Taking a chance with buying a package of hours for PPL training

[Culio]

Afternoon all,

Now, from what I've read on this forum, you just shouldn't buy hours in bulk and rather pay as you fly. From what I understand this is due to the chance of the school closing down and losing out on thousands of pounds. Of course, this is a very good reason.

However, I've come across a package that works out massively cheaper than if I pay as I fly. I'm not in a financially strong position, and don't think I will be for a little while either. I've been considering taking a bit of a chance and buying the package.

The school is very successful and is part of a larger grouping. I'm really quite desperate to start learning to fly and think maybe just taking a chance might help smooth things along.

*Dons metal hat in preparation for replies*

Cheers fellas,

A.

[znww5]

I think the myriad warnings and tales of woe on here speak for themselves. Unless you can protect your money by paying with a credit card, or you enjoy a gamble, the advice is clear - don't.

[BabyBear]

This short sighted attitude that you never pay upfront is frankly somewhat childish.

There is risk involved however it is up to the individual to minimise the risk as much as possible and then take a personal view on whether the risk is one he/she is prepared to take.

You may get some pointers here, but don't expect folks here to be able to decide for you.

BB

[Whopity]

Why do they offer such a discount? Because they need cash to pay somebody else's bill. Will there be any mugs left to pay your bills?

I have seen people in this game who paid out £35,000 one day to find there is no money in the pot a day later. Don't do it.

Maybe buy a block of 10 hours and use them up in a week but nothing beyond that. Simple rule of gambling, don't invest more than you can afford to loose!

[The500man]

Now, from what I've read on this forum, you just shouldn't buy hours in bulk and rather pay as you fly.

I think being aware of the situation is good but ultimately it's your money. Can you afford to write it off? If you are confident about the organisation and are using a credit card which affords some protection then I don't see the problem.

Most people that lose money seem to be fairly clueless about what they're doing, either paying by cash or cheque, and they never even think about the possibility of losing all their money.

There are plenty of places however that I wouldn't even contemplate paying upfront! It's your choice...

[Pilot DAR]

Culio, you're at risk of getting "don't do it" warnings in big red text and so forth, when you present this question here. It's certainly not a new subject, as you seem to have noticed.

As Whopity correctly asks, why is it so much cheaper for you if you pay up front? It does not cost less to operate the plane because someone has paid up front, so what saving is being passes along to you? Or, is the pay up front price actually the fair price, and the pay as you go is inflated? Either way, it does not ring true for me...

A small discount for grouped payments, which simply reflects the savings in administration, and payment processing, perhaps, but this should be a small difference, not a big saving for you. What else in life are you invited to pay large amounts in advance for? Not much I can think of...

I run my business, with the expectation that clients will pay for services at the time they are consumed, not much later, and not much before. I suggest that a good business model for both sides of any service would be similar. If you need the savings seeming to be offered with advance payments, you probably should not take the risk! I wouldn't!

[bingofuel]

Only pay in advance as much as you are prepared to lose if things go wrong.

[xrayalpha]

Hi,

Use the law.

Talk to the school, explain your concerns. They will undersatnd, since we all know of so many that have gone bust.

Say you want to do the following:

I want to pay a £110 on my credit card as a deposit on the course and then - maybe an hour later (ie to gve you time to transfer money between bank accounts!) - pay the balance by cheque/cash/debit card. I want a receipt claring showing this: deposit of more than £100 on the CC, and the other money being the balance of a single transaction.

Preferably, use a VISA Debit card - since it also offers "chargeback" protection for three months.

Make sure it is all in your name, and do not use dad's card etc.

If you do this, you should then have the full protection of the credit laws should the unfortunate happen.

Perhaps, just to be sure, also invest about £20 in a personal legal protection policy if you do not have one elsewhere (often sold as part of house insurance etc).

This is my interpretation of the rules as explained here:

BBC NEWS | Programmes | Working Lunch | Visa debit card refunds (http://news.bbc.co.uk/1/hi/programmes/working_lunch/7347146.stm)

BBC News - Fergus Muirhead answers your consumer questions (http://www.bbc.co.uk/news/uk-scotland-14137864)

[gasax]

In short you know there is a real possibility of loosing your money. But the prospect of you saving some is outweighing the knowledge you have.

This is exactly the behaviour that most fraudsters depend upon.

If there is a substantial discount then this is evidence that the financial situation of the school/club/organisation cannot be good.

Let us know if your greed outweighs your intelligence.

[BabyBear]

In short you know there is a real possibility of loosing your money.

Based on what exactly, without any evidence this is nothing but scaremongering:ugh:

[dublinpilot]

a package that works out massively cheaper

There are good reasons for schools and clubs to offer small discounts for those paying upfront.

If they are offering a "Massively cheaper" deal for paying upfront it smells of desperation for cash which is bad news. Anyone for Greek bonds?

