The Perfect Model For Flight Training

[Paragon2]

Trainee Pilots PPL/CPL/IR/ATPL/Instructor Rating

Please feel free to comment on the Flight Training Model that follows:

Top Urgent : Limited Shares Available

Step 1 - Purchase Your Share in the Flight Training School
Step 2 - All your Flight training is given at cost
Step 3 - Upon Completion of your Training guaranteed employment as FI
Step 4 - As a legal partner Recieve profits from the Flight Training School
Step 5 - Upon completion of FI apprenticeship/airline entry sell your share

At step 5 you have the option to sell your share to an aspiring pilot at the beggining of their career.
As a part owner during your time as a Flight Instructor, it is in your interest to actively participate in promoting the business. Any increase in size of the business not only increases your profits as a share holder, but also increases the value of your share (pro rata).

[mingmongaloo]

I'd be very reluctant to enrol in a school with such a high turnover of FIs and a very low average of hours between them.

[Whirlygig]

Step 1 - who originally formed the company in order to sell the shares and a) why do they want to sell them to you? And how much would they sell the share for?

Step 2 - if training is being done at cost, how does the company make a profit?

Step 3 - how can that be guaranteed; it would depend on the number of students surely?

Step 4 - legal partner or shareholder? The two are different. A shareholder does not have any right to a dividend. If a partnership, then each partner is jointly and severally liable for the debts of the business as well.

Step 5 - if it's a private company company or partnership, you will need the other shareholders' permissions to sell. What if they don't like your new shareolder? You cannot publicly trade shares in private companies.

Haven't really thought this through, have you? :)And I haven't even started on the tax and stamp duty implcations.

Cheers

Whirls

[Paragon2]

STEP 1 - company is already established/the company wants to increase the success rate in finding employment upon completion by 20%/1 in 5 students able to buy shares
STEP 2 - Profits made through students. Non partners. Like every other FTO with one crucial difference.....20% of company's profits are re invested in the students with employment guarantee.
STEP 3 - There is a formula!
STEP 4 - Legal Partner with rights to dividend/training without a job guarantee= TOTALLY LIABLE FOR DEBTS
STEP 5 - Any owner of a business can sell a percentage of it. Thats what contracts are for.

The business model is based on increasing employment of the students that complete the training by 20% in addition to the statistics of students (sponsored and self sponsored) that find employment through other Flight Training Organisations.


Curious about your tax and stamp duty implications?

Thanks for your input.

[Erdin]

Whos is this company

[Paragon2]

Thank you for your response.

A percentage of the Instructors would be time served, allowing New Instructors to gain valuable experience under their supervision.

Initially with students at ppl through to IR training in progressive steps.

Just like an apprenticeship.

The business model is based on increasing employment of the students that complete the training by 20% in addition to the statistics of students (sponsored and self sponsored) that find employment through other Flight Training Organisations.

[Whirlygig]

STEP 1 - company is already established

Let's look at this the other way round ....

I have, say, £1 million to start up my own flight school. I buy a few decent aircraft, invest in the costs of setting up a TRTO, maybe an AOC as well, rent a hangar with offices, and employ staff.

My new flight school is making a modest profit; enough to pay instructors and keep a roof over my head.

Now Paragon2, give me one good reason why I should want to sell you a 20% stake in my business (which I value at £200,000) and give you training at cost? Is there really that much a shortage of instructors that I need to sell part of my business to get one?

It doesn't make business sense and I'm afraid, if you don't even know that there are tax and stamp duty implications let alone the difference between a partnership and a limited company, then you shouldn't even be contemplating it.

Cheers

Whirls

[Paragon2]

Thank you again for your interest.

In response to your post.

Let me explain:

Citing your hypathetical company that is "making a modest profit", your focus is solely at your own profit as you state "why I should want to sell you a 20% stake in my business (which I value at £200,000) and give you training at cost?"

The philosophy is that after expenses the profits go to the students that are partners this has several side effects.
Firsly it is in their interest to dedicate their passion to the Flight training school and increase business during their Instructor aprenticeship as the company value will increase.
Secondly, this will increase the overall profits of the company.
Thirdly, In addition to the Flight Training School making a healthy profit from its non partnered students, it is also re investing in lets say 20% of its students ensuring that they gain employment and maintain currency. Giving the FTO a 20% increased success rate by "Investing in people".
Its not a question of "a shortage of Instructors" more a case of filling the Instructor requirement with your own students, after all they have invested in you, why shouldnt you reciprocate.

