FTOs - rumour vs. libel
 

Can I just add that anyone who says that [an FTO] are in financial trouble you must be able to back up what you say and not post on 'What you have heard'.

If you do post about their finances then I will be asking for your contact details so if you are not prepared to give them to me then don't bother posting.

Also, if you do post then you must have rock solid evidence to back up your claims or, again, don't bother posting. :)

I can only assume that Cabair have reacted to the recent postings on pprune related to them, with reference to the same subject as BRL points out. Just seems to be a bit of an extreme knee jerk reaction on the behalf of such a major FTO to a 'rumour' network.
It's actually quite scary how the moderators are forced (presumably unwillingly) into this kind of censorship. The forum is simply people with views and suggestions from different bits of evidence which could encourage someone to approach an FTO with caution, which should be the case with any flying school to be fair.

You can make whatever assumptions you like - they are free. Completely wrong, in this case - but hey, go ahead, enjoy yourself!

We removed a post that made allegations about Cabair's financial position that were not substantiated with one single iota of evidence. That was the decision of the moderators, made without any pressure from anybody.

By all means post your "views and suggestions", but as BRL says, mud-slinging will not be allowed. If you make an unsubstantiated allegation detrimental to a person or a business, then it will be removed. Simple as that.

SD

So if anyone saw a ruck of aeroplanes at a London airfield with their props tied up the other week they were all mirages....

It's called 'Arse Covering'. It doesn't matter who the business is, in fact, it could be Cabair or Ryanair, anyone at all, if you are going to post about financial problems I just want proof, thats all.

Nothing sinister like Cabair getting on to us or anything like that, my original post is to make sure they don't start throwing legal threats around at us which we don't need. It has been quiet on the legal front here recently and I want it to stay like that.

Of course if they are in trouble you can use this forum to discuss it as much as you like, it's not all one way here as you know.

In general I enjoy reading and contributing to PPRuNe because lets face it, pilots love to talk about flying or just love to talk.......

I do however seriously dislike some aspects of the network, specifically the idle speculation and gossip in relation to the financial affairs of certain FTO's which appears with frightening regularity. Virtually all of this speculation is offered in public without any substantiation or proof. Comments like ' I know what I saw' or 'heard from a reliable source' do not, in my opinion, warrant a post. They only serve to create an image of a group of gossiping busybodies with little else to do.

Has anyone noticed that the vast majority of the more active members who contribute imeasurably on interesting aviation topics are conspicous in their absence from these less factual debates.

Before anyone reminds me that this is a rumour network let me save you the time. I am fully aware of that and rumour is both productive and informative when it is directed at aviation issues such as ' Piper are rumoured to be tooling up for a relaunch of the PA 38 incorporating a 300 HP engine'. It may or may not be true but it does stimulate some great debate.

On the other hand those rumours which question the viability of a business, and are advanced without proof, only serve to threaten the future of that business, it's employees and customers. It is disinformation of the worst kind. Some use the defence that they are merely trying to warn others before committing funds to training etc and this is admirable, but only if you are in possession of hard evidence.

So if anyone saw a ruck of aeroplanes at a London airfield with their props tied up the other week they were all mirages....

There are so many things wrong with this statement. Why would you jump to conclusions without knowing the reason why. You are also speculating that others reached the same conclusion as you did. An assumption is made that the aircraft have been seized perhaps. But it is exactly that, an assumption, and the true reason could be entirely different.

Moreover, to jeopardise a perfectly healthy business based on a casual observation is irresponsible in the extreme.

Hopefully with some proactive moderation we will see less of this in the future.

Donalk

:ok::ok::ok::ok::D:D:D:D:D

Edited to add that general advice that urges not paying up front for any hugely expensive aviation training courses is quite legitimate.

SD

Ooooh I think I have just had a bit of a cold sweat.

Next you will be teasing me it will have a trimmer that works. And doesn't cause students who have never previously used swear words outside proper emergency's ie banging heads etc to use the C word every 2 mins when it does its slipping whirring thing.

PS I think currently every flying school is in Financial hardship the only difference between them all is the level of poo that they are in.

