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Beijing, 25 September , 2009. Booz & Company. General Aviation Implementation Support (GAIS) Operator s Module (Revised) 1 st Revision: October, 2010 Final Revision: October, 2011.

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Beijing, 25 September, 2009

Booz & Company

General Aviation Implementation Support (GAIS)

Operators Module (Revised)

1st Revision: October, 2010

Final Revision: October, 2011

This document is confidential and is intended solely for the use and information of the client to whom it is addressed.


Purpose of document
Purpose of Document

  • The intent of this document is to provide a detailed handover of all analysis and materials relating to regulatory gap studies on Operators Module as part of deliverables for General Aviation Implementation Support (GAIS) project funded by the US Trade Development Administration (USTDA)

  • The study focuses on drawing general aviation (GA) regulatory experience and insights from the U.S. because:

    • The U.S. has the most established and successful GA industry with a mature regulatory system that increases GA capacity and efficiency while maintaining safety

    • ACP is an U.S. organization with its members consisting of FAA and key GA aircraft and equipment manufacturers with global presence. ACP member firms are best able to share GA regulatory, management, technological and operational experiences from the U.S.

  • Analysis has been conducted and completed by Booz & Company with active contribution from Civil Aviation Administration of China (CAAC), Development Research Center of the State Council (DRC), Aviation Industry Corporation of China (AVIC), ACP members and other key stakeholders

  • For further information please contact:

    • Mr. Paul Fiduccia ([email protected])

    • Mr. Frank Yu ([email protected])

    • Mr. Kevin Wu ([email protected])

    • Dr. Edward Tse ([email protected])

    • Mr. Yang Guang ([email protected])

    • Mr. Timothy Wong ([email protected])


This is one of the seven sets of deliverables developed for acp gais project
This is one of the seven sets of deliverables developed for ACP GAIS project

ACP General Aviation Implementation Support (GAIS)

List of Deliverables

Executive Summary

1

2

3

4

5

6

Safety

Module

General Aviation Airport

Module

Airworthiness

Module

Flight Standards

Module

Operators

Module

GA Associations Module

Main Module

GA Safety Regulation

GA Airport Regulations

Airworthiness Regulations

Flight Standards Regulations

Regulatory Constraints for Operators

Roles of GA Associations

Safety Oversight Organizational Structure

GA Airport Planning & Design

Type and Production Certifications

Mechanics

GA Aircraft Ownership

Case Studies

Sub - Module

Safety Performance Measurement

GA Airport Funding

Aircraft Registration and Certification

Pilots

GA Operating Cost

Safety culture and promotion


In China, GA ACP GAIS project refers to all civil aircrafts activities other than public aircraft transportation activities

NON EXHAUSTIVE

Three Main Categories of General Aviation Flight Activities*

Definition of General Aviation

General Aviation

China:

General Aviation refers to all civil aircrafts activities other than public aircraft transportation activities. Including flight operations associated with industrial, agricultural, forestry, fishery and construction, and other purpose operations such as medical and sanitation, emergency rescue, Meteorological sounding, ocean monitoring, scientific experiments, education and training, culture and sports etc.

Public Service

Economic Construction

Consumer Aviation

Agriculture

Aerial Photography

Training and Sports

Forestry

Mine Exploration

Tourism

FAA:

General aviation (GA) refers to all flights other than military and scheduled airline flights, both private and commercial.

Meteorology

Petroleum Services

Business Travel

Disaster Relief

Others2

Private Use

ICAO:

General aviation comprises all aircraft that are not operated by commercial aviation or by the military.

Others1

Non scheduled commercial operations3

(*) CAAC categorization

(1) Others include aircraft seeding, pest control, farming and emergency rescue

(2) Others include remote sensing, power line services and industrial associated applications

(3) Non scheduled commercial operations include air taxi and air charter operations

Source: Committee of General Aviation Specialist of China Aviation Industrial Base (CAIB), CAAC and Booz Allen analysis


Operators Module a ACP GAIS projectims to identify opportunities to improve GA operating environment by reducing ownership and operating costs

  • The module aims to identify opportunities to promote GA use by reducing ownership and operating costs by drawing examples from practices in the U.S.

