Friday , December 14, 2018

April 2013

Featured In This Issue

April 2013

BizProfiles

Air travel delays are a fact of life. Bad weather is a frequent culprit, but delays can be caused by equipment problems as well. The most serious equipment problems prevent aircraft from flying, described by a term called AOG or “aircraft on ground.”

“For us, AOG has the same meaning and urgency as the term STAT does in a hospital,” explains Bill Polyi, president and CEO of Magellan Aviation Group. “When an aircraft is grounded there may be a couple of hundred passengers waiting in a terminal somewhere. That’s where we come in. One of our greatest strengths is being an AOG (same day service) company.”

Magellan Aviation Group is a global aftermarket supplier of aircraft parts and products and a specialist in aircraft engine leasing and trading. The group’s Magellan Aircraft Services operates out of 108,000 square feet in southwest Charlotte.

The company also operates Magellan Aviation Services out of 25,000 square feet in Shannon, Ireland, and has satellite offices in Florida, Peru, China, Singapore, Germany, Indonesia, Israel, and South Africa.

 

Aircraft on Ground Specialist and More

“We buy used aircraft and new and used aircraft parts and engines and redistribute them throughout the world to airlines and maintenance and repair organizations (MROs),” explains Polyi. “So if an airline is in an AOG situation, we can supply the needed part and get it to them quickly.”

Magellan employees staff their AOG service phone line 24/7 365 days a year.

“I received a phone call one Sunday morning from a Canadian airline customer of ours,” Polyi recalls. “They‘d found a defective part on an overnight check of an aircraft scheduled for a flight later that day. We had the part they needed but overnight courier service wasn’t an option, so I booked a flight to Montreal and hand carried the part to the maintenance manager. Mechanics installed it while passengers boarded the aircraft. The flight departed safely and on schedule.”

Closer to home, the company also supports many of the NASCAR teams’ flight operations.

Polyi describes, “On a regular basis, one of their maintenance crew will drive to our Charlotte location and pick up a part or we’ll hand deliver a part they need for their Embraer Brasilia turboprops or Bombardier CRJ regional jets so they can fly to their next race.”

But AOG services are only a part of what Magellan offers. Core services include parts trading and sales as well as engine and aircraft sales and leasing; they are also involved in consignments, joint ventures, asset management and can provide technical advisory services.

Magellan clients range from airlines like US Airways, Delta, Lufthansa, Air France, American Airlines, Aerolineas Argentinas, British Airways, DHL and Continental to MROs and OEMs (original equipment manufacturers) like Standard Aero, MTU, SR Technics, Pratt & Whitney, Honeywell, GE, Boeing, EADS and Bombardier. Leasing and financial institutions like GECAS and CIT Group are also clients.

“A few years back we won an exceptional consignment contract over several companies that were significantly larger than us,” Polyi touts. “That consignment agreement made us the exclusive remarketing company for Bombardier’s surplus aircraft. Part of the reason we won the contract was the 20-plus year history we had with Bombardier.

“They knew that we would do a very good job of remarketing and liquidating those assets for them in many different ways because we had the logistics infrastructure to handle a dozen aircraft or more as well as the financial resources to manage a large inventory and the global marketing team to support our customers.

“The most important thing in our industry is relationships. Many of the acquisitions that we make, whether a purchase, lease or consignment, are done through those close relationships we’ve built over the years.”

And those relationships have been built over not just years, but decades. Magellan’s current management team has an average of 20 years’ aviation experience and has managed the sale or lease of over $2 billion worth of aviation assets.

 

Taking Off

The company’s roots date back over 30 years to New York where Bobby Fessler, who traded in a range of products—none of them aircraft parts—found some JT9D fan blades in an auction. Their resale was profitable and so Fessler acquired additional aircraft parts, eventually founding Air Ground Equipment Sales (AGES) in 1979.

When AGES was purchased by Volvo Group in 2000, Fessler and other AGES senior management and owners, including Polyi, began Magellan Aviation Group, with engine leasing being a core business.

“Airlines normally have to remove their engines between 5,000 and 10,000 hours, depending on the engine type and their operating environment,” explains Polyi, who started his career with Pratt & Whitney Canada and has 30 years of experience in commercial engine sales, leasing and management.

“Airlines can forecast for those removals but they can’t plan for everything. Something like bird ingestion or premature engine failure—an airline can’t plan for that,” he says. “That’s where we come in. We can loan an airline a short-term spare for unplanned engine removals.”

Typically, Magellan engine leases run three to six months, but a current industry trend is also spurring growth in the engine leasing business, lengthening lease terms.

“Airlines are moving away from owning all their assets,” according to Polyi. “Some airlines may lease as much as 50 percent of their assets. We now have engines on lease for up to eight years. Leasing engines long-term saves capital expenditure for the airline.”

The company had a modest inventory of only four engines when they started, but now boasts more than 100 engines in their pool, ranging in value from $1 million up to $10 million each depending on engine type and condition. They are looking to continue growing their engine pool with newer high-tech engines in the next three to four years.

“We have a wide range of engines from the 50-passenger turbo props like the ATR and the Dash 8s up to the Triple 7 (Boeing 777),” explains Polyi. “Engine sales and leasing makes up about one third of our business.”

 

Destination: CLT

Magellan’s focus is on the commercial airline market which covers large commercial aircraft, both narrow and wide body, regional jets and regional turbo props.

“We’re the leading company in the regional side,” Polyi says. “We had limited funds when we started the company so we weren’t able to buy $10 million or $20 million airplanes. We bought in the $1 million to $3 million range and those were the regional turbo props.

“We’ll continue to stay pretty focused on a few aircraft and engine types and just be the best in the industry for that segment.”

The company is primed for growth. In fact, growth has been a repeating theme throughout Magellan’s history and was a driving force in the company’s relocation to Charlotte in 2007.

“We were outgrowing our facility in Boca Raton,” Polyi says, “and we were looking for a place with a more reasonable cost of living and cost of warehousing. Our first thought was to move to northern Florida, but we didn’t limit the search to just there. We also considered Atlanta, Savannah, Raleigh and Charlotte. After doing research on all those areas, Charlotte came up as the city with the most benefits for a growing company.

“Our cost of warehousing went from $15 per square foot to $4. The cost of a new home was 50 percent less than in southern Florida. Here, there are professional sports teams, a great uptown, and at the same time, mountains a couple of hours to the west and the ocean a few hours to the east. Charlotte had all the big city advantages without the big city disadvantages. I thought Charlotte would be a good place to continue growing, but it has exceeded all my expectations.”

Magellan’s Charlotte facility serves their customers in North and South America. The Shannon facility in Ireland handles clients in Europe and Africa, but with over 500 customers in 75 countries, Magellan is expanding its presence in other key regions. Starting in 2006, the company has opened satellite offices in Peru, Germany, China, Singapore, Indonesia and Israel.

“We’ve really covered the Asian Pacific and Australian regions,” Polyi says. “We’re looking to the Middle East and Africa next. While China is the fastest growing country by number of aircraft, Africa is going to be one of the fastest growing aviation markets percentage-wise. The African economy is expanding so fleets there could double or triple in the near future. It’s also a good market for the used aircraft and engines that we offer.”

