Question of the Month: Is Our Club Still Viable?

It’s a bit of an “in joke” at the Flying Clubs Initiative, but many phone calls from existing clubs start with “…we are the oldest club in the state/nation/world…”.  The point here is not to ridicule, but to realize that there are many, many clubs in the country that are “old” and some of them are old not just in years, but in behavior, operations and culture.  By the way, the oldest club still in existence that we know of started in 1909…but feel free to challenge us!

We also take calls from club officers who tell us their club is more than 30-years old and that the founders are beginning to “age-out”, so they are looking for ways to reinvigorate their flying club.  It is fascinating and amazing to hear that such clubs are operating the same aircraft and have many of the same members—many of them in the same officer positions!  Whilst stability and continuity are both generally good things, it can lead to complacency and hence lost opportunities.  Nothing stands still for long in this world, and that is especially true in organizations made up of many people.  Not only does membership ebb and flow, but also individuals change over time (for example, get grumpy as they have “seen it all before”).  So, in this month’s Question of the Month, we look at ways a club may assess its viability and we then present some ideas to get it back on track.  Buckle up, as some of the ideas may have you scratching your head!

Flying Club viability can be tested (and improved) by looking at four main areas of health:

• Financial
• Equipment
• Membership
• Procedures

Financial Viability

This is probably the easiest way to determine if your club will stand the test of time—or not.  If you can’t pay the bills, then your club is not viable, and it will fail once the funds run out.

There are many reasons why this might happen, so let’s look a few and, at the same time, identify some operational traps to avoid and some golden rules to follow:

1. Monthly dues MUST pay for all the known fixed costs. All expenses and bills that are predictable must be funded from the monthly dues. The math is simple. Add up all the known/predictable expenses that occur in a year, divide by the number of members, divide by 12 and that gives a close approximation to the monthly dues assessed on each member. We advise that you add 10% to this to for a realistic buffer.
2. This gets a little more interesting if a club operates two or more aircraft, yet not all members fly all planes. In this case, you’d be wise to separate membership dues from flying privileges:
   1. All members must pay the same monthly club dues. If you want some fun, join one of our Workshop sessions to hear Steve get heated about “family memberships”, “student member rates” and so on. A flying club is a club of equals—everyone pays the same dues for access to the benefits of being a member of the club, and everyone has one vote. Add up all the expenses for running the club (excluding aircraft, see later), divide by the number of members and then by 12 to give the approximate monthly club membership dues.
   2. In addition to the membership dues, set aircraft access dues—often called flying privileges—for each member by determining their pro-rata share of the fixed costs for each aircraft they fly. If someone flies all three of the club aircraft, their monthly bill will be the sum of the club dues, plus their proportion of the costs for each of the three airplanes. If another member flies only one of the planes, their club dues will be the same as everyone else’s, but their flying privilege dues will be just their share of the fixed costs of operating that one plane. The flywyld flying club based in Manassas, VA has perfected this technique as they operate very different airplanes: a Piper Lance, Stinson 108 and Piper Cherokee.
   3. Why would you do this? Well, it is fair and also quickly reveals whether a particular plane is the right fit for the club—in other words, if it is viable. Rather than have all members pay for access to all aircraft, so diluting the true costs of ownership across all members, having members be responsible for the costs of the equipment they use will quickly determine if it really makes sense to have that plane in the club. If your club operates significantly different aircraft, then seriously consider this approach to understanding the viability for your fleet.
   4. This also helps to attract prospective members. A club operating significantly different aircraft is far more likely to attract new members if they understand that they will pay for what they fly, and not “subsidize” others who fly the whole fleet.
   5. This might sound over complicated, but some sensible rules keep it manageable. Firstly, do not turn this into a monthly “rental” operation. It is simply not possible to determine the financial viability of particular plane if members are permitted to change their access (and so payments) month by month. So, do not permit members to book the Bonanza and pay the extra dues for just the month they wish to use it. So, secondly, we strongly advise that you require members to make an annual commitment to the planes they wish to fly and that you hold them to paying those privilege dues for the whole year. This allows you to set the access dues for each plane as part of the overall club budgeting process. If it turns out that not enough people commit to fly a particular plane, or its fliers complain that the flying privileges dues are too high, well, there is strong message right there—you are trying to operate an aircraft that most of the club isn’t interested in, and you have clearly shown that an aircraft doesn’t “fit” with the mission of the club. Time for a change!
3. As noted above, monthly dues must pay for all of the predictable costs of running the club and for the provision of equipment for use by members. We now get to the second type of club costs, that of usage fees. This is simply the actual cost of operating the aircraft on an hourly basis. This is why separating fixed costs from variable costs is so important. Even if the airplane doesn't fly at all due to extended maintenance downtime, or perhaps a string of bad weather, the club is financially secure as all fixed costs such as insurance, hangarage, database subscriptions and so on are fully funded by the monthly dues. So, since all fixed costs have been accounted for, all that remains is the actual “consumable” per-hour costs of operating the aircraft. Things like fuel (if provided “wet”), oil changes, time-based inspections (excluding the annual which is a fixed cost), contribution to the engine/propeller reserve fund and, say, $10 per hour for wear-and-tear maintenance. If you do the math—and a Cost of Operations spreadsheet will help with this—you’ll find that the typical per hour rate for a Cessna 172 or a Piper Cherokee 180 is around $90-$100.But wait—there’s more! As maintenance is generally based on Tach time, you can set the usage rate based on Tach, rather than Hobbs time, so gaining an additional 10-20 percent of flight time per dollar. Nice!

