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Question of the Month: Our club is struggling—what options do we have to stay operational?

This question—how can flying clubs weather the current economic climate—has been the topic of many recent phone calls from club officers.  Many, but not all by any means, are from well-established clubs, going back 10, 20, 30+ years.  Interestingly, we’ve had relatively few calls on this topic from newer clubs, say, less than five years old…and we think there is something to learn from that.  Recently formed clubs are probably still finely tuning their operations, so are probably more sensitive to managing their budget.  The lesson to learn for more mature clubs is to get back to regular planning and budgeting, otherwise that engine overhaul reserve fund may be ebbing away, just to keep the club afloat.

Loyal readers may recall that I have tackled this topic in three recent Question of the Month articles:

November 20th 2022:     What Can We Do to Ensure the Longevity of Our Flying Club?

September 18th 2022:  In What Ways Does “Be Careful What You Wish For” Apply to Flying Clubs?

May 16th 2021:              Is Our Club Still Viable?

Remember that you can subscribe to the Club Connector newsletter and review article archives, here.

Now, this topic could quickly go sideways and touch on virtually all aspects of club life—social calendar, safety culture, member engagement, community awareness and outreach—but I’m going to restrict this article to the cold, hard, cruel facts.

Aeroplanes (yeah…I know…just humour me!), whether in a flying club environment or not, consume money, and lots of it.  The advantage of flying clubs is that all members share the burden equally.  It does not mean that it is free.  It also does not mean that it is necessarily “low-cost” as that is very relative …but it does mean that it is always way, way cheaper than doing it all on your own. 

In our frequent flying clubs seminars and workshops, we breakdown costs into two main buckets—fixed costs and variable costs, which are serviced by, respectively, monthly dues and the per-hour usage rate. We show that, for a sole owner flying the unfortunately and scarily low average number of hours per year (around 50), their effective cost of flight exceeds $400 per hour.  We get this number by dividing a year’s worth of fixed costs by the number of hours flown, then adding the actual per-hour cost.  No…this is not for a Bonanza or Cirrus, but rather a Cherokee or C172.  The more a sole owner flies, the lower will be per-hour contribution from fixed costs because they amortize over more hours. 

Now consider the case of a 10-person club operating the same type of aircraft, where members fly 50-hours a year.  Given that each member’s fixed costs will be 1/10th that of the sole owner, the effective per-hour cost (that is, amortized fixed costs plus actual operational costs per hour) will be around $150 per hour, all in, and of course members receive all the other benefits of club membership such as social events, a safety program and so on.  As with the case of a sole owner, the effective cost-per-hour will be less as a member flies more.  For the above example, the effective cost per hour for a member flying 100 hours a year will be around $120 per hour.  The more you fly, the better value it becomes.  Nice!

Another advantage of club membership revolves around unexpected issues such as an expensive ADs, or an earlier-than-expected engine overall.  Whether such expenses are paid from “reserves” or upfront, a member in a 10-person club will pay 10-percent of the total cost…but will have access to 100-percent of the result.  Think about this.  A $25,000 avionics update will cost each member $2,500, but they will fly behind the full $25,000 panel.  Nice again!

Hangarage, maintenance and insurance are the top three contributors to fixed costs…which directly impact monthly dues.  Each one of these have risen significantly over the past three years.  Hangarage is currently suffering from the laws of supply and demand—lots of demand and virtually no supply, so rents are increasing annually since people will continue to pay to keep their pride and joy undercover.  Maintenance costs are rising due to the double-whammy of the “supply chain” (fact or fiction) and inflation.  The higher cost of living means salary increases, which means…and so on.  Then there is aviation insurance. Without wanting to relapse into another rant on this topic, have a listen to Flying Clubs Radio Editions 3 and 14.  Anyway…we know from our annual survey data that insurance shot up between 25 and 50-percent in 2019-20, with around 15-percent increases annually since then. Again…market forces are at work. In no way would I ever justify gouging, but insurance companies are trying to claw back the losses incurred from the Boeing 737-Max catastrophe and the series of high-profile accidents involving celebrities.  

Of course, we have choices—we either pay up, fly without insurance, or stop flying altogether.  As most airport hangar leases require proof of insurance—as do financing companies—and as common-sense dictates—we actually don’t have any choice at all if we want to continue flying.  Rock.  Hard place.