  • The scope of Operator Module is as follows:

    • Highlight regulatory constraints for GA operators in China

    • List interview findings with GA operators to gain understanding in challenges that facing the operators in China today

    • Present a case study on fractional ownership in the US including its impact and regulatory issues, including other options to reduce (initial) ownership costs

    • Present typical aircraft operating cost structure and conduct comparison with China where possible


New generation of GA operators differ from current GA operators in terms of aircraft ownership, management and usage

  • Current GA operators own the aircraft, employ the aircraft, mechanics and use the aircraft for profit in the aviation business, arrange for and source for maintenance of aircraft

  • In the U.S. the owner of the aircraft and the pilot in command have responsibility and authority over their aircraft

  • The new generation of GA operators exhibits the following characteristics:

    • individual GA operators: own the airplane, use the airplane for personal and business use, provide the pilot (themselves or hire someone), select and contract with a GA company for aircraft management, decide on aircraft storage and maintenance and make decisions on operation and use of airplanes, for aircraft management services

    • GA company aircraft management services include “FBO services” (aircraft storage, maintenance, fuel supply, etc.), assistance with ATC approval and flight planning including weather information

    • GA company may lease the aircraft from the owner for flight training

  • Current problem is that because of the new generation GA has one person owns and uses an airplane and another entity manages the airplane, the responsibility for safe operation is now unclear

    • This results in the dispute between the owner and the management company about who has authority over the operation of the aircraft

    • CAAC must make clear the owner has the authority (unless he leases the airplane to the management company). FAA has finally developed rules to address this situation


Summary of observations and recommendations for module 5 operators
Summary of observations and recommendations for Module operators in terms of aircraft ownership, management and usage5: Operators

Module 5: Operators


Regulatory constraints for operators ga aircraft ownership ga operating cost appendix

Regulatory constraints for operators operators in terms of aircraft ownership, management and usageGA aircraft ownershipGA operating costAppendix


GA operators and users in China face many challenges - lack of GA airports and high pilot training cost are two key ones

EXAMPLE - NON EXHAUSTIVE

Key Challenges for GA Operators in China

  • Ownership

    • Cost of ownership is high due to high import tax - 22% for helicopter 5% for fixed wings

    • Fees for managing airplanes owned by others are high and authority over airplanes unclear

    • Difficult and lengthy aircraft

      registration procedures and processes

  • Pilot

    • Source of GA pilots are mainly from veterans

    • It is increasingly difficult for military transfer of helicopter pilots to civil aviation

      -- Pilot training costs are high

Key Challenges for GA Operators in China

  • Operating costs

    • There are unforeseeable and often high operating costs in China e.g. airspace costs are one of the grey areas

    • Aviation gas is difficult to obtain, locations are uncertain

  • Airport

    • There is no regulation on GA airport

    • It’s very expensive and takes a long time to build a GA airport in China - almost the same as build a normal civil airport

Source: Interview findings


In China, private of GA airports aircraft owners face regulatory constraints that results in the low utilization of their aircraft

EXAMPLE: Typical Aircraft Registration Process

CAAC

Documents Required

Acquire Credentials

Resource Constraints

  • Purchasing purpose

  • ID document

  • Police record

  • Feasibility study

  • Pilot license

  • Intent Contract with base airport

  • Resource consuming aircraft purchasing processes e.g. registration process on the left chart takes about 2-3 month

  • Unreasonable regulatory requirements imposed - must have base airport, management company etc

  • Inaccessible airspace - resulting in extremely low utilization and depreciation cost

Submit Aircraft Logo Marking Plan

Apply for Aircraft ID Number

Submit as one document

Apply for Aircraft Registration

  • Registration application

  • Evidence of ownership

  • Applicant ID document

  • Evidence of the aircraft not registered elsewhere

  • Other documents required

Submit Application

INTERVIEW QUOTES

“My client has decided to sell his helicopter to Africa, despite taking the pain to import from the U.S., without realizing the difficulty to use it”

Airworthiness Contact Office Process the Application

Aircraft Certification Obtained

  • Applicant to fill in “Non-Commercial GA Registration Administration”

Aircraft Registered


Aircraft tax is another burden for GA operators of GA airportsas China imposes 23% import tax on imported GA aircraft

International practice on aircraft tax

  • US has set the import tariff and VAT to less than 1% for aircraft weight exceeding 2,000 kg and not tax on aircraft weight less than 2,000kg

