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The Pilot's Guide to Multiple Ownership: Co-Ownership and Flying ClubsThe Pilot's Guide to Multiple Ownership: Co-Ownership and Flying Clubs

The Pilot's Guide to Multiple Ownership: Co-Ownership and Flying Clubs

Section 2: Organizing and Operating a Flying Club

Chapter 1: Organization
Chapter 2: Financing
Chapter 3: Operations
Chapter 4: Costs
Chapter 5: Taxes
Chapter 6: Insurance
Chapter 7: Potential Problem Areas
Chapter 8: Safety
Chapter 9: Flight Training
Chapter 10: Promotion

Appendices

  1. Sample Articles of Incorporation and Sample Bylaws
  2. Sample Flight Rules
  3. Preventive Maintenance

Chapter 1
Organization

Whenever pilots get together for a little hangar flying, the conversation is likely to turn to ownership. Each pilot has his or her dream. One may talk of the ideal King Air, fully IFR equipped with a couch, bar, and separate restroom in the cabin. Another might talk about flying sophisticated, high-performance singles. But eventually the conversation drifts back to earth and to more affordable aircraft. Most pilots have to admit they probably can't even afford one of those, at least not alone. But, with a partner or two....

Most flying clubs get their start this way. Two or three pilots join together, obtain an aircraft, and presto — instant flying club. But the idea of starting a club may raise more questions than it answers. Who will form the club? How many members should it have? How many members will it need? Should it be a co-ownership, a corporation, or should it take some other form? What type of aircraft should be flown? Should the aircraft be purchased, rented or leased? Should there be regular meetings? What about dues and fees? The answers to these and other questions will shape the club.

Membership

The backbone of every successful flying club is a roster of involved members. An enthusiastic group of pilots increases a club's chances of success and makes the whole experience more enjoyable. But how does a club get good members?

There is no single best method for selecting members, but it's always a good idea to run both a credit and character check on each prospect. Some potential members may be upset by this, but it's better and easier to weed out poor prospects before they become problem members. It could save money and hard feelings. As the story goes, one flying club failed to thoroughly check out one of its prospects who, during his first month as a member, ran up a $1,300 bill and disappeared without a trace. The bill did not disappear, and the rest of the members had to make up the difference.

Membership can take any form a club chooses. It can be open to all pilots or limited to certain professions such as doctors, teachers or plumbers. It can be limited to pilots flying for business or those flying for pleasure. It's up to the club to decide whom it wants as members.

Another important consideration is how many members to allow in the club. This helps determine the number of members per airplane and is a key factor in recruiting and retaining members. A club needs enough members per airplane to cover all expenses but not so many that it's difficult to schedule a flight.

Some good rules of thumb as a starting point might be: include members who do most of their flying during the week so that the airplane gets used as much as possible. If the majority of club members fly extended trips, limit the number of members per aircraft to four or five; if the majority fly for training or pleasure, then 10 pilots per airplane should be okay.

Having more than 10 members per airplane could easily lead to a situation similar to all the members of a large family trying to squeeze into a single bathroom at the same time in the morning!

Organizational Forms

There are several ways to organize a flying club, but one is no better than another unless it is tailored to meet a club's specific needs. Members should outline the club's general objectives and decide how they want it to operate, then seek the help of an experienced attorney.

To give potential club organizers an idea about where to begin, some generalizations about different ways to organize a club are listed below. They shouldn't be used "as is." Instead, the suggestions should be used as guidelines for structuring a club that will meet its members specific needs.

Co-ownership

The co-ownership arrangement is a contractual agreement that lets each member own a fractional interest in the airplane and in any property purchased in common with the other members. A co-ownership arrangement is technically not a partnership. A partnership is an association of two or more people who operate a business for profit. Since most flying clubs are nonprofit in nature, they are usually co-ownership arrangements, not partnerships. Details on co-ownership arrangements can be found in the first part of this booklet.

Corporate Forms

Having confidence in two or three other pilots is one thing, but when that number grows to five, or six, or more, a flying club takes on an entirely new complexion. Incorporation is often the most desirable way to organize a flying club with more than four members. Because a corporation is a legal entity separate from the individuals who make up the corporation, individual members are not personally liable for contracts made in the name of the corporation. Nor are individual members personally liable for injury or property damage committed by other members of the corporation. Furthermore, corporations make it easy for the individual to transfer his or her interest in the club.

When a flying club is organized as a corporation rather than a co-ownership, its members do not own a direct interest in the aircraft. Instead, they own an interest in the corporation and the corporation owns the aircraft. One advantage is that members who wish to leave the club can easily sell their interest by offering it back to the corporation. This provision could save having to get approval from every other club member and save valuable time. Sales outside the corporation, however, should need the approval of the Board of Directors. It's wise for corporate bylaws to include a requirement that members who want to sell their interest must offer it to the corporation first. This requirement should also apply in the event of a member's death. A well-drafted shareholder's agreement should cover most of these potential situations, preventing a lot of future problems. Such an agreement should only be drafted under the supervision of a licensed attorney.

Every state permits incorporation and some have laws specifically for nonprofit corporations (also called "corporations not for profit," "non-stock corporations" or "membership corporations"). Since most flying clubs are nonprofit in nature they will be formed under the nonprofit statutes. In states without these specific statutes, clubs can incorporate under the general corporation law and still function as nonprofit corporations.

Limited Liability Corporations and Partnerships

Appendix A contains sample articles of incorporation and bylaws that can be used as guides for clubs wanting to incorporate.

Administration

A flying club needs a good manager and staff to keep it running smoothly and to keep it financially sound. Ideally, a club's administration should be handled by a paid, full-time staff skilled in club operations, accounting, and public relations. The administrator should also have thorough knowledge of maintenance and Federal Aviation Regulations. That's ideal. Realistically, most clubs cannot afford a paid staff and the administration of the club is the responsibility of the membership. Below is a typical list of the various officers and their duties. These positions should be filled with members experienced in the particular skills required for that job. (Note: If a club is incorporated, many of these offices will coincide with the offices of the corporation.)

Following is a list of typical corporation officials and their duties. More information is included in the sample articles of incorporation in Appendix A.

Manager: A good manager is the heart of a good flying club. It is important that the manager be respected by the members and trusted to run the club smoothly and efficiently. The manager should be able to resolve minor disputes without having to consult the Board of Directors or the entire membership. The principal duty of the manager is to oversee and coordinate the work of the other club officers, making sure they are performing their jobs accurately and on time. In clubs that are corporations, the manager is usually elected president of the corporation. In small clubs, he or she is often responsible for many duties that might otherwise be assigned to other members.

Treasurer: A club's treasurer has the basic responsibility of keeping the Board of Directors and members fully aware of the club's financial condition. No money should pass into or out of a club's bank account without the knowledge of the treasurer. The treasurer has the responsibility for billing members, signing all checks (with a co-signer), sending financial statements to all members, and paying all the bills. The treasurer should be authorized to meet monthly obligations such as hangar fees, aircraft payments, and insurance premiums without having to get club approval when each comes due. It is very important that the treasurer have prior financial experience, and because of the large amounts of money involved, club members should think about having their treasurer bonded.

Scheduling Officer: Of all the club officers, the scheduling officer will probably need the biggest bottle of aspirin. The duties of the scheduling officer include posting the aircraft schedule where members have easy access to it, scheduling flights and rescheduling them as members change their minds or swap times and dates, notifying members of any schedule changes due to unexpected events such as unscheduled maintenance, notifying the club manager when members abuse the schedule, and getting maximum utilization out of the aircraft by keeping the schedule full. This is particularly important because the more the aircraft is used, the brighter the financial outlook. In a smaller club, the officer may also be expected to schedule meetings and notify members about them.

Maintenance Officer: The maintenance officer is responsible for the airworthiness of the club's aircraft. The maintenance officer should know aircraft inside and out and be able to assure the quality of repair work. Ideally, he or she would be a certified mechanic. More realistically, though, this job will be handled by a member who is not a certificated mechanic. In this case it is best to choose a member who is very familiar with aircraft maintenance procedures. The job of the maintenance officer includes getting the aircraft to the repair shop for both regular and unscheduled maintenance and inspections. This should be done with a minimum amount of down time. The maintenance officer is also responsible for keeping the engine and airframe logbooks. It is good policy for any club to keep squawk sheets in the aircraft and to require all members to immediately report any aircraft discrepancies to the maintenance officer.

Secretary: The secretary is responsible for most of the club's communications and paperwork. This includes maintaining accurate records of all club correspondence, keeping minutes of meetings, notifying members of meetings or special events, alerting members when the aircraft is out of service, maintaining the club's bulletin board, and, if necessary, helping the other officers with their record keeping. Being secretary is not a grueling job, but it requires organizational ability and a talent for keeping track of several unrelated items at the same time.

Safety Officer: The safety officer plays a key role in maintaining the club's health both physically and financially. The safety officer should keep members advised of proper flight procedures, encourage flying proficiency, notify members of changes in the FARs that may affect them, and help the club establish criteria for aircraft check-outs, recurrent training and time in aircraft type. Financially, a safety program incorporated in the club's bylaws will not only encourage competent, accident-free flying, but can also be useful in enhancing the club's eligibility for obtaining the lowest possible insurance premiums.

There are other special duties that are part of a flying club. Many of them depend on the size and nature of a particular club and can include the maintenance of hangar or tiedown facilities and club headquarters, organizing social programs, managing ground school and flight proficiency programs, new member recruitment, and more. Each job should be clearly spelled out and rotated among members on a regular basis so no one keeps getting stuck with the same job. Of course, members of small clubs will have to take on more than one job.

Aircraft Selection

The main factors to consider in selecting an aircraft are purchase price, operating cost and intended use. These are interrelated and often lead to compromise unless a club has unlimited funds.

Costs

The cost of an airplane involves both purchase price and operating expenses. And though it's very impressive to have a fancy airplane sitting in the club's tiedown spot, each club has to be realistic and stay within its budget.

A club should initiate its search for an aircraft by taking a good, hard look at its finances and deciding how much it can afford to spend for the initial purchase and for ordinary fixed costs such as hangar fees, insurance, annual inspections, and so on. It's also a good idea to have a cash reserve handy for unexpected expenses. Once club members have determined how much purchase money is available, they can begin narrowing their choices to aircraft within that price range.

The actual purchase price of a specific aircraft depends on age, how well it's equipped, how well it's been maintained, total time on the aircraft and engine, the current demand in the marketplace, and many other factors.

Usually, the newer and more complex the aircraft, the more expensive it will be to purchase and maintain. A high performance, retractable gear, variable pitch propeller aircraft will cost more than a fixed-gear, fixed-prop model. The age of an airplane may also affect operating and maintenance costs. Newer airplanes may carry better warranties than older airplanes, and that may lower maintenance costs in the short run. Parts for new aircraft will be easy to obtain, while parts for older aircraft may occasionally be hard to find. When parts are hard to find, such as for antique aircraft, they may have to be specially manufactured which means they'll be very expensive. And because of the time involved, a club's aircraft could be grounded for months.

New airplanes may depreciate rapidly during their first few years. It is not uncommon, especially during times of rapid inflation, for used aircraft to appreciate. Models of some very desirable aircraft even sell for more used than they did new more than 15 to 20 years earlier. A good used airplane, then, could be a sound investment for a club considering expanding or upgrading in a year or two.

Any prospective purchase, new or used, should be inspected by the club's mechanic, and the club should have a title search run to make sure the title is free of liens and encumbrances. AOPA offers title search services to assist with this part of the purchase process. Up-to-date airframe and engine logbooks should always accompany any purchase.

Intended Use of the Aircraft

The next factor to consider is how the aircraft will be used. Will it be used for local flying, short trips, or long trips? IFR or VFR? Business, training, or pleasure? A combination of uses? When the basic purpose is agreed upon, a club should narrow its search for the right aircraft even further by considering seating capacity; useful load; cruising speed; range; takeoff and landing characteristics; high-wing or low-wing; fixed or retractable gear; instrumentation; and operating costs such as fuel, oil, maintenance, and overhauls. If these factors are not considered before a purchase, a club could get stuck with an airplane that is lovely but doesn't fit its members' needs, doesn't get used, and ultimately is responsible for the club's failure.

Not all clubs will approach cost and intended use in the same way. Some will decide how much they can spend while others may wish to decide what airplane to buy and then try to raise the money. Either way, a club must be aware of its financial limitations and be prepared to make some compromise.