Regarding variable (per-hour) costs, fuel dominates followed by the collection of reserves for high-ticket items such as engine and propeller overhauls.  The rising costs of parts and labor has, therefore, increased the per-hour usage rates beyond anything we have seen before.

Okay—you probably see where this is going.  Because of many aligning factors, it costs more to fly in the year 2023 than anytime previously, and the cold, hard facts are that whether you are a sole owner, or a member of a flying club, you have choices to make.  Feel free to use/modify the “Cost of Operations” spreadsheet found on the Downloadable Resources webpage. As treasurer of my club, I run the numbers monthly to keep an eye on reality, and to adjust the hourly rate based on fluctuating fuel prices.

The way I see it, there are four main options for individual members and four main choices for flying clubs as organizations:

For Members:

  1. Dig in, pay up and continue to fly sufficient hours to be proficient and safe. Yes, it might mean selling the Harley, and that’s why it is called a difficult choice…(probably better off with a Triumph Bonneville, anyway…)
  2. Fly less in order to help cover the higher fixed costs that show as increased monthly dues
  3. Actively work with and support the club’s management team by getting involved and helping keep costs down
  4. Pack up flying all together and join a quilting club

Now, of course, things aren’t quite as linear as they seem…

For option 1, maintaining or expanding proficiency will very likely result in static or lower insurance premiums and so…all other things being equal…lower monthly dues.  For this to be effective, a substantial majority of club members will have to follow this path.  In my humble opinion, the best way to do this is for clubs to adopt the FAA WINGS program as the basis for their safety culture.  It doesn’t get much better than documented proof of proficiency coming from transcripts stamped with the FAA FAASTeam logo. We call this “WINGS for Clubs”.  More details can be found at these links:

Looking now at option 2.  If you intend to maintain your current flying expenditure, there is little choice but to fly fewer hours, since more of your budget will be paying for the higher monthly dues leaving less for actual flying.  There is a feedback trap here.  Flying fewer hours will inevitably result in decreasing proficiency which may well trigger the insurance company to view the club as a bigger risk, and yes, premiums may increase.   Taken to extremes, members may discover that flying fewer hours can actually result in higher monthly dues, due to the increase in insurance risk.

Regarding option 3. Time plays tricks on flying clubs.  Habits develop, officers ease into their positions, and other members might quietly drop back a bit as everything seems to be under control.  These “complacency years” can be a dangerous time in the lifecycle of any social/hobby club, and this lowest energy state will happen quite naturally unless vitality is injected on a regular basis.  As we have written about before, maintaining the cadence of a two-year cycle of strategic planning and budgeting will go a long way help keep a club on the right side of the red line.  Now, if the same people do the same things time and time again, then the outcome will likely be predictable, so it is important for all members to be involved and to provide insight, expertise, and—yes—opinions!  As time goes by, it is easy to think that the main benefit of a club is cheaper lower cost flying for all, but this misses the key point of the shared responsibility for cost reduction.  Along with “many hands make light work”, many people also bring diverse skills and expertise, so, club managers…put your members to work, and club members…support the club managers by getting actively involved in all aspect of club life…the more tasks that members do, the less the club will have to pay others to do them.

More details of member involvement and engagement can be found here: “How can we get more members engaged in our flying club”.

 

On to option 4:  Increasing costs may well push some members out of the club…and if you can’t recruit new ones, well, dues will go up as there are fewer people left to pay the fixed bills.  By the way, remember the golden rule…the club should never, ever refund anything to members leaving the club.  (For more on this rather contentious topic, see “How do flying clubs set their fee structures—and how do members joins and leave a club?”).

This again has a feedback effect. As dues increase, more people may be forced beyond their budget, meaning still fewer people remaining and dues will increase again…and on it goes until melt down.  A possible redeeming situation is when a club downsizes to five or fewer members. This is what happened to my club a couple of years ago when a few members left for assorted reasons.  Our insurance allowed for up to 10 members but there were only seven paying the bills…so everyone’s dues went up.  That resulted in two other members leaving, dropping us down to five.   A timely call to our broker (AssuredPartners) revealed that a club with 3-5 members can get “named pilot” coverage which substantially reduced the premium…and hence monthly dues. Another helping factor was that we adopted WINGS for Clubs mentioned earlier, and so benefited from a really healthy safe-club discount.

