SkyHi Success
Flight school touts instructor compensation, targeting top clientele
By John F. Infanger, Editorial Director
March 2001
Explains Allen, 61, "Midland-Odessa
has a history of a roller coaster with the oil patch. Everybody seemed
to think it would rebound, but of course it didn’t. The people that
survived there are basically the old money people who pulled a lot of
money out of the oil patch years before, but for the average small businessman
and workingman it was time to move on."
A visit to Nashville led Allen to look around
the main airport for opportunity and to explore the local market potential.
"I got a real good feeling that we could do well here," he says,
"and I can truthfully say that the feeling paid off. It’s been
a very good move."
Allen negotiated a 20-year lease as a subtenant
of Stevens Aviation, today Mercury Air Centers. His leasehold includes
some 16 covered ports for aircraft storage, office facilities, and an
arrangement to purchase fuel at discount for his aircraft and those of
his customers. The only rate increase written into the lease calls for
an annual rent adjustment of 6 percent.
SkyHi Nashville operates under the umbrella
company, JMA Aviation Corporation, which also offers aircraft rental and
limited aircraft sales.
Allen explains his business philosophy is
one that says if you surround your business with good employees and customers,
you can be successful. With a flight school, that means attracting and
retaining quality certified flight instructors (CFI), an ever-growing
challenge for many such small businesses today.
GIVING INSTRUCTORS THEIR DUE
Allen started his career ferrying freight
DC-3s and Convair 440s for companies around Dallas, before venturing out
on his own in the early ’70s and purchasing a flight school in Midland-Odessa.
In time, he had two schools in the region. Along the way, the "school
of hard knocks" taught him that how he compensates his instructors
could be critical to his long-term success, he says.
"We have never taken a penny of the
instructors’ money," he explains. "It’s one thing
that I have always done, and it’s something that probably not another
flight school in the United States does this way.
"In other words, if the instructor’s
fee is $30 an hour, which it is now here for a single airplane, whether
they’re in the classroom, the simulator, or the aircraft, they get
that rate of pay. We take nothing from it.
"This is not the norm. Flight schools,
for some reason, think that they have to take 40 or 50 percent of the
fee. What you wind up with is a revolving door of instructors who know
that they can’t make a decent living while they’re there. Are
they going to give it their all? Probably not.
"On the other hand, we’ve got
instructors here who can make a decent living. All of my instructors make
between $750 and $1,000 a week. That’s kind of unheard of in the
industry."
Allen says that his compensation plan helps
motivate instructors to have personal involvement in the success of the
individual students. "They’re eager to do anything to help promote
the business," he says.
"If you were training here with Instructor
A and he got sick, we’d call you up and tell you we would like you
to fly with Instructor B. Well, what’s happening here in the interim
is that Instructor A has thoroughly conferred with Instructor B about
you and your experience. There’s no guesswork involved. Instructor
B will later talk with Instructor A about what you did and what you were
assigned for the next lesson. So, what we have here is a very tight chain.
"By running the business with that
kind of chain link between instructors, we have a very good response from
the clients — a trust."
SkyHi offers a fleet of 13 singles and twin-engine
aircraft, and owns three of them (two new 172s and a Duchess). How he
structures the leasebacks, he says, is a critical component of being a
profitable flight school.
"It’s not rocket science,"
he says. "You cut a deal with an aircraft owner to put his or her
airplane on as a working airplane. The way we do it is simple: We say,
whatever we’re going to run an airplane per hour here, JMA Aviation
will take 15 percent. Then we make money on fuel to a degree; we make
money on selling school supplies; and we well a few airplanes."
SkyHi is also a Cessna Pilot Center, and
Allen says his affiliation with Cessna affords opportunities to sell the
manufacturer’s line of new single-engine aircraft it brings to the
flight school.
"There’s a lot of ways that the
business owner can make a good living out of this without taking the instructor’s
money," he says. "I think the key to all of this is the clientele.
The selectivity of the people who trade out here has a lot to do with
it, because they will continue to come back again and again. And, they’re
going to tell another good person. If you reach a peak in clientele to
where it continues to feed on itself, the only way you can stop it is
if you the owner decide you want to try and be everything to everybody."
A CHALLENGING MARKETPLACE
In May 1999, Allen saw his offices and aircraft
destroyed by a tornado, and his company got up and running by working
with Cessna and assistance from his landlord, Mercury, which provided
a 10x20 trailer for offices and access to the FBO’s ramp.
"Cessna came down with a good sales
pitch and it was an opportunity to get some airplanes online quickly,"
recalls Allen. "We definitely needed to get back up in the air."
Having survived a tornado and total relocation
of his business, Allen has made it through challenging times. Yet, he
says some operators today face even greater survival battles, particularly
because of insurance and the new dynamics of how students are being trained.
"The insurance providers have dwindled
down to two," he explains. "It hasn’t affected my business,
but I think we’re one of the most blessed businesses in the industry.
We are insured with USAIG, which by nature doesn’t insure flight
schools. It has an awful lot to do with our track record. As long as we
keep our nose clean, we’re fine.
"However, the other schools, especially
the smaller ones, are not fine. From what I hear, in most cases the insurance
companies have doubled the rates and in some cases even gone beyond that.
From what I understand, they’re putting in a stipulation that if
you have less than five airplanes, they don’t want to insure them.
And if you’re a new kid on the block without much experience, they
don’t want to touch you either.
"In the past six to eight months, I’ve
seen a number of small flight schools in the area go out of business."
On the positive side of the flight training
business, Allen says the new regulations instituted by FAA in 1998 have
been a plus, particularly the cross country requirement for night flying
and one for a minimum of three hours logged time flying in the aircraft
under instrument flight rules.
"It’s an exposure factor that
is a very safety conscious way to write it into the regs, and it probably
should have been here a long time ago," says Allen. "They’ve
also added some meat to the multi-training. In other words, in 1998 they
added some real good things to the curriculum."