Donalk,
This is a rumour network, someone posting about aircraft being chained up is worthy of a rumour forum. Granted people posting slanderous information about the financial status of a company is wrong, particularly on such a widely read website as pprune, but you do have to realise that information such as that observed by some forumites is worthy of consideration. Yes, of course if the reader is an educated person and can make his own decisions he will bear that information in mind whilst they do there own research into spending 6k - 80k on flight training.
You accusation about idle speculation/gossip is ridiculous also, what is observed is not gossip or speculation, maybe the additional comments are, but the views and interests are valid. If I consider further training, i'd like to know whether a companies aircraft have been chained up or held in by snow plough (and trust me, from someone thats seen this before, this happens more frequently then people realise in aviation). I do agree that at times some of the posters seem to be people who only fly in windows flight simulator or whatever, but thats just part and parcel of what we have to accept unless we consider censorship by licence, which would preclude student pilots etc.

L'aviateur
I suspect our opinions are more closely aligned than would appear so at first glance. There are many newsworthy events taking place around the world on a daily basis and I for one am grateful to the many posters who take time to keep us updated. The subsequent informed debates can be both enlightening and useful in decision making.

Observing captive aircraft is worthy of mention, however it is the ensuing debate fuelled by nothing more than speculation, which causes the rumour to grow legs and arms and spiral out of control. Typically then, someone with a grievance, whether valid or not, is given a public platform upon which to vent their spleen. What follows is a one sided argument which is neither useful or entertaining.

In that situation the mods have a duty to provide balance but as they are not privy to the facts surrounding the case can only do this by insisting that posters are in possession of irrefutable evidence. I dont see this as censorship, more of an effort to uphold standards. Those standards exist to provide us with a framework where we can enjoy the forum and derive maximum benefit from it.

These are challenging times for everyone and perhaps more so for flight schools. In the spirit of fair play we should support those organisations who strive to survive and excel. Where hard evidence exists to the contrary, then I agree that in the interests of all concerned it is open season. It would be truly tragic though to witness the death of an organisation by a thousand cuts.

Apologies to all for continuing this off thread subject but I felt a response to L'aviateurs well thought out post was warranted.

FTOs - rumour vs. libel
 

I have split this off from the Cabair views / experience thread as the topics are quite separate, but both discussions are important.

SD

Cheers SD. I was just going to delete the posts from that thread today!!!!!! :)

I think this is a very interesting thread that, maybe, should appear at the top of all PPRuNe forums. There was time where most of the stuff found here had substance, then irresponsibility and anonymity came to the fore. Combine that with some Alice in Wonderland speculation and you get a load of absolute rubbish. Furthermore, having seen perfectly strong and stable global organisations ruined by wild speculation in the last 6 months, maybe we should have a little more sense than to just spread idle gossip. I find it interesting that some organisations appear to be singled-out for attacks on a regular basis (Cabair, Ryanair etc) but find it more intriguing that these companies actually do quite well.

So, I agree with the mods - put up or shut up. :D

I totally agree with the mods.

In these times most businesses (cept Pawn Brokers) are struggling, last thing anyone likes to see is wild speculation which could prove detrimental to an FTO's future. :=

The comment which was originally posted is something best posted on private forums between mates, not on a busy well known forum like these.

Enlarging Bovine,

You are ( as always!!) correct. Any FTO's in financial difficulties should be honest enpough not to take money as pre payment for any services unless they can provide cast iron gaurantees that the money will be ring fenced ( in most cases this is not possible).

Scurrilous and inaccurate rumour and innuendo are very damaging to any business. Aircraft being impounded is not actually that uncommon and being easily moveable across international boundaries many airport operators impound aircraft to recover relatively small sums of money. Sometimes this is necessary for the "can pay but won't pay" brigade, as opposed to the "can't pay at all" mob.

Some years ago there were some viciuos and perhaps not unfounded rumours about a UK based airline after a/c were impounded at variuos airports. Fees were paid, refinancing obtained and it continues to fly from strength to strength. Sadly, I have seen some poison pen rumours on this and other sites about some businesses that has resulted in (perhaps) unnecessary failure.

The other side of all this is that because so many schools are in financial trouble at the best of times (sailing close to the wind is the norm rather than the exception in GA related businesses of all types - there is something which attracts the Humphrey Bogart / DC3 / Casablanca romantic cowboys) it could be pretty hard for a GA business to successfully sue for defamation etc.

