Along with information on the fleet, club rules and procedures, prospective flying club members will want to know about the costs involved in joining a club. They’ll also want to understand the procedure for becoming a member and the financial obligations that membership will entail. Forward-looking prospective members may also be curious about how a member may leave the club, and so relieve themselves of those obligations.
We recommend that you make it easy for interested people to find all of this information on your website. By the way, also make sure that the website has a clear Contact Us page or section—we are often surprised to see websites that don’t include a contact phone number or email address!
Membership Costs and Payments:
All membership costs/payments should be clearly identified and should be split into three main parts, namely:
It is important to show all costs as most people will want to consider the whole package. For example, if a new member expects to fly, say, 5 hours a month, then their effective cost per hour could be calculated as (monthly dues)/5 + usage rate per hour. So, if your club dues are $100 per month and the hourly rate is $70 per hour, then the effective rate for the 5-hour-a-month pilot is $90 per hour. This nicely illustrates a fundamental advantage of flying clubs—the more you fly, the cheaper it is!
So, exactly what are these different costs and how does a flying club go about setting them? We cover this in great detail in Chapter 5 of the Guide to Starting a Flying Club, but here is a brief summary.
We strongly suggest that you further divide this “upfront” fee into further categories—start-up costs, membership fee and equity share.
Start-up costs: If you are starting a new club, there will be costs involved for establishing the business and tax entities for the club. As detailed in the Guide, clubs should ideally be structured as non-profit corporations in their state of operation. Most states charge a fee for establishing the corporation and many new clubs wisely choose to use the services of an attorney to set up the structure, and to create, or at least review, the clubs bylaws, etc.
Depending on the ownership model of your club (equity or non-equity), start-up costs may also include:
As you can imagine, these costs add up quickly and the founding members will need to decide how to fund them. It is fairly typical for the founders to put money onto a “float” to get the club off the ground, and to then have the club reimburse each founder when it is a bit more established.
Membership fee: Most flying clubs stipulate a maximum number of members. This is to ensure there are enough members to reap the benefits of cost sharing, but not too many as to make scheduling a challenge. Looking across our network, this averages out to around 10-12 members per aircraft. Some clubs like a smaller number of members to increase aircraft availability, whilst other may function well with member-to-plane rations of around 15:1. It all depends on the objectives of the club and the number of active members, both of which make your club unique. Anyway, your club will likely operate with a membership “cap” and this creates a level of exclusivity within the club, which translates into “value”. This is an important consideration when setting the membership fee. You want to set a high enough fee to ensure that members are committed to the club and feel a sense of ownership, but you don’t want it so high that no one will join! There are many factors involved here, but our advice is to set it higher rather than lower—$500 to $1,000 is not an unreasonable amount to charge people to be part of a unique and exclusive club. This also will quickly separate the “tire-kickers” from truly interested people.
Now, some of you may be wondering if the membership fee is “refundable” when a member leaves the club. Hold on to that thought for a bit as we work through the other costs involved with club membership.
Equity share: This applies to clubs that own their own aircraft, where each member is an equal co-owner of the fleet. Clearly, if a club of 10 people co-own a $100,000 airplane, each member has a $10,000 stake in that plane. This stake is easy to ascertain when the aircraft is newly purchased, but what happens over time? Many clubs perform either a re-evaluation of assets over time and use this to set the equity buy-in amount. The Sky-Hi Flying Club based at AOPA’s home field in Frederick, MD, does this every year.
Your club is now operational and you either own an airplane or lease one. Either way, the aircraft will consume money even if it doesn’t fly. Think of this as the costs involved in providing the availability of facilities and aircraft. We call this the fixed costs of operations, and it includes things like:
As stated, you have to pay these costs whether the aircraft flies or not, so do not budget for them from per-hour fees. Instead, add up all the fixed costs, divide by the number of members and then divide by 12, and that is the minimum dues that each member should pay per month.
We’ve heard of clubs that “trade” fixed costs and variable costs. That is, in an attempt to keep the monthly dues at an attractively low number, they add a few dollars onto the usage rate in order to cover fixed costs. This is a really bad idea—what happen if the plane is down for extended maintenance? You still have to pay all the fixed costs bill and you should be accruing for known-time expenses, such as insurance premiums and the annual inspection, but there will be no per-hour dollars coming in.
So, now we have covered the costs in starting the club, we charge monthly dues to ensure that it remains a going concern, so the only part left involves actually flying the airplane, and this is covered by usage rates.
Variable costs are incurred through the actual use of club aircraft. There are some obvious ones, such as fuel, but there are other per-hour costs to think about, such as:
Again, you add up all the per-hour costs and that is what the club will charge members of each hour of flying time. Note that most clubs base usage on tach time (rather than Hobbs), as it is tach time that determines and triggers maintenance.
One more point before we move on to consider the second part of the Question of the Month—and that is to do with sales tax (we’ll leave income tax for another day). Depending on your State of operation, some or even all of the above payments from club members may be subjected to local sales tax. We strongly advise you to speak with a local tax attorney or CPA to get the full details. You can also look at the AOPA Advocacy website to get an idea of potential tax burdens. Your AOPA Regional Manager is also a good resource for this type of question.
How do members join and leave a flying club?
On initial consideration, this sounds easy. Prospective members conform to the terms, conditions and rules set out in the bylaws, pay their fees and join the club. The time it gets messy is when a member wants to leave the club.
The club sets its operating budget on the premise of a certain number of members paying fees and dues, so members can’t just arbitrarily decide to stop paying. Indeed, the bylaws must make it absolutely clear that members have a responsibly and obligation to pay their way. Equally, the bylaws should clearly describe and define the membership application and acceptance process, as well as detailing the ways in which members may leave the club, and more importantly, how they may divest themselves of financial obligations to the club.
It turns out that this is a very complicated topic, and one in which clubs get into all sort of trouble. For example, some clubs state that all or part of the membership fee is refundable if a member leaves the club. (Try this with your gym membership!). Strictly speaking, this means that such a club must carry a liability on its accounts for the amount of refund multiplied by the number of members, as presumably it doesn’t know when any or all members many decide to leave.
Another area of potential trouble is with a member’s equity share. Keeping the equity share separate from other payments, as we described earlier, helps somewhat with this but even then, how does the leaving member get their equity “out” of the club? Should the club reimburse the member’s share and hope that there will be a new member to fill the slot, or should it be the responsibility of the leaving member to “sell” their share? To whom, and under what terms and conditions?
Keeping an active member waiting list can definitely help with this but you’d be wise to pre-qualify people on the list and also extract a good chunk of the membership fee as a deposit to ensure people are serious, should a membership slot become available.
These are questions that get to the heart of the concept of the value of club membership, and it is not an exaggeration to say that we have seen many complicated and convoluted ways to tackle it. We dig more into these topics during our AOPA Flying Club Workshops that we hold around the country. In 2020, we plan to hold Workshops at all of the AOPA Regional Fly-ins, as well as other locations - please keep your eyes on Club Connector News from Headquarters articles, as we move into spring and summer.
For some ideas on what to include in your bylaws on the topics of membership and joining/leaving a club, please see the Westminster Aerobats Flying Club Membership Packet, on our Downloadable Resources website.
Also, Steve Bateman, Director of AOPA Flying Clubs Initiative, has written an extended article that digs deeply into the concepts of club value and on people joining/leaving a flying club, so please send Steve an mail to request a copy.