 

Strategic Copilot

In 2011, Magellan’s goal of growth led them to search for a long-term strategic partner.

“We’ve grown this business organically,” Polyi explains. “We grew it on our personal savings and on our strong business relationships and the transactions and acquisitions we were able to make, and we’ve been successful. In 2007, we were a $25 million company. We finished 2012 at $110 million. I attribute that to the team we have here. They’re the best team in the industry.

“But once you get up to the $100 million level, it’s hard to reach the $200 million to $300 million level organically. That’s why, in June of 2012, we sold 50 percent of the company to Marubeni Corporation. Marubeni is a major Japanese trading company that dates back to the time of the Samurai. They’re one of the largest ‘green’ companies in the world and they’re widely diversified with divisions in industries from energy to food products to chemicals and forest products. We joined their transportation division.

“We selected Marubeni out of all potential partners because we thought they offered the best advantages, but they also selected us. We fit a need in their business. Their aerospace division had joint ventures with airlines, aircraft manufacturers, engine manufacturers and even MROs. What they didn’t have was an aftermarket supplier. Magellan fit perfectly into that opening in their organization.

Marubeni Corporation’s emphasis on environmental business also complements Magellan’s business philosophy. Magellan is a founding member of AFRA (Aircraft Fleet Recycling Association), an international association promoting efficient, environmentally sound and revenue-producing methods for aircraft disposal. AFRA members include every sector of the aviation industry and their goal is to recycle close to 100 percent of the materials from current end-of-life aircraft and the estimated 12,000 aircraft expected to retire within the next 20 years.

“Our sweet spot is purchasing aircraft that are between 10 to 15 years old,” Polyi states. “We typically expect to be able to remarket those parts for another 10 to 15 years. And we stay focused on new technology and current production aircraft and engines. This gives us what we call a ‘long tail’ on the cycle to sell those assets.”

Many retired aircraft are stored at desert locations in the U.S. Southwest. The dry climate of these “aircraft boneyards” prevents corrosion and preserves the planes. Disassembly of the aircraft also often takes place in desert locations like Tucson, Ariz.; Marana, Ariz. and Victorville, Calif. In the case of newer aircraft, purchasers can often pick and choose where the airline will deliver the plane.

“We recently bought two ex-Jetlite 737-700s and had them flown from India to California for disassembly. We also have a line of CRJs being disassembled in Tucson and just completed disassembly of several ATR72s in Myrtle Beach,” says Polyi. “Once the aircraft were torn down, we trucked the 1,000 to 1,500 parts—engines, landing gears, etc.—here to our warehouse for receiving and repair management prior to sale or lease.”

Magellan expanded their Charlotte warehouse last year and the generous space houses everything from nuts and bolts to aircraft engines.

“This is a growing industry,” says Polyi. “We’ve grown by providing comprehensive support and innovative solutions to our clients. Our industry experience, client relationships and new partnership with Marubeni Corporation sets us up for continued steady growth and a long and prosperous future.”

Although one might expect the initials in CFS Logistics to stand for owner Cathy Fisher’s name in some manner, they actually stand for Container Freight Station, which defines the type of business it is. CFS Logistics provides a wide range of services for its customers in the shipping community, from providing bonded storage space for cargo being imported and storage for freight being exported around the world to trucking that cargo to ports around the U.S.

It also provides support for its customers’ special projects ranging from printing labels to distributing product with inventory control, and shipping or receiving cargo according to customer requirements.

“Our goal is to provide the very best service possible to our customers and to continue to expand our services to meet our customers’ growing requirements within our ever changing industry,” explains Fisher.

 

Getting Assembled

Fisher, who has over 30 years experience in the warehouse and trucking industries, grew up in Charlotte. When she was 19 years old, she went to work for a Michigan-based company, Zantop International Airlines, which was one of the largest airlines in the commercial freight business during the 1980s.

Fisher started off in customer service with Zantop and soon advanced to the position of assistant manager. After working for DHL and USAir, she was employed by AAA Express, a trucking company, where she did billing, dispatch and customer service jobs before becoming a manager.

When AAA Express was sold to two brothers in Mobile, Ala., Fisher encountered what she says was the first and only gender discrimination of her career. She recollects that the brothers would begin weekly staff meetings with a greeting “to all our guys and that little gal in Charlotte.”

“They wanted me to go out selling,” says Fisher, “while I wanted to be in operations, which is the heart of the business.”

So, in 1997 Fisher decided to strike out on her own to create a new shipping and warehouse business in a building off Westinghouse Boulevard, taking the two biggest accounts from her former employer with her: Black and Decker Corporation and the largest NVOCC (Non Vessel Operating Common Carrier) company on the West Coast.

“We started in November 1997 and by March 1998 we held 97 percent of that former company’s business,” Fisher asserts. Such immediate growth necessitated moving to a much larger facility and more central location. In April 1998, the company relocated closer to the airport in West Pointe Business Park, off Interstate 85.

Just last year, the business relocated again, right in the heart of the Charlotte Airport Cargo Community, on Oak Lake Boulevard, just off Yorkmount Road. Fisher says the need to be even closer to the airport necessitated the move.

With its open, upscale appearance, the new facility doesn’t match any clichéd image of a “warehouse.” Although it is a remodel of an older building, it appears brand new and has startling “eye appeal.”

The 42,000-square-foot building includes a light and airy entryway with glassed-in office spaces, a large sunny conference room with a table that seats 10, a pleasant “break room” for employees, and a small gym complete with exercise machines and a personal trainer for use by both employees and customers.

“We wanted to create a good work environment for our employees,” says Chris Fisher, Cathy’s husband and director of operations for CFS. “We also needed to be closer to the airport and more convenient for our customers.”

The center of the new facility is the warehouse itself, complete with two huge fans that both have 10 12-foot blades to cool the storage area. The warehouse is equipped with 15 overhead doors and van ramp, as well as closed circuit cameras, monitored security protection and monitored fire protection with a sprinkler system.

 

Cargo Solutions

Today, CFS Logistics continues flourishing, counting among its customers Samaritan’s Purse and Caterpillar. In addition to its new headquarters, it occupies two other facilities. Within the past four years, it has added 75,000 square feet of warehouse space, more than any of its competitors, and, at a time when a lot of companies have been downsizing or going out of business.

The company has also added two new operating divisions: a courier company and a trucking division. Errands by CFS, LLC, opened two years ago. It provides daily airport and customs courier services, including document processing.

“We run documents between customs and the airlines, getting documents to the broker forwarder,” explains Fisher. “We have three notaries on staff and can provide notary or chamber service to our customers, letters of credit and certificates of origin for cargo.”

Fisher is working with long-time friend and colleague Jerry Cooper to establish the new trucking division, called CFS Translogix, LLC. Cooper has 27 years of experience in the industry and heads up CFS’s local and regional transportation services.

“The new trucking division will complement CFS Logistics’ core business and provide an additional revenue stream,” states Cooper. “The transportation part of the business will help grow the bonded warehouse business; at the same time, bringing the trucking division up to the same level of customer service provided by the logistics division.”

