Latest / VREF | The Truth About the Aviation Market / Aviation's Alphabet Mafia | EP 50
Transcript
- Addison: Welcome back to the truth about the market. I'm your host, Jason Zilberbrand. I'm president of VRef. Every week we pull back the curtain on what's really happening in aviation, what aircraft are really worth, what they really cost to own, and the things the glossy listing sheets won't tell you. No spin, no sales pitch, just the truth about the market. And today, we're going somewhere most people in the in this industry won't go on the record. We're talking about the alphabet organizations, MBAA, AOPA, IADA, and the rest of the acronym suit, what they pay themselves, what they tell you about the market, and what you actually get in exchange for your dues. Everything I'm going to read to you today comes from public IRS filings and the organization's own press releases. The documents are going to do the talking. I'll just be turning the pages. So let me start with a number. Two million two hundred and ninety-two thousand dollars one hundred and thirty seven bucks. That is the reported compensation for the president and CEO of the National Business Aviation Association for the fiscal year ending June twenty twenty four, folks, according to the organization's own form nine ninety filed with the IRS. And he got another $93,000 in other compensation on top. Now here's the number I want you to hold it next to. Negative $3.2 million. That's the same organization's net income for the same fiscal year. $41 million in revenue, $44 million in expenses, and a loss, a deficit. And the same year, executive pay hit a record high. One more. And then we'll get into it. 18%. That's the share of MBAA's total expenses that went to executive compensation. Not all salaries, but executive compensation. Sixteen named officers, nearly eight million dollars. And before anyone reaches for the flag, I want to put it on the record. I have no personal beef with anybody drawing these salaries. Some of them I know. Some of them I like. This episode isn't about these people. It's about institutions, incentives, and the fact that the people funding all of it almost never see the numbers. But today they will. These are not my numbers. These are their numbers, filed under penalty of perjury, sitting on ProPublica's nonprofit explorer for anyone who cares to look. And you know what? Almost nobody does. Nobody looks. But today we look and Because the same organizations cashing those checks are the ones publishing in the market reports telling you everything is fine, and I think you deserve to know how the sausage gets made, who pays for it, and who keeps the scoreboard. First, let's set the table. Because most people, including a lot of people who write dues checks every year, don't actually know what these organizations are. MBAA, the National Business Aviation Association. Is a 501 C6. That's the same tax classification as a Chamber of Commerce, a business league, organized to improve business conditions for its members. It's not a charity. Your dues are not tax deductible donations. It represents over 10,000 member companies, and it runs BASE, the biggest convention in business aviation. Then there's AOPA, the Aircraft Owners and Pilots Association. It's the general aviation side. It once consisted of hundreds of thousands of individual pilot members, that number has diminished substantially. It also represents advocacy, a magazine, medical and legal service plans. And here's something most members don't realize AOPA isn't even one entity. There's the association, there's a foundation, and there are related entities which matters a lot when you try and figure out what anybody actually gets paid. Because the compensation gets spread across all these filings. And understand the money flows before we go further. Because members tend to picture their dues as the whole story. And the dues are just the entry ticket. You know what the real engine is? Events. And everything attached to them. Those convention badges, exhibit spaces, and if you've ever priced a booth at a major aviation convention, you know a decent island position costs more than a nice used bonanza. Then there's sponsorships, advertising in the member publications, education programs, certificates, seminars, and vendors just like VREF. Every one of those product lines sold back to the same members who already paid dues, and every one of them shows up under the 990 under program service revenue. At MBAA, program services were about 95% of revenue in the latest filing. That's not a lobbying shop that happens to run a trade show. Structurally, that's an events business that just happens to lobby. Ada, the International Aircraft Dealers Association is a dealer broker club, accredited dealers, a listing portal, a quarterly market report that gets quoted everywhere as if it were handed down on stone tablets. Now, before anybody clips this out of context, I am not saying these organizations shouldn't exist. Associations do real work. And we'll spend a whole segment on exactly what that work is because fair is fair. But what I am saying is that these are institutions funded by your dues, your exhibit fees, your convention badges. And the exchange rate between what goes in and one comes out deserves the same scrutiny you'd give a fuel bill, a maintenance invoice, or even an appraisal. Nobody audits the auditors. So you know what? Let's do it ourselves. One more piece of context. This model isn't unique to aviation. Trade Association Executive Pay has been climbing across every American industry for twenty years, for the same structural reasons, comparison-driven comp studies, passive boards, and members who treat dues like a utility bill. Aviation just happens to be the industry where the numbers are uniquely equipped to understand appreciation, useful load, and what happens when the numbers on the spec sheet don't match the airplane. So Consider this a type rating for reading a tax return. So everything in this segment comes from NBAA's Form 990 filings. They're public documents. You can go download them. EIN number 521633654. If you want to follow along at home, go online, go to the Pro Republica website, type in that number, and you should follow along at home. I really want you to. That's kind of the whole point of this episode. So let's start with the trend. Because a single year can be an anomaly, but a decade is policy, right? In 2015, the CEO's reported compensation was about $1.15 million. By 2018, $1.4 million. Fiscal year 2022, $2.9 million. Fiscal year 23, $2.15 million. 