  • In some US States, luxury tax is charged to GA aircraft or some of the States are proposing the luxury tax bill

    • e.g. In 2005, Oregon State proposed luxury tax on GA aircraft - this was strongly opposed by AOPA

  • Other countries such as Germany, Japan, UK and France do not impose import tax on aircraft

    China aircraft tax (import)

  • China currently propose aircraft import tax of 22.85% - this is significantly higher than the US and other developed countries - the high import tax makes aircraft ownership less affordable and not suitable for GA development in China

INTERVIEW QUOTES

“We can’t find suitable and reliable aircraft type manufactured locally for our operation - imported aircraft is expensive”

Source: New search, Booz & Company analysis


Similarly, some of the GA operating costs of GA airportsare not transparent and difficult to estimate making economic analysis impossible

GA Operator Interview Findings

AIRSPACE

“We have canceled our Aircraft Management function due to it is very difficult to apply for the airspace usage - you’ll need relationship with the military”

PENSION COST

“After restructuring, some of the GA companies carry heavy burdens on giving out pensions to a large group of people”

AVIATION GAS

“Its difficult to get aviation gas in China - we sometimes go to the military office to get gas”

AIRPORT

“Most of the GA companies needs to share airport facilities with air carrier - the usage control of the airport is limited - hence aircraft utilization rate is low resulting in relative high costs”

Source: Interview findings


CAAC has also implemented market regulations for non-commercial operation management which are restrictive

Restrictions on Non-Commercial GA Operations

CCAR 285 Non-Commercial GA Registration Administration

非经营性通用航空登记管理规定

Documents Required from CCAR 285

  • This has introduced excessive paper work for the CAAC and at the same time created burden for GA operators

  • Some of the documents required from CCAR 285 are duplicative and inconsistent with other regulations which make it difficult for operators to comply with

  • Operators do not see any benefits of this rule which has significant costs

  • Signed application

  • ID document

  • Living address

  • Personal CV and police record

  • Activity purpose and source of funding and insurance documents (copy)

  • Aircraft registration certificate, airworthiness certificate and radio license

  • Pilot license or intention to hire a pilot

  • Intent contract with airport

  • Aircraft management company contract, activity scale and length of time and other necessary proceedings

  • This rule is applied to anyone who wish to use GA aircraft for non-commercial purpose

  • The applicant must obtain aircraft registration certificate and airworthiness certificate beforehand

  • Forms and materials required are included in this document

  • FAA does not have equivalent of this rule


China’s Operating Certificate centralized management in general aviation is stricter than that of the U.S.

Comparison of Operating Certificate Rules of FAA and CAAC

Source: literature research; Booz & Company analysis


Operating Certificate application procedure for GA in China is much more complicated than in US with more key steps

Operating Certificate Application Procedure in China

OperatingCertificateApplication Procedure in U.S.

Submit the application to the Administrator at least 90 days before the date of intended operation

Submit preparation application documents

Make decision within 20 days and notify the result for preparation

Submit an application in a form and manner prescribed by the Administrator to the Flight Standards District Office

Start to Prepare the materials and documents for OC

Each change shall notify the Administrator within 10 days

Submit all the preparation work for OC application

Issue OC within 20 days after the submission

List the situation that certificate will be issued or denied

Documentation at local industry and business authority

File application to amend its certificate with the certificate-holding district office at least 15 days before the date proposed for the amendment to become effective

Complete the certificate for future test & inspection

General Steps

Key Steps

Source: FAA,CAAC, Booz & Company analysis


The categories and definitions of ga in faa 1 2
The categories and definitions of GA in FAA (1/2) is much more complicated than in US with more key steps

Source: FAA,Booz & Company analysis


The categories and definitions of ga in faa 2 2
The categories and definitions of GA in FAA (2/2) is much more complicated than in US with more key steps

Source: FAA,Booz & Company analysis


Regulatory constraints for operators ga aircraft ownership and use ga operating cost appendix

Regulatory constraints for operators is much more complicated than in US with more key stepsGA aircraft ownership and useGA operating costAppendix

General ownership optionsFractional ownershipOther uses (aircraft rental and flying clubs)


In the us there are many different ownership options for ga operators to consider 1 2
In the US, there are many different ownership options for GA operators to consider (1/2)