So many of them have been sued multiple times for non-payment (I mean County Court judgements, bailiffs dropping by, etc) and since this stuff is in the public domain (it gets contemporaneously published in the London Gazette or something like that, as well as ending up on many company data databases) the company would be hard pushed to make itself look like a pillar of financial stability.

Therefore, legal threats and related bluster and general crude playground type bully tactics are common in this business but rarely go further.

It is also pretty normal for customers to threaten litigation. I know of one UK aircraft dealer who has barely a single customer from the last decade who never threatened to sue at some stage. Pretty sad really, and the upshot of it was that the company didn't give a t0ss about anything anymore.

Why do you feel that there is a difference in principle between rumours of financial trouble and the multitude of potentially commercially damaging slurs that are thrown at airlines, operators and schools on a regular basis on PPrune?

Arse covering. As explained above. :)

Pah...b@llocks. I coughed up my £95 for my annual membership at one place, next week it had folded. Never did see that money again. What about protecting potential "investors" hmmm....? I'd say that was tantamount to theft seeing as someone KNEW the !!!! was going to hit the fan...how can they not have known?

Good post Donalk.

I consider PPRuNe private property (though I don't know the owner) so while here, I'm either a guest under conditions, or a trespasser. I presume that if I post within the conditions, I am welcomed, if I post contrary to the conditions, I trespass, and am subject to local or widespread removal. If I don't like the conditions, I go elsewhere. PPRuNe keeps the conditions reasonable, so I return. If I see too much nonsense (like financial speculation) I tune out, I've got more important things to read.

Those who think they should have some kind of extrodinary privilage to lible another here, in the guise warning others, should start their own website, and not foul this one. The business circumstances of any person or organisation are private matters subject to the laws of the land, and companies whose proper business (credit agencies) it is to research and report such things. Buyer beware. If you pay money for services yet to be rendered, you are gambling, only gamble what you can affort to loose!

Let's talk about planes and safe flying habits here, and not speculate about private matters. This forum is populated by professionals - right? Professionals behave better....

Pilot DAR

But you don't explain why PPrune is prepared to leave its arse stark naked on all the other occasions that potentially libellous comments are made, while insisting on "contact details" and "rock solid evidence" for comments about financial matters.

They had to take the decision to close down at some point. If they just stopped accepting payments that would definitely have sealed the coffin, one must presume that they kept struggling to point were they either gave up or were forced to shut down the operation. No matter when that decision had to be taken some customers would have been hurt, sad fact when dealing with customers (or from the customers p.o.v, dealing with businesses) in tough times. I think this is a dilemma that all business owners easily can relate to, no matter the current financial state of their business.

It's rarely that clear cut Kalleh.

It is a fact (supported by widespread practices within the more aggressive parts of the debt collection business) that the vast majority of businesses that sink, with debts unpaid, were trading while insolvent prior to folding.

This makes the debts enforceable against the Directors, incidentally.

Not a lot of creditors bother because it's not worth doing for less than a few k (this will suggest how smart crooks get away with it over and over... basically you make sure you don't owe any one creditor more than that ;) ).

There is an ethical argument about how far one should trade while knowing the debts cannot be paid of.

My position is that it is morally wrong to run a business, at any time, such that ALL creditors cannot be cleared. But few will agree, taking the more common position that creditors are taking a risk when extending credit and they know it, etc. I think this is bollox :) But then, from the 30 years I've been in business, there is not one person who will say I treated them like ***t, and I quite like being in that position. If I took somebody for money, he will spend the rest of his professional life badmouthing me - just like happens to so many of the "colourful" characters in aviation.

If I was running a school I would put client deposits into a separate account and make sure there is always enough liquidity to refund all not yet delivered training.

IO540
 

I agree, I just wanted to add another perspective to the discussion. It could be that englishals business took his money out of greed and mischief, but it is also likely that they were just fighting to stay alive and made bad decisions on the way.

A very fine line, Kalleh.

It isn't actually very hard to run a business so the creditors can be paid off, prob99.

A charitable situation is where the company has just one or two big debtors (customers), both on credit accounts, and one goes bust. Then paying off the suppliers could get a little tricky... But flying schools don't work like that. Their "debtors" are students (or renters) paying cash that day. So, practically, anybody in that business who goes down without paying off creditors has been financing their business using money borrowed from creditors, which is legal (to the extent that one cannot and should not outlaw the concept of a limited company) but IMHO unethical. And it's widespread - almost every school that shuts down has taken student deposits with it.