[IO540]

Based on what exactly, without any evidence this is nothing but scaremongering

The mean time before going bust for a flying school is just a few years.

When they go down, the students lose all prepayments.

The schools offer a discount mainly to get the up front cash so they can pay their wages, their suppliers, etc. Also to stop students leaving (it "enhances customer commitment" :) ).

[jimmellish]

If the school is part of the Cabair group then look at their press release from June:

"June 2011: Cabair to relinquish interest in PPL schools"

Cabair News (http://www.cabair.com/news/index.htm)

[BabyBear]

Thanks for the input, IO540, I am aware of the potential pitfalls as I am aware of the methods of carrying out due dilligence to establish if a risk is worth taking. My objection is to those, especially those without sufficient knowledge, who delight in scarmonering with assumptions that any school offering a discount is on the verge of going under and that paying up front is never an option. To me they are as blind as those who do pay up front without carrying out any due dilligence.

[IO540]

as I am aware of the methods of carrying out due dilligence to establish if a risk is worth takingIt's not that easy.

I've been in business since 1978 and have met more crooks than I've had Kentucky Fried Chickens, so I know a few ropes on how to see if somebody can be trusted :) But "even I" don't know a good way to see if the 5 grand or so I am going to lend a flying school is going to outlast the school itself.

There is no way you can tell. A Ltd Co. files accounts, but they are usually late. My company's financial year ended 31 Dec but the accounts going to the Companies House were only finished recently. And even they are a distant-past snapshot... worse than a car MOT really. Under a certain turnover (£4M I think?) you don't disclose your sales figure, so what is left is a load of meaningless extrapolation from various asset categories, which are trivial to fiddle to look good at the year end.

Anyway 99% of PPL students are not going to be purchasing accounts and getting somebody half competent to give a view on them.

Also aviation has a bigger concentration of dodgy characters than any business I have ever seen, apart from personal computer dealers, and TalkTalk :) Aviation attracts them like a magnet. I am just having an ex-UK EASA-145 £800 mag overhaul re-done in the USA and there is a nice list of things the UK company messed up. Good job I never put it in my plane :)

[IanPZ]

Culio, The idea of paying the deposit on a credit card is a valid one, as long as you pay more than £100. However......do not be misled by debit cards having Visa printed on them.

There is no protection in law for using a debit card beyond that of paying by cheque. It says Visa, because Visa came to an agreement with many of the banks to carry out the electronic funds transfer. However, this is just a direct funds transfer between your bank and the payee, and does not go through a credit card account.

The banks pay a standard rate to Visa be part of the clearing system, and there are no transaction fees. This is why many sites charge an additional cost for using credit, but not debit cards.

Also, be aware that you do need the receipt showing deposit....and ideally all the details on one receipt. Finally, you need the receipt to show what you are receiving for the payment (ie 45 hours training), so that if you do have to make a claim, you can validate it.

You should then be covered for whatever proportion of the training you don't receive if the company goes under.

....On another note, it occurs to me that training organisations should start arranging loans, with interest and cover. That way, they get their money up front, you get to pay in installments, the current interest rates probably mean its worth it, and one tick box covers you if the company goes under (or if you lose your job!) How about it?
Hope that is of help.

[silverknapper]

especially those without sufficient knowledge, who delight in scarmonering with assumptions that any school offering a discount is on the verge of going under and that paying up front is never an option

Sadly most people here have sufficient knowledge to know not to pay up front. Ask why a school would offer a huge discount? Do they get their fuel cheaper if you pay now? No. Indeed fuel is on the way up, constantly it feels like, so unless their hedging their bets it will drop and they'll profit then they are shooting themselves in the foot selling a service now which will cost them more in 3 months time.

I remember a school I did PPL training at offering a fantastic deal in a CPL IR. Pay up front. I didn't. They went bust weeks later taking around 6 people's money. Look at highland flying school. Busy school, reasonably priced. It went under taking a lot of cash too.

What school is it? You having nothing to lose by telling us?

[Final 3 Greens]

Could you set up some form of escrow agreement, where the money is drawn down as the services are delivered, but the school knows you cannot renege an go elsewhere?

[Ph1l]

Personally I think its a bit unfair to be expecting any flight school to let you down, there are so many that have been around for years and will be for years to come. Do proper checks by all means, just as you would before paying out for any substantial purchase, but as with any business at the moment margins are tight, cash flow tighter and they need all the help they can get. Stapleford seem quite stable and were very helpful to me, they let me pay it in 2 halves, but still gave the full discount for paying in advance. Just put it on a credit card and you should be pretty safe.

I would imagine that choosing a school based on the lowest price could come back to bite you if you hand everything over at once, those that charge more and have been around a while have set those prices so they can remain as stable as possible.

