IASCO

Providing flexibility for airlines, opportunities for pilots

 

By

 

Ken Cubbin

 

 

     Despite economic hardships the aviation industry has suffered over the last few years, Boeing predicts that the future will likely be brighter for airlines. In the next twenty years, if Boeings projections prove correct, the global commercial airline and freighter fleet will more than double to 37,500 airplanes. By some estimations this growth will require an additional 416,000 new pilots with a resultant annual investment in pilot training of approximately $3.5 billion. Obviously this should provide tremendous opportunities for training organizations

 

Also, in the cyclical environment of the airline industry, many airlines have come to realize that outsourcing services, such as maintenance and training, can provide the flexibility they need to control costs and dampen highs and lows. Some carriers, particularly in Asia, have extended their economic flexibility to include outsourcing aircrew.

 

IASCO, a leading organization that provides ab initio pilot training and aircrew leasing services, may be perfectly poised to reap the benefits of industry trends. 

 

IASCOs beginning

 

    Following World-War-Two there was a huge demand for freight and emigrant movement between Europe and the Americas. Transocean Airways was founded in 1949 to fill this need. The fledgling airline operated war-surplus DC-4s with mostly American crews. Among the pilot ranks were two irascible, but highly professional pilots: Captains Jack and Smith were to become the principal founders of IASCO.

 

Around the same time, Japan Airlines (JAL) was in its embryonic stage of development. Originally JAL operated DC-3s and Martin 404s on Japanese domestic and regional routes, but as the airline entered the 1950s, it expanded into international operations with DC-6s and DC-7s. But, because of the war, Japan had a limited pool of Japanese pilots on which to draw. It had, therefore, been necessary for JAL to hire foreigners virtually from the beginning of its operation, but as the jet age approached, it was clear that many more foreign air crew would be needed to facilitate the airlines expansion plans. Jack and Smith got wind of JALs need and offered to help recruit and manage as many crewmembers as JAL needed. In 1959, Jack, Smith and a few other investors formed IASCO[1].

 

 As JAL expanded its operation into DC-8s in the 1960s, IASCO was awarded exclusive contracts to provide foreign aircrews. Even though Jack and Smith had no blueprint to follow for establishing a flight crew leasing company, they simply applied good sense and made the rules up as they went along.

 

So begun a symbiotic relationship between JAL and IASCO, built on mutual benefit, trust, and respect that has lasted more than forty years. The blueprint that IASCO developed for leasing aircrews to airlines was so successful that it has basically become the industry norm today.

 

Since its inception, IASCO has evolved into a sophisticated company that now offers global crew leasing and management, customized ab initio flight training,  airline management services, and full flight services at its base in Napa, California. At its peak, IASCO had more than 350 flight crewmembers on lease to JAL, but, for reasons that will be explained later, this number is somewhat fewer today.

 

Filling a need

 

     In 1970, JAL, now in rapid-expansion mode, was having trouble finding suitable ab initio pilot training for its Japanese recruits. The islands of Japan lacked both suitable airspace and facilities for training. Jack and Smith, never ones to let obstacles deter them, convinced JAL that IASCO could also satisfy its training needs. Once given the nod, some hurried acquisitions and building of suitable premises began. In 1971, IASCOs ab initio training facilities at Napa were born.

 

The airport at Napa was chosen for its ideal weather, professional ATC, open airspace, and access to instrument-equipped airports, such as San Francisco, Oakland, San Jose, Sacramento and Lake Tahoe. The location was also close to IASCOs head office in San Francisco. (While the surrounding wine district never affected the selection process, I am sure that off-duty students and instructors appreciate its proximity.)

 

The challenge was to take Japanese university graduates and train them to meet FAA and JCAB standards. Not an easy task considering that language, cultural, immigration, and procedural barriers would have to be bridged. But, once again, IASCO learned and adapted as it went along; a successful training program was soon established.

 

In 1986, JAL purchased the assets at Napa from IASCO, but retained IASCO to provide all the services and staffing. IASCO trains students on advanced simulators, Bonanza A-36s, and King Air C-90s, while JAL provides several Japanese captains to help students with any cross-cultural problems they may encounter. The flight instructors for IASCO are career instructor-pilots with an average of 15 years tenure. As a consequence, the stability and professionalism of IASCOs training are second to none. In fact, over the course of over 450, 000 flight training hours, there has never been a major incident or accident at IASCOs Napa facility. Apart from the 2,000 JAL pilots IASCO has trained at Napa, IASCO has also trained pilots for over 50 international air carriers, as well as major U.S. corporations, such as the FAA and U.S. Forest Service.

 

IASCO stands apart from other ab initio training organizations inasmuch as it has years of experience with training English-as-a-second-language (ESL) students. This niche market is also catered to by IASCOs ability to train to international regulatory authority standards and also to provide students with culturally adapted housing and food. There is recognition that live-in Asian students are a long way from home, and that if they feel more comfortable they will learn faster.  This customized flight training and support are unique in the industry.