   When doing this calculation, don’t forget to adjust the cost of fuel to reflect gallons per tach hour, rather than the usual gallons per elapsed (Hobbs) hour.

   Now is the time for a reality check.  If no one is flying a particular club aircraft, question it.  Do members not like it? Do they find it too expensive?  Do their passengers hate how it smells? (“Little Trees” can help with this—Steve’s club plane smells like a pine forest).  Whatever the reason, it is time for some serious strategic planning and to reset the mission and objectives of the club. More on this later.

4. There is one other area of financial viability that needs attention—and that is to do with the way that members join, and more importantly, leave, the club. More here. Everyone is very happy when a person goes through the selection and onboarding process (you do have one, don’t you…?) and becomes a new member. This means one more person to contribute to the fixed costs of the club, so theoretically, everyone’s club fees will reduce somewhat. Clubs typically operate with a stated limit of membership (usually called the cap) and they base monthly dues on that number of members, rather than the actual number, so be careful—if your membership drops off considerably, the sum of all dues may not pay the fixed costs.

   This is where we must get a bit intangible.  A flying club is an exclusive, member run, member limited social organization.  Again, if you want some amusement, attend our Workshop series and watch Steve and Drew rail about clubs that operate (illegally) as flight schools, and rogue flight schools that masquerade as clubs. We send invitations to the Workshops to “Contacts” listed for each club on the AOPA Flying Clubs Finder, so please ensure your club’s information is current.

   So, back to intangible.  By virtue of being an exclusive club, the notion of membership has “value”.  Members have access to all the benefits offered by the club, which of course includes flying airplanes, social events, training opportunities, and so on.  It is reasonable, then, for new members to pay a membership (or joining fee) in addition to the dues that pay the bills, and usage fees that pay for per-hour costs.  By the way, this membership fee should be treated quite separately to any “equity share” that a new member will pay when joining an equity club, and the membership fee applies equally to equity and non-equity clubs, alike.

   The membership fee is the price of admission to the club, in just the same way as joining a country club.  It is a one-time, upfront commitment to be a member and should never, ever be refundable.  This is an area where clubs can really suffer a hit in financial viability.  If your bylaws state that membership fees will be refunded, then as you have no idea when a member or members may leave, you’ll need to keep a considerable amount of money as a liability on the accounts, which essentially removes it from working capital.  What if a large proportion of the membership get torqued-off by something and leave in a huff?  That might well deplete the club accounts to a non-viable level.  Country clubs, golf clubs, quilting clubs, cricket clubs…none of these promise to refund membership fees, so why on earth should a flying club?  This seems to be something that has been handed down in flying club folklore over the years, but it makes no sense and we strongly advise against it.  The membership fee is the price of entry and is a commitment to a long-term relationship with the club, and no one should be offered “a refund” to leave the club!  So, having a no-refund policy and setting membership fees at a sufficiently high level to instill a sense of exclusivity and skin-in-the-game will go a long way to avoiding financial catastrophe.  As an aside, this will also help weed-out people who think they can join a flying club to “learn to fly”, beat-up the club planes for more than 40-hours, and then leave.  For more information on flight training within clubs please visit here and here.  In our opinion, flying clubs should be very cautious about having student-pilot members for many reasons—financial, ethical and legal. Bottom line on this topic is that if you rely on, or solicit for, new members based on promises of learning to fly, you will not only be operating illegally, but will also be continually on the edge of the finance precipice.  More on this topic during our Workshop series.

