Royal Queensland Aero Club in voluntary administration

[aplund]

I received the following email today. I'm not sure what it all means. I'm in the final stages of study for the PPL exam and have about half a dozen flights to go before the final test. There are many cases of companies trading under administration (Dick Smith?). The AAA, which I think is a subsidiary, seems to have _heaps_ of students and lots of staff. The carpark this year has been full of cars most days. There must be some debt or cash-flow back story that I'm totally unaware of. Today I booked a solo flight for Saturday, not sure if that will go ahead at this stage. Nobody has contacted me though.

 

 

24 March 2016

 

 

 

Note to Members – Appointment of Voluntary Administrator

 

 

 

Dear Members

 

 

 

I regret to advise that the Boards of Royal Queensland Aero Club Limited, Airline Academy of Australia Pty Ltd and ATAE Pty Ltd resolved earlier today to appoint a Voluntary Administrator to all entities within the Royal Queensland Aero Club structure. As a consequence of this appointment all entities ceased trading with effect from this afternoon.

 

 

 

This outcome is particularly disappointing given the substantial progress recently made towards achieving increased scale and profitability.

 

 

 

I would like to take this opportunity to record my and the Board’s appreciation of the wonderful efforts of Management and Staff, particularly through the many challenges that have arisen in recent months.

 

 

 

The Voluntary Administrator, Nigel Markey of Pilot Partners, has commenced the process of reviewing the position of the RQAC group and will provide advice to Directors, Creditors and Members and Students in the coming weeks.

 

 

 

Obviously this is an incredibly sad day for our proud and historic organisation. There will be a number of people working tirelessly in the coming days to explore all avenue and options to develop a proposal that will allow the entities to emerge from Voluntary Administration.

 

 

 

Members will be kept informed throughout the process.

 

 

 

Yours sincerely

 

 

 

Clif Hefner

 

 

[red750]

Hi Clif,

 

From personal experience, that doesn't sound good. In my case, the two partners in the business went to lunch to look for new premises, and came back to tell us they had placed the business into administration. It was a case of pens down, don't post the mail, you are all out of a job. The key sentence in the email is

 

As a consequence of this appointment all entities ceased trading with effect from this afternoon.

Unless they find someone very quickly to take over the operation, I'm afraid you will be looking for another flight training centre.

 

 

[aplund]

Hi Clif,

I'm not Clif. That was the sender of the email.

 

Unless they find someone very quickly to take over the operation, I'm afraid you will be looking for another flight training centre.

It all seems so strange! The flight school was booked out all the time. I had to book many days in advance for planes and they must have at least two dozen planes. I was hoping for a Nav on Saturday, but had to do a 1 hour area solo as the plane was otherwise booked out. And surely it's not the revenue that's the problem as they charge $414/hour for dual, plus $109/hour for briefings and you have to pay for your own landing fees, headsets, materials, photocopying, etc. They had lots of advertising around the city as well. Though I have noticed with companies in the past, they often give the impression of expansion just before they end.

 

The RQAC has a very long history at Archerfield. It is indeed a very unfortunate situation.

 

 

[Geoff13]

There is far more to running a business than taking bookings and being busy. If the profit margins are not there then it won't work. I have worked with people who would not have a clue even what there operating costs are let alone what their profit margins could be. Needless to say most of those guys are no longer in business, the rest won't be for long.

 

 

[MarcK]

Wow I was only down chatting with them about training a couple of weeks ago. I think they invested heavily in developing courses for govt funded CPL training. (vet fee help). They also have a school at Toowoomba. I spoke to a few of the staff and they where friendly professional and very helpful.

 

Sad news for the staff and students. I hope there is enough capacity in the area to pick up the CPL students so their training isn't disrupted too much.

 

 

[aplund]

If the profit margins are not there then it won't work.

I tried to figure that out very roughly a while ago. Let's say the instructors really do cost $100/hour, then it's just under $300/hour (ex GST) for flying the C172R. Clearly there are a lot of costs wrapped into that, but is that really an unprofitable and/or tight margin? Fuel will be around about $80/hour (maybe less more recently), and hopefully they have a reasonable arrangement for parking included in their lease for the office space. No idea about maintenance costs, but they also offer a student program for maintenance and perhaps things can be bundled together there. Lots of other expenses need to be included in this of course, but given that most planes were up to their 110 hourly after 4-6 weeks, that's a fairly rapid throughput which would cover a number of fixed costs like running the operations centre and other office staff.