 

According to Jerry Huss, Senior Director for Flight Services, IASCO is well aware of the projected number of new pilots that will need to be trained in the next twenty years. As a result, Huss says that IASCO hopes to capture a share of the ab initio pilot training market, focusing on Asian, European, and Middle Eastern carriers.

 

Crews for hire

 

    Over its years of operation, IASCO has provided aircrews and/or instructors to 50 international companies. Motivation for airlines to hire contract pilots may evolve from any of the following reasons: outsourcing, testing new routes, fulfilling seasonal requirements, integrating new aircraft types, start-up operations, rapid response to shifting market demands, ferry flights, and replacing crew members during training or transition. Whether the need is for short-term, or long-term, IASCO has top quality crews ready to fill the need.

 

Currently, IASCO has a pool of over 5,000 pilots and flight engineers in its database. The company thoroughly screens applicants before offering candidates to clients in a process that includes several interviews, background check, and proficiency testing. The client will usually dictate what type of simulator will be used for assessing proficiency. Final interview, physical examinations, and acceptance are determined by clients. If a crewmember is offered a contract he or she will sometimes undergo rigorous training in the clients home base. For example, crewmembers who accept contracts for JAL or JALways are trained in Tokyo, Japan. Although training can take up to six months, for these contracts, crew members are housed in a luxurious hotel, receive generous per diem allowances, and are allocated one or two round-trip tickets to their home of record during breaks in training.

 

IASCO offers its clients full-service management of its leased aircrews. This makes it easier for both airline clients and contract crewmembers. By IASCO taking responsibility for crewmember relocation, payroll, benefits, travel, human relations, and other administrative issues, cultural problems that might otherwise arise are all but eliminated. Airline clients are then able to concentrate on operational issues, such as schedule.

 

Customers

 

IASCO has provided aircrews for companies in Europe, including Italy, Germany, the Netherlands, and Sweden. In Asia, clients have included carriers from Japan, Taiwan, the Philippines, Indonesia and Korea. Other regional clients from Central and South America, the Middle East, the Caribbean and North Africa have also had crews supplied by IASCO.

 

Labor union opposition to the augmentation of aircrew by companies, such as IASCO, has grown over the years, particularly in the U.S. and Europe. This remains a big barrier for airlines wanting to outsource or augment their pilot ranks, and, of course, is a hindrance to companies like IASCO. However, in countries where more autocratic governments preside Asia, Africa, Central and South America, and the Middle East for example airlines have more economic freedom to take whatever actions they need in order to enhance their competitiveness. Huss says IASCO is constantly campaigning for new clients and is well equipped to handle small or large contracts when they come along.

 

Other services

 

     IASCO has used its expertise in managing airlines and crews to help startup operations. For example, in 1979, IASCO helped Emery Air Freight become established. As the freight industry grew IASCO also helped Consolidated Air Freight get into the business. The company is able to provide airlines assistance with every facet of business needs, including flight operations, maintenance, record keeping, cost reduction, and so forth.

 

In the middle of 2001, IASCO leveraged its facilities at Napa and formed IASCO Flight Services to serve the general flying public. Services include charter, aviation fuel, maintenance, weather information, pilot lounge and Internet access. While this facet of IASCOs operation is relatively new, Huss says that he expects business to grow substantially in the future.

 

 

Fragility of East-West relations

 

    All successful companies exhibit similar qualities: service quality, product excellence, stability, and customer satisfaction. Companies that not only concentrate on fulfilling their clients needs, but also make sure their employees are happy, are the most successful over the long term.  But, when dealing with Asian cultures, successful business dealings often depend on deep-rooted relationships between top management. For example, it is not uncommon in Japan for companies to do business with each without a written contract. Historically, mutual respect, honor, tradition, and protocol meant that written contracts were superfluous, in some respects an insult to the participants integrity.

 

While there were written contracts for the foreign crews IASCO provided JAL, Jack and Smith had special relationships with certain senior managers at JAL that enabled IASCO to maintain exclusive rights to supply foreign crew to the airline. However, following JALs privatization in 1987, the managers with whom these relationships were based began to retire. The years following privatization were somewhat difficult for JAL as it adapted to a truly competitive environment. As younger, more market-savvy, managers rose to power severe cost reduction campaigns were initiated. IASCOs exclusive right to provide crews was coming to an end

 

Because of restrictions in Japanese airports at Narita and Osaka, JAL considered it viable to establish a subsidiary, charter airline that would use regional Japanese airports to serve the lucrative Oceanic vacation market. As a result, in 1990, Japan Air Charter (JAZ) was formed. To contain costs, JAZ would be operated by all foreign aircrew based in Honolulu, Hawaii. JAL also reorganized and formed JAL Group. As the date of approval for JAZ to begin operations approached, there was a large, almost urgent need for foreign crewmembers.