   Quickly back to the topic of equity shares.  If the club is an equity club, new members will pay an equity share that is basically calculated from the market value of the club’s equipment divided by the number of members.  More on how to establish the dollar amount in another article, but in the context of this piece, clubs should never, ever, state that it (the club) will buy-back an equity share if a member decides to leave.  This is usually a significant amount of money and the club would have to carry that liability on its accounts.  Thinking about it, as a club has no idea when members may decide to leave, it strictly must hold the full market value of the aircraft on its books as a liability—which would be financially throttling to operations, to say the least. 

   So, do not “buy-back” equity shares.  A member buys in to the equipment and has a share.  It is their asset.  If they leave the club then they should be responsible for selling that asset.  Many clubs handle this correctly by stating in their bylaws that the leaving member has sole responsibility for selling their share, albeit that the board of directors must approve the sale, since the purchaser will also become a new member and must go through the usual selection and onboarding process—another good reason for having such a process.

5. One other area of financial viability that needs considerable focus rests with the responsibilities of the club Treasurer. In consultation with other members of the board, the Treasurer must establish a realistic and viable working budget and then operate to that budget, adjusting as necessary. We suggest at least a rolling four-year budget so that the club can start planning for high-dollar maintenance, improvements, acquisitions, and so on. The budget should be a month-by-month view of income and expenses, including goals for membership recruitment, flight hours per member, etc. In other words, it is a cash-flow budget and as many of you know, cash-flow, (along with airspeed) is king.

Now, good Treasurers are worth their weight in avionics equipment, so turnover is usually very low.  Either the rest of the club “encourages” them to stay in the job, or no one stands against them in elections.  We are quite convinced that the rotation of board positions is healthy for club operations, but the one position that requires considerable thought is that of the Treasurer.  Over the years, the Treasurer gets to understand budgeting, financial management, and the all-important filing of reports and tax returns.  There is truly a danger when long-time Treasurers retire from the position, as a lot of institutional knowledge may retire with them.  We advise that you get ahead of this and have your current Treasurer capture everything that they do to and to keep impeccable records.  We hear quite regularly from clubs that changed Treasurer (for a variety of reasons) but then had idea about the club’s federal and state obligations.  At best this may get you into “discussions” with the IRS and state comptroller, but at worse, you could lose a coveted tax-exempt status and/or discover that you owe considerable back taxes and filing fees.  Although it is the Treasurer’s job to do a lot of this, the rest of the board—and really, the whole membership—should understand the financial obligations of the club, if nothing else for reasons of “checks and balances”.

Bottom line on financial viability is that a flying club should never be considered as an investment plan.  The idea of a club is for its members to enjoy each other’s company and at the same time, have affordable, ownership-like access to aircraft.   If a prospective member appears to be over interested on “getting money back” if they leave, then thank them and move on.

Equipment Viability

Another area to consider is the viability of club equipment, by which we mean the aircraft. In the AOPA Guide at Starting a Flying Club, in Club Connector articles and during flying club webinars and workshops, we talk a lot about the initial selection of club aircraft and the need to dig deeply into the club’s mission and vision during the selection and acquisition process.  It makes sense that the same care should be taken with the selection, acquisition and integration of additional aircraft, but in general, less thought is given to continually assessing the existing fleet for alignment with changing life cycles and the rhythms of successful flying clubs.  To remain viable and to always have a future vector, a club must understand its reason for being, and the requirements, desires, and aspirations of its members. Given that things change in many dimensions (economic times, members, regulations, pandemics, and many more), a forward-looking club should regularly question whether the existing fleet is meeting members’ expectations.  We suggest you make this part of a biennial strategic planning exercise and solicit detailed input and feedback from club members.  In our Workshops, we talk about a club that for more than 30-years operated several Citabria aircraft—that’s what they did and what they were known for. Then, membership started to wane, so the board initiated a detailed strategic planning project.  On soliciting for information, they found that the exiting members didn’t really want to fly specialist tandem tailwheel aircraft anymore, so (long very story short), they sold them and bought a couple of Grumman Tigers.  Club membership soared and the club quickly returned to being successful and extremely viable.

