Today I'll continue the story of how a strong economic franchise business was created from virtually nothing. It became so strong that Warren Buffett paid $1.5bn for it (I'll describe the making of that deal in tomorrow's newsletter)
In the late 1940s a number of companies bought corporate airplanes to provide greater flexibility and save the time of their executives. Ueltschi knew most of the pilots working for the directors because they would frequently meet at airports all over the country. He noticed that some needed to update their flying skills.
The training at Pan Am, where Ueltschi worked as personal pilot to the founder Juan Trippe, was rigorous and never-ending, with pilots forever going back to the school to learn the latest system or navigation technique, or simply to refresh old knowledge. The head of operations was stickler for precision and professionalism. As Ueltschi recalls it,“we were tested to be sure we knew what we thought we knew. All of us understood that was what it took to be safe.” Ueltschi was often assigned to help out older pilots with the transition to DC-6s and Constellations.
In contrast, corporate pilots had generally ceased training years before, many after leaving the military. The lack of up to date knowledge was a problem because new high-performance aircraft were coming into the corporate fleets. These were much faster than slow and low flying boats and other light aircraft they were used to.
While major airlines were forced to keep up, through both internal pressure to be safe and government six-monthly proficiency tests, business aviation pilots were out on their own with no requirements to demonstrate competence.
Ueltschi thought about the problem for a long time, eventually concluding that there might be an opportunity to establish a business serving their needs, offering a training system as good as the ones provided at the major airlines.
He went to Trippe with the idea who thought it excellent; it would improve aviation and it was a good business opportunity. Ueltschi also talked to Bernard Baruch, a leading financier, advisor to Presidents and a friend, who was much more cautious, "You'd better be careful. You've got a good job at Pan Am, and you might lose everything."
Ueltschi had to solve the problem of combining family security – by then he and his wife, Eileen, had four small children – and at the same time, follow his dream,
His solution was to, first, take a $15,000 mortgage on their house and rent a 200 sqft office on the third floor of LaGuardia Airport for the new company, FlightSafety, in 1951. It had one paid employee, a secretary, who was to mostly type letters soliciting business. Ueltschi himself would be unpaid by the company (for 17 years).
Second, he would hold onto to his job at Pan Am. Trippe was okay with that, so long as he restricted his FlightSafety business to his off hours and days off.
For years there was little business because the older pilots generally couldn’t see the need for training. According to Ueltschi the typical attitude was “They already knew how to fly just fine, thank you, so why did they need advice from a bunch of outsiders?”
Trippe was Ueltschi’s greatest supporter, and he convinced many of his pals at the top of Fortune 500 companies that they really need to be flown around by pilots fully conversant with modern airplanes. “We hung in there, and one by one the customers came a
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Prof. Glen Arnold
I'm a full-time investor running my portfolio from peaceful Leicestershire countryside. I also happen to be UK´s best selling investment book author and a Financial Times Best selling author.
Originally, I wrote all my ideas out in full on this website. Now that ADVFN publish them they are entitled to display the full version for six months – you can see them here. Thus can I only post the first few paragraphs here for anything younger than six months.
I write 2 to 3 newsletters per week - investing is about making the right decisions, not many decisions.