the proper wording was available foraviation.Actually, the imposition of PublicTransport conditions is onlypermitted by the enabling Act (of theANO) where the aircraft is used fora commercial, industrial or gainfulpurpose (specifically Sect 60 (3) (f)).What it says is that:"An Air Navigation Order maycontain provision as to the conditionsunder which passengers and goods maybe carried by air and under whichaircraft may be used for othercommercial, industrial or gainfulpurposes".284 Operational FlyingQuite a mouthful, but the use of theword "other" in conjunction withthe Rules of Interpretation of Statuteinfers that "conditions" may only beimposed when aircraft are beingused for gainful, etc. purposes(notice the absence of the words"valuable consideration"). As theserules are meant to be enforceable bycriminal proceedings, they becomepenal situations, and as such must bestrictly construed in accordance withthe enabling statute.So what may be relevant as to whatis or is not Commercial AirTransport is not the presence of anyconsideration, but, if there is,whether the aircraft is being used fora commercial, industrial or gainfulpurpose. Therefore, all you reallyhave to do is pin down who the useris and see what his use of the aircraftis to see whether Commercial AirTransport or Aerial Work conditionsmight apply.Since, in most circumstances, lightaircraft are chartered to a sole user,most "charter" flights could in factbe called private flights (if not forthe ANO) unless the aircraft is beingused during flight for commercial,industrial or gainful purposes.The user (that is, the hirer) is usingthe aircraft for his own purposes(unless buying and selling is going onin the back) and the "operator" is thepilot. Whoever hires out the aircraftto the user could be held to be theiragent in respect of maintenance andall the other things needed to keepthe aircraft flying. If passengers arebeing carried for separate fares, onthe other hand, then the aircraft isbeing used in that way by the personwith the right to the money.But beware! The terms of an AOCcould be enforceable if made as theterms of an Air Transport Licence.If an aircraft is being used for thecarriage for reward of passengers orcargo, the CAA may apply airtransport licensing even if theaircraft is not being used foranything resembling Commercial AirTransport or commercial or othergainful purposes.All that being said, what about thesituation where you're asked to do ajob and you're not sure what's goingon? Do you feel up to actually askingfor a certificate to say a flight is notCommercial Air Transport? This isplainly impractical, so you need toknow a few ins and outs to protectyourself (please note the intention is
not to enable you to fly illegally!).A workable CAT flight (ANOdefinition) must have the following:·
An Air Operator's Certificateissued to "the operator"·
The crew must have currentlicences (e.g. CPL/ATPL) andbe type rated, base/linechecked, etc. in accordance withthe operator's OperationsManual (indeed, the whole flightmust be conducted under it).·
The aircraft must have a(current) Transport Category Cof A, Certificates ofMaintenance Review andRelease to Service, TechnicalLog (with Deferred DefectSheet), Passenger BriefingLeaflets and all legally requiredequipment (Fire extinguishers,placards, etc.).You may be able to get around theserequirements by ensuring that theLegal Stuff 285person hiring the aircraft does sowith a separate contract than the onehe hires you with, and you'll bebetter off if you can also prove thatyou weren't paid, or at least you werean employee of the hirer's organisation (if you do this, you may haveto show that the enabling Act onlypermits an Air Navigation Order tomake different pilot licensingprovisions according to whether theperson concerned is actuallyemployed or merely engaged in aflight crew capacity). You could alsoget base and line checked by aproper company and put it throughtheir books, but don't forget youmust use their Ops Manual andother documentation.Finally, you could resort to drasticmeasures and form a company for ashort time with nothing in itsmemorandum and articles ofassociation about gainful use ofaircraft or hiring out by the hour.There is a Common Law rule thatyou cannot buy or hire fromyourself—this is the basis uponwhich co-ownership groups andnon-profit members clubs are run inevery walk of life. However, theANO says that any agreementbetween any such organisations, ormembers of them (this also meanswithin the same group), in respect ofa situation where valuableconsideration would normally beexpected, would be considered as ifit had been given anyway. This isnotwithstanding any rule of law as tosuch transactions; in other words,the Common Law purports to bespecifically overridden, yet it is notclear from the enabling Act that theANO is permitted to do this, that is,put Common Law into abeyance.An unincorporated non-profitmembers' club can be created for aspecific purpose or occasion andexist for one flight or a day only,being dissolved once it has served itspurpose. They should pay for theirown operating costs to avoid theinference of valuable consideration.For instance, it should not be toodifficult for a group of parachutiststo form a club for the day for the