Being a successful club in the past is not a sufficient reason for continued success.  Given the natural changes mentioned above and coupled with the cyclical swings in people’s interests, finances, and hobbies, it should be expected that clubs are always considering their future state.  We are often asked by existing clubs about how they can increase membership, or at least, retain membership, perhaps to get back to some bygone glory.  In many cases, the reality is that the glory has (or should) change and is highly situational.

Here are few ideas to consider if you find that your club cannot continue to operate “as is”:

1. Perhaps the club is too big for the times. Many clubs were started in the boom days of the 60s, 70’s and early 80s, but now times are different. It may be that the local pilot population just cannot support a flying club with, say, five aircraft and 75 members (don’t get us wrong, we’d much rather grow the pilot population and clubs help with this by lowering the cost of ownership). There could also be some hidden facts, here. Perhaps the club has 75 members but only 25 are actually flying. If the other 50 pay full dues, then great, they are subsidizing the flying members, but they are probably not flying for a reason and are likely to drop out of membership soon. If they are not paying full dues, then they cannot be considered as flying members. Call them social members or some other term that differentiates them from flying members. Some clubs charge social members a modest monthly fee, others do not and treat it as part of their outreach. Either way, be sure that you do not include social members on the club roster as doing otherwise will significantly affect the insurance premium.
   
   

   If truly only 50 members are flying, then the club likely doesn’t need five aircraft, so there is an opportunity to balance the realities of membership with the size of the fleet.  This could even provide an unexpected boost for the club.  Sell a couple of the underused aircraft and invest in the remainder of the fleet—new avionics and a coat of paint will work wonders for the attractiveness of the airplanes and hence the club.

   On the topic of insurance…I’ll try not to re-rant, so listen to Flying Clubs Radio Episodes 3 and 14 for the full fury.  Nevertheless, why are many older pilots getting so heated about their insurance premiums increasing due to their age?  Now, I’m not drinking any insurance-sponsored Kool-Aid here, and I definitely understand why people are upset about insurance companies not even quoting any sort of rate, but we’ve learnt from experience that if a club (or individual) is not being quoted, it is usually for reason other than just the age of its members.  When challenged, many clubs admit to multiple claims, which raises their risk profile in the eyes of insurance companies.  If you want to help control insurance hikes, then don’t have claims, which means increasing the proficiency for all members. How?  Instigate a club pilot proficiency program based on the FAA WINGS program.

   Back to the older pilot situation.  As we age, we expect to pay more for life insurance, health care, motor insurance and so on, so why should aviation insurance be any different? If a flying club consists of a few older pilots that has resulted in significantly increased insurance premiums, perhaps the older pilots should be charged an insurance surcharge to keep the lower-risk pilots at a level of dues commensurate with not having any older members.  This might sound harsh, but remember we’re talking about long term viability here.

   One final thought.  Help the insurance company understand that you are a safe club.  Insist that members take a phase of WINGS every year and upload members’ transcripts with the insurance renewal paperwork.  If you don’t know how to start this, contact Steve or Drew who are FAASTeam Safety Representatives, for more information.

2. We mentioned the Citabria club earlier that was able to change its fortunes by matching its equipment with members’ requirements—this is an example of rightsizing. A related concept is downsizing. If the club Bonanza is just not being used, perhaps it is time to change it. We’ve seen clubs downsize from airplanes such as a burly Bonanza to a flighty little colt such as a Van’s RV-12. Again, this requires considerable thought, as not only will it alienate some of the old crowd, but it will also completely change the mission and culture of the club, which presumably was the whole point of making the change. On the upside, a new Van’s RV-12 S-LSA with modern, clean looks and glass panel (with autopilot) may be just the tonic that an ailing club needs to fire up enthusiasm and attract new members.
3. Now for something a bit more radical—sell the club airplanes. We don’t mean close down the club—quite the contrary in fact—but today’s market is very buoyant for certain types of aircraft. Pretty much every used Cessna and Piper are selling at much higher prices than many thought possible. Is this a bubble? Probably not. The sort of planes used by clubs are generally older and, well, they just aren’t making older airplanes anymore! As more pilots realize the benefits of cost sharing and sharing the passion, new clubs being formed at increased pace.  At the time of writing, AOPA’s Flying Clubs Team has helped start 177 new clubs since the start of the program, and so typical club airplanes are becoming hard to find. Also, some aircraft, that in the past were not considered as “club airplanes”, are becoming affordable—such as the Cirrus SR20. So, take advantage of the market, sell high, and buy into the next generation of club aircraft!