Summary

It takes a lot of time and effort to organize a flying club but the rewards are sweet. Club flying is generally less expensive than renting because clubs usually do not operate for profit. And though it's great to realize the lifelong dream of owning an airplane, it's even nicer not to have to pay the full overhead alone. New friendships may develop as club members work together to build a solid organization, and a little hangar flying on a rainy day is a ray of sunshine on any pilot's soul.

But it's important for club members to research many factors before joining or forming a club. Compatible members should agree on the purpose of the club, the intended use of the aircraft, financing the club, the form of organization (co-ownership, incorporation or unincorporated association), how to administer the club, and many other considerations. And each member must be prepared to do his share of voluntary work. As the old saying goes: "Anything worth doing is worth doing well." With flying clubs, that's especially true.

Chapter 2
Financing

Some banks and finance companies specialize in financing aircraft, and a club may find it easier to get a loan through one of these institutions than through a local bank with no aviation expertise. Many lending institutions do not look favorably upon loan applications for financing aircraft. Too frequently they do not understand aviation or the nature of an airplane, and are unwilling to commit themselves to financing one. Companies specializing in aircraft financing advertise regularly in national aviation publications like Trade-A-Plane or in regional publications. Aircraft manufacturer's finance subsidiaries remain very active in both the new and used markets as well.

AOPA members can take advantage of AOPA's Aircraft Financing Program offered through MBNA. Call 1-800-62-PLANE for an application and information about current rates and terms.

If, however, a club wants to finance an aircraft purchase through a local bank, the chances of getting a loan are better if one or more club members have already established good lines of credit at that bank. Even so, it may be difficult to get the loan. Most local bankers simply do not understand the difference between an ADF and a transponder, and don't care to take the time and energy to become "experts" in this specialized field. In a situation like this, even if the bank does grant a loan, the club may not receive the best possible financial package.

Before a club agrees to any financial arrangements it should investigate the terms carefully. Club officers or members familiar with financing aircraft, or any kind of capital equipment financing, should assist in setting up the arrangements. If necessary, a club should seek outside assistance from a knowledgeable person to help arrange the financial package. And a club should be sure to get all the information to which it is entitled. Truth-in-lending laws require that all loans show the amount to be financed, the amount of monthly payments, the total amount to be repaid, the true annual percentage rate (APR), and any other charges involved. In a nutshell, clubs should know exactly what they are getting into before any members sign on the dotted line of an aircraft finance contract.

The amount of the loan will depend on the credit rating and credit history of the club, its cosigners, and any individuals providing personal guarantees. The amount of the down payment required and the interest rate a club obtains will also depend on many factors, including the type of aircraft being purchased, whether it is new or used, how it is equipped, and current market conditions.

Each club should search the marketplace thoroughly to get the best deal, since loans for aircraft are just as susceptible to economic fluctuations as other types of loans.

In many cases a lender may require evidence that a used aircraft has been inspected by a qualified mechanic. Since it's always wise to inspect a used aircraft before purchasing it, this shouldn't present a hardship to the club.

Also, experienced aviation lenders will insist on a title search before granting a loan. This ensures that the airplane being purchased is free from any unsatisfied debt. AOPA Aircraft Title and Escrow Services is a fully bonded industry leader with a full array of search services including title and lien services, Airworthiness Directive and Service Bulletin summaries, information on major repairs or alterations (FAA Form 337), complete microfiche filings, "N" number changes, full closing services, and much more. The title office can be reached at 1-800/711-0087.

Clubs may also find it possible to borrow money for purchasing avionics, instruments, major overhauls, and modifications. And aircraft insurance premiums to be included in monthly loan payments. A few lending institutions even finance flight training.

A basic, conceptual question that we are often asked deals with the mix of financing and equity to apply in the club set-up. Obviously, if all equity is used — in other words if members buy an airplane with cash — the hourly rate could be very low, approximating the cost of gas, oil, and maybe some maintenance. While all equity is the safest route financially, many clubs are quite successful financing much of the club airplane. Banks are typically willing to finance 80 percent to 90 percent of the aircraft purchase price. Clubs that choose to finance most of the cost of the aircraft then charge members higher hourly rates, often approximating rental rates. When this is the case, members are generally required to make a minimum monthly payment, regardless of how many or how few hours they fly.

Newer twists on flying club financial structure may involve one or more club members leasing their airplanes back to the club. This can be a very satisfactory arrangement for all parties because it spreads costs and increases aircraft utilization.

Summary

Financing the purchase of an aircraft or other equipment is probably the largest investment a club will ever make. Once again, aircraft finance agreements should be studied thoroughly and understood completely before any papers are signed.

Chapter 3
Operations

It's difficult to draw a line between club organization and club operations. If a club is organized properly, it will have a good chance of running smoothly because operating guidelines and procedures will be established in the articles of incorporation, bylaws, operating rules, or operations manual. But if a club isn't organized properly, it will collapse almost as fast as a flimsy tent in a wind storm.

Of course, good organization alone doesn't guarantee smooth operations. Meetings must be held, aircraft have to be maintained, a good scheduling system has to be worked out, a safety program needs to be "built in" to club operations, and good records have to be kept for all club activities. As in any successful undertaking, running a club takes a lot of hard work by a dedicated membership. Following are some tips that will be helpful in keeping a club running smoothly.

Scheduling

A good scheduling system will eliminate many potential problems and go a long way toward ensuring harmonious operations. It must provide all members an opportunity to use the airplane regularly as well as be flexible enough to allow for extended trips. The type of schedule a club uses depends on the number of members per airplane, how often they fly, and what type of flying they do.

In clubs with no more than five members, airplane scheduling duties can be assigned to each member for a week at a time. All other members wanting to fly can contact the member in charge for that week to see if they can get on the schedule. It's an equitable way to rotate both the use and the scheduling responsibility among all club members.

Another common system involves scheduling the airplane on a strictly first-come, first-served basis. Each week or month a new signup sheet is posted so members can indicate when they want to fly. Limits should be placed on the number of reservations a member can make in a week, and special arrangements should be made for extended trips.

If all members do their flying primarily on weekends and holidays, club members must be especially cooperative so that everyone who wants to fly gets a fair chance to use the airplane. A good scheduling system for this situation would be to divide each day into three parts: morning, midday, and late afternoon, then assign each member a particular time slot on a rotating basis. For example, member "A" will be scheduled for Saturday morning one week, Saturday midday the next, and Sunday afternoon the next. The schedule should be posted at the airport so each member knows exactly what is going on. If a member doesn't show up by his scheduled time, or within a reasonable grace period, the airplane can automatically go to the next member or be released on a first-come, first-served basis.

Members should be able to trade times and dates as they like, but the scheduling officer should always know who has the airplane and where it is. An aircraft sign-out sheet should be posted next to the schedule at the airport, and members should be required to sign the sheet whenever they take the aircraft. Penalties should be imposed upon any member inconsiderate enough to keep the airplane past the scheduled time without adequate notice.

Maintenance

A good maintenance program helps keep an airplane in the air, not sitting idly on the ground chewing up club funds. Aircraft upkeep is the responsibility of the maintenance officer who should ensure timely inspections, repairs, and modifications. Aircraft record keeping is also part of the maintenance officer's task.

Maintenance can be divided into three categories: 1) minor, not affecting airworthiness (replacing a broken cigarette lighter); 2) minor, affecting airworthiness (replacing a worn tire); 3) major (replacing a damaged prop).

To keep the program under control, the maintenance officer should be the only member authorized to approve repairs. An exception could be made for minor repairs that affect airworthiness so any club member can have the plane repaired while away from the home field. For example, replacing a flat tire in order to continue a trip should not need the approval of the maintenance officer. There should be a maximum expenditure placed on minor repairs so that, beyond a certain cost, all repairs are clearly defined as major and must be approved by the maintenance officer.

A limit should also be placed on the amount of money the maintenance officer can spend without consulting the entire membership. In extreme cases, repair costs may be so high that a club will want to buy another airplane rather than repair the one it already owns.

Regular inspections are among the most important ingredients of a successful maintenance program. Since most club aircraft are flown by many different pilots, commercial standards of maintenance might well be applied, including 100-hour inspections in addition to the required annual inspection. Not only is this an added safety factor, it could help save money by catching minor repairs before they become major ones. The frequency of inspections and service intervals could be higher or lower, but either way it's a club decision and should be agreed upon by the majority of the membership.

Appendix D lists the type of work a pilot can legally perform on an airplane without the assistance of a certificated mechanic. Because not all pilots are mechanically inclined, each club should have specific rules governing who can and cannot perform aircraft maintenance. Each member willing to do maintenance work should be checked out by the maintenance officer to ensure competence. A club may wish to credit such "skilled labor" time against dues and flying time charges. The more work members do, the more money the club can save in shop charges. Before embarking on such a program, club members should consider the local FBO's situation and the airport's operations standards. (See the section in Chapter 7 titled Relationships with Fixed Base Operators and Airport Authorities.)

Meetings

Flying clubs commonly hold three types of meetings: business, social, and training. All three may be combined into a single session, but it's important to conduct the business portion of the meeting in a formal and business like manner. Club officers are responsible for establishing and following a standard agenda according to parliamentary procedure while the secretary is responsible for keeping accurate, detailed minutes. If the business of the club isn't handled responsibly, the club may not be around long enough to hold social or training meetings.

For some clubs, social meetings are one of the main reasons for existence, and they can be anything the club chooses — as long as they're fun! Some ideas are fly-ins to resort areas, flight competitions between club members or with other clubs, FAA facility tours, films, speakers, group air tours, or even get-togethers at the airport to wash the airplane.

Speakers are easy to find if club members use a little imagination. For example, the local banker can talk about aircraft and club financing, attorneys can speak on liability and other legal subjects, light service personnel and air traffic controllers can talk about using the ATC system, and there's always the local airport manager and government officials who might deal with current local issues of concern to aviators. The biggest advantage to having local speakers is that they are familiar with local conditions and can gear their remarks to what's happening on the home front.

A "ground school" meeting doesn't have to be as boring or as limited as it might sound. It can be used to increase general knowledge and proficiency, or to help members prepare for certificates and ratings. Ground school meetings can also be used to acquaint members with changes in regulations, prepare members for biennial flight reviews, familiarize them with new equipment, review problem areas in piloting technique, teach maintenance and safety procedures or survival techniques. There are many aids available to help structure a ground school course, but it should always be taught by a certificated flight or ground school instructor. Special courses, like survival training, should be taught by someone skilled in that field. Manufacturers' representatives and FAA personnel could be invited to attend the appropriate sessions.

New Members

Club members come and go, and a club should have a good system for attracting new members. If membership gets too low, each current member will have to take on a bigger financial burden to help keep the club afloat. And if membership stays low, a club may have to sell one of its aircraft to keep financially sound.

The most common, easiest and least expensive way to recruit new members is through friendships or personal contacts with current members. Other methods include posting notices on the airport bulletin board, advertising in newspapers and aviation publications, getting a listing in the yellow pages, or running a direct mail campaign to all the pilots in the area.

Prospective members should be given a brochure explaining the club's activities and the requirements for membership. It's also a good idea to include a copy of the club's constitution and bylaws so potential members know as much as possible about the club before joining. In return, prospects should fill out a questionnaire that includes information about their aviation background; occupation; credit and character references; hobbies; club sponsor; and whether they intend to use the airplane for business, pleasure, or training.

The club should run a thorough reference check on all prospects before admitting them to the club. After this has been done, it's up to the club to either approve or deny membership. Small clubs may want to require the approval of all current members before accepting a new member, while large clubs will probably only require majority approval or let the final decision be handled by the management staff, membership committee, or Board of Directors.

The initiation fee for new members is based on a prorated share of equity in the club's assets (see Depreciation and Equity in Chapter 4). And a club may want to charge an additional small fee to reflect the expense of initially forming the club.

Records

Keeping good records is a fundamental part of managing any organization, including a flying club. Good records should be kept for flight time, maintenance, and business transactions.

The basic flight time form should contain space for the date, tachometer readings before and after each flight, and the member's signature. A more complete form might include an area for airplane squawks, type of flight (local, cross-country, etc.), fuel used (cash or credit), and any other information that would be useful in billing members and recording an airplane's activity. Naturally, the form should be in duplicate with one copy for the member and one copy for the treasurer. An aircraft sign-out sheet with space for the above information can be posted at the airport in lieu of the flight time form.