Type of Aircraft Ownership (1/2)

Source: World Aircraft Sales Magazine, AvBuyer.com


In the us there are many different ownership options for ga operators to consider 2 2
In the US, there are many different ownership options for GA operators to consider (2/2)

Type of Aircraft Ownership (2/2)

Source: World Aircraft Sales Magazine, AvBuyer.com


There are also aircraft ownership operators to consider (2/2)leasing companies and banking institutions to help make aircraft more affordable

EXAMPLE

National Aircraft Finance Company

AOPA Aircraft Financing Program with Bank of America

Type of aircraft covered for loan

  • Single Engine and Twin Engine 

    • Corporate Turbine 

    • VLJ's 

    • Completed Experimental Aircraft 

    • Experimental Aircraft in Kit Form 

    • War Bird Trainers 

    • Engine Overhauls & Re-Furbishing

    • Avionics Up-Grades 

      Loan options

  • Pre-Approval Credit

  • Variable Rate Loans

  • Fixed Rate Loans

  • Balloon Payment Loans

  • AOPA Aircraft Financing Program makes aircraft financing easy and aircraft ownership affordable through Bank of America

  • This loan can be used for purchasing new or used aircraft, avionics, refinancing and upgrades

  • AOPA also provide tips for first time buyers on how to finance aircraft purchasing more effective and efficient

The applicant can borrow up to 90% of the aircraft value

The applicant can finance up to US$ 500,000


Similarly pilot training is also offered different financing options
Similarly, pilot training is also offered different financing options

EXAMPLE

US Pilot Training Financing Options

AOPA Flight Training Funds Program

  • The candidate can contact local pilot training schools for cost/lesson and make decision on frequency of lesson and payment to the school

Self-Funded

AOPA Flight Training Funds offers:

  • Predictable payments

  • No annual fee

  • No collateral needed

  • Renewable source of cash

  • Credit line up to $25,000

  • Support AOPA and General Aviation

In association with

  • The airline scholarship is the most common one

  • However, there are industry associations and individual funds that offers scholarship - e.g. EAA Young Eagles Scholarship

Scholarship

The program gives perspective pilots flexibility to structure training - the applicant can use the account to pay for a rating or certificate program, get additional training hours, aircraft rental, instructor fees, books and supplies

  • This options can help people to pay part of the training fee

  • The most noticeable one are offered by AOPA - AOPA Flight Training Funds Program

Line of Credit

Source: AOPA, Booz & Company analysis


Regulatory constraints for operators ga aircraft ownership and use ga operating cost appendix1

Regulatory constraints for operators financing optionsGA aircraft ownership and useGA operating costAppendix

General ownership optionsFractional ownershipOther uses (aircraft rental and flying clubs)


Part 91k and ac 91 84 oversees the fractional ownership and ensure safe operations
Part 91K and AC 91-84 oversees the fractional ownership and ensure safe operations

Fractional Ownership Definition and Regulatory Oversights

  • A fractional ownership program is a program of shared aircraft ownership that is conducted under the requirements of part 91. As defined in part 91K, a fractional ownership program must contain all of the following elements:

    • Single program manager who provides aviation expertise and management services

    • Two or more airworthy aircraft

    • One or more fractional owners per program aircraft

    • Possession of at least a minimum fractional ownership interest in one or more program aircraft by each fractional owner (1/16th for airplanes/1/32nd for helicopters)

    • Dry-lease exchange agreements among owners, and

    • Multiyear contracts or program agreements for management services and aircraft dry-lease exchange

  • Subpart K provides the regulatory definitions and safety standards for fractional ownership programs; defines the program and program elements; allocates operational control responsibilities and authority to the owners and program manager; and provides increased operational and maintenance safety requirements for fractional ownership programs

Source: AC 91-84


Fractional program can also operate under part 135 with key differences identified
Fractional program can also operate under Part 135 with key differences identified

Fractional Ownership vs. Part 135

Source: AC 91-84


3 differences identified

Fractional ownership has played a significant role in revitalizing the general aviation jet manufacturing industry in the 90’s

Fractional Ownership Development

1995

1999

1986

2000

Today

FAA OVERSIGHT

  • Today, fractional ownership programs are subject to an FAA oversight program

  • FAA aviation safety inspectors (ASI) conduct scheduled and unscheduled inspections, and surveillance of personnel, aircraft, records, and other documents to ensure compliance with the regulations