The last two areas of viability to consider in this article are members and procedures. Let’s take them one-by-one, but bear in mind that each could easily take up a whole edition of Question of the Month!

Member Viability

Economic conditions, the density of pilots (numbers, not brainpower), the equipment being operated, value for money and many more factors dictate the opportunities and attractiveness of a flying club to its base of existing and prospective members. When coupled with the life cycle idea discussed earlier, a club would be wise to consider its members as an integral part of all strategic planning exercises.  When doing this, here are a few pointers to consider:

Take a look at your roster and flight hours. It is usual for clubs to trifurcate along the lines of those who fly a lot, those who fly infrequently and those who do not fly at all. Considering that clubs should operate with a membership cap (based on a sensible member-to-plane ratio) then it could be argued that if all members pay their dues, then why should this matter? In fact, such an arrangement means that the members not flying are subsidizing those that do fly. Well, another argument is that members who don’t fly are lowering the usage of the aircraft, perhaps to unhealthy levels, and are also “taking-up” membership places that could be filled by more active pilots—active in terms of both flying hours and, importantly, engagement in the club. We see a strong correlation between members who do not fly very much and their withdrawal (often complete) from the activities, governance and running of a club.  

So, harsh as it may sound, you should look deeply at your members beyond the fact that they pay dues.  Are they contributing members of the club? Do they participate in the club’s events, social and otherwise?  Do they engage in other ways, such as willingly taking on board or officer positions?  As we know, a flying club is first and foremost a social club of like-minded people, so weeding out “the renter” can be beneficial on many levels.  How do you do this…?  Well, the best way is to revise your bylaws such that everyone understands that they are a member of a club and that there are expectations.  Steve’s club includes this list in their bylaws (borrowed from a club that the Flying Clubs Team helped form a couple of years ago):

Section 21:  Members of the club are expected to:

• attend meetings.
• be available for Board of Director and Officer positions as rotations dictate.
• help with the organization of events and outreach.
• conduct themselves in a proper and fitting manner.
• uphold the dignity of the club at all times.
• be alert, mindful and considerate of the club and members’ interests.
• exercise due caution and safety in flying.
• observe all federal, state, local, airport, and club flying rules and regulations.
• not divulge club information and membership rosters to external parties, without permission from the President
• adhere to the bylaws and operating rules of the club.
  
  

  We know of at least one club that includes the notion of “required service hours” in their bylaws.  Members are expected to work a certain number of volunteer hours per quarter on behalf of the club in order avoid a fine, but more importantly, in order to stay as a member in good standing.  This idea of adding service hours to the notion of being in good standing—beyond the more typical requirement of just being paid-up—is really very creative and reinforces the idea that a flying club is just that, a club.

• A related consideration is whether the club is “sized” correctly. We discussed this from the aircraft perspective earlier, but it also applies to membership. If the club operates multiple aircraft yet few members are actually flying, then it makes sense to rebalance the equipment and people. That is, when looking at your plane-to-member ratios, do it based on members flying, rather than the whole membership. This will likely spur the discussion about selling an aircraft and the related case of shedding membership based on realistic ratios.

  Steve recently had a conversation with a board member of a well-established club (more than 40 years old), that is suffering the effects of an economic downturn in their city.  The club has dwindled to 40 members from its heyday of 80, but still operated four aircraft, and, of the 40 members, only 20 flew the club planes.  After a good discussion, the board member decided to propose that the club sell two of its four aircraft, invest in the remaining two and convert non-flying members into social members so they could still enjoy the social camaraderie of the club.  A rough calculation showed that the monthly dues would be about the same for the 20 flying members, as there would be less equipment to maintain. You may think this a bit odd coming from the Flying Clubs team, whose mission is to get more people, not fewer, flying in flying clubs. Well, this article is about ensuring sustainability, and, as all gardeners know, sometimes you need to prune to encourage growth.  We look forward in hearing back from this club in the near future.