Schools with a handful of aircraft I personally would not feel so confident handing everything over at once, larger schools with many more aircraft of different types have assets that can be released should they really need to do so to survive.

[IO540]

Could you set up some form of escrow agreement, where the money is drawn down as the services are delivered, but the school knows you cannot renege an go elsewhere?

I doubt you could draw up a legal contract for that.

Also the reason the schools offer say a 10% discount on a prepaid hour block is because they use the money in their business, and because their finances are mostly shakey they are unable to borrow the money conventionally.

If you can borrow money normally (commercially) you would not give a 10% discount - it's a huge discount.

What I don't know is the value (to the school) of getting the increased customer commitment which comes from having paid up front. It might be quite significant. OTOH, IIRC from my PPL training, not that many people (of those who actually have any money, let alone have enough to pay up front) drop out during the training. Nearly all drop out once they have the PPL, but the average school is hardly interested in those.

[Final 3 Greens]

I doubt you could draw up a legal contract for that.

Any particular reason why? Alteratively, one could set up a letter of credit.

I do agree that the flying school probably needs the cash now, but don't see why one should not set up a draw down contract.

[Pilot DAR]

but the school knows you cannot renege an go elsewhere?

How would this serve the student's interest? You've got your money locked into a training deal with a flying school. There is a very difficult to measure expectation of service on their part, which they have all kinds of outs to evade with (let alone the weather).

You start with them, their service is not to your liking, and you cannot get out of it. In my opinion, there is no discount worth the amount of difficulty that could cause you!

They should charge for the service when it is rendered, and you should pay for it promptly. Anything else is not worth the dealing and uncertainty in the flight training industry.

In Ontario, there is actually a law, recently introduced, prohibiting health clubs/gyms from seeking payments for "memberships" more than a month in advance. Just too many were taking off with client's money, and the government was getting tired of handling all the complaints. Commercial flight training is regulated here, in that service providers must register, and pay $30,000 into a fund - even if it only pay as you go! (that's a bit extreme!). That policy has forced some small but worthy schools to stop providing that service.

[Final 3 Greens]

How would this serve the student's interest?

How does paying upfront serve the student's interest?

Ask the OP, not me. I'm only suggesting one potential way he could mitigate againts financial loss.

[Whopity]

When a company has gone bust and has no assets a legal contract is not worth the paper its written on! I have seen a relatively small number of people loose a lot of money, and its always the people who can least afford to do so, and who inevitably are looking for the cheapest deal. Work out an average cost for what you want to do; because that's what its most likely going to cost you, if you can't afford it don't start it. Cheap deals always have a catch, and invariably turn out to be the most expensive in the long run.

[IO540]

F3G - I am not a lawyer, so if you pushed me I would have to back out :)

I think it would be unworkable because a contract which binds the customer to spend £X/month at the school, in return for having got a 10% discount, is going to fall apart as soon as the school cannot deliver due to weather, broken aircraft, instructor(s) off sick, etc.

Escrow is certainly possible but I can't see a school going for it because they would not get the cash up front.

[airpolice]

Every day is a school day, but I'm still amazed to learn that so many people who are bright enough to fly a plane, are unable to do "Primary School" level spelling.

[Gertrude the Wombat]

If you do this, you should then have the full protection of the credit laws
Providing that the credit card company regard the transaction as "buying hours and paying in advance" and not "providing banking services by lending money to a company", which one might guess would be subject to different regulations. Personally I would take advice first. (From a real live lawyer with a physical existence who could be sued if the advice was wrong, not from anonymous tossers on some randomly selected web site.)

[gasax]

Based on what exactly, without any evidence this is nothing but scaremongering

Based upon the OP's post - However, I've come across a package that works out massively cheaper than if I pay as I fly.

Why is it massively cheaper? We can all guess - but the obvious reason is cash flow difficulties - or are their fuel or maintenance costs going to decrease?

[The500man]

not from anonymous tossers on some randomly selected web site.

:) Priceless!

Something else to be careful of is a school offering a package that is discounted and also non-refundable. Presumably that would cover them for a lot, and who reads the small print? Right? ;)

[Sam Rutherford]

Repeating part of an earlier post:

"Let us have the name of the school."

You will probably get a much clearer (more accurate?) idea of people's thoughts - either in open forum or by PM.

No harm in giving out that possibly key bit of info.

Fly safe, Sam.

[24Carrot]

At the very least negotiate!

I was once offered a discount for paying everything in advance, "like everybody else". 15 minutes later, I had the same discount for paying 2K at a time, and staying in credit.

I had to endure a "lady from accounts" talking to me for a while like I had six legs:sad:, but that cost me nothing:ok:.

[Pilot DAR]

I think we are now talking to ourselves....!

Isn't that who we're usually talking to anyway?