Flight Schools Often Grounded by Unfavorable Economics

Flight schools are bouncing along on a bumpy ride financially at Van Nuys Airport.

At least two schools have gone out of business in recent months, the latest casualties in an aviation industry that favors charter business and corporate jets over the less-profitable flight schools, according to industry experts.

“There definitely is an economic problem. The main reason we keep our school open is that our students are potential customers for our other services down the road,” said Rick Voorhis, owner of the Van Nuys Flight Center, which has been around for 14 years and currently employs five instructors and 18 workers.

Voorhis said the number of flight schools at Van Nuys has remained steady at about a dozen in recent years, but several different operators have been in and out of the same locations as one school fails and another takes its place.

Most recently, he said, Av8 Inc. and Green Hornets Aviation have shut their doors.

Van Nuys Flight Center can afford to stay in the pilot training business because it makes a profit on the other operations it provides, such as selling Cessna airplanes, performing maintenance and offering related aviation services, Voorhis said.

Flight schools enjoyed a heyday in the late 1980s, school operators said, but the rise in the number of charter and corporate jet operations, California’s recession, the Northridge earthquake, regulatory changes in Europe, the recession in Japan and rising insurance premiums have all taken their toll on the industry.

“We’re in the biggest slump I’ve seen since I’ve been here,” said Yoyo Gusso, an instructor and marketing representative for King Aviation Center at Van Nuys, where he has worked for three years.

Students at King pay about $18,000 to $20,000 for a six-month course leading to an entry-level commercial pilot’s license. But Gusso said new regulations adopted by European countries have cut deeply into King’s enrollment, which consists primarily of foreign students, most of whom are from Europe. Those rules refuse to recognize U.S. flight school training unless the American school also operates a facility in Europe.

*

Gusso said King is hoping to open an overseas facility soon.

According to Voorhis, flight schools prospered in the 1970s and 1980s but suffered from the recession in the early 1990s.

The local boom in flight schools reflected a national trend, according to Mitch Barker, a Federal Aviation Administration spokesman. The number of student pilot licenses dropped every year from 1991 through 1996 after peaking at more than 88,000 in 1990, according to FAA figures. The number climbed slightly in 1997, the latest year for which figures are available.

“As an industry, we’re probably flying about 50% of the hours we flew in the 1980s,” Voorhis said.

Van Nuys Flight Center had 30 airplanes at its peak but is now down to 14, although enrollment has increased slightly in recent years, he said. Most schools today have only five or six airplanes, but many had 15 or 20 during the good times and one school had 70 planes, Voorhis said.

The flight school business was already slumping when the Northridge earthquake added to the woes of local operators. Many potential students had to spend money on home repairs and other earthquake expenses instead of discretionary expenditures like flight school, Voorhis said.

“The earthquake devastated our business,” Voorhis said. “I knew several customers who would have bought airplanes if they didn’t have to put $100,000 into their houses.”

Flight schools have also faced a slow and steady encroachment by charter and corporate jet operations, which are enjoying a boom in business with the the economic recovery. The jets squeeze the small prop planes out for reasons that are “pure economics,” according to Voorhis.

Voorhis explained that charter and corporate jet operators require much larger and more sophisticated facilities and services than small prop planes, and the jet operators can afford to pay the higher rates.

Flight schools at Van Nuys typically sublet space from an airport leaseholder that in turn rents land from Los Angeles World Airports for $14,000 to $15,150 per acre per year.

Those leaseholders, Voorhis noted, can only charge flight school operators and private plane owners an average of about $125 per month for tie-down spots, Voorhis said, because the schools and the airplane owners will go elsewhere if the rates run much higher.

With an average of about 14 small planes tied down per acre, that means the most the leaseholder can gross from an acre of tie-downs is about $21,000 a year, which isn’t enough to generate much profit after expenses, according to Voorhis.

“The economics force the leaseholders to convert the tie-down areas to other uses,” Voorhis said. He said a leaseholder who builds a hangar and converts a tie-down area to jet use can easily command rent of $1 per square foot per month or $43,560 per acre, compared with the $21,000 a year the same land would generate from tie-down fees.

The greater profits to be reaped from the jet business, and the continued demand for hangars and jet services, have prompted the boom that has meant less space available for flight schools--even those that can manage a profit.

Although the charter and corporate jet boom hasn’t been a worry for Orbic Helicopters Inc., the 10-year-old company has recently faced tough times, according to Orbic President Chris Templeton.

Orbic once depended almost entirely on Japanese students, but the Japanese stopped coming when their country slipped into a recession, so Orbic has had to find local students.

“We’re a small operation. We only have about 10 students. We only had about 15 at our peak,” Templeton said, adding that Orbic is down to three helicopters from four because of the drop in enrollment. Students pay $10,000 to $12,000 for a course of training that takes two months to a year, depending on how often they can attend.

Templeton said Orbic makes much more profit on other facets of its business than it does on the flight school. The company offers helicopter tours of the Southland, provides charters for photographers, and is used often by the film and television industry for aerial footage.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Student Pilot Slump

The number of student pilot licenses issued in the United States declined for most of the decade.

*

Source: Federal Aviation Administration