Aircraft and engine logbooks are the basic maintenance records for any aircraft. Parts 91 and 43 of the Federal Aviation Regulations specify what maintenance records must be kept to satisfy the FAA, including preventive maintenance work on the aircraft. For more information please see Appendix D. In addition to these requirements, a club may also want to keep records on the cost of maintenance, service life of equipment, and malfunction and defect reports. A major benefit to keeping records beyond those required by law shows up when it's time to sell the club airplane. Potential buyers will be favorably impressed if they can go through the records and get a complete history of the airplane, and they'll feel better about purchasing it when they can see the time and effort that was put into keeping it in good shape. These records are also a way of putting your best foot forward when it comes to introducing potential new members to the club facilities.

Last, but not least, are the business records. Even the smallest clubs must keep accurate records of meetings, club transactions, member billings, and all other financial activity. If necessary, consult an accountant, especially at tax time.

Summary

A flying club that is properly organized has a better chance of operating smoothly, but it takes attention to detail and dedication from the members to make it happen. Each member must be willing to contribute his share of time and be willing to give a little extra when necessary. There is no such thing as a laissez-faire flying club. There are, however, many laissez-faire former flying clubs.

Several important areas of operation that need special attention are scheduling, maintenance, meetings, membership, and financial records.

Scheduling must be reasonable and fair so that all members get a chance to fly and the aircraft gets maximum utilization. There are many ways to set up a schedule including using having a schedule officer handle all scheduling; putting each member in charge of scheduling for a week at a time; posting a signup sheet and letting members schedule on a first-come, first-served basis; or assigning each member a particular time of day, such as morning, midday, or late afternoon. A good scheduling system will keep the majority of members happy while meeting the needs of the club.

A good maintenance program is essential for keeping an airplane in the air. Members may be able to participate in the program by performing certain preventive maintenance, but the club's maintenance officer is normally the only person allowed to authorize major repairs. In certain situations, individual club members could be allowed to authorize minor repairs that affect airworthiness, such as changing a flat tire.

New members are important to every club. They help keep a club stable by keeping dues down and providing a source of additional capitalization if a club wants to expand. And any enthusiastic new member can help make club flying more enjoyable. All clubs should screen prospective members and develop a system for approving or rejecting membership applications. This can require approval of all or a majority of the members, or it can be left up to the management staff or Board of Directors.

An ongoing recruitment campaign and an eager waiting list are valuable assets. A flight training program can be used to "grow your own" new members, and a big enough waiting list can be converted into an additional club aircraft with more flexibility for everyone.

Clubs should always keep good records of club business, finances, and aircraft maintenance. They can benefit clubs by letting officers and members identify trends that will affect the club's health. If special help is needed from an accountant, a club should quickly enlist the necessary assistance.

Chapter 4
Costs

Enthusiasm is an essential ingredient in the success of every flying club, but enthusiasm alone is not enough to keep a club solvent. That takes money, enough money to meet all capitalization and obligations, plus fixed and operating costs.

Clubs do help lower the cost of flying, but it's unrealistic to believe they can bring back the good ol' days when an hour's worth of flying with an instructor could be had for only $10.00 and a good cigar cost 5 cents. The primary purpose of a club is to keep flying costs to members as low as possible while still being able to meet all of the club's financial obligations. That means setting realistic fees for initiation, annual dues, and hourly rates.

A club's costs can be divided into three categories: 1) capitalization, 2) fixed, and 3) operating. To keep cash flowing to cover these costs it is important that all club members pay their bills on time. Allowing just one or two members to put off paying annual dues, monthly fees, or flying expenses can stifle a club's cash flow and hurt the entire membership.

Capitalization

Capitalization costs are finite in nature, but they are an important part of starting a flying club. They usually require a substantial outlay in cash and may also require the assumption of a loan. Capitalization costs include the purchase price (including sales tax, licenses, registration, reconditioning, "base" reserves, etc.) of an aircraft if it is purchased outright, or the down payment and monthly principal payments if it is financed.

There are many ways to gather money for purchasing an airplane and capitalizing a flying club. The outright purchase of the club airplane can greatly reduce the monthly financial burden on club members and the financial liability of the club itself. All founding members contribute an equal share of the purchase price and receive an equal interest in the aircraft. If an individual member needs financing, it is an individual matter and does not result in a lien on club property.

A second option for funding capitalization costs is to have each founding member contribute an equal share towards the down payment on an aircraft with the club collectively assuming responsibility for the balance. Each month members pay an equal share of the monthly loan payment. This method of capitalization could be combined with the monthly dues, but in setting up a payment system, club members should remember that capitalization costs are finite. Once the mortgage is paid off, the monthly mortgage payment disappears, although other fixed costs remain. So, initially, monthly or annual dues must be set high enough to cover the temporary capitalization costs as well as the permanent fixed costs. Once an aircraft is paid for, club members should take a look at their dues program to see if restructuring is needed.

A third way of paying club capitalization costs, and the option that requires the most accurate record keeping, is to let each member contribute whatever amount of the down payment he or she can afford. Again the club would assume the responsibility for the balance. Each member would still contribute to the monthly payment, but the amount would be in inverse proportion to the amount of down payment he or she made. In other words, members who contributed a large amount to the down payment would be paying a small amount towards the monthly payment and vice versa. Again, the capitalization cost would be finite, and once the aircraft is paid for the dues program should be reassessed.

Major financing of the club aircraft or other club assets by individual club members carries with it the potential for conflicts of interest between "owners" and "other members." Such arrangements should be examined carefully.

Fixed Costs

Fixed costs are the costs that must be paid regularly whether or not a club's aircraft ever fly. They are a basic part of owning an airplane and the fundamental reason for operating a club. These fixed costs become the "shared costs" of club flying and, if split among enough members, can substantially reduce the price of a member's total flying cost. Typical fixed costs include the following:

Insurance:

  1. Liability
  2. Hull
  3. Medical

Storage:

  1. Hangar
  2. Tiedown

Administration:

  1. Legal fees for incorporation
  2. Accounting
  3. Management staff
  4. Office supplies
  5. Rent for a club room

Miscellaneous:

  1. Training aids
  2. Social events
  3. Additional equipment
  4. Aircraft registration fee (if required by the state)
  5. Property taxes (if required by the state)
  6. Annual maintenance inspection
  7. Interest on loan
  8. Depreciation

Not all costs listed are applicable to every club. Some clubs may list an operating cost on the fixed cost list or vice versa, while other clubs may consider certain costs as special or onetime expenses. But no matter how costs are categorized, members should give careful thought to the process, making sure that no fixed expense is overlooked when computing costs and assigning membership dues. Such an oversight could be very embarrassing and expensive!

The money used to pay fixed costs should come from a club's fixed income, specifically fees or dues, which are assessed on a monthly, quarterly, or annual basis. It is important to set the dues high enough to cover all fixed costs for one year. It's better to initially overestimate fixed costs and have a few extra dollars in the kitty than to come up short when the bills are due. Any extra money can be refunded to the members or used to expand or upgrade equipment.

Fixed membership fees should be designated and used only for paying fixed costs. They should not be used to fulfill capitalization or operating costs, and, conversely, money collected to pay capitalization or operating costs should not be used to pay fixed costs. By following this policy, a club has a better chance of remaining financially airworthy.

Operating Costs

Flying clubs can get into financial problems quickly if they do not carefully determine an adequate hourly rate for use of their aircraft.

Problems frequently stem from the fact that some clubs try to recover a portion of their fixed costs along with the direct operating costs. This often forces the total hourly rate, which should equal the direct hourly operating cost, higher than necessary. It may also compel members to pay for a minimum number of hours per month whether or not they fly. The result is a vicious cycle with members flying less because the hourly rate is high which, in turn, pushed the hourly rate higher because members fly less. In some areas, a spate of poor weather may be all that it takes to reduce flying hours and begin the vicious cycle.

All clubs should remember that fixed costs should be covered by membership dues, and they should always be kept separate from operating costs. Relying on the number of hours an airplane is flown to help offset fixed costs is courting financial disaster. Fixed costs should be met before the plane leaves the ground.

Operating costs are determined by computing the actual cost per hour for operating an aircraft, including gas, oil, reserves for overhaul, etc. Operating costs should not be dependent on the number of hours an aircraft is flown, and do not vary except with an increase in the cost of fuel, oil, or a limited number of other variables. Keeping this rate as low as possible will help increase the aircraft's utilization and give each member the maximum chance to fly.

It's true that most manufacturers provide guidelines for computing the operating costs, but these should be considered no more than a starting point. When an airplane is tested by a manufacturer, it is flown by a highly skilled test pilot who knows how to get the maximum performance from that particular type of aircraft. And all the figures found in the operator's manual are based on ideal conditions rarely found in the real world of flying. These typically optimistic figures are unlikely to apply to a plane flown by a "squadron" of different pilots.

The following table can help determine the hourly rate for a specific aircraft:

 

Per Hour

Fuel: gals. /hr. at $ /gal.*

$

Oil: qts. /hr. at $ /qt.

(Include oil changes at 25-hr. intervals.)

$

Inspections

  1. 50 hours
  2. 100 hours

$

$

Maintenance

  1. In conjunction with inspection
    (Does not include flat-rate charge for inspection.)
  2. Other
    (Replace tires, unscheduled maintenance, adjust brakes, avionics, repair gyros, etc.)

$

$

Reserve for overhaul

  1. Engine
    (This is computed by dividing the cost of the overhaul by the number of hours between overhauls recommended by the manufacturer. Example: X model engine has an expected time between overhauls of 2,000 hours. If the cost of the overhaul is $8,000, the hourly reserve is $4.00. If the club bought a used plane with 1,000 hours already on the engine, the hourly reserve for overhaul initially would be $8.00.)
  2. Avionics
    (As a rule of thumb, use 10 percent of the price of avionics options overhauled at 1500 hours. Adjust this based on experience. $ price x.10/1500.)

$

Total cost per hour:

$

* Some clubs charge members a "dry" hourly rate, and the members pay individually for fuel. Dry rates have been shown to encourage fuel economy and reduce a club's billing for receivables. But requiring members to buy their own fuel can risk higher maintenance bills for burned valves — the result of excessive leaning in an effort to achieve greatest fuel economy.

Probably the best way to begin estimating real-world operating costs is to talk with a local mechanic who has experience working on the type of aircraft in which the club is interested. The mechanic can give accurate, realistic estimates on the cost of inspections and maintenance, and can point out the strengths and weaknesses of the airplane. Other sources of information are fixed base operators or friends who operate the same type of airplane.

As in estimating fixed costs, it's better to overestimate operating costs from the beginning than to charge rates that do not cover the necessary expenses and then be faced with the problem of catching up on a shortfall. Once a club gains experience with its aircraft it will be able to establish a very accurate hourly operating cost.

Clubs should set up a method for collecting payment from members that ensures a steady cash flow. Two common ways to do this are to require payment immediately after each flight or to bill members monthly.

Allowing members more than 30 days to pay their bills is asking for trouble. Credit companies know that the longer a bill is overdue, the harder it becomes to collect. Unpaid flying time stifles cash flow and makes it harder for a club to meet monthly obligations.

It's the treasurer's job to issue monthly bills for dues and aircraft use charges, and to collect any other money owed the club. In that respect, the treasurer has to be especially alert. To keep members informed and involved with the club's finances, the treasurer should also issue the club's financial statements at least quarterly. In small clubs, formal billing procedures may be unnecessary, but accurate bookkeeping is still a must.

Members who fail to pay their bills on time should be penalized. If a backlog of overdue income accumulates because of a few inconsiderate members, the club can quickly find itself in a tight financial situation.

No club should overextend itself financially for any reason. It's a wonderful feeling to have a brand new airplane on the ramp, but cash reserves should be built up and maintained so that reliable resources are available to guarantee that a club can successfully meet its obligations without facing financial difficulty.

Depreciation and Equity

Depreciation and equity must be considered if members are to have a true picture of how much it costs to belong to a club and fly its aircraft. Depreciation refers to the difference between a piece of equipment's purchase price and the current market value of the equipment. The actual depreciation may not be the same as depreciation computed for tax purposes.

It is possible for a used airplane to hold its value for a long time after it is purchased, but as a rule of thumb, a new aircraft generally will not hold its value well. Many factors determine current market value, including an aircraft's age, condition, and desirability. Periodically, a club should check the marketplace to determine the current value of its aircraft and to get a clear picture of how depreciation is affecting that value.