24, 2.29 million. plus another $93,000 of other compensation, which they labeled as airfare. The pay doubled in roughly a decade, guys. Now, what happened to the industry in that decade? Flight departments got squeezed, shops can't find technicians, the pilot pipeline got so thin that operators are paying signing bonuses for turboprop captains, and the association representing all of them roughly doubled its top salary. Let me put that top number in context, because $2.3 million floats in the abstract until you anchor it. That's more than the CEOs of some publicly traded airlines. Their take-home pay. It's roughly 10 times what a senior FAA executive earns to actually regulate this industry. It's 40-some entry-level AMP salaries at a time when every shop in the country is starving for wrenches. And it's paid by a nonprofit whose stated purpose is improving business conditions for its members. Members who are in many cases small flight departments, cutting every discretionary line item in their budget. Widen the lens beyond the corner office. The fiscal twenty twenty-four filing lists 17 named officers and key employees, a chief operating officer at $546,000, multiple senior vice presidents in the 400s, all told. Executive compensation of $7.9 million. 18% of everything the organization spent that year. Nearly one dollar out of every five goes to their salaries. And that was a year they lost money. It was a deficit year. The revenue of 40.9 million. Expenses 44.1. Net income, a loss of 3.2 million dollars. In my world, In any operating business. You run a $3 million loss. The compensation committee is not approving a record payroll at the top. At a member-funded nonprofit, apparently things work differently. Two more things. And these come straight off the checkboxes of the filing itself. I'm not characterizing anything, I'm just reading. Box one. The organization reported that it provided first class or charter travel to key employees or officers. Box two. The organization reported conflict of interest transactions on Scheduled L. That's the schedule for business dealings with insiders, their family members, or businesses they control. The details are in the schedules. The point is, the organization itself told the IRS both of those things happened. So when your renewal invoice shows up, that's what the machine looks like from the inside. Hold that thought. Because the next question is what comes out the other end. And ask governance questions. Because someone should. Who approves this? The answer formally is a volunteer board. Industry executives donating their time relying on a compensation study prepared by a consultant, the association hired. Guess what? Benchmarking against a peer group, the same consultant selected. If the peer group is stacked with bigger organizations and for profit comparables, the study says underpaid every single year. The raise sales through, and everyone involved acted in procedural good faith. That's how a number doubles in a decade without anyone ever deciding it should. Process replaces judgment. I've watched it happen on boards across this industry, and the only fix is a board member rude enough to ask who picked the peer group. Be that board member. Alright, quick pause. If this is the kind of conversation you're not hearing anywhere else in aviation media, and I promise you it isn't, it's because most aviation media depends on these same organizations for press credentials and ad dollars. Do me a favor right now. Hit follow or subscribe on whatever platform you're listening on. Give the show a like. Drop us a rating. It takes 10 seconds. It costs you nothing. And it's the single best way to make sure this show keeps its independence and keeps landing in front of people who write the checks, who write the dues checks. Alright, let's get back to it. Now let's talk general aviation. Because if you thought seven-figure pay was just a turbine market phenomenon, well, AOPA would like a word. Because AOPA's president total compensation came in around $1.96 million in 2023 on an organization doing roughly $42 million in revenue. That's the same neighborhood as MBAA, except AOPA's members aren't Fortune 500 flight departments. They're private pilots. They're guys with a Skyhawk. And maybe a quarter per share. People agonizing over a hundred dollar hamburger while their association's top officers clears more than the CEOs of some publicly traded regional banks. Do the member math on that, guys. Annual dues run under $100. Takes roughly 20,000 member renewals, 20,000 pilots deciding the association is worth it this year to cover the compensation of one office. Every renewal notice that goes out, some fraction of it is spoken for before a single dollar touches advocacy, or its magazine, or its safety programs, and the foundation side is a 501c3 that solicits actual charitable donations, people giving to support aviation's future, which makes the compensation question sharper, not softer, because the donor money and the member money are supposed to carry different obligations. And here's the structural piece I flagged earlier. That compensation shows up across related entities. The association, the foundation, the affiliated organizations. Each entity files its own 990. So unless you pull all of them, like I did, and cross-reference the related compensation columns, like I did, you will never see the whole number in one place. Now, I'm not alleging the structure exists to hide anything. This is very common and there are very legitimate reasons for it. But the practical effect. Is that a member who looks up one filing sees a fraction of the picture? Transparency that requires