Cooper, who has worked for an expedited carrier for the last 19 years and most recently acted as a consultant within the trucking and air cargo industry, has a thorough knowledge of the new federal regulations governing the transportation business. In February 2012, the U.S. Department of Transportation implemented new rules revising the hours of service safety requirements for commercial truck drivers.

“Trucking is a tough business and very competitive,” states Cooper. “The new hours of service rules are concerning to us since we believe it will exacerbate the current driver shortage. Still we know we have opportunities we can build on.”

In the past, most of CFS Logistics’ trucking has been within a 200 mile radius of Charlotte with daily trips to Greensboro and Raleigh Durham airports. It has also provided a daily line haul service to Atlanta. Cooper expects to expand the number of cities CFS services, first on a regional basis.

“Eventually, we will look to join with parties that have transportation networks that can expand our reach,” he says. “Ultimately, we plan to serve customers nationwide.”

 

Customs Capabilities

CFS Logistics location at Charlotte Douglas Airport has been vital to the company’s growth and competitiveness over the past 15 years.

“We’ve benefited from the excellent management of the airport and we expect to continue that trend with the opening of the Charlotte Regional Intermodal Facility,” says Fisher.

The company has also benefits from its contract with U.S Customs as a Central Exam Site. CFS was first awarded a five-year contract in 2002 as a CES for Customs. This contract was renewed in 2007 and then again in 2013. As a CES, CFS works with Customs, Homeland Security’s Border Protection, and the Department of Agriculture to ensure that goods entering the country at Charlotte Douglas International Airport are compliant with all of the government’s rules and regulations.

The CES system was developed in 1986 because of significant increases in the volume of merchandise imported into the U.S., as well as the increase in the number of container freight stations, bonded warehouses, truck and rail terminals and other facilities which receive and hold imported cargo that need to be examined and cleared by Customs.

CFS Logistics has the facilities and the experience necessary to make the Customs exams as expeditious as possible so that the cargo can be quickly released for entry. This involves timely communication, as well as providing the necessary security and equipment.

Occasionally, a cargo will fail the inspection. Fisher tells the story of a moped which failed to meet U.S. emissions standards and was denied entry to the U.S. The importer abandoned it and, as a courtesy, Customs gave it to CFS Logistics to try to find an owner for it. Of course, this owner had to be outside of the U.S. It took 10 years, but eventually, through Samaritan’s Purse, a couple in Somalia was located and today they are enjoying ownership of the vehicle.

CFS Logistics often goes above and beyond in order to serve its import/export customers. When the Department of Agriculture denied entry to a shipment of Christmas trees intended for a retailer because of the type of bark, CFS employees removed the bark.

When a shipment of textiles were held up because they didn’t have the proper labels, CFS brought in employees with sewing machines to get the labeling completed. In one instance, a CFS employee identified an unlawful beetle in a shipment of wood and notified Customs. She received a special award for her efforts.

“Attention to detail is our hallmark and one of the primary reasons for our success,” asserts Fisher. “Customers know they can count on CFS Logistics to provide excellent service and unparalleled value.”

 

Customer Care

Over its almost 20 years of doing business, the CFS Logistics has been dedicated to serving its customers. It has grown to include three operating divisions and, depending on the services required, may use one, two or all three divisions to meet customers’ expectations.

“From the onset we are in constant communication with the customer,” says Fisher. “First, we evaluate their business and then we work together to build dependable supply chain solutions.”

Some customers use the services of CFS every day, some every week, and others, once a year. A lot of the company’s business is seasonal with every holiday bringing special shipments of cargo to be stored or transported, examined or distributed.

Father’s Day and the spring gardening season are busy times for tool companies. Easter brings candy and decorations. Back to school in the fall sees increased shipments of office supplies. And, of course, December is always busy with Christmas ornaments and gifts.

During the recent economic downturn, Fisher reports that import accounts were down, along with distributions. A lot of inventory just wasn’t selling. However, export accounts are currently at an all-time high and she is confident of the future.

She points out that CFS Logistics has never hired a full-time salesperson to grow the business; the majority of its growth has come from word of mouth.

“If our customers are satisfied then they’re going to be our best sales team,” Fisher says. “Our primary goal every day is to take care of the customer and our employees, which is the key to our success.”

The company’s devotion to customer service and the determination of its employees to get the job done right is evident. Cathy Fisher has provided the experience, dedication and drive to take her company to the forefront of the Charlotte airport shipping community. She has been able to connect talented hardworking employees with the technology and structure to build an efficient, effective and strategically focused company.

“I have a lot of respect for this woman and her business acumen,” states Cooper, who knows Fisher well. “She is very sharp.”

Mankind has always wanted to fly, to soar with the birds, to have the mile-high view. And while we haven’t physically evolved to fly, we’ve used our scientific genius to innovate machines that can—among them, the adventurous, useful helicopter.

The father and son team of Rocco and Nic Novelli, owners of Queen City Helicopter Corp., are working diligently to attract and train helicopter pilots and provide the helicopter tour experience to the public.

N.C. Helicopter, Inc. was originally established in 1978 as a flight school. When the Novellis purchased the company, they decided to add a subsidiary, Queen City Helicopter Corp., to offer flights for aerial photography, survey and scenic and entertainment tours as well. The two companies share space in Gaston County’s Bessemer City.

 

A General Overview

Situated on private property, N.C. Helicopter flight school students gain an advantage. “Most flight schools operate out of municipal airports and can’t offer the opportunity to take off and land near trees or in confined areas,” says Rocco, chief operating officer for both companies. “Our students get real-world experience.”

The company’s grounds are bordered by trees on two sides, and a lake and electrical wires on the fourth side. Located 15 minutes from Charlotte and the Charlotte Douglas International Airport, and surrounded by smaller airports in Gastonia, Shelby, Lincolnton and Concord, the property is optimally situated for students to learn about air space and communication frequencies.

The company is also just minutes away from Lake Norman, Lake Wylie, Crowders Mountain and Chimney Rock, giving it the perfect base for helicopter touring.

The flight school, designated as a part 61 school, is one of the few in the state that is approved by the Federal Aviation Agency. It is one of the very few that utilizes the R22 Robinson helicopter, which N.C. Helicopter does exclusively. These helicopters, the most popular in the world, require pilot certification in addition to licensure.

“Their controls are more difficult to manipulate; they have a semi-rigid rotor system,” explains Nic, company president. “If you fly a Robinson correctly, it is the safest helicopter out there. If you don’t, it is not very forgiving. If you can fly one of these, you can fly any helicopter.” The Robinson helicopter also has a reputation for being extremely fuel-efficient.

The school offers state-of-the-art facilities, including a simulation classroom and hangar. In addition, there is a three-bedroom, two-bath house on the premises for students to stay at no extra cost during the first 30 days of their flight lessons.

Nic is the pilot and certified training instructor for the company. Rocco oversees the business.

Flight students must be at least 16 years of age. There is no upper age limit, although everyone must pass a regulated medical exam conducted by a certified physician.

“Students come for different reasons. There are complete novices as well as some with previous training,” says Nic. “Many come to learn for pleasure and leisure pursuits; something they’ve always wanted to do but didn’t have the time or money before now,” says Rocco. “Younger students tend to come in preparation for a career in flying.”