purposes of hiring an aircraft.However, the paperwork must besound and, as I said, these are drasticmeasures, so get legal advice here.Legally, there's nothing to stop you(as a pilot) obtaining your own AirTransport Licence or AOC shouldyou feel the need.International Air LawThe idea is to reduce the possibilityof a phenomenon known as conflict oflaws, and the resulting confusion thatcould arise where, say, a claim fordamages is brought in a Frenchcourt for injury to a Dane travellingon a ticket bought in Holland for ajourney from Germany to Englandon an Italian plane.International Law (Public or Private)consists of internationally agreedrules that courts of participatingstates apply to cases with a foreignconnection, the private side of thingsaffecting individuals and the publicside affecting states. PublicInternational Law takes precedenceover Private, which in turn issuperior to State law, although (shortof war) International Law isunenforceable where the originalconsent disappears.Air Law has mainly evolved throughagreements between "high286 Operational Flyingcontracting parties", through variousInternational Conventions orTreaties, too numerous to mentionhere. These form the basis of PublicInternational Law which in turn canbe incorporated into the law ofindividual states, an example beingthe UK Carriage by Air Act 1961 inrelation to the Chicago Conventionof 1944 (in fact, the ChicagoConvention and its annexes are alsoembodied into Section 60 (2)(a) ofthe Civil Aviation Act, 1982).A Convention is an agreement thatmany nations are at liberty to enterinto and the word Treaty is used toindicate agreements between two (ormore) States that bind onlythemselves. The Tokyo Convention1963, for instance, relates tooffences committed on boardaircraft (but not to offencescommitted by aircraft, as such).Thus, Conventions can cover manysubjects, including the agreement ofstandards for navigational equipmentand documentation, but they canalso establish governing bodies, suchas the International Civil AviationOrganisation (ICAO).ICAO is a worldwide bodyconvened by governments while theInternational Air Transport Association(IATA) is an equivalent bodyestablished by the airlines. AlthoughIATA is a private organisationcomprising of virtually all thescheduled airlines of the world, itnevertheless has strong links withICAO and governments, and isoften used by many airlines as anagent for inter-airline cooperation.IATA has many committees, but themost significant is Traffic, whichnegotiates many arrangementsbetween states and airlines. Otherairline organisations exist,particularly within Europe, whichoperate on a similar basis. As well ascertain freedoms granted byConventions over the years (such asflying over certain territories, takingtech stops and collecting ordischarging passengers), other rightsof commercial entry are establishedby bilateral agreements, whichprovide for route(s) to be flown,estimate traffic capacity, frequenciesof service and establish other preciserules under which operator and crewlicensing are accepted by therespective parties to the agreement.EmploymentAs soon as you start working acontract of employment is deemedto have started. There are reams ofpapers on the ins and outs ofcontracts, but basically once acontract is formed there are rightsand duties on either side, made themore binding if something calledconsideration (remember that?) is givenby anyone to seal the bargain. Thisconsideration need not be money,nor need it be adequate.Unless you're a freelance, you willnormally enter a contract of servicewhere you have a master/servantrelationship with your employer. Ifyou're self-employed, you will beregarded as an independent contractor,and in a different legal position if apassenger decides to sue for anyreason (your "employer" may be ableto drop you right in it).If a passenger does want to sue,you're more protected if you'reactually an employee, because thecome-back is then on your employer,
as you're a part of his business,although there is a let-out if he canLegal Stuff 287prove you were acting outwith theterms of your employment, but as long asyou haven't done anything totallystupid, you should be OK (this alsoapplies in Canada).Aside from whether your tax isdeducted at source, you can identifythe essential difference between thetwo in the way that you're treated.An independent contractor isoutside the employer's business andis told merely what has to be done,and not how.In Canada, there is a 4-part test as towhether you are an independentcontractor or not, but, unless youactually own the air service or haveincome from other business pursuits,it is difficult to meet (deductions atsource are not part of it).Most contracts are free and easy, itbeing up to both parties what theywant out of any situation. However,contracts of employment (and salesof goods, incidentally) are regulatedby law, so there is less freedom ofmovement, although the bias is onyour side, helping to protect you andallow more collective bargaining(this last only applies if you're in aunion, of course, but there are nonefor General Aviation).Although any contract may be madeverbally (which could override awritten contract, by the way, subjectto provability), the law lays a duty onthe employer to give you a writtenstatement within 13 weeks ofstarting work detailing conditionsabout such things as pay, hours,holidays, pensions, sick pay, notice,disciplinary rules and any otherprocedures which may affect you. Ifyou don't get a written statement,you may be able to use what actuallygoes on between you as evidence ofthe presence of a contract.Employer's Duties·