a forensic accountant isn't really transparency. By the way, the dues conversations write themselves. Go read the member forms any year dues go up. Members asking what they're getting for the increase. And the answer in fairness isn't nothing. Which brings us to the part of the show where I steal me on the other side. Because if we're going to swing, we swing fair on this show. So let's talk about what we actually get. So what does the money buy? Let's give the associations their due, honestly and specifically. NBAA has been on the right side of fights that matter. User fees, every time Congress floats per per flight changes or charges for general aviation, the associations beat it back. And that's worth real money to every operator listening. Then there's bonus depreciation. The 100% expensing that's driving half the demand in today's market didn't defend itself in the tax bill, guys. The association lobbying did that. Base is genuinely a productive week. I think I've done deals there, maybe. You might have done deals there, maybe. I'll say something else, in their defense, that nobody else will. Association work is generally hard. It's not fun. The FAA reauthorization fights, the endless state level attempts to tax aircraft so much as an overfly just in a county? See, the associations show up to every one of those fights. And showing up, well, it costs money. If you're a good lobbyist, you're not cheap. And the alternative to funding them is losing to the people who fund theirs. So if your dues were buying nothing but user fee defense of the last two decades, they'd arguably have paid for themselves. All right. AOPA's Air Safety Institute puts out free training that has no exaggerations, saved lives. The medical and legal services plans are real member value. The airport advocacy, keeping your home fuels from being turned into a warehouse park. It's unglamorous work, but somebody has to do it. AOP does it. AOPA does that work. All right. Ada. Credit where credit's due. They brought a code of ethics. An accreditation process to the corner of the industry that historically operated like a flea market. Some call that progress. And watch the direction of travel because it tells you where the institutions think they're headed. And just this month, MBA or MBAA announced a brand new position. Senior Vice President of Product Development and Sales, recruited from the CEO chair of one of their biggest brokerages in the industry. Read that title again. It's not safety, it's not advocacy. It's product development and sales. The association's own press release says the role exists to launch new products, new services, and accelerate growth. I'm not knocking the individual. She's talented. And I said so when the news broke. But when a member's organization's flagship hire a sales executive from one of the big brokerage houses, the institution is telling you in its own words what it believes its business is. You are not just the member anymore. You are the market. So the question is not whether the associations do anything, they do. The question is the exchange rate. Does the advocacy require a top office that pays double what it did a decade ago? Does it require 16 executives absorbing a fifth of the budget in a deficit year? Does it require first-class travel disclosures on the tax return of a member-funded nonprofit? Because here's the thing about trade associations: they have no market discipline. No shareholders, no activist investors, no analyst calls. The only accountability mechanism is you, the member. Well, and the board. And boards of trade associations are staffed by volunteers from member companies who, quite reasonably, spend their governance energy on the industry issues, not on interrogating the compensation study the association's own consultant produced. I ran a company built on doing what we said we'd do. When we missed, customers left. And that was the discipline, an association that misses just mails next year's invoice. That asymmetry is the entire reason episodes like this one need to exist. Speaking of knowing, what you're actually paying for. That's literally the business we're in at VRef. Before you buy, sell, refinance, or renew anything with a six or seven figure number attached, pull the actual data, guys. A VRef online membership gets you current values, historical trends. Operating costs on virtually everything flying. And if the deal is big enough to lose sleep over, get an accredited appraisal and sleep away because v ref.com is all you need to know. That's where the values are. Go to v ref.com and sign up today. All right, let's get back to the scoreboard because we want to know who keeps it. On July 27th, IATA released its second quarter 2026 market report. Let me read you the highlights the way they wrote them. Closed transactions up 21% year over year. Inventory historically tight. Sellers gaining negotiating leverage. Fewest price reductions since they began tracking the metric. Outlook. Stable and moving toward improvement. Dealer confidence. Strong. Sounds fantastic. Wow, that was a read. Now let me tell you what else is in that same report. In their own numbers, of course, IADA dealers purchased. Let me read that one more time. IADA dealers purchased 118 aircraft into their own inventory in the first half of the year. You know what that is? An 87% increase year over year, double the level of two years ago. So let's think about what that means. The people conducting the survey, answering the survey. And publishing the survey just went long in the market. Not small, massive. A dealer holding inventory is exactly one acceptable answer to the question: is this a good time to buy? I'm not saying anyone is lying. Actually, if you go back a few episodes, I told you it was the time to start buying. So I'm saying the scoreboard is being kept by the players. The report is built from the member self-reporting. Nobody outside the association audits a line of it. And every incentive in the building points the same direction. Up. Remember, read the member quotes in the release itself. There are study in unanimity. Because values are going up in multiple markets. Buyers must act fast and expect to pay premiums. Super mid-size prices are at an all-time high. Buyers waiting for pricing to fall or missing purchase opportunities. 