Equity in an aircraft is equal to the amount of money that's been invested minus the amount of accumulated depreciation. As an example, imagine a case where a five-member club pays cash for an aircraft costing $40,000. Each member contributes $8,000 toward the purchase. A few years later, the club aircraft has a market value of $24,000. (For the sake of keeping the illustration simple, assume that the decline in the aircraft's market value is entirely due to depreciation.) Each member of the club would then have an equity value of $4,800, or $24,000 divided among five members. Any member leaving the club would be entitled to sell his or her share for $4,800 to recover the equity.

If the club had established a "Reserve for Depreciation" account and retained the cash, perhaps from monthly dues deductions, then at the time the aircraft's market value reached $24,000, the club's reserve account would hold $16,000. A departing member's share of this reserve would be $3,200, one-fifth of the total. That $3,200 plus the $4,800 equity in the aircraft would equal the initial investment of $8,000. That full amount would then be available to the departing member.

Alternatively, if the club decided to replace its aircraft, the reserve account would make it possible to do so with the same $40,000 that was used originally — $24,000 from the sale of the old aircraft plus $16,000 from the reserve account.

This extremely simplified example illustrates that by maintaining a cash account for reserves for depreciation, a club can maintain its members' original equity position. Without such an account, member equity value will rise and fall with the market value of the club's aircraft. While the example used here assumed that the club's aircraft was the only item affecting equity, the same analysis can be applied to any equity item that is subject to depreciation.

Money makes the world go around. And it certainly helps keep flying clubs in the air. Financial mismanagement or inadequate funding is responsible for the collapse of the majority of unsuccessful flying clubs. But with proper records, and sound judgment, financial problems can be avoided.

Summary

In review, a club's costs can be divided into: 1) capitalization, 2) fixed, and 3) operating. Capitalization costs should be paid from initial contributions or in special monthly payments to finance the start-up cost of a club.

Fixed costs such as tiedown fees, office rental, and insurance should be paid from the regularly scheduled fees or dues assessed members, and should not be dependent upon income from flying.

Direct operating costs of an aircraft should be paid entirely from the hourly rate charged for flying. Each club should establish a list of fixed costs and generate enough fixed income each month to be able to pay all regularly scheduled bills on time.

Members should be billed monthly and be expected to pay on time. Those who don't should be penalized so as to encourage more conscientious attention to the club's financial health.

Each club should keep a good eye on the current market value of its equipment so it can accurately determine real depreciation and take steps to preserve members' equity. This will help to keep the actual value of each individual membership share up to date. All members will know what each share is currently worth, and members joining or leaving the club will be dealing with "fair shares."

It is clear that the keys to sound club financial management are: good records, timely billing and payment of amounts owed to the club, guarantees that fixed costs are met from fixed income, and protection of the club's equity. In a real-world situation, a depreciation reserve account will probably not be exactly equal to the true loss in market value, but it should be close or may even show an excess reserve. For purposes of illustration, assume that the reserve for depreciation account, as a coincidence, equals the difference between purchase price and current market value.

Chapter 5
Taxes

Like individuals, flying clubs have a responsibility to Uncle Sam when it comes to federal income taxes. It's a good idea for club members, particularly club officers, to be aware of how the tax structure applies to incorporated flying clubs. But unless those officers are professionals who deal regularly with taxation, it is a good idea to seek assistance from a qualified accountant or attorney, whether for federal, state, or local tax purposes. It's imperative that clubs keep their group tax matters separate from any tax problems that individual members might have.

Except as noted below, every incorporated flying club is responsible for filing a federal income tax return whether or not it earns a taxable income and whether or not any tax is due on that income. In some cases, a club may be required to file a separate Schedule D (Gains and Losses from Sales or Exchanges of Property) along with its regular income tax return. A qualified accountant or tax attorney should be consulted on any major financial transaction undertaken during the year.

There are opportunities for clubs to become exempt from filing a federal income tax return. An exemption may be granted when a club is "organized and operated exclusively for pleasure, recreation, and other nonprofit purposes." The Internal Revenue Service has ruled that to qualify for exempt status a flying club must have an organized social program with the social activities being promoted through club funds. Programs can be set up on a "pay-as-you-go" basis with members paying for the events at the time they take place as long as all funds go through the club and are reflected in its financial records.

A grant of non-profit status does not automatically exempt a club from submitting a federal income tax return. The club must specifically apply for an exemption on a special form that is submitted to the district director of the Internal Revenue Service for the district in which the club's principal office is located. Once a club is granted exempt status, it need only file annual information returns.

The local IRS office can supply clubs with all the information and forms they need to comply with existing tax regulations.

Summary

Flying clubs should do their best to take full advantage of existing federal income tax laws. Depending on their organizational form and purpose, most clubs can be granted nonprofit status and enjoy the exemption from having to file annual federal income tax returns. Nonprofit status is not automatically granted; it must be specifically requested. If it is granted, a club may need only to file an annual information return, and not a federal income tax return. Regular consultation with competent tax counsel is highly recommended.

Chapter 6
Insurance

Even though a club may accept only the best pilots as members, it is still smart to have liability and hull insurance coverage for both the club's and the individual members' financial protection. When talking about clubs, most insurance companies consider aircraft ownership by more than three persons to be a flying club. This is important to know because club rates differ significantly from individual rates.

Flying club insurance rates are influenced by many factors, but the two most important are the number of members per aircraft and the proficiency of members. Insurance premiums rise substantially for every member over 10 per aircraft. Relative to proficiency, insurance rates depend upon the type of pilot certificates held by members and the amount of experience each member has in the type of aircraft to be insured. Clubs with a large proportion of student pilots as members, or clubs wanting to insure sophisticated aircraft for members with little flight time in that type of aircraft, can expect to pay high insurance premiums.

There are other factors that play a role in helping insurance companies determine premiums. The include the types of airports used by a club, the extent of supervision over flight operations, the quality of the club's maintenance program, the club's accident history, the type of storage facility, whether or not a club requires periodic refresher courses and check rides, and the type of aircraft to be insured.

Liability Insurance

The primary purpose of liability insurance is to protect the club and its members from financial disaster due to damage that might be caused by a club member, or an accident involving a club aircraft. It's a good idea for a club to carry as much liability insurance as is warranted by the club's actual risk exposure. Expert insurance counsel should be sought, and several sources should checked against each other before a policy is purchased.

Under a policy's liability coverage, a club's insurance company agrees to accept responsibility for paying monetary damages because of destruction of property, bodily injury, disease, or death sustained by a nonmember whenever any of these are the result of, or arise from, the ownership, maintenance, or use of a club aircraft.

Cross-liability coverage, i.e. coverage for club members who are passengers or bystanders when involved in an accident resulting from the actions of another club member, may or may not be included in the club's liability policy. A club should be aware of its coverage in this regard and either elect to include member coverage in its policy or alert members to the lack of such coverage. (Refer to the section entitled "Medical Payments" in this chapter.)

As mentioned in the previous section, insurance rates vary depending on the size of the club, the flight experience and ratings of members, the type of aircraft being flown, and many other factors. Clubs should seek quotes from several insurance companies to check on the insurers' service records and determine the best value for coverage, cost, and service.

When checking rates, it's also a good idea to plan for the future. Clubs might consider quotes for the cost of adding new equipment, upgrading used equipment, raising or lowering pilot standards, and changing the number of members per aircraft. If an insurance company anticipates a club will grow and expand its line of equipment, it may be willing to offer lower initial rates to gain additional business in the future. Rates are not cast in concrete. "Horse trading" is often possible.

Hull Insurance

Hull insurance is for protection against the loss of or damage to a club's aircraft. It's usually a good idea for a club to carry hull insurance, but it's not an absolute necessity Consideration needs to be given to the value of the aircraft a club flies.

With older aircraft, or aircraft having low market value, a club may decide to accept the risk of repair bills or loss of its airplane rather than pay a large premium for hull insurance. The club may also wish to limit flight instruction to certain, specific aircraft to handle insurance cost considerations.

Also, for a club with a large fleet of aircraft, a self-insurance pool can be created. When a club has enough aircraft that the total hull insurance premium exceeds the value of an aircraft, some thought should be given to expectations of the club's risk of loss. It may be considerably less expensive to create an account to "save" insurance premiums, and use it to pay for the club's actual hull damage. A small fleet or single aircraft club with limited risk exposure may not be able to create a large enough "pool" to justify the risk of self-insurance.

Hull insurance is flexible in nature and can be written to cover almost any situation. The most common coverage options are "all risks ground," "all risks flight," or both. Takeoffs and landings are considered in-flight operations rather than ground operations. A careful club will clarify this point with its insurance company before choosing an insurance policy. One other important point to consider is that some "all risks ground" policies exclude taxiing. Again, the insurance policy needs careful examination to determine exactly what coverage is being offered.

There are times when complete insurance coverage is required, usually when the aircraft is being financed. Most banks and lending institutions require a club to carry "all risks flight" coverage. A club also may have to obtain a Breach of Warranty Endorsement. This endorsement guarantees payment to the mortgage holder should the aircraft be lost due to a club violation breaching the insurance contract.

Hull insurance should be as thoroughly studied as liability coverage so that a club gets what it needs at a price it can afford. Good legal advice at this point could be invaluable.

Medical Payments

Medical payment coverage is another type of insurance that clubs may wish to consider when purchasing insurance. It takes up the slack beyond liability coverage by providing medical coverage for club members. Medical payment coverage usually covers expenses for medical, surgical, and dental services for a person who is injured while in a club aircraft, or while getting into or out of the aircraft.

Non-Owner Insurance

A standard insurance policy for flying clubs frequently may not cover individual members. It is designed to protect the club. Should a club member cause bodily or property damage due to an aircraft accident, the insurance company will handle all claims on behalf of the club. The member causing the accident, however, is still subject to suit as an individual for the injuries and damages he or she caused. In fact, the club's insurance company will often attempt to recoup its loss from the individual member responsible.

A small club may choose to protect its individual members by listing each of its pilots as "named insureds" on the club's policy. Larger clubs, however, may find the insurance company unwilling to administer a long list of members that is continually changing. An alternative in this case is for the larger club to seek a "subrogation clause," which would protect any member in good standing against the insurer's attempting to recover a loss from an individual. Cases involving violations may be the exception to this clause.

Club members can protect themselves by purchasing a renter insurance policy that provides personal liability coverage. All club members should carefully read the club policy and understand its coverage and limitations and, if necessary, look into the possibility of getting additional individual coverage. The fee for individual coverage is moderate, and the policy can be tailored to provide coverage for items not covered in the club's policy.

Other Insurance Coverage

Clubs do not have to purchase insurance coverage as an all-or-nothing package. Most insurance companies can tailor insurance programs to the needs of each club, eliminating unwanted or unneeded coverage. For example, a club can get coverage against theft, fire, lightning, and explosion while in flight, on the ground, or both. This coverage is normally included in "all risks flight" and "all risks ground" but can be singled out if a club decides not to get the "all risks" coverage.

Clubs also may be able to purchase life insurance for individual members, particularly if the club is small. This protects the club in the event of a member's death by having the club named beneficiary. Each member would be insured in an amount equal to the amount of equity he or she has in the club's assets. If a member dies, the insurance money would be used to buy his or her share from the estate. This prevents the club from having to sell its assets or make a special assessment against members to cover the loss. A knowledgeable life insurance agent should be consulted for details.

Summary

Every club should examine the terms of coverage very carefully before committing itself to one policy or another. Rates and types of coverage can vary markedly, and each club should tailor its insurance package to its needs, which depend largely on the type of aircraft flown and the proficiency of its members.

Clubs should know exactly what their insurance covers. Nothing is more heartbreaking than to believe an aircraft or personal injury situation is covered by the club's insurance and then find out that it isn't.

A club should periodically look over its insurance policy to be sure its coverage is keeping pace with its equipment and its membership. As equipment changes and membership increases or decreases, there's a good chance rates will change also. And it's always better to have too much insurance than too little.

Chapter 7
Potential Problem Areas

Murphy's law, which states that anything that can go wrong will go wrong, applies to flying clubs as much as it does to the rest of the world. No matter how well organized a club is, and no matter how farsighted its members, the potential for problems is always present. Each club can lessen the impact of problems by anticipating potential trouble spots and preparing in advance to handle them. Some of the following potential problem areas have already been mentioned elsewhere in this book but they deserve repeating.