To pay wages as agreed. You areentitled to a written itemisedpay statement, regardless of themethod of payment. It mustcontain certain minimum items.·
To indemnify against liabilityand loss (as a result of doing hiswork).·
To provide a safe system ofwork (including premises andaircraft).·
References are subject to thelaw of defamation (libel iswritten, or, rather, permanent—slander is spoken). Be careful,though, to distinguish between afalse statement and anexpression of opinion madewithout malice.Your duties·
Obedience. It's your duty toobey a lawful order, but thereare proper procedures for yourdismissal if you don't.·
To show good faith, that is,work in your employer's bestinterests.Like any contract, one foremployment will take placeaccording to agreed terms and
conditions, but if there is a dispute, itwill be judged according to what isreasonable. In the case oftermination, there may be damageson either side, provided it could beproven that damages were sufferedas a result of the action.288 Operational FlyingThe usual problem is unfair dismissalon the employer's part, though, andthere are strict procedures thatenable you to go to an IndustrialTribunal should such an eventhappen. I suggest you check outyour local Citizen's Advice Bureaufor the latest information. InCanada, you would have to apply tothe Human Resources Developmentpeople, as aviation is a federallyregulated business.There is an Equal Pay Act whichallows women to receive the samepay as men for performance ofequivalent work. It also makes itillegal (with certain exceptions) fordiscrimination on grounds of sex,and it applies both ways.Neither is an employer allowed todiscriminate on race grounds.In Canada, employees have rightsunder the Canada Labour Code PartII, or Occupational Safety andHealth Regulations.Health And Safety At WorkThis applies to Aviation as well, andthere is actually a Common Lawduty of care laid on whoever youwork for to ensure that the aircraftflown are airworthy and fit forCommercial Air Transport in everyrespect. You are required to do apre-flight check, to be sure but, notbeing a qualified engineer, there aresome things about an aircraft'scondition for flight you just have totake on trust, which become theOperator's responsibility. Ifsomething turns out to be wrong,then despite the adherence toauthorised maintenance schedules,there could be negligence involved.Recent amendments to the ANOmean there are cases in which crewscease to be passengers carried underthe terms of Commercial AirTransport. Under thesecircumstances, there is a lowering ofsafety standards applicable toworking conditions, as they areobviously no longer protected bythose conditions.Setting up a CompanyMost pilots are quite happy workingtheir way up the career ladder,graduating to larger and larger typesas their experience grows and don'tconcern themselves with thepossibilities of operating their ownaircraft.One day, though, there will be anopportunity to set up your ownCompany and obtain your ownAOC, typically where you comeacross somebody with an aircraftwho would like to offset the costs ofoperating it against some income. Orit may be that you come into somemoney yourself and feel able to go italone. More common is where youfly somebody on a charter who isnew to flying, they becomeimpressed and decide to buy their
own aircraft, and because you weretheir first pilot you get made an offeryou can't understand.There's nothing wrong with this, butthink seriously before leavingemployment with relative securityfor something that may only last afew months. One rule of thumb(which works very well) is that themore attractive the package offered,the less stable is the job. Another isto subtract twenty-five from thephysical age of anyone who's keenon Aviation for its own sake, andwants to make a business out of it,to get their mental age. If you can,find out something about thecompany your prospective employerruns. Have they got credibility? Arethey well established, or is the manyou're talking to just an idiot withaccess to other people's moneyrather than his own? (See how manyof his cheques bounce, and howmuch of what he says will happenactually comes true). Signs that acompany won't last long includeexcessive flamboyance on the part ofthe Boss, who naturally pays foreverything, treating all and sundry tolunches, drinks, etc. (if it was reallyhis money, he wouldn't be doingthat). Statements to the Press thatare less than complimentary to othercompanies around should also benoted, as should excessive hype andillogical spending on non-essentials,where the basics aren't being lookedafter—that is, they spend money onsmart new offices rather thanservicing the aircraft.290 Operational FlyingI don't mean to put you off fromanything that could lead to greaterthings, but a little scepticism in theearly stages could save you and a lotof other people plenty ofaggravation later on. There areseveral ways to protect yourself. Oneis, don't move at all—bide your timeand see what actually materialises outof what your prospective employerpromises. Many people say a lot, butnot much actually happens—theygive the illusion of movementwithout actually progressinganywhere (like 'reorganisation' in alarge company). The more urgencyprojected, the more sceptical youshould be.Another way of protecting yourselfis to have somewhere to go to ifthings fail to materialise; an evenbetter way is to estimate the amountof work you can expect to do for ayear and insist on payment of thewhole lot in advance. If they wantyou enough, they'll produce thegoods. In fact, to work in Aviation atany level (as opposed to playing in it)needs a more businesslike approachthan most people think, at least asfar as mental attitude is concerned.The whole idea of doing the job is toearn money; if you happen to enjoyit, you're lucky, but you are doingyourself and other pilots a disserviceby underselling yourself just becauseyou're keen to fly. You suffer thesame fate as companies whoundercut—in the end, the waters justget stirred up, nobody makes any