Not just immoral; illegal. As you said, trading whilst insolvent i.e. liabilities greater than total assets, can leave the directors liable (although very difficult to enforce due to the company being a separate legal entity and proof is required that the directors were acting in the full knowledge that the debts couldn't be repaid) and be grounds for any creditor(s) to apply to the courts for a compulsory winding-up order.

Cheers

Whirls

My position is that it is morally wrong to run a business, at any time, such that ALL creditors cannot be cleared.

In an ideal world this is true, however there is a clear distinction between reckless trading and those who trade fraudulently. Some businesses who find themselves in difficult circumstances will try valiantly to trade their way out of trouble, perhaps suffering from an overdose of optimism believing that recovery is within sight.

Those who trade fraudulently have a more sinister premeditated motive.
In either case it is difficult see the full picture until the company has folded.

Understandably this becomes an emotional issue particularly in the case of an FTO whose creditors include private individuals who can sometimes feel the loss more personally than would a trade creditor.

To return to thread, and notwithstanding the above, most if not all FTO's are struggling to survive through a global economic crises. I believe that as members of the aviation fraternity we should act responsibly by ensuring that rumour about the financial health of an organisation is not circulated unless clear evidence is present. Who we select to receive our hard earned cash for initial and further training can in part be based on the excellent references gleaned from this forum in relation to instrucor quality, aircraft condition, customer service etc.

Once that selection is made, prudent payment terms for services rendered will eliminate or seriously reduce any potential losses should the worst come to pass.

A gross over simplification.

It can be difficult to establish whether a business is insolvent. Moreover, there may be very good reasons for believing the company can recover.

Indeed, for that reason many companies are given legal protection while trying to re-structure their affairs.

Yes Fuji, a simplification but true nevertheless. If a company has a "negative" balance sheet; that's insolvent. There are grey areas inbetween granted, but trading with the knowledge that you can't pay your debts is illegal. Simples.

Indeed, it's called Administration.

This is what I do for a living after all :ok:

Cheers

Whirls

It is.

However, it may be insovent because it cant pay back its bankers or directors who are never the less happy to proceed under security of a PG or take the risk they may never see their money again.

It may have an excess of assets, but be unable to manage its current liquidity - just as serious as being totally insolvent.

It may also be solvent on a going concern basis, but just wait until the break up value of the IP, goodwill, stocks, debtors and FA has been realised.

There is a danger in allowing forumites to believe that assessing the state of health of a company is as simple as you suggest. :)

I have seen businesses that have traded successfully for 50 years or more eventually throw the towel in for reasons beyond their control and which they could not have reasonably forseen. They paid their taxes, they employed 100s of people, they ran a sound business - immoral that they went bust and owed some money - I dont think so - illegal - certainly not.

Thanks for your valuable insight. :} Things I never knew :rolleyes:

"Circumstances beyond a directors control" does NOT equal "trading with knowledge that debts cannot be repaid".

If any forumite gets a set of Statutory Financial Statements from Companies House, and those accounts show a negative balance sheet, then it is not unreasonable that he or she can come on to this forum and say that that company is in financial difficulty. I can't see the danger there and it's a damn sight better than the "I heard from my mate's second cousin that they saw a Cessna chained up".

Cheers

Whirls

Quote - If any forumite gets a set of Statutory Financial Statements from Companies House, and those accounts show a negative balance sheet, then it is not unreasonable that he or she can come on to this forum and say that that company is in financial difficulty.

It is not unreasonable to come to such an informed personal conclusion assuming of course that one is inclined to go to such lengths. But is it truly reasonable to share your conclusions with the wider world, and what purpose does that serve?

Many businesses will trade in and through difficult circumstances during their lifetime and a lot of them will survive and thrive. Putting sensitive information into the public domain only increases the pressure at a difficult time and may in fact thwart a company's ability to plan and execute a successful recovery.