 

Whether JAL considered it too great a task for one company to provide such a large number of crewmembers, or whether new-age managers were seeking to expand their resource suppliers, is debatable. However, the decision was announced that JAZ would split the contracts for new crewmembers between Hawaiian Aviation Contract Services (HACS) a newly established company and IASCO. Unfortunately, this was only the first indication of how radical the management change at JAL had become.

 

Because it would take time to train new crewmembers, JAL really needed to transfer some existing contract crewmembers from other bases. However, instead of asking for volunteers to transfer, JAL advised IASCO that the Anchorage base was over-manned and would be cut by half. While IASCO managers anticipated JAL would be offering new contracts in Honolulu, this option was not part of JALs initial announcement. Anchorage-based crewmembers, many of whom had just moved their families to the base, literally reeled at the news that half of them would soon have their contracts terminated.

 

Several resigned on the spot while others weighed their options. Within several weeks, JAL did offer IASCO new contracts for the newly established Honolulu base, but for lower remuneration.  IASCO went in to bat for their crews. To IASCOs credit, they were eventually able to negotiate with JAL to increase the remuneration package and offer relocation assistance. As a result of IASCOs efforts, enough crews voluntarily relocated to Honolulu to fulfill JALs immediate needs. Unbelievably, JAL repeated the above procedure a year later for the Los Angeles base. In 1997, JAZ was renamed JALways.

 

After these two events, JAL lost the trust of many foreign crewmembers, and some resigned and went to major U.S. carriers in the boom of the late 90s. However, throughout the whole ordeal, IASCO proved itself an ardent defender of its crews interests. As a consequence of the proven impermanence of basing, many crewmembers now commute to Honolulu from the mainland. While getting back and forth can be difficult in peak travel seasons, JALways schedulers will build commuting schedules that usually require just one pattern per month, albeit a long one. Currently, JALways operates scheduled services between Japan, Honolulu, Bangkok and Guam. In the future, more Oceanic and South East Asian routes will be added.

 

While IASCO still enjoys strong ties with JAL, its one-time exclusive supplier status has eroded substantially. Currently contracts for foreign crews are split between IASCO, HACS, Parc Aviation, Air Lease Asia, and more recently, World Aviation Systems, Inc. (WASinc). But, because of its competence, experience, and reliability, IASCO still maintains exclusive contracts for ab initio training of JALs recruits and remains the airlines major supplier of contract crewmembers.

 

In the highly competitive airline industry, Huss says that IASCO intends to increase its client base for both aircrew leasing and ab initio training by aggressively marketing its services. 

 

What the future holds

 

JAL Group now includes Japan Airlines System, JALways, Japan Asia Airways, Japan Transocean Air, Jal Express, J-Air, along with numerous airline industry support businesses, and hotels. However, with the loss of exclusivity with JAL has come IASCOs realization that it needs to expand its list of customers and fields of expertise. The company markets itself via a web site (www.iasco.com), advertising in aviation magazines, brochures, virtual-tour CDs, and PowerPoint presentations. Marketing representatives regularly attend seminars and other major industry events.

 

Global passenger growth is predicted to average 5% per year from 2000 to 2019, with the Asia-Pacific, Middle East and Latin American regions outpacing growth in Africa, Europe and North America.

 

In particular, China is seen as a high growth market. As IASCO has provided crews for China-based airlines in the past, it hopes to be able to leverage this experience to attract more regional clients. However, the Middle East might also provide new opportunities. While Huss did not remark on any market specifically, I would be surprised if IASCO is not intending to take advantage of the tremendous growth in the Middle East.

 

For example, Qatar Airways recently reported its intention to purchase 32 Airbus aircraft. At the 2003 Paris Air show, Emirates also announced an additional $19 billion order for Airbus aircraft. Emirates, which has ordered a staggering forty-five A380s, expects to be carrying 29 million people and 1.5 million tons of cargo per year by 2010. So, evidently from this region alone, there will be a high demand for new pilots and/or contract aircrew. Obviously after 9/11 it has become difficult for people of Middle Eastern descent to obtain visas for pilot training, however, if any organization can overcome immigration hurdles, IASCO will.

 

IASCO is also aware of other industries where outsourcing of professional labor is a growing trend. For example, there is rapid expansion of fields where the need for fast relocation of personnel has evolved. Information technology, medical practitioners, engineering, telecommunications, and financial services, to name a few. Huss says that IASCO is carefully considering just how it might leverage its core competencies into one or more of these fields.

 

If you are interested in contacting IASCO you can do so via its web site or by calling (650) 593 8100. I can personally recommend the company, as I have been a contract crewmember with IASCO for the last 14 years. IASCO is still a family-owned entity and is small enough for managers to care about each and every employee. The next twenty years will be an exciting time in the industry, full of change and opportunities. As many recently furloughed pilots have discovered, having a job at one of the majors can no longer be considered a lifelong career. Luckily there are always contract jobs available in various parts of the world. Perhaps you should consider broadening your horizons.

 

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