FORAC

  • In October 1999, the FAA convened a special aviation rulemaking committee, the Fractional Ownership Aviation Rulemaking Committee (FOARC), to address the issues surrounding the regulation of fractional ownership program operations

PART 91K

  • The Fractional Ownership Rule, published on September 17, 2003, identifies fractional ownership programs as private, general aviation programs conducted under part 91K

DEVELOPMENT

  • During the 1990s this growth was substantial and sustained. While growth in new fractional ownership programs is minimal, the FAA expects existing programs to continue increasing in size

Number of Aircraft in Fractional Fleet

(1986-2001)

EMERGENCE

  • The fractional ownership concept began in 1986 with the creation of an industry program that offered increased flexibility in aircraft ownership and operation

2001

2000

1999

1998

1997

1996

Fractional Ownership Program has bring discontinued growth

1995

1994

1993

1992

1991

1990

1989

1988

1987

# of A/C in Fractional Ownership Fleets

1986

Source: AC 91-84, Wilbur Smith Associates, NBAA


Fractional ownership can make aircraft more affordable, economical and enable more people to use GA aircraft

Fractional Ownership Advantages

NetJets Example

Efficient Use of Capital

  • The fractional owner actually purchase an undivided interest in a specific, serial numbered aircraft

  • The size of the undivided interest purchased is directly proportional to the number of hours flown each year

Comments

  • NetJets pioneered the concept of fractional ownership in 1986 by allowing businesses to purchase shares in a jet to reduce costs

  • Aside from regular fractional ownership program, NetJets also offers flight card program, Marquis Jet Card

Predictability of Expenses

  • Once a fractional ownership contract is signed, which is typically five years, the cost of using the aircraft is guaranteed and predictable for the entire term of the contract

Guaranteed Liquidity

  • Once the fractional owner meet the minimum commitment term, the aircraft management company normally offers the guaranteed liquidity and guaranteed repurchase of the fractional owners interest at fair market value less a remarketing fee

Guaranteed Availability

  • Aircraft is guaranteed available when the fractional owner requests it - sometimes the aircraft in demand may not be the owned aircraft but a comparable or a larger one in the fleet

Source: NetJets, AvBuyer.com and Booz & Company analysis


% economical and enable more people to use GA aircraft

Significant savings can be made with Fractional Ownership - the operating cost can reduce by 80% with 1/8 of fractional ownership

ILLUSTRATIVE

Whole Aircraft Ownership vs. Fractional Ownership

Gulfstream V

US$ 1,926 / Hour

Others

Total Cost: US$ 1,926 / Hour

100%

1%

100%

9%

Engine Reserve

Variable Cost

Fuel Cost

With Fractional Ownership Program, costs are shared among fractional owners including both ownership and operating cost

Maintenance

Fixed Cost

Insurance

Hanger

1/8 Fractional Ownership: US$ 240 / Hour

Training

7%

Hourly Variable Cost

Hourly Variable Cost


Regulatory constraints for operators ga aircraft ownership and use ga operating cost appendix2

Regulatory constraints for operators economical and enable more people to use GA aircraftGA aircraft ownership and useGA operating costAppendix

General ownership optionsFractional ownershipOther uses (aircraft rental and flying clubs)


In the u s other ways of using aircraft not involving ownership are significant
In the U.S. other ways of using aircraft, not involving ownership are significant

  • People who fly more hour usually own aircraft through sole ownership or joint ownership

  • In the U.S. significant part of GA piston airplane usage is aircraft rental and for major part of flight training

  • Aircraft rental from FBO

    • Hourly rental - pilots must be previously “checked out” and authorized by FBO flight instructors, or flying with the instructors

  • Flying clubs

    • Pilots pay annual, monthly and hourly fees to fly aircraft. Use by pilots who fly more hours per year than those using aircraft rental, but less hour per year by those owning aircraft


AOPA indicates that in the U.S. two third of pilots don’t own an airplane, they rent airplanes and are charged on a hourly basis

EXAMPLE

Brief Descriptions of Platinum Aviation Rental Business

On Line Scheduling

  • Platinum Aviation is a South Florida based family of companies which team up with Cirrus to provide flight training, aircraft rentals, aircraft maintenance services for the newest Technologically Advanced Aircraft market