If the motive is to alert potential customers then this only makes matters worse. Does the wider world have a right or indeed a need to know? I believe not. You draw your own conclusions based on personal visits, testimonials etc. It has been stated many times before on this forum that the onus is on the customer to conduct business with any FTO in a manner which reduces their exposure to an accepable level, and which is commensurate with their personal circumstances.

This is taking responsibility for one's own actions and conducting business in a prudent manner.

I also suspect that from a legal perspective the information gained from companies house would be discounted successfully by any lawyer in pursuit of a libel/defamation claim.

In short there is no real measure available to the general public to indicate the ability of an organisation to proceed as a going concern. Using best judgement at all times and staying risk averse is not a bad strategy.

The basic point in "management accounting" (a term many "proper" accountants utter while spitting ;) ) is that a company can be solvent but not have enough cash.

A pretty common scenario.

Such a company is vulnerable because a supplier can (in general terms) get a winding up petition, or simply a CCJ.

But the company is still solvent, so this way of trading is not illegal.

IO540

Exactly.

Whirlygig

I am pleased to have been able to enlighten you.

So let me see. Consider IO540's earlier scenario when a large debtor goes bust - at that moment the directors may well have knowledge the debts cannot be repaid, but given a little time, there may be better alternatives than placing the company into receivership.

Based on abbreviated accounts probably at least 8 months out of date? Hmm.

It is never black and white - which is why you do what you do - give sound advice, rather than dogma.

The information from Companies House is actually of very little use. Small businesses dont have to file audited accounts for a start. Also the accounts tend to be well out of date. Therefore a satisfactory position 12 months ago might be something totally different now.
Some accounts look wierd because several compnaies might be interelated with cross loans/liabilities which only a forensic accountant could unravel.

As a result it is hopeless placing reliance on companies house information.

The other reason why the balance sheet can be an all but meaningless guide to solvency is that a company which is borrowing money is much more likely to be fattening up its accounts by doing minimal writedowns, and generally overvaluing assets - to impress the bank.

Whereas, ordinarily, the name of the game in a business is to maximise cash generation while minimising profits (because profits are taxed) and thus one writes off everything under the sun to the maximum extent allowed, and any useless assets are promptly scrapped.

So, the kind of company which is most likely to go bust due to lack of cash is also the one which most likely was running dodgy (if legal) accounts.

"I consider PPRuNe private property (though I don't know the owner) so while here, I'm either a guest under conditions, or a trespasser"

Pilot DAR.

P-DAR, while I don't disagree with your broader sentiments, the website may well be privately owned (like many non listed companies), and may even be able to choose its customers (users) and source of advertising revenue, but it is very, very firmly in the public domain and likely to be viewed as such from a legal perspective, much like a newspaper for example.

Which probably explains BRL's caution on libel issues.

My understanding (and I'm happy to be proved wrong) is that the definition of insolvency is not that liabilities exceed assets but that the company is unable to meet its debts as they become due.

So for example a company that has a bank loan of 100k, trade debtors of 200k and assests of 150k has liabilities (300k) that exceed its assets (150k). However providing its cash flow allows it to continue to meet its debts as they become due then the Directors are not commtting an offence by continuing to trade.

Always a judgement call for mods.

Let's say multiple witnesses see chained props - fair game.

Public domain such as our present thread on the Indian airline not paying hotel bills and having a fuel company take action against them - all grist to the mill.

A new sign up making non specific allegations fires up the mods tingling spider senses whereas a regular reporting redundancies or changes of conditions for instructors at set bases and supported by other regulars is watched carefully.

All basic day to day stuff around the site. And hard won experience as well.

When the well known school SFT went bust they had spent the previous 10 days telling us nothing was wrong. Many fingers burned financially then and at other times. Those of you who have been around a while will be able to reel off 10 establishments without effort that have done the same to those who have paid very large sums up front.

Rob

I would put it slightly differently but essentially agree. There are a number of possible definitions of "insolvent", including a very literal interpretation of the balance sheet. Howevere the offense of "wrongful trading" as defined by s214 of the Insolvency Act 1986 occurs when:

"at some time before the commencement of the winding up of the company, [the Director] knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into insolvent liquidation,"

Thus the definition of "insolvency" as a term in isolation is moot.

Towers and BRL, thanks for your comments, and I for one appreciate the fine line you tread in allowing PPrune to create its value as a communication forum while protecting those who are unfairly targeted.