20 plus quotes. And I'll save you the reading. Virtually every one of them lands on the same version of buy now quickly at the seller's number. Ideally, through an accredited dealer. One quote even tells you pre-buys are becoming lighter to support transactions. Read that one twice. Because a market where buyers are waving inspections to win deals is not a data point I'd brag about in a press release. It's a data point I'd warn my clients about. Meanwhile, and you've heard me say this for three episodes, the data on my desk tells a more complicated story. Published values on plenty of out of production and midlife aircraft are showing negative trailing 12 months. I appraised a global XRS last week where our own published data showed the model down 5% year over year while the trade press was quoting sellers' market headlines from the same week. Guys, Deals are freezing at the confidence layer before prices break. I did a whole episode on it. Both things can look true at once, because transactions up and value soft outside the newest inventory are not contradictory. But only one of those makes it into the press release. And that's my real issue with the alphabet reports. Not that they are fabricated, because I don't think they are. It's that they're marketing documents wearing a lab coat. When an association's revenue comes from members who Who benefit from a hot market narrative, the report will find the hot market narrative, quarter after quarter, the same way a listing sheet finds the fresh paint and forgets the corrosion. You wouldn't buy an airplane off the seller's description. Don't buy a market outlook off one either. One more detail from the fine print, because it's my favorite genre. The association states its accredited dealers complete transactions 20% faster because of the accreditation process. Faster than what? Measured how. Against whom? Because there's no methodology. There's no footnote. No control group. It's a marketing claim living inside a document the industry cites as research. Again, useful intelligence, real activity data, honest survey of member sentiment. But the moment it gets quoted in a loan committee or a board presentation as independent market analysis, it's being used for something was never built to be. You guys need to know the difference. And your lender should too. So, what do you do with all of this? Three things, and none of them are quit your associations in a huff. But first, the disclosure you already know that's coming. I run a company that sells data and appraisals to the same industry. So you should discount my incentives too. That's the consistent standard. I don't get to exempt myself from it. The difference is, I'd offer it is when my number is wrong, it gets tested in a courtroom, in a loan file, in the resale of the same aircraft two years later. When a market report is wrong, It just gets replaced by the next quarter's market report. Scrutiny should flow to wherever the accountability doesn't. One, read the nine ninety before you renew. Every nonprofit's filings are free on Po Pro Republic's Nonprofit Explorer. Go look it up. Ten minutes. Look at three lines. Top compensation. Executive compensation is a share of their expenses, and then the net income. Then look at the checkboxes. Their travel, the schedule L. If you're comfortable, renew. If you're not, ask questions. You're a member, it's your organization. You need to act like an owner because you are one. Two, treat every market report, including the ones that agree with me, as a document with an author and ask what that author is selling. AyADA's report tells you what accredited dealers report and expect. That is genuinely useful intelligence. It is not an audit, and it's not an appraisal. Three. If you're on a board or a committee at one of these organizations, and I know plenty of you listening are, ask for the compensation study. Ask who the peer group was. Ask why the peer group includes for profit companies ten times the size. The people writing the checks have every right to see the math. And in my experience, simply asking the question changes the answer over time. And if writing a letter feels like too much, Here's the two-line version you can send to any association you belong to today. You ready? Write this down. As a dues paying member, I'd like to know total executive compensation as a percentage of expenses for the last fiscal year and the peer group used in the most recent compensation study. Please point me to where members can review both. That's it. It's polite, it's specific, it's answerable. If the answer comes back clear and fast, that tells you something really good. If it comes back as a runaround, that tells you something too. And both answers are worth exactly 10 minutes of your time. The associations will tell you scrutiny like this hurts the industry. I'd argue just the opposite. An industry that can't discuss its own institutions' pay without flinching is an industry that's forgotten who works for who. The dues flow up. The accountability is supposed to flow down. Today we just turned the valve. That's the episode. If it made you uncomfortable, good. That was the assignment. If it made you want to go pull a 990, even better. Do me a favor, send me what you find, because the mailbag drives this show and I read everything. If you got value out of today, here's the ask. I'm gonna make it plainly. Follow the show. Like this episode, subscribe on YouTube. And wherever you're getting your podcasts, leave a review, make a comment, and share this one with somebody who just wrote a dues check without reading the fine print. See, independent voices in this industry only survive when you, the listener, amplifies them. So be the algorithm. I'm Jason Zilberbrand. This has been the truth about the aviation market. The market doesn't care what you paid, it only cares what it's worth. We'll see you next week. Until then. Fly safe and stay smart.