Financial Problems

More clubs disband because of financial difficulties than for any other single reason, so the financial arena is clearly an area of operation that needs to be studied closely.

Clubs that are just starting out should be absolutely sure that they can cover all capitalization costs without financially overextending individual members or the club itself. Under capitalization, for example, creates an instant problem. Or, one or more members may suddenly decide to drop out with a resulting loss of income to the club, which could cause a financial crunch. Remaining members can either dig deeper into their own pockets, or recruit new members to fill the void.

Another unexpected expense can occur in the form of major equipment failure or serious damage to the club's aircraft. Repairs could be so extensive that an unprepared club would be unable to afford the cost and be forced to close. It's very important that a club properly insure itself and financially protect its aircraft against unscheduled major repairs, liability, and accidental damage. The often forgotten, and generally not insurable, situation is the loss of use from "downtime" on a major damage repair.

The most important point to consider when preparing for financial problems is that a club should do its best to keep a reserve fund. This can be built into the dues or rental structure so that a portion goes directly into the reserve fund. Another safeguard is in the careful selection of members, being sure that all prospects are both enthusiastic about flying and financially able to afford the dues and hourly direct operating costs established by the club.

All members must pay their bills on time. This allows the club to pay its bills on time and maintain a good credit rating. One way to prevent delinquent payments from becoming a problem is for clubs to require members to maintain a credit balance in their individual accounts.

Relationships with Fixed Base Operators and Airport Authorities

Airports usually exist to serve the public. For this reason, well managed airports have specified minimum standards to be met by tenants and operators on the field. Some of these standards pertain to equipment and facilities permitted. Others deal with air and ground traffic, local taxes, and fees. The most important kinds of standards concerning flying clubs in particular, however, are those which relate to the types of operations permitted on the field.

"Operations" in this sense may be subdivided in numerous ways, including flight versus ground services; types of flight services such as training, rental, charter or air carrier; types of ground services such as hangars, storage, fuel, maintenance, car rental franchises, parking, and pay toilets. But the most important distinction for a club is the difference between commercial and non-commercial operations. The simple fact that a club may identify itself as non-profit may not be enough to satisfy some airport sponsors or owners that the club is not a commercial operator, just like a fixed base operator or FBO.

When a club selects an airport for its operations, its members must consult airport management and reach a clear understanding as to the standards and limitations that are to be placed on club operations. These airport-imposed standards and limitations should be uniformly applied to all tenants. It would be a good idea to get a letter of understanding between the club and the airport management formalizing the club's status on the field. The club, in seeking out this understanding, is identifying itself as a new neighbor with good intentions.

Nevertheless, flying clubs have never been popular with some FBOs. There are FBOs that think of clubs as competitors, particularly if a club has a flight training program or does its own maintenance. Such activities can be seen as a threat to the FBO's income.

All clubs must be thoughtful about recruiting members, realizing that some may have been viewed as potential FBO customers. Trying to persuade someone to join a flying club rather than purchasing or renting from the FBO is one way for a club to get on the wrong side of an FBO and stay there.

There are at least a couple of simple solutions to handling or avoiding tense relationships with the local FBO. One good idea may be to establish an account with the FBO for fuel, oil, parts, and maintenance. Some clubs might even want to arrange flight training through the FBO. If a club wants to use an FBO's facilities for meetings or ground school, it should offer to pay for them. Another way to smooth relations is to encourage club members to rent from the FBO when a club airplane is not available. If someone wants to join the club but is not eligible, or the club is not accepting new members, then the club should direct that person to the FBO. Clubs should also take every opportunity to point out to the FBO that its individual members represent potential future aircraft owners, and that the club itself will probably be looking for new or additional equipment some time in the future.

Either can mean added sales for the FBO. If a club lets an FBO handle its maintenance, the FBO should not have to discuss each service job with any club members other than the maintenance officer and treasurer. A steady parade of individual club members through the FBO's facilities and shops, all inquiring and cajoling as to the service and aircraft status, will only make the club seem like a less than desirable customer.

Members having complaints, questions, or suggestions should contact the club president or manager who is then responsible for discussing it with the FBO. The maintenance officer should be the only liaison between the club and the FBO concerning matters of aircraft maintenance, and the treasurer should handle the club's financial obligations to the FBO.

Use of Aircraft by Non-members

To serve the best interests of club members, a flying club should include a provision in its rules that club aircraft cannot be used by nonmembers and that club instructors cannot teach non-members in club aircraft. It's the simplest way to avoid problems created by non-members using club aircraft. Since non-members do not bear the same regular expenses as members, they would be enjoying an unfair advantage if they were allowed to use club aircraft. Also, an outsider's use may be depriving a club member of the very airplane for which he or she is paying.

If an exception is granted to this rule, certain stipulations should be met. The non-member must be qualified and current in the type of club aircraft to be used. The non-member must be covered by the club's insurance policy or must, at his or her own expense, obtain adequate insurance to protect the club and its aircraft. Any request for use of the club aircraft by a non-member must be made by a member and approved by the club membership.

Member Proficiency

Member proficiency is one of the keys to a successful safety record which, in turn, directly affects insurance rates. Each club member is expected to maintain as high a level of proficiency as possible and to maintain a minimum level of experience or fly a minimum number of hours per month. This standard is usually set by the club's safety officer or safety committee. Any member not meeting the minimum proficiency requirements should be required to take a check ride with a club instructor, or with a check pilot designated by the club.

Regardless of how often a member flies or how much experience he or she has, all members should consider a check ride at least once a year. This will help correct bad habits, serve as a basis for updating knowledge, meet the biennial flight review requirements, help maintain proficiency, and keep member interest high.

Summary

Clubs should plan for potential problems and resolve them quickly when they occur. Procrastination will spell doom for a flying club. Good planning, financial reserves, and a bit of consideration will go along way toward heading off unexpected problems and financial emergencies.

Chapter 8
Safety

When it comes to general aviation, safety is one of the most talked about subjects. It is usually discussed from a negative point of view. Accidents do happen. Flying clubs are not immune, but they can and often do maintain accident-free records, reaping the direct benefit of keeping insurance rates as low as possible. Developing sound safety programs and fostering safety conscious attitudes among members are key elements in accident prevention.

Safety Programs

Safety is everyone's responsibility, but the creation, development, and updating of safety programs should be coordinated by the club's operations or safety officer. Safety information and safety standards should be included in the club's bylaws or standard operating procedures manual, and each member should receive a copy of the information. It would be a good precaution to have club members sign a release that says they have read and understand all safety regulations.

A good place to begin a safety program is with the creation of a safety committee made up of club instructors, officers, board members, or a combination of all three. These people are usually, but not always, the most experienced and best qualified to design and implement a club's safety program. Don't overlook a veteran member, though, who has lots of experience and knows the ropes but, for whatever reason, has chosen not to get an instructor certificate or be a club officer. The knowledge that such a person contributes could be invaluable to a club's safety record.

Once the safety committee has been formed, the next step is to develop a set of safety standards that apply specifically to the club, its members, and the aircraft they fly. Naturally, each club will vary in terms of pilot qualifications, experience, club purpose, complexity of aircraft, and other matters relating to safety, so it is best to tailor safety standards accordingly.

To ensure good safety practices, clubs must take the necessary steps to deal with the minority of pilots who don't follow safe operating procedures. Violations of club standards should lead to penalties or disciplinary action, including temporary suspension of privileges or expulsion from the club. Obviously, the punishment should fit the crime, and it is up to the safety committee to establish fair guidelines.

Some Suggested Safety Standards

Broadly speaking, safety standards should deal with everything directly and indirectly involved with flying an airplane. This section lists a few of the safety standards a club may wish to set.

A club would be wise to keep accurate records of each member's qualifications, and even issue ID cards listing those qualifications such as student, private, VFR-day only, VFR-day and night, IFR, and so on. With an ID card, there can be no doubt as to exactly the type of flights each member is allowed to make. Cards can also tell each instructor or club check pilot the qualifications of the pilots he or she is flying with. This eliminates all doubt as to who is qualified to do what.

The most stringent and comprehensive standards should deal with proficiency and recency of flight requirements. Members should be encouraged to fly a minimum number of hours during a specified period of time. One good rule of thumb might be to expect members to fly one or two hours and complete three takeoffs and landings every 90 days. Student pilots might be asked to fly a minimum of one hour every 30 days. Failure to stay "current" could be a reason to withdraw student solo privileges in club aircraft, and any pilot failing to meet the proficiency requirements could be required to take a check ride with a club instructor before being released for solo flight.

It is possible for a club to build proficiency requirements into its dues structure. Members could be required to pay for a certain number of hours each month whether or not they actually flew. This would encourage them to fly regularly and keep current as well as promote maximum utilization of the aircraft.

To make this work, members could be allowed to accumulate their "minimum flying time" for up to three months or the same time frame as the club's proficiency requirements. For example, if the required monthly flying fee was $50, each member could build up $150 worth of credit in any 90-day period. If a member remained current by flying the minimum number of hours without flying during every month, his or her account would be credited or debited accordingly. However, if a member failed to fly within the prescribed time period, he or she would be responsible for continuing to pay the monthly aircraft rental fee but would forfeit any amount over the maximum permitted accumulation. At the same time, that member would be ineligible to fly until satisfactorily completing a check ride.

Additional proficiency requirements could be added to suit a club's particular needs. For instance, club members with instrument ratings might be required to meet proficiency standards beyond those stipulated in the Federal Aviation Regulations. Minimum proficiency requirements could be set for each type of aircraft a club owns, with stricter requirements applying to sophisticated aircraft. Or club members could be required to meet proficiency requirements based on specialized types of flying such as winter, mountain, or seaplane flying.

An excellent safety standard applicable to every flying club is a mandatory annual check ride. Regardless of how much or how little members fly, each member should complete a check ride each year. This requirement will help keep piloting techniques sharp and, through recurrent training, catch bad habits before they have become firmly entrenched.

Club instructors should be checked out by the chief pilot, and the chief pilot should be checked out by a competent designee selected by the board of directors. Such a check ride should apply to all members. To help ease the cost, the check ride could be credited against the required monthly aircraft rental fee, if that is part of a club's dues structure.

A few other requirements, which may seem like common sense procedures, should be considered for inclusion in the safety regulations. These requirements might include a thorough preflight, including a visual check for fuel; mandatory filing of flight plans for any trip beyond a 50-mile radius of the home airport; a weather briefing for any flight; and use of current charts. It may seem almost absurd to have such elementary requirements, but many a pilot has taken an airplane into bad situations that could easily have been avoided.

Mandatory attendance at one or two ground school sessions per year could enhance the safety awareness of club members. For example, at the onset of each winter, members could be required to attend a refresher meeting on winter flying. Other sessions could be held to review critical areas such as weather, stall-spin avoidance, emergency procedures, high performance aircraft, or other subjects of special importance to the club.

Other Safety Suggestions

According to the AOPA Air Safety Foundation, the following areas should be considered as high risk and club rules should be developed to address them:

Maneuvering (buzzing, steep pull ups, tight turns) during low level flight is among the leading causes of serious accidents in fixed-gear single-engine aircraft. This is not something that is covered in training curricula and should be avoided. It gives general aviation a bad name and can easily result in a major accident.

Night flight, although a unique privilege with many advantages, carries some additional risk. The ASF Nall Report (free at www.aopa.org/asf/publications/nall.html) shows night flying accidents have a fatality rate about twice as high as daytime accidents. For flying club members who wish to exercise night flying privileges, a requirement for additional training and higher weather minimums would be a wise precaution. Maintenance of night flight proficiency should also be required.

Weather minimums should be considerably higher than FAA regulations and cross-country night privileges should generally be restricted to instrument rated pilots.

Mountain flying requires additional training and should be the subject of special briefings and flight training by a knowledgeable instructor prior to operations. Night flight in mountainous terrain should be on an IFR flight plan.

Pilots with low time in a particular make and model of aircraft are involved in many more accidents than those with more experience. Consider requiring different minimums, both VFR and IFR, until the pilot has acquired at least 50 hours in type.

Winter and spring flying result in many crosswind landing and takeoff accidents. Periodic crosswind practice with a competent instructor will help to prevent many accidents.

The Air Safety Foundation has many pamphlets, videotapes, and books relating to the safety records of particular aircraft that are available at nominal cost to help your club get off to a safe flying start. (See Appendix for more specific information about ASF publications.)