Awareness of the school is driven by word of mouth as well as their website. Students come from all over, according to Nic and Rocco.

Flight school instruction is geared to the individual. The school doesn’t train for companies, but rather the individual who wants to apply for a job. “We train the person that has to walk in the door of a company as a pilot,” says Nic.

There are a variety of job possibilities for helicopter pilots. Transportation for individuals—everyone from corporate professionals to snowboarders—emergency rescue or relief efforts, long-lining (hoisting big equipment or other items to the tops of buildings or towers), immediate delivery services, scenic tours, the list goes on. The Novellis say the demand for helicopter pilots continues to increase.

“There are not as many coming out of the military now,” says Nic. “During the Vietnam era, helicopters were in great use, but not so much in Afghanistan and Iraq.” N.C. Helicopters has no affiliation with the military but does have some students with past military experience.

Pilot licensure initially requires a minimum of 40 hours of in-flight training. At an average of $275 per hour, training calls for a significant investment; an average of $11,000 to $12,000 is equivalent to the cost for a year at many colleges and universities.

“Students’ access to funding is the biggest challenge,” acknowledges Rocco. “Most people pay out of their own pocket. It is difficult and rare to get bank loans for flight school.”

There are some organizations of experienced pilots and aviation industry people who provide students with financing but the criteria for the loans is extremely high, according to Rocco. Women often have better luck because of an organization named Whirly-Girls which gives out scholarships and grants to women for flight school.

 

On Top of the World

Being at the controls is not everyone’s cup of tea. For those that seek out the Queen City helicopter service for quick transportation or a great scenic tour,they are well rewarded. Queen City Helicopter is set up to provide flight tours for aerial photos and real estate surveys, and transportation for events of all kinds including birthday or anniversary celebrations, Easter egg drops, festival rides, vineyard tours and tastings, and high school career days.

The company frequently tours over Charlotte, Crowders Mountain and Lake Norman. Gift certificates are popular as are corporate incentives and rewards. Recent tours include a flight over Charlotte with members of a visiting band, Emperor, to assist them in their production of a tribute video to Sandy Hook victims, and flights over Lake Norman to photograph power boat poker runs. The company is also working with the Charlotte-based security firm, Karl de la Guerra Associates to provide VIP and tactical training for pilots.

The Robinson helicopter can seat one to three passengers at a time. Tours are affordably priced and in many instances are less expensive than a zip-line experience. Cost is based on time, calculated by a Hobbs meter, versus distance. The helicopter can travel at speeds between 115 and 120 miles per hour. Helicopters can hold enough fuel for three hours of operation.

Regionally, the company’s helicopters can land for refueling at Wilson Air Terminal at Charlotte Douglas International Airport and the airports in Gastonia, Shelby and Lincolnton. The number of customers varies greatly depending on promotions, the weather and events taking place. There is generally more activity in the summertime.

In their final stages of its application for 135 certification, Queen City Helicopter Corp. will soon be certified to transport passengers from point A to point B, meaning that a passenger could book a flight from Charlotte to Myrtle Beach, S.C., for example. The Novellis anticipate significant increase in business from both business and individual traveler sectors as a result.

The company is hoping to participate as part of the grand opening event for the new Charlotte Knights Stadium. Ironically, Charlotte’s largest event of this past year, the Democratic National Convention, did not provide any work for the helicopter company—in fact, it actually brought business to a screeching halt. “They put a temporary flight restriction in place to protect the President and that affected a 30-mile radius around Charlotte. We couldn’t even start a helicopter engine,” says Rocco ruefully. “Technically, if you did go up, the government could send an F-16 or Black Hawk to shoot you down,” grimaces Nic. “We worked it so the helicopters were in the shop for required maintenance during that time, about a week.”

Conveniently, Queen City typically conducts flights in uncontrolled air space where no flight plan is needed. “You don’t have to talk with anyone if you don’t want to,” says Nic, although he quickly points out that he does maintain contact through the appropriate radio frequency for the class of airspace. When entering controlled airspace such as that around the Charlotte Douglas, one must be in communication with their control tower. What is and is not controlled airspace is based on volume of flights in the area.

 

Flying High

The Novellis hail from a town on Long Island, N.Y., called Shoreham Wading River. Nic grew up and went to school there. His first exposure to aviation was in high school through an experiential learning program that allowed students to pursue various vocational and technical curriculums. He spent half of his school morning at the airport where he learned to fly airplanes. He would fly over Manhattan and the Statue of Liberty. Then, he went on a helicopter discovery flight and was hooked.

“That was it; I’ve never looked back,” says Nic.

Part of his motivation for owning a flight school was due to the fact that several of the flight schools he attended were in the process of going out of business.

“There are a lot of pilots trying to be businessmen,” says Rocco. “They don’t have the right skill set and end up not making it. We did a thorough feasibility study and also found out that no one else in the area was flying Robinson helicopters, so we decided to open our own business.”

Rocco is a former New York City police officer who ventured in real estate. He and Nic moved to North Carolina’s Piedmont in 2009.

Much of the plans for the company over the next five years have to do with marketing and promotion. “People don’t yet know we’re here,” says Rocco. “We need to get our name out there.”

The Novellis are working to connect with regional high schools and community colleges to become a resource for vocational and technical training, perhaps similar to what Nic experienced in Long Island. “There are enough potential students regionally to support the flight school,” says Rocco.

The tour side of the company is already contracted to provide tours for the upcoming American Legion World Series (baseball) which is held in Shelby, and also the annual Foothills Wine Festival in Morganton.

Both N.C. Helicopters and Queen City Helicopter Corp. are active in the various tourism offices and efforts of Mecklenburg, Gaston and surrounding counties. Nic handles the internal marketing graphics and has designed the company’s web site, brochures and business cards.

Budgeting and other financial planning can be difficult with a constantly shifting customer base but the Novellis say they anticipated this variable in their business plan. “I’m very happy with how we’ve progressed so far,” says Rocco. “We’re in a good place.”

Rocco points out that fuel costs are even more unpredictable. Fortunately, the company’s established prices incorporate fuel costs and it hasn’t been necessary to raise them in the past year, says Rocco.

“We give good value,” promises Rocco, who adds that flight schools are not very competitive with each other regarding cost. “You can’t really cut costs because maintenance and fuel are built into tuition fees.

“In order to distinguish your school from another you must provide a higher quality of service, project a strong image of safety, have state-of-the-art facilities, and maintain clean and modern aircraft. It’s a small industry but there is plenty of work out there for everybody if you provide the right level of service.”

When Chiquita Brands International was looking for a new headquarters location, one of the primary reasons they chose to move to Charlotte was Charlotte Douglas International Airport. With direct flights to many of Chiquita’s main business centers in Europe and Central and South America, Charlotte was a perfect fit.

That scenario has played out any number of times, with Charlotte Douglas figuring sizably in corporate decisions to move to the Queen City as well as event planners to host in the city.