  • Basic minimum requirements for rentals and solo flight are aircraft type dependent. Requirements for renting Cirrus SR22 Turbo are:

    • Private Pilot Certificate

    • Instrument Rating

    • High Performance Endorsement

    • 250 Hours Total Time

    • 10 Hours Aircraft Make and Model

    • Cirrus Transition Training Course Completed

    • Cirrus Turbo Transition Course Completed

    • Platinum Instructor Sign Off

  • Pilots that are interested in renting aircraft will be required to do an aircraft checkout with one of its instructor pilots prior booking any rental flights which include:

    • A standard aircraft checkout with a review of a few ground topics such as regulations, airspace and aircraft systems

    • In addition, the instructor will go over procedures and policies of the rental company

    • This will be followed by a flight for the instructor to evaluate your ability to operate the aircraft safely

Clear information on aircraft type and rates

Less than US$300 per hour (not inclusive of fuel cost)

Source: Platinum Aviation Company website, Booz & Company analysis


The Flight Card and Block Charter programs, which derived from fractional ownership, can accommodate some ad hoc flying needs

Flight Card Program

Block Charter Program

  • A type of fractional ownership made available to persons with aircraft utilization requirements of less than 50 hours per year

  • For example, with a Jet Card Program, a customer generally pre-pays for a certain number of flight hours (typically 25) on a certain make and model of aircraft, and thereby gain access to the fractional fleet

  • Whenever the customer flies, the total number of flight hours flown is debited from the card - when the card is used up, the customer has no further obligation

  • This program is similar to card program associated with large fractional programs but usually provide for access to charter fleets rather than fractional fleets

  • Aircraft in charter fleets tend to be older on average and do not have standardized interiors and amenities like fractional fleets

  • The customer may have access to only the charter fleet of a single charter operator

Source: World Aircraft Sales Magazine, AvBuyer.com


Regulatory constraints for operators ga aircraft ownership ga operating cost appendix1

Regulatory constraints for operators from fractional ownership, can accommodate some ad hoc flying needsGA aircraft ownershipGA operating costAppendix


China share very similar ga operating cost structure to the u s with difference in proportions
China share very similar GA operating cost structure to the U.S. with difference in proportions

Aircraft Operating Cost Breakdown

*) Detailed information on China GA operating cost is difficult to obtain - only partial information available

Source: PlaneQuest.com, industry interviews and Booz & Company analysis


The US allows free usage of GA airports and airways through AATF which existing GA operators contribute to via tax charges

Airport and Airway Trust Fund

  • The Airport and Airway Trust Fund (AATF), created by the Airport and Airway Revenue Act of 1970, provides funding for the federal commitment to the nation’s aviation system through several aviation-related excise taxes

  • Funding currently comes from collections related to passenger tickets, passenger flight segments, international arrivals/departures, cargo waybills, aviation fuels, and frequent flyer mile awards from non-airline sources like credit cards

GA Contribution to AATF

GA Benefits from AATF

  • General aviation operators pay into the Airport and Airway Trust Fund through a fuel tax of 21.9 cents per gallon for aviation jet fuel and 19.4 cents per gallon for aviation gasoline

  • Furthermore, on-demand air charter operators pay the same ticket and fuel taxes as scheduled airlines due to their classification as commercial operators

  • This funds helps guarantee free usage of FAA funded airports and airways which makes GA more affordable and available to people

This is believed by US GA Industry as the best method for non-commercial GA paying into the AATF because it guarantees a consistent and efficient stream of funding and promote more flying as the result of safe operation

Source: NATA, FAA, Booz & Company analysis


The new proposals for ga user fees has raised many oppositions from the ga industry
The AATF which existing GA operators contribute to via tax chargesnew proposals for GA user fees has raised many oppositions from the GA industry

GA User Fee

Impact on GA

  • For over a year, the FAA has claimed that the existing aviation tax revenues are falling short of the FAA's expenses, noting that ticket prices are not linked to their productivity costs

  • They also claim that the current tax-based funding system promotes an unstable operating environment for the FAA, making long-term financial planning impossible

  • Stating tight budget years make continued funding from the General Fund unlikely, the administration proposes to implement a user-fee-based system of revenue collections