 

 

[djpacro]

Perhaps the significant cost in transitioning to the new Parts 61/141/142 rules contributed.

 

 

[Geoff13]

Without knowing the real figures everything is just a guess. Sadly people do try to run businesses like that.

 

 

[fly_tornado]

they have a legal obligation to avoid trading insolvent, could jut be a temporary cash flow problem.

 

What is insolvent trading?

 

Insolvent trading is when directors allow their company to incur debts when the company was insolvent. The liquidator can make a compensation claim against a director if those debts are unpaid when the liquidation commences. A director may be held personally liable to compensate creditors for the amount of the unpaid debts incurred from the time the company became insolvent to the start of the liquidation.

 

http://www.worrells.net.au/InsolvencyResources/FactsheetArticle.aspx?ArticleId=27

 

 

[red750]

I'm not Clif.

Sorry Aplund, my mistake. Replying in a hurry and not checking.

 

 

[aplund]

Well, there are lots of possibilities. But it just seems unlikely this is a case of year on year operating losses, unless the level of liabilities taken on were far too high for some reason. I may be wrong and if I am, I cannot see myself owning a single engine GA plane if average operating costs exceed $300/hour.

 

 

[poteroo]

That's most unfortunate. I did the last part of my CPL with RQAC in 1965 and they were the top school at Archerfield in those days...... (there were only 2!).

 

$414/hr dual is pretty high for a C172R. The award rate for a Grade 1 instructor is barely $80/hr, and lectures/briefing would usually be less than that. Avgas use for training would be around 33-36LPH @ $2.00 these days. If you flew 500 hrs pa at this rate, it's difficult to see how it could be losing. They must have experienced unusual losses elsewhere in the operation? Overheads? Bad investments elsewhere?

 

 

[cooperplace]

The AAA, which I think is a subsidiary, seems to have ....... lots of staff.

you have above pointed out one of the causes. My father, now gone from this world, was a banker, and he used to say "the assets are always obvious but the liabilities are hidden" and this is why a business can go from looking fantastic right up to its death knell. Sad news for aviation in Qld.

 

 

[GAFA]

I can't believe people are paying $414 per hour for a C172 and $109 per hour for briefings. Large flying schools operating from Class D airports these days are just ripping students off. They have all moved to operating C172's ( most with glass) for basic training, when all you need is a 2 seater with a basic six pack.

 

Even if you want to fly a C172 there are smaller schools operating from non class D airports where you we pay around $350 per hour for one. As for paying $109 briefing, back when I learnt to fly briefings were free and eventually when I become an instructor the school I worked for never charged for briefings, it was all part of the service of teaching someone to fly.

 

With regard to the Royal Qld/AAA, look how much they have diverted away from just being a flying school. They have started flight attendant tand aircraft engineering training (trying to compete with Aviation Auatralia). Their rates were also the highest on the airport and were geared for those seeking a CPL via VET-Fee and not for the average Joe who just want's to get a PPL (what Aero Clubs were set up for).

 

Look back at all the flying schools that have closed in Australia over the last 20-30 years. Majority of them have been large schools (Royal Aero Club of NSW,Navair, AFTS, Axis, Aerospace, Airtex, FTA etc) that got greedy and and sold the 'you will be an airline pilot in 2 years' product, with all their students walking around in uniforms. Whilst the smaller schools (ie C and H, Witworths at Bankstown, Gill Lyatts at Archerfield etc) are still here.

 

 

[facthunter]

It's illegal to trade while insolvent. AS to why they are in that state, who knows? It's typical of many organisations in GA today unfortunately. When I was a Teacher, my wages would purchase just over 2 hours flying per week so the $400 is still cheaper than then. Flying generally is not a cheap activity. RAAus provides the prospect of a cheaper path so keep working on it folks. Nev

 

 

[aplund]

I can't believe people are paying $414 per hour for a C172 and $109 per hour for briefings. Large flying schools operating from Class D airports these days are just ripping students off. They have all moved to operating C172's ( most with glass) for basic training, when all you need is a 2 seater with a basic six pack.

AAA only had one glass cockpit C172, iirc. They charged even more for that one. I have been paying $414/hour (dual, $304/hour solo) and $109/hour for briefings + landing fees + all my own equipment for the entirety of my PPL until now. All on basic 6 pack C172R.