Summary

This is by no means a comprehensive list of safety regulations for flying clubs. Each club should determine its own needs and then tailor a set of safety regulations to meet them. The regulations should be developed by the safety committee and agreed upon by all the members or a majority if the club is large. Each member should get a personal copy of the regulations, and no member should be exempt from them.

What may appear to be simply common sense procedures, such as pre-flighting an airplane, should not be overlooked as possible club safety regulations. And a club need not limit its regulations to those required by the Federal Aviation Regulations. In fact, it may be a good idea for a club to go beyond the FARs in terms of safety. Anything practical that can be done to increase safety awareness and improve safety practices should be done. It contributes to peace of mind, and sets the stage for a better accident record for general aviation.

Chapter 9
Flight Training

Clubs that are permitted by airport authorities to conduct flight training as an integral part of their regular programs have the opportunity to develop their own membership. Student pilots who complete their primary training as club members frequently remain in the club after receiving their certificates and add a certain stability to operations. An active student base also helps the club gain maximum utilization of its aircraft.

Each club must decide whether or not flight instruction fits in with its purpose. For example, clubs operating high-performance aircraft that are utilized mostly for business flying will not be interested in offering extensive flight training in these aircraft. On the other hand, clubs operating less sophisticated aircraft and doing a lot of pleasure flying may want to include flight training for higher ratings as part of their program.

Flight training is among the responsibilities of the Operations Officer. This individual is responsible for keeping the training program running smoothly and up to club and FAA standards. The first step is to decide what type of flight instruction will be offered: primary, commercial, instrument, multiengine, or a combination. That decision will be based in part on the types of equipment a club flies.

When a club decides on the type of instruction it will offer, the next step is to develop a curriculum that will provide all the training required by FAR Part 61 for the license or rating concerned. A source of information and somewhat more-than-minimum training curriculum might be adopted from the standards required by FAR Part 141 for FAA-approved flight schools. It isn't necessary for a club's school to be FAA-approved or to meet all of these standards, but the curriculum requirements of FAR Part 141 are a good starting point for planning and developing a flight training program.

All club instructors should be required to follow the club's approved curriculum. Providing a written copy of the curriculum to each student will keep training orderly and give him or her the best possible chance of becoming a proficient pilot. More importantly, if a student changes instructors, both the student and the instructor will be able to continue the training program without a break in continuity. And it's a safe operating procedure. If all club members know how the flight training program functions, then they know what to expect during training sessions.

A potential problem for clubs wishing to offer flight instruction comes from commercial flight schools located on the club's home field. Many flight schools will look upon any club offering flight training as a competitor.

Naturally, this could present a problem if not handled sensibly. One possible solution might be to use the flight school's instructors to teach club members in club aircraft. (relationships between flying clubs and FBOs are covered more thoroughly in Chapter 7.)

Clubs using their own instructors have to develop a reliable system for selecting them. The safety committee, board of directors, or club officers should set the standards or minimum qualifications for each instructor. They can be as lenient or as strict as a club desires. For example, clubs flying mostly high-performance aircraft will probably want higher qualifications in their instructors than clubs flying less complex aircraft. In any case, flight training standards should include the stipulation that only designated instructors be allowed to teach in club aircraft.

Flight training and insurance rates go hand in hand. Extra training leading to advanced ratings, particularly the instrument rating, can help a club lower its insurance premiums. If enough club members earn an instrument rating, a club may substantially reduce its insurance costs. To encourage members to earn instrument ratings through a club training program, a club can consider setting limits for VFR pilots, such as no VFR at night for non-instrument rated pilots, or more stringent VFR weather minimums for cross-country flying than those specified by Federal Aviation Regulations.

Summary

The overall well-being of a flying club can sometimes be enhanced by flight training operations. Furthermore training can promote maximum utilization of club aircraft. While flight training by a flying club may be an effective way of enhancing the club's operations, there are also other considerations which should be part of the decision to conduct flight training.

Chapter 10
Promotion

A flying club that aggressively promotes itself and its activities has a better chance of surviving than one that doesn't. Since there is a natural turnover in most clubs' membership, an aggressive club should develop a good membership recruitment and retention program. But effort should also be directed at flying activity, since aircraft utilization is the key to low operating costs. That's why a wise club will devote some of its time, effort and money to promote maximum use of its aircraft.

Membership Recruitment and Retention

The most common source of new members is word of mouth. That means most new members will be brought in by current members who actively promote the club by talking about it. Not only should current members recommend their club to other pilots, they should also recommend good flight training prospects for possible future membership to the club. This helps the club recruit new members and create a pool of potential members who are compatible with current members, goals, and policies.

Once a prospect expresses interest in joining the club, his or her name should be put on a waiting list. By maintaining a waiting list, a club can expand rapidly without an extensive, time-consuming membership drive. Interest can be maintained by occasional "guest night" meeting invitations which keep prospects informed about club activities.

Why should a club be interested in gaining new members? First, every club will have its share of comings and goings based on the personal lives of members. To maintain membership levels, a club will need new members from time to time to fill the vacancies this creates.

Second, adding new members can be a way of financing the expansion of a club and can help bolster the club's capitalization. The additional money brought in by initiation fees, dues, and increased utilization of the aircraft can spread the fixed costs over more members and reduce everyone's flying costs.

Third, changing interests among members can lead to the purchase of more sophisticated aircraft. In this case, new members can be recruited to help keep the utilization of the less sophisticated aircraft high.

Fourth, when a club decides to expand its fleet or upgrade its equipment, it is probably facing substantially increased expenditures. Increasing the size of the membership can help provide funding for such upgrades.

A club has to be careful when it decides to increase membership. It's great to have the extra money that new members bring in, but the club should be careful not to grow so large that it has too many members per aircraft. This could lead to discontent or frustration because members might not be able to use the aircraft when or as often as they might like.

Periodically placing classified ads in the local newspaper or in aviation publications can help a club gather names of potential members. The membership chairman should always follow up the leads so that potential members do not become disenchanted because they have not been contacted by the club. Failure to contact pilots responding to the classified ads could lead to a reputation for being unresponsive to a pilot's interest.

Another method of recruiting new members is through a direct mail campaign to all the pilots in the local area. A letter introducing the club and a brochure or other piece of literature explaining the club's policies and practices is a simple beginning.

The idea behind promoting membership recruitment is to keep the club's name in front of local pilots. Word of mouth, classified ads, and direct mail campaigns are obvious ways of doing this. Other easy methods include posting notices on airport bulletin boards in the area, listing the club in the yellow pages, or holding an "open house" on a regular basis so that prospective members can visit club facilities, and inspect aircraft and equipment. Making club aircraft available for mercy missions, CAP patrols, or newsworthy events may also generate some free publicity.

Obviously, a club shouldn't need to take away FBO customers. Clubs, though, can point out to the local FBO that if the FBO can get enough pilots to join the club, it can sell the club another airplane. Such an approach may result in having the FBO become one of the club's supporters. Also, very infrequent fliers will find a club more expensive than renting aircraft from an FBO. And some club members will eventually become prospects for an aircraft purchased through an alert FBO. (Read the section in Chapter 7 on Relationships with Fixed Base Operators and Airport Authorities for more information on this subject.)

Non-Flying Programs

Social programs and meetings provide excellent opportunities for a club to recruit and retain members. Current members should be encouraged to bring prospective members to at least one social function each year and the club could even host an annual get- acquainted party where potential members can learn about club activities.

Clubs should strive to create exciting and interesting programs so members enjoy club activities and individuals feel they are part of a larger whole. It's not too difficult to get interesting speakers, and a club need not confine its programs to airplane-related subjects.

Examples of places to get good speakers are the FAA's Flight Standards District Office (FSDO), Airports District Office (ADO), Air Route Traffic Control Center (ARTCC), or Flight Service Stations (FSS). Other possibilities include the National Weather Service (NWS), military bases, county commissioners, airport managers and personnel, Aircraft Owners & Pilots Association (AOPA), aircraft and avionics manufacturers, and any other group that fits in with the club members' interests. Films on the same topic being discussed will add a professional touch to the program and break the monotony of listening to a single speaker.

Sample topics might include the local airspace environment, aircraft equipment systems, airport development, safety, planning for future club activities or fly-ins, seasonal weather briefings, or anything that suits the club's purposes. Of course clubs should not hesitate to get together just for fun. An annual barbecue at the home base, a dance in the hangar, or even a quarterly gathering to wash and wax the aircraft help to promote membership retention as effectively as a safety meeting.

The program chairman is in charge of planning and developing activities for a club, but he or she need not be the only one to get involved. Let the program chairman direct the overall planning but have him or her delegate the responsibility for each individual activity to one or two club members. It will help keep all the members involved and bring some freshness and creativity to the programs as subcommittees try to outdo one another.

It is important for a club to have printed material readily available for prospective members. This gives the club a more professional appearance and helps its image as a credible and stable organization. The literature should include explanations of club fees, requirements, what is expected of members, dues structure, how equity in the aircraft is handled, meeting arrangements, social and program schedules, and any other pertinent information. Another beneficial piece of printed material is a brochure that gives a general overview of how a flying club works. It doesn't have to give details about a specific club, but it should explain the basics of a flying club, how a pilot can save money, and the other benefits offered by club flying.

Flying Activity

Promoting flying activity is just as important as promoting membership recruitment and retention. A club with a full membership roll faces financial instability if its aircraft sit idly on the ground. Again, aircraft utilization is the best way to cut costs.

Flying activities that keep the club's name in front of the public will help a club build community support and keep its aircraft active. For example, flying blood plasma or providing free transportation for visiting dignitaries are good public relations efforts. A club should be careful to stick to strictly charitable projects so as not to run afoul of regulations covering commercial operations, or to fall into competition with the local commercial aviation interests. Club officers should take the initiative in organizing flying activities that are public service oriented.

The following suggestions can help promote flying activity, but the fertile minds of active club members will come up with even more new suggestions and ideas — just ask what they think.

Weekend fly-outs: Clubs can fly from their home base to a predetermined destination for a day or an entire weekend. By using most, if not all of the club's aircraft, all the members who go should have the opportunity to fly.

Breakfast flights: For early risers, a morning flight to a favorite restaurant for breakfast is a great way to start the day and to keep the aircraft flying. For the lazy members in the club, a luncheon or dinner flight may be more appropriate.

Fly-ins: All clubs can hold fly-ins to help sharpen their skills and have a little fun. Neighboring clubs can be invited and a series of competitive events can be organized to keep the fly-in exciting. Events such as accuracy landings, bomb drops and ribbon cutting followed by a barbecue or picnic lunch can turn a nominal flying day into a day to remember.

Summary

Promotion is an important part of any flying club's activity and should receive a lot of attention from club officers. Members and officers alike should always spread the word about their club and let other pilots know it's an exciting organization. Once a solid membership has been established, a club needs to maintain a list of prospects to fill the vacancies created by normal turnover. Steady promotional activity designed to generate a waiting list of potential members is the best way to do this quickly, efficiently and economically. The sooner a club fills vacancies, the better able it is to maintain its financial stability. A key element in maintaining a club's financial viability is keeping the aircraft in the air. There are many flying activities that clubs can organize to help keep their members and their aircraft active. A smart club will take the initiative to do it. Both member satisfaction and club survival are assured for the club that can "keep 'em flying."

Appendix A
Sample Articles of Incorporation

The following Articles of Incorporation and Bylaws may be used as guides for any flying club; however, since statutes vary in different states, no organization should be created without the aid of an attorney.