As the largest connecting hub for US Airways, Charlotte may have the best air service of any city its size in the world. Charlottebusiness and leisure travelers benefit from over 700 daily nonstop flights to over 100 cities in the United States, plus 35 more around the globe. It is the 6th busiest airport in the world in aircraft movements, and is 11th nationwide and 25th worldwide in passenger traffic.

Without a doubt, Charlotte Douglas has been a key driver of economic growth for the Charlotte region over the last three decades. According to UNC Charlotte’s Center for Transportation Policy Studies, the airport contributes nearly $10 to 12 billion in annual total economic impact to the region, and more than 100,000 jobs are either directly or indirectly tied to the airport and its services.

Now, with the US Airways and American Airlines merger underway to create the world’s largest airline, and with the Norfolk Southern Intermodal Facility at the airport becoming operational late this year, Charlotte Douglas’ role will expand from being the largest hub for the nation’s fifth largest airline to a global hub for the world’s largest airline and one that can be simultaneously accessed by air, rail and highway.

Alongside the new trade corridors being opened up to the East coast because of the expansion of the Panama Canal (to be completed next year), Charlotte Douglas is poised to become an “inland port” for world trade. It is no wonder the city of Charlotte and the North Carolina Legislature have recently begun battling for control of this crown jewel.

 

Successful Leadership

  1. J. “Jerry” Orr is the chief executive of Charlotte Douglas International Airport. As Aviation Director, Orr is responsible for all aspects of the airport’s operation. Orr is a native of Charlotte and a 1962 graduate of North Carolina State University where he received a bachelor degree in Civil Engineering. From 1962 until 1975, he operated his family-owned land surveying business. In 1975, Orr joined the City of Charlotte’s Aviation Department as a staff engineer and was named Aviation Director in 1989.

He says his management strategy hasn’t changed from 24 years ago: “We decided that was about providing the highest level of service at the lowest possible price. So that’s how we structured the program, and that’s how we’ve always run the program.”

Eric Spanberg of the Charlotte Business Journal captures the “plainspoken visionary’s” personality regularly in his news columns. One example: “At 71, Orr remains blunt and spry. His cryptic sense of humor is a constant, as demonstrated by his relish for telling CEOs and civic groups the airport is spending money ‘like a bunch of drunken sailors.’ The truth, of course, is anything but.”

Or his description to Spanberg of running the airport: “We look at it like we’re running an infrastructure platform that is publicly owned and operated without any cost to the public, which is a pretty good deal. We run it very much like a business. We don’t like to tell people ‘no’; we don’t like to make people mad. We like to find common ground, knowing that if we make them successful, it will make us successful.”

Although the 71-year-old hints from time to time about his imminent retirement, talking about how much he enjoys picking oranges from the tree outside his house near Charleston, when asked point-blank about retiring in 2013, he responds in his usual taciturn style, “No. Maybe another year.”

Known for his unique style and fiscal stewardship, Orr is respected as a visionary in aviation by leaders in the industry. During his 38-year tenure at Charlotte Douglas, Orr has developed, implemented and refined unique solutions to challenges in an ever changing industry, resulting in an air transportation facility with continued airline growth that is one of the most cost-efficient airports in the world.

Orr also developed the CLT Air Cargo Center and has led the extensive development of corporate aviation, resulting in the locating of seven Fortune 500 corporate flight operations at CLT. He has spearheaded the establishment of the airport-based intermodal facility, connecting four modes of transportation—air, rail, sea and highway—in one location, transforming Charlotte into a major global freight center.

Voted Charlotte Business Person of the Year 2012 by the Charlotte Business Journal as man-in-charge of what has become an airport of international distinction and one that is vital for keeping and recruiting companies and jobs to the region, he is noted for being “off limits” to political rhetoric and none too keen on excessive supervision.

It doesn’t matter if you agree with his management style; the results speak for themselves—he has steadily built Charlotte Douglas into the nation’s most efficient operation, working closely with US Airways/American Airlines to secure its hub status, and is creating the airport of the future.

According the Air Transport Research Society, Charlotte ranked as the most “cost-competitive” airport among 30 large U.S. airports studied. And among several dozen airports in North America, Charlotte also had the lowest landing fees for a Boeing 767.

Orr is quick to point out that even the airport’s bond rating as well as passenger traffic have increased over the last few years, both of which are against the flow.

 

Significant Growth

The airport that preceded today’s facility was privately owned and used only on weekends for air shows and military pilot training. In 1935, with the leadership and foresight of Mayor Ben Elbert Douglas Sr. (for whom Charlotte Douglas International Airport is named), Charlotte voters approved a bond that brought the airport under the management of municipal administrators and set the stage for the expansion that was to come.

Charlotte’s airport was an airline “hub” long before people even called them that. In the early 1970s, Eastern Air Lines used Charlotte as a regional connecting point, funneling passengers from other cities in the Carolinas to connect with flights to the Northeast, Florida and upper Midwest.

But it was the Airline Deregulation Act of 1978 that ultimately set Charlotte on course to become one of the nation’s largest airline hubs. In a regulated environment, Winston-Salem-based Piedmont Airlines’ mission had been to serve smaller communities and feed passengers to Eastern and Delta in places like Atlanta.

But after deregulation, Piedmont was free to expand its own route network, buy bigger airplanes, and fly passengers to their final destinations without funneling them to the bigger rivals. Charlotte was perfectly positioned along the east coast flyway between the Northeast and Florida, and in 1979, Piedmont picked Charlotte as its first hub.

While deregulation was a boon for Piedmont, Eastern struggled to adapt its cost structure to the changing market environment. As Eastern was dying, Piedmont flourished, eagerly assuming all of Eastern’s vacated gates. In 1989, Piedmont merged with USAir, and in 2005, USAir and America West merged to form US Airways.

Fueled by the mergers, Charlotte has continued its meteoric growth trajectory. Total annual enplanements have grown from less than two million passengers in 1980 to over 20 million in 2012. In 2010, the airport was the fastest growing airport in the world outside of the Pacific Rim and Middle East.

Synergistic Growth

While many cities have seen air service decline as the industry consolidates through mergers, Charlotte has bucked the trend. US Airways has continued to add both domestic flights and international destinations, and the airport’s other domestic carriers—Delta, American, United, Jet Blue and Air Tran—have also added service. This month Southwest Airlines flights will replace those of their Air Tran subsidiary as part of the operational integration of those two carriers.

Earlier this spring, US Airways and American Airlines announced an agreement to merge, creating the world’s largest airline. According to airlines officials, the new carrier will operate as American Airlines and be headquartered in Fort Worth, Tex., where American has its headquarters now.

US Airways’ CEO Doug Parker will serve as CEO, and the new American will offer 6,700 daily flights to 336 destinations in 56 countries with hubs in Charlotte, Chicago, Dallas-Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix and Washington, D.C.

Parker says he is confident of antitrust approval because both airlines networks are so complementary: “One of the holes in the American Airlines system is up and down the East Coast, particularly the Southeast. Charlotte fills that hole extremely nicely.”

Furthermore, Parker contends the merger will strengthen the industry because American will become the largest airline but remain comparable to Delta, United and Southwest, with American-US Airways accounting for 25 percent of the total airline seats in the United States.