money at all and very few survive.Financial MattersIf, despite all that gloom, you stillwant to carry on, please let me addone more word of warning—youwill need much, much more moneythan you anticipate. Not for nothingis it said that to end up with a smallfortune in Aviation, you need tostart with a large one! But it needn'tbe that bad, provided things aredone properly from the start.First of all, if you need to borrowmoney, you'll need as much slack asyou can get to cover cash flow whileyou're waiting for customers to pay,and emergencies—if you only askfor just enough money, it will bepatently obvious you don’t knowwhat you’re doing and will be shownthe door. When running an airline,you will find that major travelagencies can take up to 6 months (ormore) to pay their bills, if they pay atall, which will cause major cashflowproblems. Once the fuel companiesdon't give you any more credit, youdon't have long to go, becausepeople who owe you moneydefinitely won't pay if they can getaway with it.Also, things only work out cheaper ifyou can afford to fork out themoney from the start. Buying yourown bowser, for instance, instead ofpositioning your helicopter to thelocal airfield for fuel, will probablycover all that empty flying andunnecessary landing fees inside threemonths, but you have to have themoney in the first place—paying asyou go along should be avoided asmuch as possible, as it will usuallykill any project stone dead.Don't depend purely on loans. Infact, you probably won't get one tillthe lender sees some input fromanother source (preferably yours), soyou may need to find a VentureCapitalist who would be willing toinvest in your project. These sort ofSetting Up A Company 291people supply money in return forstock (shares in the Company),typically expecting to be free of theirobligation in about four years or sowith a handsome profit (althoughthey could make a loss). The majorbenefit to you is that they provideready cash and a bit of stabilitywithout your spending power beingdrained continually by interestpayments. Although a business planis important, you will find that yourpersonality, or those of others in theplot, will account for at least half ofthe decision.Use accountants, by all means (youwill need one on board for thebusiness plan), but never, ever letthem run your business, unlessthey’ve either been there themselvesor have gone to business school. Theproblem is, their training makesthem very narrowly focussed, andthey often fail to see the big picture.Mind you, pilots running businesseshave limitations, too, since they’reprogrammed to fly and don’t alwaysrealise you can make more money bynot flying sometimes.Business Plan
This is needed to raise capital—it is abrief sketch of your proposals,detailing how you mean to repay themoney, together with how thingswill be run (this includes details ofthe management team). Like a cv, itshould be short and to the point,somewhere between a quarter and ahalf inch thick, and, provided it iswell thought-out, need not be toopolished, though it should still lookneat, tidy and professional. Here aresome suggested headings for a start:· Introductory letter. Why are youwriting the plan (to raise moneyfor expansion? An aircraft?).· Title Page. Name phone, datecompleted.· Table Of Contents.· Summary of proposed venture.Description of business.· How much needed, and how itwill be used.· Amount already invested;equipment, market testing , etc.· Security—property, stock andother assets.· Background info—Limitedcompany? plc? SoleProprietorship?· Mission Statement. Keyactivities.· The industry. Niche available.Competition.· Management—organisation, cvs,proposed benefits.· Target markets—individuals orcorporate.· Advertising· Land, buildings and equipment.· Operations—work flow,personnel.· References· Financial Plan—capitalrequirements and sources todata, profit/Loss—cash flow forat least one year; projectedincome for at least one year;proforma balance sheet, showing292 Operational Flyingprojected current and fixedassets, and liabilities. Break-evencalculations.· Risks and problems; worst case -what if demand falls, or you getmore competitors, or overheads.What's left if you don't succeed?Avoidance of risks. Impact ofrisks you can't avoid.The magic figure to survive in thesmall charter world is 500 hours peraircraft per year—that's revenuehours, ten a week, which doesn’tinclude training, etc. Remember, theobject of the company is not to fly,but to make a profit so that you canlive, or to provide the investor with areturn on his capital (not profitnecessarily, although sometimes theycan coincide). Far too many peopleforget this, set themselves up withno research, don't market theirproduct, then expect the world tobeat a path to their door becausethey have an aircraft. Even if workdoes come, more often than not byaccident, the same people undercuteverybody else around, thinking toput the opposition out of business