Do you not think that this would have a possitive impact on the number of students applying for entry to your FTO.
Have you considered expansion?
You mention that it "does not make business sense": does it make business sense to have a sole interest in profit without consideration to increasing the employment prospects of your students by 20% over night, by marginaly reducing profits?
There is a clear distinction between GREED and business sense.
Many FTO's have commited the same financial suicide through GREED.
If you reduce your profits by 20% only to increase your student population by 35% and employment stats by 20%, and more importantly your reputation by 200%. Where is the failure in business sense?

With respect to tax/stamp duty and company law, please try not to be overly concerned, it is dealt with by the accountants and law firm.

Thank you again for your interest.

[Whirlygig]

Thank you paragon2, but I am an accountant and Finance Director for a commercial business. I can tell you that none of what you write makes any commercial sense at all.

If someone invests their own money into a venture, why should they share the profits for no gain? That's not greed, it's charity.

Why don't you put your proposal to a number of FTOs and tell us their reaction? Or, find another 4 like-minded students and start your own FTO.

Or maybe, if you can't find work as a pilot, study for an MBA. :}

Cheers

Whirls

[Bealzebub]

So you are a shareholder, a partner, an owner, an employer, an employee with guaranteed employment prospects, an apprentice and the business provides its services with no profit and a commitment to guarantee employment for everybody who subscribes?

If 5 people subscribe and each becomes an instructor under the guaranteed employment scenario and in turn needs 5 more students to become guaranteed instructors, then by the time the 10th course has gone through you have employed (5x5 to the power 10) people. That is you now have (48,828,125) nearly 49 million instructors/employees on your books with a wage bill of (assuming a paltry £5000 pa salary) £240 billion! Those airlines better be mopping up your throughput quickly!

Pyramid schemes, don't you just love them!

No I cannot see how that could be anything other than a perfect model. Go for it!

On the 04th of June you wrote;
Have just completed my Flight instructor course and made the fatal and incorrect analysis that in addition to the pre flight requisites for the commencement of the course that upon completion a job vacancy (even part time) with that training provider would be on the cards.
It's a question of "GOOD WILL". RIGHT?
If your paying for work based training you expect work right?

WRONG WRONG WRONG.

BE WARNED !!!!

Common sense does not apply !!!!
The training is there but ensure that the provider is WILLING TO OFFER YOU EMPLOYMENT UPON COMPLETION. (THERE ARE SOME OUT THERE!)
Otherwise you end up with a very expensive printed piece of paper from the CAA. To the tune of TEN GRAND!
Unfortunately, words like "INTEGRITY" do not seam to mean anything to some organisations.
It is a great shame that within an industry of such passionate individuals that good will is meaningless and a solid legal contract is your only form of protection from wasting your time and money on a course with absolutely no prospect of a job at the end of it.
Catch 22 comes to mind, without that first opportunity to gain experience no employer is interested.
It seams as though there should be some legislation that if an individual is willing to pay the best part of Ten grand to complete the FI training the very least that Flight Training organization could do is allow that individual the opportunity to gain some valuable experience upon completion as an instructor.
If anyone knows of any vacancies as an instructor, for an extremely disheartened individual of the aviation industry, please contact me.

Has the "penny dropped" yet?

[Paragon2]

I kind of like your way of thinking.

Perhaps your example is an alternative for wanabee pilots thinking of an alternative to an FTO.

1. Find lets say 6 trainee pilots who want to "invest £75k" in their training
should give around £450K
2. Buy a brand new Twin for around £200K
3. Employ a suitably qualified Instructor to train all of you.
4. Pay for fuel and insurance with whats left over

Once qualified you still own 1/6th of a 2 year old twin!!
Maybe start Instructing with it to stay current!

[Paragon2]

If the model that increases pilot employment by 20% is a pyramid scheme then what does that make the FTO's existing model?

Pyramid minus 20% I guess!

I think you are over simplifying with your 10 year forecast, lets not run away with ourselves now.
The instructors one would hope would move on to airlines/corporate/cargo and would be in a much better situation with hours and experience.
Moreover they may only work sufficient hours to remain current, which becomes a big issue in very little time after completing your training without employment.

It seams a shame that you are steadfast and oppose any model which may improve the employment of people that have invested their lives into an industry.

[madlandrover]

2. Buy a brand new Twin for around £200K

Really?

Firsly it is in their interest to dedicate their passion to the Flight training school and increase business during their Instructor aprenticeship as the company value will increase.

You'll find this already exists - the great majority of FIs are paid per flying hour, so the more students we can recruit the better things go.

