Aviation Marketing Intelligence

The TAG Aviation / AMI Jet Charter Fiasco

Almost every species that ever lived is extinct. Many of them became so during a single event almost 70 million years ago by an ELE, or Extinction Level Event. Something - probably an asteroid crashing into the Earth - kicked up enough dust to dramatically cool the planet almost overnight, ending the 130 million year reign of the dinosaur. (Photo by Dan Hyde.)

The world changed dramatically when Brontosaurus, Triceratops and T-Rex were suddenly no longer with us - the ecological void left behind allowed new species to flourish, especially a tiny family of hairy layabouts, called the mammals. Because they were small, they required fewer resources, and because they were environmentally agile, they could take advantage of the rapidly shifting climate. The dinos weren’t prepared to deal with this shift, and they either morphed - into birds or something similar, or just went away forever.

Most of you know how this turned out, and on the whole, people consider it a positive event.

Which brings us to the recent FAA suspension of TAG/AMI’s operating certificate, and why so many left-seaters are sniffing the air for a little climate change in the private charter world.

There are a lot of factors currently bearing down on this industry - The U.S. economy threatening to have a Grand Mal Seizure, the growing awareness of charter customers prompted by the Internet and a related increase in demand for operational quality, the TSA’s ever growing encroachment into our airspace, and now, the FAA’s march - politically motivated or not - to clean up Operational Control validity.

It’s a tough time to be a charter company, and we have been suspecting (and warning people willing to listen) that something was going to hit pretty hard for a while now.

In our opinion, most private & business aviation industry publications, trade shows, etc. have little to do with the reality or the health of any given aviation business, or the industry as a whole. If you remove yourself as much as possible from the press releases, fluffy talk, overtures to the future and announcements you’ll find it a lot easier to call things as they are. In the case of AMI Jet Charter & TAG, let’s be frank:

TAG really wasn’t in the charter business to begin with. Those of you that are will know exactly what I’m talking about. At NBAA in 2003, we had a quiet moment with one of their financial folks, and he told us what we already knew - management, maintenance and services to the owners is what floats their boat. Hanging up a Part 135 ticket was indicated at best to be a way to legitimize operating losses for tax reasons, and at worst a way to bait charter brokers (or end users) into aircraft availability that really had to get approved by the owner. By keeping rates reasonably high and allowing the owner to call the ball on every flight, the air charter side of the house was being kept small and out of the way.

For those not paying close attention: In most cases, a charter management company, in its present form, isn’t really a charter company at all. And this recent decision hints that the FAA may be beginning to see that TAG / AMI can’t really have two masters: Promising to satisfy both the “on demand” charter customers, who the FAA is tasked to protect, and the owners of the aircraft, whom they need to keep happy in order to keep the revenue from maintenance and management fees, was probably seen as a conflict of interests. Unfortunately for TAG / AMI, they are being lumped in with the operational control fiasco & Part 135 violations of the Challenger accident in Teterboro in 2005 that led to this intrusion into the quiet and fairly corrupt world of illicit Part 135 the version we like to call “Part 91, plus 44“.

Compounding the TAG / AMI was the challenge in “controlling” wayward autonomous aircraft (with highly autonomous ownership), never mind a European owner who (allegedly) ran afoul of the US Citizenship and ownership requirements associated with air carriers. Really, it comes down to the FAA mandate, and as much as we may hate to admit it, if you can’t produce training documents or weight & balance records for aircraft on your certificate (even if it is across the country) then you probably aren’t in control and are facing revocation unless you can fix it. (Much like a similar incident in May 2006, which further shows this isn’t a new trend per se.) As much as we may hate the Feds somedays, the fact is - you are breaking the law and either you already knew it, or you’re incompetent.

At the same time, investment dollars are flowing into all kinds of air taxi schemes with business plans ranging from the insane to the sublime, and finally, the industry is starting to solidly distinguish between the expensive babysitting services and the organizations doing the hard to work of building actual successful on-demand air charter businesses. The latter is what Part 135 is, and when we feel wistfully positive, we see the FAA’s current actions as the beginning of them waking up and helping to eradicate the arrogance, strangeness, and dichotomy that is manifested by the former.

We can’t explain (or excuse) the motivations, but we do like some of what we see: They are purporting to do their job, and what they claim to have done here is very much within their mandate. And we do smell an ELE coming for some of the largest operators in this industry. The best way to make it through this next round will be to stay small (decide what your core business is and embrace it), stay agile (be ready to change that business as new opportunities and obstacles appear), and above all, get ready to duck. Times of great change reward the prepared.

Unpleasantly, If we had to pick one part of this that really disturbs us, it’s the value of external auditing. We’ve always questioned the value of keeping safety data secret or expensive.* Increasingly, secrets are hard to keep (hey.. the Internet!) and expensive doesn’t do you any good when the FAA is one step ahead of the industry in terms of enforcing their rapidly changing ways of viewing ownership and control. (By the way, here is what your POI is given for guidance on this matter.) The speed with which the A002 and A008 (operational control guidance) hit the industry is enough to call into question any present form of auditing, since the FAA now appears to be attacking the very culture of “we’ll watch your jet for you, hire your crew and make it do some charters if you really need the money.” You could even argue that TAG / AMI didn’t even need an audit, since like most corporate jet operators, they were “safe enough.” What the FAA claimed (on the basis for emergency suspension) was the fact that they were certain some aircraft weren’t really directly under the operational control of AMI Jet Charter. And that opens up the entire industry to scrutiny. Be warned, they are now clearly aware of the culture, and if that is the case, Jim Coyne’s lamenting of “not understanding” the culture is misplaced. Not only are they aware, but they may throw a spear into it… every week if they feel like it, and the auditing industry not only missed this coming, but presently offers nothing that will actually protect a carrier from it.

Now wise to the fact that 80% of the turbine fleet is not only managed, the FAA is now aware that they aren’t really in “business” in the first place. If you shut down a “TAG” type, it is very different than shutting down a “Delta” or “United” type. How can we utter such heresy? Simple, the airlines make money with their aircraft, and if they are shut down everyone in the organization starves, instantly. In TAG / AMI’s case revenue shrinks by 10% and life goes on merrily baby sitting aircraft. The FAA is indeed in the hen house, and we aren’t terribly unhappy about this, since ownership, control, financial risk and highly motivated air carriers (who want to make money with their aircraft) are who our clients are.

Furthermore, auditors are now, more than ever, poorly equipped to deal with the new “operational control” guidance, since frankly, it is so deeply embedded in the culture of private aviation that the auditors themselves may not have the ability to see it, since they (at one time) were most likely Gulfstream, Hawker or Challenger captains who were intimately aware of the “necessity” of placating wealthy and autonomous patrons who choose to place their aircraft on a Part 135 certificate.

What probably brought down TAG / AMI was not a “select group of attorneys with an axe to grind” (loosely paraphrased from Jim Coyne’s angry-gram) but rather a culture that simply didn’t take running an air charter business seriously enough for some agency attorneys, who ultimately are responding to public pressure from high profile accidents.

Exciting and frightening storms are on the horizon.

* We once (in candid and friendly conversations with Joe Moeggenburg) advised ARG/US to change their business model, give the data away for free and determine some small fee to charge participating air carriers. Why? Safety data should be free, and whether the FAA’s recent action was safety motivated or not, paying for an opinion on TAG / AMI would not have guaranteed continuity in your charter or management experience.

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