““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”
A yardstick for charter brokers
Charter brokers are sometimes treated like the Rodney Dangerfields of the business aviation world. They don’t get the respect typically accorded to the operators they work with–the companies that control or own the aircraft you use when you charter a flight.
A group of charter brokers under the umbrella of the Air Charter Association of North America (ACANA) is trying to change that situation, which they say resulted partly because some of their brethren don’t understand “what it means to be good brokers,” in the words of ACANA chairman Dave McCown, who’s also a senior vice president at charter brokerage Air Partner.
With this in mind, ACANA is promulgating a code of conduct that its members must embrace and that it suggests all brokers follow. If you’re shopping for a broker, you can use ACANA’s standards to see how your candidates measure up. (If you’re a “belt and suspenders” type, you should also check out the National Business Aviation Association’s Best Practices for Air Charter Brokering, which you can download at www.nbaa.org.)
Here’s a summary of the standards ACANA considers essential:
Clear message on operational control. A brokerage should make it clear to you that it is not the operator or in operational control of the aircraft. Making this distinction is important because charter operators must comply with Department of Transportation (DOT) regulations that, among other requirements, provide you with financial safeguards and avenues for recourse should you be unhappy with the transaction.
Brokerage firms, which the DOT doesn’t regulate, don’t provide such protections. Thus, a brokerage that fails to inform you of its lack of operational control–or worse, intimates that it has some control over the aircraft it arranges for you to fly on–is engaged in a form of deceptive advertising in ACANA’s view.
Financial stability. ACANA requires potential members to present a letter from a CPA stating that the business is financially viable and an ongoing concern, “not in a zone of insolvency,” as McCown termed it. You should demand a similar CPA letter before doing business with a charter broker.
Industry experience: ACANA demands that brokers or the firms they represent have charter industry experience, though no minimums are set. Ask your broker candidates about their industry background and the history of their companies. If the brokerage is new but the broker claims to have come from another firm, check references at the previous employer.
Industry experience is important not simply to ensure the brokerage can handle a legitimate charter booking. Efforts to defraud charter providers by paying for flights with stolen credit cards, phony wire transfers and other scams are rampant, according to insiders like McCown. “The problem with our business is the sums of money we’re talking about are very big,” he said. “One fraudulent transaction can put a business under, and you do not want to be one of the clients.”
Clean criminal record: ACANA said it doesn’t accept felons as members, nor does it accept companies whose owners or officers include a felon. “That’s one more way to protect the consumer against fraudulent practices,” McCown said. Perform due diligence on the background of the broker or the brokerage’s principals you are considering dealing with. In the Internet age, this doesn’t require hiring a private investigator.
Aircraft, crew and operator auditing capability: ACANA requires members to check and verify that pilots are properly rated and current in the aircraft they fly; that the aircraft are registered with their operators and that the operators have all required certification documentation as well as proper insurance for every flight the broker arranges.
Ask your broker about its auditing methods and capability. If the broker works exclusively with charter operators that are Wyvern or Argus audited–a common method of ensuring such compliance–you should be provided with the Argus or Wyvern report on the aircraft and crew for the trips you book.
A harsh light was cast on broker practices after the 2005 takeoff accident of a chartered Challenger 600 business jet at New Jersey’s Teterboro Airport, when an investigation revealed the jet wasn’t even certified for use in air charter. In addition to safety issues, other downsides of a badly brokered flight include the possibilities of getting botched catering, a surly flight crew or even a misrepresented or inadequate aircraft.
None of the above suggests that you should avoid chartering through charter brokers in favor of working solely with operators. A broker or brokerage has access to more aircraft than a single operator does, and can find the right model for your needs at a good value.
Still, you have to be careful. The DOT has recently raised the possibility of regulating air charter brokers the way they do operators. For now, ACANA’s industry self-policing is a step in the right direction. By keeping the group’s standards in mind when you’re broker shopping, you can exercise effective regulatory authority over your own air charter operations.