Or a dozen other excuses for a company to fold taking the dreams and money of the students at Silver State Helicopters.In fact its a pyramid scheme endorsed and promoted by the FAA.
I have been telling prospective pilots for about two years now to stay away from flight training at Silver State Helicopters. The fact that I have or had three friends working at Silver State Helicopters in high placed positions put me a little more in the know than the average Joe…but,really ,anybody with a knowledge of the helicopter business could have seen this train wreck coming.
I feel bad for the students. Its a hard lesson to learn but you are in good company. A lot of people who should have known better and perhaps did will lose or appear to lose as well.About 34 years ago I finished my flight training,was hired as a pilot and went in to work only to find the doors to the second largest helicopter company in Canada closed.
I have seen helicopter bankruptcies several times over my long career and they all have the same three factors in common.
1. Helicopter company management that lacks fiscal responsibility and has little or no independent accounting oversight.
2. A naive, or greedy and naive financial lender.
3. A pyramid scheme that is not only unchallenged but endorsed by government.
Let me talk about point three first. Pyramid schemes work as long as new blood is drawn into the “plan”. In this case the FAA promotes this type of business by allowing the blind to train the blind. A quick example. The student who gets started early in the company ,will have his/her training over and done quickly ,particularly if he or she shows promise as a good pilot and communicator. Nothing wrong with that. However the only employment available to the graduating student is as a flight instructor. This newly graduated student with no real world helicopter experience and very limited time in helicopters is now employed as a certified flight instructor . It is in his or her best interest and their employers to get more students and perpetuate the scheme. The problem is that there are a finite amount of pilot jobs outside of flight training that an inexperienced commercial helicopter pilot can get . One commercial helicopter pilot out of five will get some kind of flying job in really good times and one in ten in average times. That job is almost always as a flight instructor in the U.S.A.
The plan collapses under the weight of its own excess. How long it takes varies with the economy , the amount of students starting and the availability to place flight instructors in junior positions in the real commercial helicopter industry. The helicopter industry shortage of pilots allowed this pyramid to really grow to unprecedented size. “The bigger they are”….. crash!
Point two. Why do supposedly smart financial operations get duped by helicopter operations year after year? Sometimes its their fault and sometimes they have the protection of secondary insurance or government backed programs. Sometimes they are just greedy and lack knowledge of the aviation industry,or appear to lack knowledge. I won’t deal with specifics in Silver States bankruptcy. I don’t know. What I do know is that banks have been financing aircraft and helicopter companies for years without understanding how quickly the asset can depreciate. You can finance a helicopter for $300,000.00 ( a small one) and with proper maintenance,insurance and everything operating on that helicopter as it should it can be worth $150,000.00 in a year. A helicopter is the sum of its parts and when a company operates that asset at a rapid rate it brings in rapid revenue that looks good to a bank. The bank sees the money coming in,bigger operating loans being paid in a timely manner at a premium price. More loans are given out money is coming in at a higher than expected rate. Everyone is happy. When the unprecedented business wanes do to economic and other factors such as mismanagement or misrepresentation of business the financial institutions as the chattel holders are left with the assets of what appeared to be a thriving company. As long as the money was flowing nobody thought to check what the aircraft were currently worth and in some cases I have seen,whether the aircraft actually still existed.Aircraft are also nothing more than a data plate surrounded by parts. More on that at another time.
The result of the above situation being that when the receiver for the lenders got into the companies true inventory most of the aircraft were nothing more than a flying set of timed out ,near timed out or rental components sitting on aircraft that were worth of fraction of their book value.
Point one. Management. Who is running the operation? What is that persons history? What are the people who have been hired to manage allowed to input into the company if they see something is wrong ? There were so many red flags popping up at Silver State you had to wonder if there was any accountability. I personally knew of two instances that I was involved in where aircraft were sold to or offered for sale to Silver State on condition that a sizable premium be paid to a person in management at Silver State. That person would endorse the sale price at the inflated value and take a “commission” in cash.
There will be a thousand sad stories to come out of Silver States demise. The scripts were written months ago.