Both airlines’ officials as well as Orr expect Charlotte to prosper as an American hub—anticipating that traffic will continue to grow. According to Parker, US Airways and American Airlines overlap on 12 routes out of 900, which bodes well for retaining almost all of the employees. Executives from the airlines hope to close the deal in the third quarter.

 

Running a Tight Ship

Ask the airport’s aviation director to explain Charlotte’s success and he will tell you it all starts with smart cost control, as well as offering a high quality product that meets airline and passenger needs. Unlike some other cities that have built large, sometimes extravagant terminals at enormous cost, Orr says Charlotte has stayed true to the principle of building the airport one brick at a time.

“I’m a small businessman and I run this airport like it’s my own small business,” declares Orr. “Revenues need to exceed costs; you don’t spend money you don’t have; and you don’t spend money that you don’t need to. We’ve built only what we could afford, but we built everything to be expandable. So we’ve just added on to it as the demand is there.”

Orr says the airport’s efficient operation helps keep the rents and fees paid by the airlines the lowest of any major domestic airport. According to Fitch Ratings, CLT’s cost per boarded passenger is only about $1 per passenger, compared to a national median of $9.97. Airport concession and parking revenue also helps defray operating costs for both the airport and the airlines.

Orr predicts continued growth after the merger as a direct result of the airport’s low cost advantage.

“The new American can choose to feed Latin American and Caribbean passengers through Miami or they can choose to feed them through Charlotte. But the cost per passenger in Charlotte is $1, and the cost per passenger in Miami is almost $20. Do the math.” He also points out, “Miami is a very crowded airport. Charlotte is a lot easier to navigate.”

Orr also looks at American’s extensive international network and sees potential for many new international destinations out of Charlotte Douglas. Between now and 2020, experts predict that 75 percent of the growth in air traffic will come from emerging markets like Latin America, and Orr thinks that Charlotte will capture its share of that growth.

“To start service to a new international city, an airline must negotiate with the foreign government, get State Department approval, obtain a gate, hire staff, and set up the operation in that new city before they ever carry the first passenger,” explains Orr. “That’s a lot of work on the front end. But with the merger, the new American could start flights fairly easily from Charlotte to many of the places they already serve. That means we can grow our international traffic more quickly.”

 

Charlotte Regional Intermodal Facility

Ironically, one of the largest projects currently underway at the airport isn’t really about airplanes per se. It’s an “intermodal facility,” offering a freight hub with a combination of available transportation (rail, highway and air). Add to that the direct access to shipping ports, and it becomes an “inland harbor.”

Orr was the visionary for the concept back in 1994. He describes that they had an FAA-mandated master plan coming up (a federally required plan), and rather than just meet the plan, they wanted to take a broader look at how the airport fit in the Charlotte region and how it could grow.

Orr commissioned strategic urban planner Michael Gallis to study the issue. “At the time, passenger traffic was soaring at the airport hub, but air cargo traffic was limited to freight coming to or from the local market. Charlotte freight was actually being trucked to international freight hubs in Atlanta and New York to be flown to world markets,” describes Gallis. As Gallis studied those larger freight hubs, he saw an opportunity for Charlotte to compete.

“The freight infrastructure was very fragmented in these other cities,” explains Gallis. “The airport, rail yards and truck terminals were not near each other, nor were they well connected. So we realized that the way to out-compete these other cities was to develop a new kind of freight hub—one where all the different transportation modes would be located at a single center. That concept gave rise to the idea of building a rail yard at the airport between the runways.”

The airport provides an attractive rail freight base not just because of the obvious proximity to air freight, but also for its easy access to Interstates 77 and 85. Those, in turn, link freight to three major Eastern seaboard ports: Charleston, S.C.; Savannah, Ga.; and Jacksonville, Fla.

Freight arriving in containers at seaports like Charleston or Savannah can travel by rail to the intermodal yard and the containers can then be transferred to trucks so they can hit the roads to their final destination. This is sometimes referred to as an “inland harbor.”

While traditionally there isn’t a lot of direct freight transfer between a rail line and an airport, the hope is the rail yard will attract a cluster of truck terminals that can feed freight to either the intermodal yard or the airport. Because all three modes of transport will be located at the same place, the transfer times will be reduced, as will complexity and cost.

The idea made sense and took root. In 1998, Charlotte business executives began hatching plans for the freight center as part of a Charlotte Chamber initiative called Advantage Carolinas. Construction of an intermodal facility became an important part of the airport’s CLT 2015 expansion plans.

With a lot of foresight and frugality, Orr realized that when the airport began work on a third runway alongside I-485 several years ago and needed 10 million cubic yards of dirt to stabilize the land, the cheapest, most environmentally friendly place to get that dirt was right next to the runway.

“So after we moved all that dirt, we were left with a big flat graded area that just happened to be the same elevation as the main line of the Norfolk Southern railway that runs north of the airport. It all just fit together naturally,” Orr says matter-of-factly.

Charlotte is a key hub on the Norfolk Southern intermodal system and on their Crescent Corridor stretching from New Jersey to Memphis and New Orleans, so it was a natural fit for them as well. And thus the graded land started the footprint of the rail freight yard. Gallis calculates an estimated $20 million in savings created by Orr’s forethought on the project.

In spring 2012, the city of Charlotte and Norfolk Southern entered into a formal agreement for the $92 million regional intermodal freight hub between the two west-side runways, which will replace the existing, outdated 40-acre intermodal facility at North Davidson and North Brevard streets. Construction is presently underway, with operations commencing in late 2013 and completion expected in late 2014.

“With a major international airport here along with highway and rail, you have accessibility to all modes of transportation. It places us at the intersection of those rivers of commerce,” Orr points out.

“Charlotte Douglas has done something almost no airport has done, which is to lay the foundation for the future,” says Gallis. “The intermodal yard will be a centerpiece of completing a multimodal integration that does not exist anywhere in U.S. at a single facility.”

Charlotte will become more attractive because companies will be able to move goods without having trucks on city streets. Instead, cargo can move by air, by tractor-trailer on interstate highways or by rail to nearby ports, with all transfers at a single, security facility.

“It’s about creating an integrated global-trade hub that can move goods by any mode,” affirms Gallis. “It will transform Charlotte from a big airport to a global trade center…that’s a quantum leap.”

City officials estimate the 200-acre freight hub will generate $9 billion in economic impact, creating 5,000 jobs over the next 20 years. Mayor Anthony Foxx says the hub “places Charlotte even more in the manufacturing, distribution, transportation and economic growth business.”

Orr adds that the relocation from uptown will also relieve the center city of 500 tractor-trailer trips each day.

Chamber president Bob Morgan likens Orr to a master chess player: “Jerry has the next 50 years mapped out. When Jerry leaves—if Jerry ever leaves—his successor won’t need to be a visionary because the vision is already there.”

Nobody knows just when Jerry Orr will pack his bags, but for as long as he stays around, you can bet it’ll be good for Charlotte’s bottom­ line.

BizXperts

S corporations are a very popular form of business entity, accounting for over 43 percent of business entity tax return filings in 2011. In fact, S corporations nearly doubled C corporation filings (arguably what most people think of when they hear the term “corporation”). Although S corporations are clearly in favor, some of their governing regulations can present unsuspected consequences.