ARTICLES OF INCORPORATION OF THE ________________________ FLYING CLUB

  1. The name of this corporation is the ___________ Flying Club, hereinafter referred to as the "Club."
  2. The purposes for which this Club is formed are:
    1. To own or lease and maintain one or more aircraft for the education, transportation, and general use of the members of the Club or their families or such individuals as the Board of Directors may designate pursuant to any bylaws which may hereafter be adopted.
    2. To acquire, own, hold, sell, lease, pledge, mortgage or otherwise dispose of any property, real or personal, necessary to the operation of the Club.
    3. To borrow money, contract debts, make contracts and to exercise any and all other powers as a natural person could lawfully make, do, perform or exercise which may be necessary, convenient or expedient for the accomplishment of any of its objects or purposes, providing the same be not inconsistent with the laws of the state of and to that end, enumeration of such shall not be deemed inclusive.
  3. The term of existence of the Club shall be perpetual or until such time as it is dissolved as provided by the laws of the state of ___________________.
  4. The principal office for the transaction of the business of this Club is to be located at_______________.
  5. The names and addresses of the incorporators of this Club are:
    ___________________________________
    ___________________________________
  6. The names and addresses of the persons who are hereby appointed to act as the first directors to manage the affairs of this Club are:
    ________________________________________________
    ________________________________________________
    ________________________________________________
  7. The name and address of the resident agent of the corporation is:
  8. The Club is organized without shares.
  9. The property rights of the members of this Club shall be equal.
  10. The Club shall be operated not for profit, and no part of the net earnings of the Club will inure to the benefit of any member.
  11. Upon dissolution of the Club as provided by the laws of the state of _____________________________, three members of this Club shall be designated as trustees who shall liquidate the assets thereof and after paying all debts and liabilities of the Club, and shall distribute the surplus equally among the members thereof.
  12. IN WITNESS WHEREOF, for the purpose of forming this Club, under the laws of the state of ________________________, we the undersigned, constitute the incorporators including the persons named herein above, as the first Directors of this Club and execute these Articles this ____________________________
    ________________________________________________________
    ________________________________________________________
    ________________________________________________________
    Notary's paragraph of acknowledgment
    Notary's Seal

Sample Bylaws

Club bylaws may be as specific as possible or they may be a bare outline for the operation of a club. In fact, some clubs operate with no bylaws whatsoever. These samples are not meant to be all inclusive or minimum acceptable bylaws. They are presented as guides for the successful operation of a club.

Article 1 - Purpose

The purpose of this Club shall be to provide for its members convenient means for flying at the most economical rates.

Article 2 - Meetings of Members

  1. All meetings of the members, except as herein otherwise provided, shall be held at a place to be determined by the President.
  2. The annual meeting of the Club shall be held during the first week in __________ at such time as the Board of Directors shall determine.
  3. Notice of the annual meetings of the members shall be given by written notice mailed to each member at his last known place of business or residence at least ten (10) days before such annual meeting.
  4. Special meetings of the members may be held at such time and place as the President may determine, or may be called by a majority of the Directors or by written petition of at least ____________(_____) members. It shall be the duty of the Secretary to call such meetings within thirty (30) days after such demand.
  5. Notice of special meeting of members, stating the time and in general terms the purpose thereof, shall be given in a like manner as the notice required for the regular annual meetings, if all the members shall be present at any gathering, any business may be transacted without previous notice.
  6. At any meeting of the members, a quorum shall consist of one-half of the members who are in good standing.
  7. The President, or in his absence the Vice-President, or in the absence of the President and Vice President, a Chairman elected by the members present shall call the meeting of the members to order and shall act as the presiding officer thereof.
  8. At the annual meeting of the members, the members shall elect by ballot a Board of Directors as constituted by these bylaws.
  9. At every meeting of the members, each member shall have only one vote. Votes cast by mail will be accepted provided they are received by the Secretary at least _________(_____)days prior to the meeting when the vote is to be taken. Proxy votes in writing will be accepted.
  10. A majority vote of the members present is necessary for the adoption of any resolution and for the election of a member to the Board of Directors.
  11. Parliamentary procedures will be followed and minutes will be kept at all meetings.

Article 3 - Directors

  1. The powers, business and property of the Club shall be exercised, conducted and controlled by Board of Directors of _________(_____) members.
  2. Each Director shall be elected annually from the membership of the Club at the regular meeting of the members.
  3. In case of a vacancy in the Board, the remaining Directors shall fill such vacancy by appointment from the Club membership. If ________(____) or more vacancies occur at any one time, they shall be filled by vote of the members at a meeting duly called.
  4. No later than one week after each annual meeting of members, the newly elected Directors shall hold a meeting and organize by the election of a President, Vice-President, Secretary, Treasurer and Aircraft Maintenance Officer; and transact any other business.
  5. Regular meetings of the Board of Directors shall be called at a time and place to be determined by the President.
  6. Special meetings of the Board of Directors shall be called at any time on the order of the President or on the order of ___________(_____) Directors.
  7. Notice of special meetings of the Board of Directors stating the time and, in general terms, the purpose shall be mailed or personally given to each Director not later than three days before the day appointed for the meeting. If all Directors shall be present at any meeting, any business may be transacted without previous notice.
  8. __________(_____) Directors shall constitute a quorum of the Board at all meetings and the affirmative vote of at least __________(______) Directors shall be necessary to pass any resolution or authorize any act of the Club.
  9. Each member of the Board of Directors shall serve without any compensation or reward, except as otherwise provided in these bylaws.
  10. The Board of Directors shall cause to be kept a complete record of all its acts and proceedings of its meetings and to present a full statement at the regular meeting of the members, showing in detail the condition of the affairs of the Club.
  11. The Board of Directors may assign to any member any duty or office which the Board deems appropriate and necessary to the conduct of the Club and which is not otherwise expressly provided for in these bylaws.
  12. The Board of Directors may engage salaried personnel from outside the Club membership to perform such services in behalf of the Club as the Board deems appropriate and necessary.
  13. The Board of Directors shall have the power and authority to promulgate and enforce all rules and regulations pertaining to the use and operation of Club property and to do and perform, or cause to be done and performed, any and every act which the Club may lawfully do and perform.

*Depending on the size of the club, additional officers may be specified in the bylaws or some duties can be combined into one office.

Article 4 - Officers

  1. The Executive Office of the Club shall have a President, Vice-President, Secretary, Treasurer and an Aircraft Maintenance Officer (see note * above).
  2. The President, Vice-President, Secretary, Treasurer and Aircraft Maintenance Officer shall be elected by the Board of Directors from their own number at the first meeting after organization of the corporation and thereafter at the first meeting after the regular annual meeting of the members and shall hold office for twelve (12) months and until their successors are elected and qualified.
  3. The President and Vice-President shall serve without compensation or reward. The Secretary, Treasurer and Aircraft Maintenance Officer shall each receive two (2) hours of flying time per month as compensation for their services.
  4. The Treasurer shall be bonded, the premium therefore to be at the expense of the Club.

Article 5 - President

  1. The President shall be the Chief Executive Officer of the Club. He shall preside at all meetings of the Club and the Board of Directors and shall have, subject to the advice and control of the Directors, general charge of the business of the Club, and shall execute with the Secretary, in the name of the Club, all certificates of membership, contracts and instruments other than checks which have been first approved by the Board of Directors.
  2. The President shall co-sign all checks executed in the name of the Club.
  3. The President shall be responsible to the Board of Directors for the operation of the Club. He shall make and enforce decisions regarding the suitability of all equipment and the qualifications of all members for each type of flight operation. He shall recommend for approval to the Board of Directors all operational rules of the Club and shall report with recommendations all violation of such rules by any member of the Club.

Article 6 - Vice-President

  1. The Vice-President shall be vested with all the powers and shall perform the duties of the President in case of the absence or disability of the President.
  2. The Vice-President shall also perform such duties connected with the operation of the Club as he may undertake at the suggestion of the President.

Article 7 - Secretary

  1. The Secretary shall keep the minutes of all proceedings of the members and of the Board of Directors in books provided for that purpose. He shall attend to the giving and serving of notices of all meetings of the members and of the Board of Directors and otherwise. He shall keep a proper membership book showing the name of each member of the Club, the book of bylaws, the Club Seal, if any, and such other books and papers as the Board of Directors may direct. He shall execute with the President, in the name of the Club, all certificates of membership, contracts and instruments which have been first approved by the Board of Directors. In the absence or disability of the Treasurer and under the direction of the President he shall execute in the name of the Club checks for expenditures authorized by the Board of Directors. He shall also maintain an appointment book for the operation of the aircraft.
  2. The Secretary shall perform all duties incident to the Office of the Secretary, subject to the control of the Board of Directors.
  3. The Secretary shall also perform such duties connected with the operation of the Club as he may undertake at the suggestion of the President.

Article 8 - Treasurer

  1. The Treasurer shall co-sign with the President, in the name of the Club, all checks for the expenditures authorized by the Board of Directors. He shall receive and deposit all funds of the Club in the bank selected by the Board of Directors, which funds shall be paid out only by check as herein before provided. He shall also account for all receipts, disbursements and balance on hand.
  2. The Treasurer will provide a monthly report of the financial status of the Club to the Board of Directors and a quarterly report to every member.
  3. The Treasurer will inform the President on the ______(____) of each month if any members are delinquent and notify him when such delinquency plus any fines have been paid.
  4. The Treasurer shall perform all duties incident to the Office of the Treasurer, subject to the control of the Board of Directors.
  5. The Treasurer shall also perform such duties connected with the operation of the club as he may undertake at the suggestion of the President.

Article 9 - Aircraft Maintenance Officer

  1. The Aircraft Maintenance Officer shall be responsible for maintaining current information in the logbooks of the aircraft.
  2. The Aircraft Maintenance Officer shall be responsible for maintaining the aircraft in proper operating condition, by or under the supervision of a properly certificated aircraft and powerplant mechanic, and for obtaining all inspections, major overhauls and for compliance with all service bulletins for the aircraft.
  3. The Aircraft Maintenance Officer shall be responsible for all papers required to be carried in the aircraft and for the execution of all papers required upon the completion of inspections and major repairs.

Article 10 - Vacancies

If any Office, other than that of President, becomes vacant for any reason, the President shall appoint an interim successor until such time as the Board of Directors shall elect a successor from the membership who shall hold office for the unexpired term. If the Office of President becomes vacant, the Vice-President shall become President and the Board of Directors shall elect a new Vice-President from the membership.

Article 11 - Safety Board

  1. A Safety Board shall be designated by the Board of Directors for each aircraft accident involving either a member of the Club or any equipment belonging to the Club, providing such accident resulted in damage to equipment exceeding a sum of _______(___) dollars.
  2. The Safety Board shall consist of _____________(_______)members of the Club who were not involved in the accident.
  3. The Safety Board shall take all steps necessary to ascertain the facts, conditions and circumstances for the accident; shall arrive at conclusions regarding the probable cause and the responsibility for said accident; and shall make known to the Board of Directors, and to all parties involved in the accident, its findings in the form of a written report.

Article 12 - Hearings

  1. The Board of Directors, upon receipt of the findings of the Safety Board shall offer to all parties involved in the accident the opportunity of a hearing. After the hearing, or if such hearing is waived by all the parties involved in the accident, the Board of Directors shall decide the financial responsibility The decision of the Board of Directors shall be final.
  2. The Board of Directors shall not impose financial responsibility on any one member in excess of _______(______) dollars for any one accident, unless the damage results from a violation which is not covered by insurance carried on the aircraft; then the party responsible for the damage shall be liable for the full amount. Recommendation of the Board should be approved by recorded vote of all Club members.
  3. All financial obligations imposed on any member as a result of the decision of the Board of Directors shall be satisfied within thirty (30) days of written notice. Otherwise, in the case of a member, all unsatisfied monies may be deducted from the membership fee, the remainder of which shall be returned to the member with a cancellation of membership in the Club.

Article 13 - Membership

  1. New members may be admitted to the Club only after being approved by a unanimous vote of the members. Large clubs may require only majority approval or approval by the Board of Directors. Membership shall be limited to ________(_____) in number for the first aircraft and not more than a total of ________(_____) for any additional aircraft.

    Note: Some clubs also provide for the admission of "Associate Members." These associate members have no voting power or property rights in the club assets. They are governed by the same regulations, bylaws, etc., as the regular members, and pay the same monthly and hourly fees. Their admission fee is not refundable. They join the club in order to take advantage of the more economical flying - caution must be exercised therefore that the club does not operate as a commercial operator or in competition with the fixed base operator. The club needs the FBO's help and, therefore, should not operate in such a manner as to antagonize the FBO. The club admits the associate member in order to "keep the airplane flying" and to build up the reserve fund in the event that regular members fail to fully occupy the aircraft.

  2. Upon receipt of the initiation fee, the Club shall issue to each member a certificate of membership on a form approved by the Board of Directors.
  3. A member may withdraw from the Club upon notification to the Secretary in writing thirty (30) days in advance, and said member may make withdrawal final within the next ninety (90) days without further notification provided that the withdrawing member has disposed of all share in the assets of the Club to a new member acceptable to the Club. The Club shall have the first option to purchase the share of a member wishing to withdraw from the Club and the Club shall have thirty (30) days from the withdrawal notice to exercise this option.
  4. A member may be expelled by a two-thirds vote of the members voting at any regular or special meeting of the members. Ten (10) days notice shall be given to each member who shall have the right to be heard either in person or by counsel at a meeting of the Club called for this purpose. A member so expelled shall receive from the Club a sum equal to his/her share in the assets of the Club less any monies, dues, or fines owing to the Club.
  5. In the event of the death of a member, the Club shall have the first option to purchase from the estate the member's share in the assets of the Club. If a member wishes to name in his/her will a beneficiary of his/her share in the assets of the Club, the named beneficiary must be acceptable to the Club.

