from the start, has always been to be a worldwide operation.” This strategy obviously fits the missions of the aircraft under management; but having long-range aircraft are not enough – Crystal Air Aviation is also seeking a physical presence in the markets it targets.
But range brings with it high fuel consumption and this concerns Salvo greatly. “The cost of fuel has gotten out of hand in the last six months,” he states firmly. “We have people here doing nothing but shopping our fuel prices.”
Salvo is a man for whom aviation is not only in his blood but also in his DNA. “I started in aviation at 17 as a helicopter crew chief in the army.” At 56 he has devoted 39 years to the skies – be it as a bush pilot in Alaska, a pilot in the Caribbean and an airline pilot in the US. He continues to pursue his goal of crystal clear management.
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