An S corporation is a ‘flow-through’ entity, aptly named as its tax effects flow through to the owners’ individual tax returns. It is this blend of business and individual tax that leads to some of their most complex rules. The advantages to S corporations of avoiding double-taxation and the potential to minimize payroll taxes are well documented. However, the intricate and restrictive rules over its owners are relatively less understood and could be costly if not complied with.

For the purposes of this article, the term “owners” refers to greater-than-2-percent S corporation shareholders.

 

Health Insurance-Related Items

In order for owners’ health insurance premiums to qualify as deductible expenses, the plan must be established through the business. This is not to say that the plan needs to be in the business name. However, the payments must filter through the business, either from reimbursement to the owner or paid directly by the corporation. Also, an owner or their spouse must not be eligible for coverage through another employer in order to receive the deduction.

Perhaps the most convoluted regulation over S corporation owners involves the reporting of health insurance, long-term care, and health savings account (HSA) contributions paid on their behalf. Health insurance-related benefits are required to be treated as compensation taxable to the owners on their W-2.

However, if actual wages are received up to the amount of premiums paid, the owner is then allowed to deduct them on his/her personal tax return. Why include health insurance as income and then a few lines down allow it as a deduction? The likely answer is to prevent passive investors (not receiving wages) from using the entity to deduct their insurance premiums.

 

Section 125 Plans and Flexible Spending Arrangements

Both section 125/cafeteria plans and a derivative of them, Flexible Spending Arrangements, can save employees thousands of dollars annually. However, owners’ participation in the plan could cause its disqualification and render all benefits provided by the plan as taxable to the respective employees.

 

Disability and Life

Disability and life insurance premiums paid by an employer are generally deductible by the business. However, if owners want any potential proceeds to receive tax-free treatment, they are effectively not allowed a deduction for the share of premiums paid on their behalf. Such premiums should be included in their income through their W-2.

Unlike health insurance premiums, disability and life insurance expenses do not become deductible on the owners’ individual returns to offset the inclusion in W-2 income.

 

Shareholder Loan Documentation

Although the brevity of this article prevents us from discussing the details of why, loans between the owners and the S-corporation can provide tax benefits to the owner loaning the money. But, this is only true if the loan is properly evidenced by formal written documents that specify a qualifying purpose of the loan, collateral, interest rates, etc. Otherwise, repayment of a “loan” to the owners may carry some harsh and unintended tax consequences.

 

Reasonable Wages

One of the advantages of S corporations over partnerships is that payroll taxes are avoided on the S-corporations taxable income; only the wages paid to the S corporation owners are subject to payroll tax. To prevent S corporation owners from abusing this benefit through deflating their salaries, the IRS requires that the business pay the owners “reasonable compensation” in light of the owners’ duties. The definition of “reasonable compensation” is not clearly defined and often varies from one situation to the next.

 

Owner Home Offices

There are multiple regulations in place that greatly diminish or otherwise eliminate tax benefits from an owner charging the S corporation rent or from the owner claiming a home office deduction involving the corporation’s business.

 

As with most things tax-related, there are sometimes exceptions to these general rules (which also may have exceptions). We encourage you to consult your tax advisor if your business participates in any of these activities, in order to see how they may affect you and to avoid any unintended consequences.

 

Content contributed by Potter & Company, a local certified public accounting firm offering core services of audit, tax, business consulting and financial analysis. Content written by Dan Huskes, CPA. For more information, contact him or John Kapelar, CPA, Partner, at 704-662-3146 or visit www.GoToPotter.com.

Part Two: Are You “Personally Ready” to Sell?

 

Last month we looked at the first two personal motives that can influence your timing on selling your business—taking “chips off the table” and losing the “fire” in your belly. Let’s look at the next two scenarios that can influence your decision to cash out of your business and move on to the next stage of your life.

 

The Successor Selected Doesn’t Work Out

     A successor or successors are anointed from within the business (a key employee or usually two) or from within the family (a child or two). If no one has:

 

  1. stepped forward;
  2. the talent to take the business to the next level;
  3. demonstrated sufficient commitment to the business (at least equal to what yours had been); or
  4. the money now or through future cash flows from the business adequate to buy the business; then the business has become too valuable or too complex to transfer to anyone other than an outsider. Let’s look at how one fictional business owner tried (and failed) to lure his desired successor into ownership.

 

It was the most unexpected outcome imaginable. John owned a disaster recovery service that had prospered for the last 20 years. As a careful, conservative businessman of the “old school,” John had amassed a significant fortune outside of the business—a business that earned $1 million or more each year. One of John’s exit objectives was to reward the key employees who had helped build and sustain his successful company. After much soul searching, John decided to “give” the business to his key employees. They would pay him nothing out of their own pockets.

The technique John used to give the business away was to have the business contribute money to a separate fund for three years. At the end of that time period, John would receive the money as a down payment for the purchase of the company. The down payment would equal 50 percent of the purchase price.

The remaining 50 percent would be paid to John over the subsequent six years from the available cash flow of the company. If cash flow was insufficient, John was willing to accept a longer payout period, although if cash flow continued as expected, it would be more than adequate to pay John the remaining balance.

In short, John would pre-fund his own buyout with three years of revenues (money he would otherwise be entitled to) and would obligate key employees and the company to provide the remaining 50 percent of the payment solely from the future cash flows of the company. In essence, John was “giving” the company to his employees.

At the end of six years, without one penny coming from their own pockets, John’s employees would own a company producing at least $1 million of cash flow per year. Imagine John’s surprise when their unanimous response was, “Thank you very much, but we don’t want to own the company. There’s too much risk in this business.”

John’s exit advisor was not nearly as surprised as John because through experience the advisor had come to realize that many key employees—wonderful, valuable and contributing employees that they are—simply have little tolerance for the risk that is part and parcel of business ownership. In John’s case, the employees weren’t even willing to be given the company.

 

There’s More to Life than Building and Running a Company

Many business owners reach a point where they realize that there are a lot of things that they want to do while they are young enough to enjoy them. These include active vacations, spending time with family and friends, service work and personal growth and development which they can’t get to because they are too busy running their business.

Many Boomer owners are deciding to pursue a second life or second career full of possibility, activity and involvement. This crowd gravitates toward race car seats rather than rocking chairs. To be strapped into the driver seat, owners need financial, emotional and time freedoms.

If you find yourself falling into one of these categories, then the time may be now to create a plan for preparing your business for your eventual exit. Find an expert advisor that can help guide you through the process of reviewing all of the factors associated with exiting your business and creating a comprehensive exit plan that addresses all of your personal and business objectives.

Article presented by Robert Norris, founder and managing partner of Wishart Norris law firm, a member of Business Enterprise Institute’s International Network of Exit Planning Professionals. © 2013 Business Enterprise Institute, Inc. Reprinted with permission. Wishart Norris law firm partners with owners of closely-held businesses to provide comprehensive legal services in all areas of business, tax, estate planning, exit planning, succession planning, purchases and sales of businesses, real estate, family law, and litigation. For more information, contact Robert Norris at 704-364-0010 or Robert.Norris@wnhplaw.com.

