Advice on creating a non-profit FAA Part 135 non-scheduled air charter service?
Asked by Born2flyAK
I have the opportunity to go into business with my cousin/colleague by buying out a small FAA Part 135 non-scheduled air charter business in Interior Alaska that we are both employed as pilots for. The company has a fuel truck, a Cessna U206F Stationair 6 on wheels, and floats for it are included. There is also a Piper PA-12 Super Cruiser on wheels, that is not included in the sale. The owner is willing to sell the whole company to us for $120K, not including the PA-12. He will take $20K down and finance us at 7% for 5 years. As of yet, neither of us has the financial means nor have been able to secure loans to outright buy the business or cover the $20K down payment. The company has been in operation for 30+ years and the current owner (son of the original founder) is ready to hang up his hat and retire (he has made a very well living from his airline and other business ventures). This company once was much larger, with scheduled flights throughout Interior Alaska, many more aircraft, and pilots. Due to various reasons including slower business in hunting/guiding operations, closings of nearby goldmines and general economic recession, flying business in Alaska is not as profitable as it once was. However, once aspect of the business has not seen recession. That is of local residents and natives needing to travel through the state for personal/medical/professional reasons. Through my own observation throughout my life, and being an Alaska Native myself, (mostly Yupik Eskimo along with a few Eurpoean descents) I think a non-profit orginization providing air transportation services to the peoples of Alaska (native and non-native) would better serve the interests of the residents in a state that almost completely depends on aviation for normal day-to-day life as well as emergency medical service. I was raised in Alaska, around aircraft, have been flying for over 10 years with 6 years professional experience and have watched the cost of flying within the state more than triple. Having the professional experience I do, as well as professional contacts as managers and pilots, (current and former) of several air carriers in the state, I also know of the direct and indirect operating costs and the profit margins associated with operating aircraft charter businesses. From my experience profit margins of $100-$200 per hour of aircraft operation are very common (small business, low-overhead, to larger high-overhead part 135 scheduled operators). My former employer operating a scheduled commuter/charter business with 2 Piper Cherokee 6's and a Piper Navajo Chieftain was netting just over $200,000 in profit annually, with just 2 pilots, the owner and myself. I understand costs of an airline, including office overhead, aircraft loans, fuel, maintenance, pilot payroll, insurance, as well as other maintenance surpises unavoidable with aircraft. My question is, could it really be feasible to run a non-profit airline, or are my figures a bit off the mark? Many airlines (both large and very small) have failed miserably trying to MAKE a profit. Could an airline survive by being able to substantially lower prices while remaining solvent, and would this really make enough difference to ramp up business enough to be successful? I am working on a business plan to pitch to the board of directors of my native corporation to gain interest in such a venture. Operating a non-profit flightschool run completely on grants and scholarships to increase local/native hire is another vision of mine (I earned my commercial pilot ratings the hard way, blood, sweat, and tears to pay for school) Applying for grant and scholarship funding was nothing but a waste of time and a hinderance to achieving my goals. Even in a receding economy, aviation will not go away in Alaska. I would really appreciate input on this matter, thank you all who took the time to read through this long-winded question. If any of you have a better idea, I'm open to suggestions. I guess I meant creating a non-profit orginization that would own this part 135 operation, (I'm no business major, correct me if needed)

Best Answer:
The short answer is that you cannot run a non-profit organization if it would compete with a for-profit organization. That doesn't mean that you can run a non-profit organization simply because your business doesn't make money. The only incentive of a non-profit status is being tax exempt. Since Alaska doesn't have any taxes to speak of there is very little incentive for you to pursue this. For-profit corporations are allowed to pursue grants etc. Additionally, non-profits have to be ran like a corportation. They cannot be ran by proprietors. This means you need a board of directors etc that have to be voted in and after a couple of years the corporation is running in a way that you never intended. When you are financing anything, you cannot normally (legally) borrow money for the downpayment. It is supposed to be YOUR money that is offered as your stake in the "risk" of the transaction. Since this is an owner-financed opportunity offer him something else, like a lower buy-in in exchange for more money for him later.