  • Increased cost to nonscheduled operators

    • All operations should be charged the same fee because air traffic control does not differentiate between types of aircraft

  • Less general aviation activity

    • Due to the increased costs of using the aviation system, many GA operators would fly on a less frequent basis

  • A tremendous administrative burden

    • Virtually all countries that have implemented a user fee system have adopted a method of billing users of the system for the air traffic services used after their particular flight - given the large amount of GA activities in the US, this would create significant burden for GA pilots

Source: AOPA and NATA


For airspace charges, Australia has a set of rules on when and how to charge aircraft that using low altitude airspace (Class E to G)

EXAMPLE

Australia Airspace Classification and Charges

Australia Air Traffic Service (ATS)

Enroute Charges

The Main features of NAS Australia airspace are…

  • Complies with ICAO Classifications with minimum differences

  • Based primarily on the North American airspace system

  • Provides a continuous Search-and-Rescue (SAR) and IFR traffic service for IFR services to the terminal area

  • Allows for IFR aircraft to operate on a self-announce, no enroute charge basis in Class G airspace

  • Facilitates VFR climb and descent in Class E airspace for aircraft which have filed an IFR flight plan

  • Changes the MBZ calling in the blind procedures to proven FAA style CTAF/UNICOMs with a third party operator

  • Ensures that ATC frequencies remain free of aircraft self-announce broadcasts

  • Provides an IFR separation service to 700’ AGL at non tower terminal airspace at selected locations.

  • Provides a full radar based advisory service on a workload permitting basis for VFR aircraft

  • Simplifies procedures and makes the maximum use of modern technology

  • En-route ATS charges apply to aircraft that have filed IFR flight plans with the ATS provider

  • There will be no charge to aircraft that have not filed IFR flight plans but require a short term IFRclearance to climb or descend in Class E airspace, or a clearance to cross a Class E corridor

  • There will be no charge for a workload permitting RAS, flight following service for VFR aircraft

  • There will be no charge for SAR alerting services to VFR flights over water

Source: National Airspace System, Australia


In china some of the operating costs may not seem very transparent and difficult to capture
In China, some of the operating costs may not seem very transparent and difficult to capture…

GA Operator Interview Findings

AIRSPACE

“We have canceled our Aircraft Management function due to it is very difficult to apply for the airspace usage - you’ll need relationship with the military”

PENSION COST

“After restructuring, some of the GA companies carry heavy burdens on giving out pensions to a large group of people”

AVIATION GAS

“Its difficult to get aviation gas in China - we sometimes go to the military office to get gas”

AIRPORT

“Most of the GA companies needs to share airport facilities with air carrier - the usage control of the airport is limited - hence aircraft utilization rate is low resulting in relative high costs”

… There is a need to establish fee policies to guide charges for GA airport and airspace access

Source: Interview findings


Regulatory constraints for operators us fractional ownership model ga operation cost appendix

Regulatory constraints for operators transparent and difficult to captureUS fractional ownership modelGA operation costAppendix


Cost breakdown examples for a single engine prop

t transparent and difficult to capture

Cost breakdown examples for a single engine prop…

ILLUSTRATIVE

Typical Operating Cost of Cessna 172XP (Single Engine Prop)

U.S. Example

Total cost for a Cessna 172XP is ~ US$ 68,500

US$ 78 / Hour

100%

5%

Others

11%

Engine Reserve

US$ 4,294 / Year

Fuel Cost

100%

Annual Insurance

Maintenance

Fixed Cost

Annual Hanger / Tie Down

Training

4%

Hourly Cost

Annual Fixed Cost

Source: PlaneQuest.com, Booz & Company analysis


And a twin engine business jet

t transparent and difficult to capture

…and a twin-engine business jet

ILLUSTRATIVE

Typical Operating Cost of Gulfstream V (Twin-Engine BizJet)

U.S. Example

Total cost for a Gulfstream V is ~ US$ 45 million

US$ 1,926 / Hour

100%

1%

9%

Others

Engine Reserve

US$ 206,134 / Year

Fuel Cost

100%

Annual Insurance

Maintenance

Annual Hanger / Tie Down

Fixed Cost

19%

Training

Hourly Cost

Annual Fixed Cost

Source: PlaneQuest.com, Booz & Company analysis


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