Recently, several fraudulent checks were cashed against our company’s bank account. Some thief obtained our RTN and account number, and then manufactured fake payroll checks from a regional staffing company with the names of three big banks printed on them. It was a mediocre job at-best—something any high school could create on their laptop computer—but good enough to fool a few tellers and cashiers.

As a result, the funds were debited from our account, and it took a few weeks to have those monies re-deposited into our account—after filing police reports in each of the jurisdictions that a check was cashed. During this unfortunate experience, I decided to dig deeper into the seedy business of fraud and identify theft and concluded the following:

 

It is incredibly easy to defraud the financial industry and its customers;
There are an infinite number of very easy methods by which your identity can be stolen and exploited—as a business owner or as an individual; and
Just as easy, are the preventive measures.

 

Nearly all identity theft starts with the stealing of source information—it is rarely created. In our case, that source information was our company’s bank account number, which had to be obtained from a valid check, either paper or electronic. So I started mapping the possibilities.

First, I considered the paper check. We issue dozens of paper checks each month to vendors, which sit in mailboxes. Once received and processed, the check stubs are often discarded into trash cans and recycling bins. It is just too easy for someone who is willing to steal mail or go “dumpster diving” to retrieve this information.

The first step in protecting yourself against fraud—shred everything that has your name, address, financial and other information—including credit card applications and other offers having your name and address.

Then I started mapping the possibilities for nefarious collection of information via the Internet.

Our accounting team often collaborates via email with scans of cancelled checks, bank statements, and other source information. Our finance department uses online requests for wire transfers, and our purchasing specialists conduct online transactions—all quite susceptible to malware and phishing schemes.

Phishing is the practice of tricking people into divulging private or sensitive data by fake email links and websites. This has been shown to be more than 80 percent effective. Why? Two recent studies indicated that most business people ignore warnings from their Internet browser.

Firefox, Internet Explorer, Safari and Chrome notify the user when an Internet site does not have validated credentials. When asked, most people don’t realize that their reflex of clicking “Ignore” to a warning (shown) puts them at significant risk of a phishing attack.

Unless you trust the source, and verify the URL, it is strongly recommended that you select the “get me out of here” button when your browser warns you of an untrusted site.

Your browser also indicates when you have a secure connection to a website—in technical terms a Secure Socket Layer (SSL)—a communications protocol for encrypting information over the Internet. Without an SSL connection, thieves can easily impersonate / replicate a trusted website (i.e., bank, bill pay, online store, etc.) and trick you into providing account information including usernames, passwords, and account numbers.

Once you have typed in that information, it is off-to-the-races for the thieves. To minimize this vulnerability, be sure to verify an SSL connection when entering any and all private information. The URL should include an “s” in the address “https://…”

Having your identity stolen is as invasive as someone breaking into your home. Locking you’re digital doors by following these few simple actions will thwart most attacks.

In the next article, I will introduce several methods for encrypting data for safe transmission over the Internet.

 

Content contributed by Advanced Mission Systems, LLC, a company specializing in technical surveillance and physical, electronic and cyber security for military, law enforcement, commercial and individual use. For more information, contact Jerry Snyder at 980-819-2600 or visit www.amsdv.com.Jerry Snyder is President of Advanced Mission Systems, LLC. AMS specializes in technical surveillance and physical, electronic and cyber security for military, law enforcement, commercial and individual use.

Publisher's Posts

While the Affordable Care Act (ACA) was passed by Congress and signed into law in 2010 and was substantially upheld by the U.S. Supreme Court in mid-2012, the impact of its reform efforts will not take full effect until January 1, 2014 when individuals and employers will be mandated to purchase coverage under the new requirements set forth in the legislation and directed by the administrative rules established by the Department of Health and Human Services (HHS).

In all likelihood, you have an opinion about this Act and what it will do to or for your life, your business and your family. Regardless whether you support or oppose its implementation, it is the law and we must make every effort to comply with it.

What is important to know is that the Affordable Care Act is not incremental, but substantially systemic reform of our health care system. Our system of health care in the United States is badly in need of changes. The primary funding for health care—employer-provided coverage, Medicare (coverage for those over 65) and Medicaid (means-tested coverage) are failing or have failed to deliver coverage at an affordable cost for a significant share of the U.S. population.

Businesses are reaching the breaking point. An increasing number can no longer afford coverage for their employees or their families. As a result, more and more are going without coverage.

At the same time, health care costs continue to skyrocket. Those without coverage are receiving uncompensated care which is significantly more expensive than regular primary care. Add to that the advancements in medicine, technology and pharmaceuticals, as well as the fact that individuals are living longer, and it becomes apparent why total spending on health care has soared to 18 percent of GDP.

Total spending for 2013 will be nearly $3 trillion in the United States. Private insurance and out-of-pocket spending will reach $1.26 trillion or 42 percent of the total. Public spending through Medicare, Medicaid, and all other federal programs will total $1.72 trillion or 58 percent of the total. With nearly 10,000 Americans reaching 65 years of age each day, total spending will climb to about $4.6 trillion in 2020. Per person, that is $9,348 per year in 2013 and $13,708 per year in 2020.

Considering all these elements, it is important that our health care system change. There are four yardsticks that need to be applied to reform—access, coverage, quality and cost. To a degree, the Affordable Care Act addresses access, coverage and quality, but it does very little to address cost. Costs to the individual, costs to the employer and costs to the health care provider are going to grow.

The ACA’s mandated Health Insurance Exchanges (HIX) open for enrollment Oct 1, 2013. They are state or federal online marketplaces where Americans can purchase “affordable” health insurance from private health care providers. Shoppers can use a price calculator to find the best deal for them and their family. The health insurance exchanges are estimated to provide up to 23 million people with affordable health insurance.

States can build a HIX on their own, partner with one or more other states, or have the federal government build and run the insurance exchange for them. Both North and South Carolina have opted out of forming an exchange, so individuals will participate in their federal exchanges for coverage to take effect as of January 2014.

The HHS will soon release the package of essential benefits required of insurance carriers to offer individuals through the exchanges. Among the choices will be coinsurance at 60, 70, 80 and 90 percent levels.

We want to be helpful to you in complying with the implementation of the new laws and regulations and choosing your appropriate options. We are planning content for upcoming issues and would welcome hearing about your questions and concerns. We are assembling resources and experts who are knowledgeable and thoughtful to deliver you comprehensive information on your options.

The Affordable Care Act is not a finished product. It will undergo many changes, amendments and improvements over the next several years. We must act to address care from the direction of access, coverage, quality and cost so that we can continue to succeed as individuals and as a nation.

I invite your input, feedback, recommendations, questions, concerns, thoughts and ideas. Please email me at jgalles@greatercharlottebiz.com or call me at 704-676-5850 x102.

WELCOME TO CLT.biz!

Yes, I want to subscribe to CLT.biz Insights and join the CLT GLOBAL AMBASSADOR NETWORK promoting economic growth and development in the greater CLT region.

Please keep me up-to-date and informed about CLT assets, resources and economic progress.

Thank you, John Paul Galles