then put the prices up again.Unfortunately, it doesn't happen likethat—they're the ones to go out ofbusiness first because they have nocash flow, left with debts, wonderingwhat went wrong.A lot of Aviation Companies owetheir existence to a larger parentcompany that bought an aircraft as away of spending excess money thatcan't otherwise be used (there is sucha thing), but it's not impossible tosurvive purely on Aviation withoutassistance from a Big Brother.Whether it is or not depends on theexistence of competition, how bigyou expect your Company to be andthe availability of the work itself (ifthere's no competition, have youthought of the fact that there mightnot be any work?).Purchasing An AircraftWhatever happens, you will have toget your hands on a machine.Expensive stuff like that (while beingan asset in itself) will create massivedebt which will require servicing,which in turn means interest. Whichcompany will take care of that? If theAviation Company itself buys themachine then it will have that muchmore to worry about.What is more likely is that an outsidecompany will own the aircraft andlease it to your Company, giving theadditional benefit of the equipmentbeing one step removed in case ofdisasters. Outside aviation it'scommon practice to place allvaluable assets into a holdingcompany that trades only withassociated ones, thus insulating themfrom unplanned contingencies (trylooking at a Pure Trust). WhereAviation is concerned, it also legallyseparates the registered owner fromthe user. The leasing cost to you willbe a total of maintenance costs,spares or engine replacement costs,insurance costs plus a bit on top forcontingencies (the spares or enginereplacement costs are likedepreciation, an accountant's way ofestablishing a fund for futurereplacement of machinery).There are two types of lease, wet ordry. The former will include fuel,which is useful, because there's lesssquabbling over who put what fuelin what aircraft. It's easier just to letthe owner pick up the tab, providedSetting Up A Company 293he's not overcharging. Leasing costsare charged hourly and the total costis variable, that is, dependent on theamount of hours flown.There is a chance that the anticipatedcosts above turn out to be lessexpensive than you anticipate, butthat will be the lessor's good fortune,not yours. Of course, things couldgo the other way and it will cost himmore—this will happen if he buys abad machine in the first placeand/or it's flown badly. Leasingmeans that you have no asset to fallback on, which you would have ifyou raised a mortgage and bought it.If you ever end up leasing an aircraftto somebody else, you will make themost money by stumping up at least50% yourself and financing the rest.
One creative solution is to raise aloan on something else, say, a house,and use that money to buy theaircraft – you will then get lowerinterest rates and longer terms.The aircraft doesn't just cost, say twomillion pounds. It will also cost whatyou can't do with the money havingspent it—what economists call theopportunity cost. In other words, youlose the opportunity to dosomething else with it, even if onlyto sit in a bank account and gaininterest. Sometimes it's better not tobuy outright but to do it on amortgage and let the interest gainedfrom whatever you do with the restpay the interest on the mortgage.With a little shopping around forinterest rates (abroad as well) this isentirely possible.Imagine you have the choice of twoaircraft—one relatively expensive tobuy, but cheap to operate and theother cheap to buy, but expensive torun. Both do the job you want—well, near enough, anyway. Thedifference in purchase price betweenthe two may well, if placed ondeposit somewhere, more than payfor the increased running costs ifyou buy the cheaper one. However,in the UK, which is not an aviationminded country in general, this maybe low on the list of priorities, asoften the purchasing of an aircraftwill tend to be a personal decisionon behalf of the Chairman.So, when evaluating an aircraft, firstestablish what you want it to do—inmany cases, a simpler, cheaperaircraft will suit. For example, if youwant a helicopter for corporatetransport, use a 206B-III, but fortraining or pleasure flying, a 206Awould not only be cheaper, but moreefficient, as its C18 engine is notcycle-limited.What's the maximum range, andwhere is the nearest airfield to thefactory? What's its optimum cruiseheight and will you get a "wetfootprint" if you have to go lowerover water if an engine stops? Doyou want an aeroplane, or would ahelicopter be better, where youmight spend longer in the air, buthave a shorter time between officesand not need ground transport fromairfields? How many passengers willyou normally carry, and will theywant to hold meetings in the back?The bigger and faster it is, the moremoney it will cost.However, having the most costeffective aircraft ever won't help ifyou can't afford even that. Yourbudget may stop you dead andrestrict you further—you have to runit as well.294 Operational FlyingIf you get professional help, it willcost you money, so what you needto do is aim your money at the besttarget. The proportion of the cost tothe actual purchase price will belarger with smaller aircraft becausethere's just as much work involved inselling them as there is with largerones, and the total price issubstantially less.A broker will be selling somebodyelse's plane on their behalf,essentially taking money for the