Take a leisurely stroll through the Question of the Month archives for several articles about positioning a flying club to be attractive to new members.

For Clubs:

Now that we have considered a number of options for members to cope with higher costs, let’s now consider the same goal, but from the perspective of the club as an organization.

  1. Reduce costs, overall.This will require a really deep dive in the finances and operations of the club and asking tough questions
  2. Use club members rather than outsiders
  3. Right-size or downsize the equipment, according to the times
  4. Get rid of deadwood

Considering option 1:  If you have not increased monthly dues and per-hour operating costs for “a while”, now is the time.  Yes—some old timers will complain and may threaten to leave.  Don’t let them call your bluff…flying clubs will always offer the most affordable access to aircraft…period. 

Look carefully at the extras.  Yes, it is nice to continue the tradition of “free” dinner at club meetings, but it might be time to charge a prorated fee or ask members to bring something for a pot-luck affair. 

While some costs will hold steady over the span of a year (for example, insurance and hangarage), others, like fuel, will fluctuate month-by-month, so take the time to update the per-hour usage rate on regular basis to ensure you are not operating at a loss in any given month.  If you use a club management tool like Flight Circle, this is really easy to do.

More on cost containment can be found in Section 3 “Financial Responsibility” in “What can we do to ensure the longevity of our flying club?”

Quickly going back to the topic of insurance, please do ensure that the hull coverage listed on your policy is realistic.  We all like to think that our planes are worth more than others, but as the hull coverage component of a policy is 70-percent of the total, any amount of over-coverage will be expensive.

On to option 2:  This is the other end of option 3 for members—use internal resources rather than pay for external ones. Many times, people are willing to help but just need to be asked…so ask!  Try collating a “skills and talents list”.  We all like to be known for what we do well, so a simple list of skills will help the management team assign tasks and assemble work crews, as necessary.  There are many opportunities here.  For example, changing the engine oil…in fact all of the preventative maintenance tasks detailed in Part 43, but be careful…choose and train your wannabe mechanics very carefully and be sure that all maintenance records and logs are maintained to the highest standards.  We talk lot of about club-performed maintenance in our annual Workshop series, so keep a look out for an email, later in the year.

Option 3:  Times change, member requirements change, cost of operations change.  What was good for the club 20-years ago may well be holding it back, today.  As part of the biennial strategic planning exercise we recommend that all clubs conduct, take a long, hard look at the “fit” of the fleet along two related lines—alignment with member’s flying behaviors (around the patch, serious cross country, real IFR, and so on), and what members are actually prepared to pay for such aircraft.  Yes—through the magic of cost sharing, flying clubs offer the most affordable flying of any type of ownership, but that doesn’t mean it is low cost…we fly airplanes, after all.  I tackled this topic in great detail in “Is our club still viable”, but the bottom line is, well, the bottom line.  If members don’t want to pay for it, it is time to change it, whatever “it” happens to be.

…and finally, option 4:  On the topic of changing things, look seriously at club members, and look beyond the fact that they pay dues.  Contrary to some member’s behaviors, flying clubs are not country clubs…they generally do not “have people” to do the myriad tasks required to keep a club active and healthy.  Just as with the fleet, ensuring membership “fit” is important, and yet oftentimes it is just easier to live with the grumps and slackers. 

No!  Take action!  Prune in order to encourage growth!  As with sizing the feet, I tackled the issue of member viability in “Is our club still viable”,  so please take a look.  Don’t feel hampered by what the bylaws currently say—they can—and should—be updated on a regular basis to reflect the club of today, not of yesteryear!

Bringing this article to a close, I hope you’ll see from the above that that there are many things club members and club management can do to keep flying clubs active and viable in these challenging economic times.  In fact, there may be a silver lining…tough times call for tough measures which can position a club not just for sustainability, but also for planned growth.

As always, fly lots and fly safely!

Stephen Bateman

Flying Clubs Initiative
Steve leads the You Can Fly Flying Clubs Initiative, which helps start and grow flying clubs, nationwide. Steve is a CFI, an AOPA staff instructor, LSRM-A and FAASTeam lead representative. Contact Steve at [email protected]

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