Article 14 - Member Payments

  1. Initiation Fees. A person duly elected to the Club as provided for by these bylaws shall be deemed a member upon payment of an initial fee ________(____) dollars.
  2. Dues. Each member shall be assessed monthly dues in the amount of __________(_____) dollars, said dues to be payable one (1) month in advance, due on the (15th) day of each month. The monthly dues may be changed from time to time at the discretion of the Board of Directors.
  3. Hourly Aircraft Rate. The hourly aircraft rates shall be _______(___) dollars for "A" model aircraft; ________(_____) dollars for "B" model aircraft; etc. Members will notify the Treasurer on the last day of each month of their accumulated meter readings for the month. Members will be billed on the _______(_____) of each month for their accumulated hours for the previous month. The hourly aircraft rate may be changed from time to time at the discretion of the Board of Directors.
  4. Delinquency. Any member who has failed to pay the dues, hourly aircraft rate charges or any other sum due the Club within fifteen (15) days after said sums shall be due, shall be considered a delinquent member and shall be automatically suspended from flying the Club aircraft and engaging in any other Club activity. A ten percent (10 %) penalty of the delinquent amount shall be charged after one (1) month's delinquency unless the Board of Directors waives the penalty upon a showing of good cause by the member. When a delinquent member fails to pay any sum owed to the Club, or at the discretion of the Board of Directors, to make suitable arrangements with the Board for payment thereof within sixty (60) days of the due date, the member shall automatically be considered as indicating an intention to withdraw from the Club.

Article 15 - Club Finances

  1. No member may authorize expenditures or otherwise incur financial obligations in the name of the Club except as expressly provided for in these bylaws or other regulations duly promulgated by the Club membership.
  2. The Treasurer is authorized to expend Club funds in payment for all normal fixed costs of the Club and all operating costs not in excess of ________(____) dollars. The Treasurer must obtain approval from the Board of Directors for any unusual expenditure and all expenditures in excess of __________(_____) dollars.
  3. The Maintenance Officer may authorize work on Club aircraft in an amount up to __________(_____) dollars without seeking approval from the Board of Directors. The Maintenance Officer must consult with the Treasurer before authorizing any work to determine whether there are sufficient funds to pay for the work.
  4. Individual members will be reimbursed for any personal expenditures not in excess of __________(_____) dollars when such expenditures are for club aircraft repairs or maintenance necessary to safely complete a trip back to Airport.
  5. No member, officer, Director or any other individual shall obligate the Club to any purchase, repair, service or in any manner in an amount in excess of __________(_____) dollars without the approval of a majority of the Club members.

Article 16 - Flight Proficiency Program and Flight Rules

  1. The Board of Directors shall develop, or cause to be developed, a Flight Proficiency Program for all members to include, but not necessarily limited to, periodic check rides with qualified flight instructors, minimum number of flight hours per month, minimum number of landings per month, and periodic refresher courses. The Flight proficiency Program must be approved by a majority of the Club members.
  2. The Board of Directors shall develop, or cause to be developed, a set of Flight Rules. The Flight Rules will take into consideration varying levels of members' experience and proficiency and the type of aircraft to be flown.

Article 17 - Surplus

The net savings or surplus remaining after all operating costs and other expenses have been paid shall remain in the Club's treasury for the purchase of new equipment, for engine overhaul, for contingencies or for the purpose of reducing the hourly rates for flying as shall be determined by the Board of Directors. The net savings in any event shall not be distributed to the members for their individual use.

Article 18 - Amendments

  1. These bylaws may be repealed or amended or new bylaws adopted at any meeting of the members called for that purpose or any regular meeting of the members by a two-thirds majority vote of such members.
  2. __________(____) of the members shall be considered a quorum.

Appendix B
Sample Flight Rules

  1. All members of the Club shall comply with all Federal Aviation Regulations, state, airport and Club rules while operating Club aircraft.
  2. A violation of any of the Club's rules by a member renders him liable to either a temporary flight suspension of not more than __________(_____) days or a monetary fine not to exceed __________(_____) dollars, or both. Repeated violations shall result in a recommendation by the Board of Directors that the member be expelled from the Club, such recommendation to be voted on by the membership. A majority vote shall be necessary for expulsion.
  3. All members must be checked out and approved for solo by a flight instructor designated by the Board of Directors before soloing any Club aircraft.
  4. A member must perform a thorough preflight inspection of the aircraft, including a visual inspection of the fuel quantity, prior to commencing flight. Any damage or discrepancies discovered by a member will be assumed to be the responsibility of the last user unless it has been reported previously to the Maintenance Officer. If a condition is discovered which may affect the airworthiness of the aircraft, the aircraft shall not be flown until cleared by the Maintenance Officer.
  5. Each member must ascertain that the airworthiness and registration certificates, appropriate operating limitations information, current aircraft radio station license and operator's manual are in the aircraft prior to commencing flight.
  6. All aircraft operating limitations must be observed. Aerobatic maneuvers are prohibited except those which are permissible under the operating limitations when the aircraft is operated in the utility category.
  7. Flight plans must be filed with the FAA for flights over sparsely populated areas; mountainous, wooded, or desert terrain; or for extended overwater flight; and for all student solo cross-country flights in excess of fifty (50) miles.
  8. The Schedule Officer must be notified of the destination of all flights which will result in the aircraft being gone from the __________(_____) Airport more than __________(____) hours.
  9. Except in emergencies, Club aircraft shall be flown from and landed on airfields approved by the Board of Directors only. Any member with less than __________(_____) hours total flying time who lands on an unapproved field due to an emergency must call the President before attempting a takeoff from the field. The President shall decide whether the member should attempt the takeoff alone or wait until a better qualified pilot arrives.
    Note: The Board of Directors may approve fields in a number of ways. They can approve all airports listed in the Airport Directory of the Airman's Information Manual, all airports in the AOPA Airport Directory, or all airports shown on sectional charts. The Board may allow well qualified members to use nondesignated fields. Student pilots and low time members may be restricted to runways of a specified minimum length.
  10. No member may fly Club aircraft after sunset unless approved to do so by the Board of Directors.
  11. Members with less than _______(____) hours shall not fly Club aircraft when weather conditions are less than _____ feet _____ ceiling and _____ miles visibility or when the surface winds exceeds miles per hour.
  12. Upon completion of a flight, the pilot must tidy up the aircraft. Ash trays will be emptied, waste paper and extra charts (a sectional chart for the local area should be kept in the aircraft) will be removed, seat belts will be straightened, etc.
  13. All tanks will be topped at the end of every flight unless the member next scheduled to fly is on hand and there is sufficient fuel for the intended flight. In no case will the tanks be left less than full after the last flight of the day. *
    *This rule may be modified depending on the particular aircraft and weather conditions. A member may not be able to fill all seats and carry some luggage without exceeding maximum gross weight limitations if all tanks are full. Also, if the weather is extremely hot, the tanks may overflow through the fuel vent if they are kept full.
  14. All members must take a proficiency ride every ________(_____) months with a flight instructor designated by the Board of Directors. Following a proficiency check, the flight instructor shall recommend to the Board either continued solo privileges or additional dual or ground instruction for the member.
  15. No member (except the Maintenance Officer) may perform any maintenance on Club aircraft, other than preflight inspection, without authorization from the Maintenance Officer.
  16. Club aircraft may not be used to give flight instruction to anyone except Club members and, upon approval by the Board of Directors, members of their immediate families.

Appendix C
Preventive Maintenance

Part 43 of the Federal Aviation Regulations authorizes the holder of a pilot certificate to perform preventive maintenance on any aircraft owned or operated by him/her provided it is not used under Part 121, 127,129, or 135 (see Part 43.3[g]). Any preventive maintenance performed must be done in accordance with the appropriate manufacturer's instructions and must be accompanied by an appropriate entry in the aircraft maintenance record (see Part 91.167[a] and Part 43.9 [a]).

It is the responsibility of anyone performing maintenance on an aircraft to be aware of the current regulations governing the work to be done. Work considered to be preventive maintenance as defined by Part 43s is limited to:

  1. Removal, installation, and repair of landing gear tires.
  2. Replacing elastic shock absorber cords on landing gear.
  3. Servicing landing gear shock struts by adding oil, air, or both.
  4. Servicing landing gear wheel bearings, such as cleaning and greasing.
  5. Replacing defective safety wiring or cotter keys.
  6. Lubrication not requiring disassembly other than removal of nonstructural items such as cover plates, cowlings, and fairings.
  7. Making simple fabric patches not requiring rib stitching or the removal of structural parts or control surfaces. In the case of balloons, the making of small fabric repairs to envelopes (as defined in, and in accordance with, the balloon manufacturer's instructions) not requiring load tape repair or replacement.
  8. Replenishing hydraulic fluid in the hydraulic reservoir.
  9. Refinishing decorative coating of fuselage, balloon baskets, wings, tail group surfaces (excluding balanced control surfaces), fairings, cowling, landing gear, cabin, or cockpit interior when removal or disassembly of any primary structure or operating system is not required.
  10. Applying preservative or protective material to components where no disassembly of any primary structure or operating system is involved and where such coating is not prohibited or is not contrary to good practices.
  11. Repairing upholstery and decorative furnishings of the cabin, cockpit, or balloon basket interior when the repairing does not require disassembly of any primary structure or operating system or interfere with an operating system or affect primary structure of the aircraft
  12. Making small simple repairs to fairings, nonstructural cover pieces, cowlings, and small patches and reinforcements not changing the contour so as to interfere with proper air flow.
  13. Replacing side windows where that work does not interfere with the structure or any operating system such as controls, electrical equipment, etc.
  14. Replacing safety belts.
  15. Replacing seats or seat parts with replacement parts approved for the aircraft, not involving disassembly of any primary structure or operating system.
  16. Trouble shooting and repairing broken circuits in landing light wiring circuits.
  17. Replacing bulbs, reflectors, and lenses of position and landing lights.
  18. Replacing wheels and skis where no weight and balance computation is involved.
  19. Replacing any cowling not requiring removal of the propeller or disconnection of flight controls.
  20. Replacing or cleaning spark plugs and setting of spark plug gap clearance.
  21. Replacing any hose connection except hydraulic connections.
  22. Replacing prefabricated fuel lines.
  23. Cleaning fuel and oil strainers.
  24. Replacing and servicing batteries.
  25. Cleaning of balloon burner pilot and main nozzles in accordance with the balloon manufacturer's instructions.
  26. Replacing or adjustment of nonstructural standard fasteners incidental to operations.
  27. Removing and installing balloon baskets and burners that are specifically designed for quick removal and installations and when such removal and installation can be accomplished by the pilot, provided that baskets are not interchanged except as provided in the type certificate data sheet for that balloon.
  28. The installations of anti-misfueling devices to reduce the diameter of fuel tank filler openings provided the specific device has been made a part of the aircraft type certificate data by the aircraft manufacturer, the aircraft manufacturer has provided FAA-approved instructions for installation of the specific device, and installation does not involve the disassembly of the existing tank filler opening.
  29. Removing, checking, and replacing magnetic chip detectors.
  30. The inspection and maintenance tasks prescribed and specifically identified as preventive maintenance in a primary category aircraft type certificate or supplemental type certificate holder's approved special inspection and preventive maintenance program when on a primary category aircraft provided:
  1. They are performed by the holder of at least a private pilot certificate issued under part 61 who is the registered owner (including co-owners) of the affected aircraft and who holds a certificate of competency for the affected aircraft (1) issued by a school approved under 147.21 (f) of this chapter; (2) issued by the holder of the production certificate for that primary category aircraft that has a special training program approved under 21.24 of this subchapter; or (3) issued by another entity that has a course approved by the Administrator; and
  2. The inspections and maintenance tasks are performed in accordance with instructions contained by the special inspection and preventive maintenance program approved as part of the aircraft's type design or supplemental type design.

AOPA has available a separate booklet titled A Pilot's Guide to Preventive Maintenance that gives expanded detail on these items.


Updated Wednesday, June 28, 2006 4:25:37 PM