I don't want to sound too negative, and definitely don't want to stamp on good ideas in the current climate, but why do people keep on insisting on reinventing the wheel???????

[Paragon2]

Unfortunately your responce does come over as being rather negative.

If you look around you can find a twin for around £200k, besides it was merely an example. Try looking at the DA 42 or Tecnam for around £250/300k if you really want to splash out!

The principal still holds if there are 6 trainee pilots all willing to front up £75K.
Then as owners you could Instruct/Taxi work etc etc.

It seams as though you are opposed to any suggestions that might make life easier for someone joining the industry?


With reference to your comment about flight instructors already being paid for each flying hour "so the more students we can recruit the better things go" I could not agree more.
However it also applys that if a student has to re train for any reason "the better things go".
I have NEVER heard of re training for test being given to students due to poor Instruction somehow it is always the students fault. I am sure there are some poorer students but just as sure that there are some poorer Instructors.
For that same reason it is in the schools interest to add additional hours training or re training (at a cost to the student), whereas the model shown encourages the Instructors to get their students through first time because if the pass rate of the FTO increases then their customer base also increases, ergo the value of there ownership in the FTO increases.
Its basic psychology 101.
There is more incentive there.

As far as re inventing the wheel is concerned, Its called progress.
Otherwise all aircraft would still have wheels made of wood!

[Whirlygig]

The principal still holds if there are 6 trainee pilots all willing to front up £75K.
Then as owners you could Instruct/Taxi work etc etc.Any idea how much it costs to set up an AOC?

What you are describing is a flying club, not a business. A business would find it very difficult to survive if its owner/director/managers were changing every year. The CAA might also have something to say about that as well since they like the Head of Training and/or Chief Pilot to have some stability.

You might want to look up Benefits in Kind for directors ..... as you will pay tax on the reduced cost flying and that accountant's advice doesn't come cheap. Any idea how to value shares in a company? The reality is, that shares in a private company are only worth as much as the next person is prepared to pay. It takes a long time for "first-time pass" reputation to build for any school; the goodwill generated cannot be recognised as a financial asset so there is no increase in the value. Revenue may be increased if more students go there (but only the ones who are not lucky enough or talented enough to be invited to be a shareholder) but what happens when one of your 6 investors actually turns out to be a rubbish instructor?

It seams as though you are opposed to any suggestions that might make life easier for someone joining the industry?Not at all but don't you think if it was such a good diea someone would have tried it? Or if it was such a good idea, do you think I'd waste my time here? No, I'd go out and set one up myself before you had a chance. But I haven't.

However, you go ahead ,,,, start the reseach .... find 6 like minded people and start your kibbutz sorry, flying school.

Your frustration at not being able to find work is evident but things need to be thought through.

[MagicTiger]

Yes sounds like a pyramide in the end, recruiting more and more students an promising them a chance of instructing if they invest, however there is not a bottomless pit of fools that will spend £75.000 on the their pilot education.

What about insurance, accounting, maintenance, and you would need to have a chief pilot/instructor that was CAA approved.

Now if I would invest £75.000 in a business, I would want to have some profit of that. The "new aircraft" at £200 - £300.000, would not have anything close to this NEW value after 6 months or more. With students bashing about on these aircrafts they would be pretty well used within a few years. So your initial company value/investment would be less then what you invested, the only way to increase the value would be to get more students paying for their courses, so your turnover increased.

There are people today with shares in airplanes, from £5000 to £20.000, they struggle to sell them on when they want out. How easy do you think it would be to sell on a £75.000 pilot course, when you have no name or reputation?

Why would anyone risk so much money, when you can NOT be certain of anything. If you do not attract enough students then the concept fails, if you attract to many students - it becomes a pyramide - where the bottom chain will loose because there will not be sufficient supply for you to be able to keep your promises, unless you are prepared to have xxxxx number of instructors! You will need more than 1 airplane though! For that amount of instructors and students!

[Keith.Williams.]

A more fundamental problem is that a new FTO, even when run on a commercial basis, is more likely to make a loss during the first year. With good management and lots of luck it may break even during the second year, and hopefully make a small profit during the third. All of this assumes that things like economic downturns don't get in the way.

So after the first year when the company has a loss of one hundred thousand or two hundred thousand pounds on the books (even more if you bought the aircraft instead of renting them), who is going to want to buy a share in it?

It would be far less risky to simply pay a conventional FTO to do your training, even if you were daft enough to pay up front!!

[madlandrover]

If you look around you can find a twin for around £200k, besides it was merely an example. Try looking at the DA 42 or Tecnam for around £250/300k if you really want to splash out!