 

Seems I may be on the lookout for a new flying school in Brisbane to complete my PPL. Any suggestions? (I absolutely must have it done by August. I was hoping for end of April, but I don't think that's a possibility now).

 

 

[facthunter]

Good luck . Are all your log book entries certified by the school ? Nev

 

 

[gareth lacey]

Aplund,try Sunshine coast club ,based at Sunny coast ,ATC etc

 

cheers gareth

 

 

[Jaba-who]

Discussions here forget all the other huge costs associated with running a club based business.

 

And I'm not trying to be sarcastic or rude but posts saying " when I was learning things were cheap and briefings were free" are just glimpses of a past world that does not exist any more.

 

In those days rents were cheap, wages were low and there were lots of people wanting to learn to fly flying in an aero club was the only way to do it. Clubs relied on the acceptable work practice of not paying instructors for much of their work, which is just plain illegal now.

 

Now average citizen joe doesn't want to learn to fly ( all of GA, recreation and sport aviation numbers are down ) he wants to do a dozen different activities that are now available and which take people's time and money and the dwindling numbers that do want to fly have concentrated in the RAAus end of the spectrum. GA aero clubs have closed down all over because there is just not the customer base any more.

 

To say a club who is not making ends meet is " greedy by charging $X" because someone else is charging less ignores a lot of other factors in the equation. A lot of the small flying schools manage only because the principles do everything themselves, take a below the poverty line wage and have parred down their costs behind the scenes to unimaginable levels and have long long leases or contracts where airport owners are precluded from screwing them.

 

As a club gets bigger it is required to pay real wages, move out from behind the fog of the small family business and be financially accountable to a wider range of creditors and finance institutions.

 

Rent and property leases are often the killer

 

Office and business costs can be high and all these activities are essentially non income producing. Non income producing staff ( receptionists, admin people) have to paid from somewhere.

 

Non income producing activities of instructors which still must be paid for.

 

Wages are only a part of the money that goes toward staff. Don't forget superannuation, extra cost of leave entitlements, extra staff to cover when leave is taken.

 

Maintenance is another killer, especially as aircraft age.

 

Often clubs maintain solvency by positive valuations on assets. If external events happen - like changes in the dollar, changes in demand for the asset etc the asset can suddenly be worth significantly less and cause the balance sheet to become stretched.

 

I was involved with the North Qld Aero Club board for some time and we were always being stretched to the limit by these constantly changing factors.

 

Our club finally met its match when the private owners bought the Cairns airport and 60 years of association with the airport were considered not worthy of keeping us there and they upped the rent/lease costs incrementally and took away income streams till we were forced out.

 

Our club had the positive option of moving to a nearby town ( Mareeba) and things are looking better for the club. But managing the costs is a constant chore.

 

Having aircraft flying is only part of the equation.

 

 

[aplund]

Good luck . Are all your log book entries certified by the school ? Nev

First page yes. It was complete. Second page was in progress. They have a full electronic record of all lessons and detailed notes. My guess is that I may be able to get a copy of this.

 

 

[aplund]

I got an update via email. Seems that the use of VET FEE-HELP is being raised as the primary culprit.

 

I don't fully understand what was sent around, but it appears that this source of money is only settled at the end of the course. This would clearly cause a massive cashflow issue. (I only have a very fuzzy view of this, but makes sense if true.)

 

 

[aplund]

Aplund,try Sunshine coast club ,based at Sunny coast ,ATC etccheers gareth

That's a long way for me to travel (from Indooroopilly). I only had about 6 nav exercises left in the course schedule, plus the PPL written test. So I guess it would be possible.

 

 

[GAFA]

That's a long way for me to travel (from Indooroopilly). I only had about 6 nav exercises left in the course schedule, plus the PPL written test. So I guess it would be possible.

If you want to continue your training at Archerfield there are a few other schools their operating C172's. Otherwise you have Redcliffe with 2 schools operating C172's, Caboolture with at least 1 school operating C172 's and Caloundra (closer than Sunshine Coast Airport) with 2 schools operating the C172. You will pay less per hour for the C172 at Redcliffe, Calbooture and Caloundra then both Archerfield and the Sunshine Coast Airport.

 

 

[cooperplace]

First page yes. It was complete. Second page was in progress. They have a full electronic record of all lessons and detailed notes. My guess is that I may be able to get a copy of this.

I would do so immediately.

 

 

[facthunter]

A summary each six months is one way. Nev