Procedures

 The last element to discuss in this treatise on viability, is that of club procedures—such as bylaws, operating rules, and of course, culture, which can insidiously affect the tenor of any club.

As with any club-based organization, flying clubs are composed of individuals, from different backgrounds, with different expectations, and with different motivations and egos.  In the case of a flying club, members share complicated flying machines, hence the need for rules that not only safeguard the club’s reputation, but also considers the wider good of all members.  In many ways, club rules must provide levels of protection to club members, from club members.

We often get asked to give our opinion on bylaws and operating rules.  By the way, they are different as you’ll read in these past Question of the Month articles:

What is the difference between Bylaws and Operating Rules?

What are Operating Rules?

Now, we are not aviation lawyers so do not give any legal advice, but we been at this for a while and know a thing or two, so we are pleased to give a broad opinion in the context of setting-up and running functional flying clubs.  Many long-established clubs have dusty old bylaws and rules that have been simply added to over the years.  This might remind you of the FARs…when something happens and the FAA deem it necessary to protect us, they add a regulation, and the rule book soon becomes unwieldy and disjointed.  Some new flying clubs base their rules on what they find during an internet search, and so end up with bloated rules and procedures.  Don’t get me wrong here—rules are important, but they also have to make sense, be enforceable, and be enforced, otherwise the crocodile has no teeth.

We are always pleased when a forming club asks us for information on rules, as we can point them to examples on the Flying Clubs Downloadable Resources website and explain the importance of clear and concise rules and the ramification for not following them.

We strongly advise all clubs to do a regular review of their bylaws and operating rules as part of a biennial strategic planning exercise.  This makes good sense as it allows the reviewers to consider rules as an integral part of the club’s mission and behaviors (culture).  We also advise you to be careful with bylaw amendments, since, from experience, even the most mundane sounding change will get some people heated and factions will emerge.  Also, from experience, allow at least 3-4 club meetings (months) for this exercise as it will require much protracted discussion prior to agreement—and don’t assume that agreement will be unanimous!  Nevertheless, it is worth doing, so keep the faith.

Some final words on viability and procedures:

• Rules should be clear and concise. There is absolutely no reason for “herein, therefore” or “whereas, as of the sixteenth day of May, in the year 2021” or other lawyerly language that few can decode or understand.
• Less is more. There is no way you’ll every cover every eventuality in the bylaws and operating rules, so rather than driving yourselves (and all members) crazy with constant additions, use terms like “at the discretion of the Board of Directors” to empower the elected officials to run the club.
• Rules are there for the protection of the club and its members. If members don’t like the rules, then you have a problem. Club members are pilots, so are smart and opinionated and they’ll tell you if something doesn’t make sense to them. Take the time to listen rather than tell.
• If a member does not follow the rules (consistently), the president should convene a grievances committee, comprising general members as well as the board, to hear all sides and to make a determination. Ensure that there is an odd number of people on the committee and explain that no one can abstain from voting, so preventing a hung vote.
• Members will leave if they don’t like the rules. We’ve seen this recently where a dictatorial board of directors misinterpreted their role and pushed through changes that reduced members to mere serfs. Guess what? People left and the club is no longer viable. It would be ironic if those members established a new club and bought the assets from the failed club!

Well, that’s it for now on the topic of club viability.  As always, please feel free to contact Steve and Drew, the Flying Club Crew, at [email protected], but before we end, we promised a hint about some future ideas and directions for the Flying Club Initiative.

Part of AOPA’s mission is to continually advocate and provide for General Aviation, and to ensure that GA remains accessible to as many people as possible, especially in the face of changing generational expectations and demographics.  Flying clubs are extremely well positioned to support this mission by helping new and returning people to aviation find welcoming and cost-effective places for them to “own their aviation journey”.  We’ll be developing this opportunity for flying clubs much more in subsequent editions of Club Connector, but as a teaser, think about flying club operating newer composite aircraft with avionics very familiar to people who enjoy using flight simulators, and also the place of electrically propelled aircraft in a club’s fleet—clean, modern, efficient, low emissions, low operating costs…and very likely to attract a new breed of aviators.

 Fly lots and fly safely.