2. Buy a brand new Twin for around £200K

So, which is it?

There's often a very fine line between being negative and being realistic - having seen 2 schools fail in the last 1.5 years due to poor management and helped to set one up recently that's running rather better I've seen both sides of that line. It is unwise to suggest a business proposal and then backtrack on the details when questioned. EG any idea of the required qualifications for air taxi pilots when working SP-ME-IFR?

[rit]

there are also government approval that you need to pass all the requirements before you can run a school.

[Paragon2]

I could not agree more with you Bealzebub, madlandrover, MagicTiger & Whirlygig. Pyramid schemes are a waste of everyones time and credibility, and your arguments have proved that:

Based on Employment figures (FACT) for Flight Training Organistaions, that the present system IS a PYRAMID SCHEME and/or FINANCIAL SCAM to MORE THAN 50% of qualified pilots.


Employment figures Approx number of Unemployed Pilots in UK? [Archive] - PPRuNe Forums (http://www.pprune.org/archive/index.php/t-97205.html)

Regulation of this industry is well overdue!

After all, no one expects a guarantee of a job, only a fair chance. And the statistics show gross negligence.

In reality there are pprune'rs out there in the same situation suggesting class action and government regulation, and the list is growing.

How hard would it be to pass an act limiting all of the Flight Training Schools student population based on numbers of jobs available and existing license holders?
In addition to passing law, forcing the FTO's to provide these statistics prior to any form of training under the Supply of Goods and Services Act.

I can imagine the headline now:


"THE FLIGHT TRAINING BUBBLE"


.....

[Bealzebub]

Flight Training Organisations, contract to provide you with flight training. They do not guarantee you employment, nor do they gurarantee you success. Whilst there are undoubtably some very disreputable businesses in this regard, they should be relatively easy to spot with a bit of careful research.

Unfortunetaly, there are enough people with half baked ideas, unrealistic "dreams" and woefully inadequate research, and access to substantial sums of cash, to keep these businesses alive.

The reputable businesses are fairly easy to find, and they exist in a industry that is heavy on regulation.

Regulation is never going to ensure your investment will bear fruit, nor will it ensure employment.

I am afraid the only regulation that would stand any hope of achieving what you suggest, is one where you regulated that only people who could demonstrate that they had properly researched, risk assesed, and safely fiscally qualified for training, would be allowed to enter. That would be impossible.

Training and qualifications place you in contention to apply for jobs, they do not mean you will be succesful, or at any competitive advantage for jobs that require specific higher levels of qualification and experience, or specific methods of qualification aquisition. If you convinced yourself that wasn't the case, or failed to research that reality to a sufficient degree, you have made a mistake.

I am also slightly confused. Eleven months ago you started this thread by advocating a fairly nonsensical pyramid scheme. You abandoned the subject within 2 days of starting it 11 months ago, and then today suddenly re-activated it, with an accompanying and seemingly non-sequiter private message. Am I missing something?

[rmcb]

This is extraordinary stuff - I had a girlfriend who was all coy and cagey about the Hearts setup and how it would empower women by not letting men's cynicism ruin a good thing for the sisterhood.

When the sisterhood shafted those at the pyramid's base (quite legally, I hasten to add), she refused to pay back to those now in real hardship stating she 'had every right to behave like a man'.

:confused:

We fell out.

How will the OP justify not paying back the losers at the end of this scam? People he had encouraged to join in the game, maybe personal friends, despite Whirly's wise words?

I despair. Bring on the giant asteroid.

[The500man]

How hard would it be to pass an act limiting all of the Flight Training Schools student population based on numbers of jobs available and existing license holders?
In addition to passing law, forcing the FTO's to provide these statistics prior to any form of training under the Supply of Goods and Services Act.

Why do you feel the need for legislation on this? Surely common sense tells you that there are very few jobs available? If you decide to train anyway that is your business!

Regulation of this industry is well overdue!

I remember a 16 year old, trying to tell me this just recently!

[Halfwayback]

This thread was started over a year ago and contains the total postings that the OP has made on Pprune - with one exception which is the one that Bealzebub has copied in above.

It has been recently resurrected but offers no additional rational information. The only thing it has done is generate a complaint from the OP to Moderators about the negative responses he is seeing here.

Each poster is entitled to their own opinion. As Moderators we will ensure that happens without flaming or the like. To stop this thread going that way I am closing it.
HWB

[Craggenmore]

The perfect model used to exist.

Airlines paid for the training and you were bonded until it was paid back..!