THRESHOLD AVIATION

Business Process Improvement Report

Prepared by:

Siam Kazi

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Executive Summary

This report is the analysis of Threshold Aviation and its business

processes. Observations and analysis were conducted to gain insight

on bottlenecks in the company’s daily operations and ways to

improve dated practices. After an initial interview, the business team

from California State University, San Bernardino visited Threshold

Aviation at various times to interview and observe employees take

part in their daily routines. After eight weeks of observations, it seems

that communication is an issue as is the company’s tendency to

acquire projects at an “at-will” basis. Projects should be chosen

carefully and focus should be limited to those with highest priority.

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Table of Contents

Executive Summary ……………………………………………………... 1

Business Overview …………………………………………………...…..3

Market Analysis …………………………………………………………...4

Competitive Analysis ...………………................................................7

SWOT Analysis ...……………………………………….........................9

Critical Risks and Success Factors …………....................................11

Recommendations and Projected Costs ……………….....................13

Appendix A .......................................................................................16

Appendix B .......................................................................................17

Appendix C .......................................................................................20

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Business Overview

Threshold Aviation is ran by Mark DiLullo and caters to many areas of

the aviation sector. Services they offer are: Flight charters,

maintenance, interiors, sales, and acquisitions. Threshold is located

at Chino airport and is a FBO (fixed based operator). With two

enormous hangars, it is easy to see upon entry the vast majority of

aircraft they work with. The clientele ranges from business executives

to recreational flyers. Threshold has a tendency to be chaotic in its

way of completing tasks with work being usually completed later than

expected or costs exceeding original estimates by great variations.

With their great variety of services, it is hard to see what their biggest

strength is and where they make the least amount of revenue. One of

the biggest issues that they face are the reviews pilots leave amongst

each other so that needs to be addressed. Employees on the line feel

communication is a huge issue and that it is very hectic and unclear

on what is required each day given that there are no set goals that

are adhered to on a constant basis.

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Market Analysis

Upon first glance when entering the facility of Threshold Technologies

I was amazed at how large their operation really was and the diversity

of work they actually perform on aircraft. When I continued to learn

more and more about the company I realized that there seemed to be

a lack of focus on the operations that were generating the most profit.

I found that they do have low operating costs and they are able to

remain stable at a pace where all employees are being paid and the

company is somewhat profitable. The things that the company needs

to focus the most on would have to be buying and selling of aircraft

and plane maintenance and restoration.

They have a large number of employees, which comes out to

60 total, and a large customer base that reaches over 300 customers.

A majority of their customers are repeat customers with maintenance

and upgrades. Threshold as a company has many strengths and

opportunities over the competition. So far the biggest advantage they

have is their pricing over the competition with fuel, services, and

maintenance. They are able to provide better prices due to the lower

operating costs they have. They also have an advantage with their

quality of service and customer service and prompt work. The

operations are typically running smooth enough to provide the

customers with a reliable timeline of completion. The customer has a

say of when they want their work finished. Also it is difficult for

competition to arise due to the large amount of money it takes to start

up.

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I think that the best way for them to begin to move forward out

of the current form of stagnation or recession they are in is to invest

time and money into branding, marketing and capitalizing on their

current customer service reputation by offering more services. Also

with their low operating costs, they should be able to see more profit

if they take the risk and even their prices with the competition.

The biggest contributor to thresholds struggle was the

economy. In 2008, they saw their best year. Their gross revenue was

the highest it had ever been and the company was moving forward

quickly. Until the recession began, when the recession began, luxury

items and services for them became too luxurious to afford. In an

economy that is in a state of recession a company like threshold is

one of the firsts to feel the effects in their revenues. Along with being

vulnerable to the economy, they are also very much affected by

government regulations that change often and require them to attain

new certifications and licenses that are very expensive.

When I first arrived at Threshold I had remembered the note

that they have a bad reputation because of the foul smell from the old

dairy farms that surround it. As I arrived at their location in Chino, I

remember thinking to myself that it couldn’t be that bad, I was wrong.

The smell was very bad to the point that someone who wasn’t familiar

to the area would be offended. Besides the smell that cannot be

avoided, I also noticed a lack of focus on the operations and general

direction of the company. The operations were stable, but there

seems to not be enough focus on what is actually pulling in the most

profit and that is flipping the planes. As the general direction of the

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company goes, there needs to be a stop in new creative ideas for

earning money and buckle down and just focus on the skill they have

at hand. By doing that they are setting themselves up for success

down the line. It may not be immediate, but they will see profit.

Threshold is a company that holds a massive amount of

potential. The company has a large customer base with substantial

customers that are willing to spend money. They have great prices

and to their advantage, can hold them there. The best route I think

that threshold should be able to use without any risk involved is to

just focus more on perfecting the operations they have been going

through all along and slowly build profits. When they are finished

getting all the profits they need and are in a comfortable position, they

should be able to focus on expansion and generating new money

making techniques and services. It just seems like there is a general

lack of focus.

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Competitive Analysis

Just like any other business, Threshold Aviation also faces fierce

competition. We are going to be taking a look at a few of them that

are located throughout the Southern California region. The three

companies we are going to be discussing are, Southern California

Aviation, West Coast Aviation and Clay Lacy Aviation. I would have to

say that Threshold’s biggest competitor from the list is Clay Lacy

Aviation. Most of these companies deal with management, sales,

hangars and charters. I was very impressed at the information I was

able to gather just through their website, each and every company

gave me a different impression about their business through it.

Southern California Aviation located in the city of Victorville is the

least worries of our competitors from the list. I was able to speak with

one of the employees and she let me know that they didn’t have a

fueling station at their location. Out of the three competitors I

compared this was the only one who didn’t have a charter license.

However, it seems that most of their business comes from

management and hangar availability.

West Coast Aviation has two locations; one is in Long Beach and the

other in Santa Ana. Just like the other competitors, they are open

24/7 as well. They have a very large charter selection for its

customers and they have a list of all the airplanes for sale on their

website. They have pictures of the airplanes with details about each

and every one of them with the price as well.

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Our last competitor, Clay Lacy Aviation, has two locations as well.

One of the locations is in Los Angeles and the other is in Seattle,

Washington. Aside from dealing with management, sales, hangars

and avionics, they also have an astro-vision team. This means they

are professionals at taking pictures of other airplanes in the sky. If

you need an airplane commercial, these are the people you would

want to seek. They also have their own interior department just like

Threshold.

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Threshold SWOT Analysis

Strengths

Customer Service

Quality of Work

Diverse Range of Services

Knowledge/Expertise

Weaknesses

Communication

Use of Information Technology

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Opportunities

Build Relationships

Public Relations

Referrals

Mobile Services

Threats

Environmental Regulations

Local Competitors

Public Perception of Business Aviation

Weak Economy

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Critical Risks and Success Factors

At the present time, providing a wide range of services is critical in

Threshold’s ability to create and retain customers. Although diversity

of services provided is one of Threshold’s strengths, it is imperative

that they focus on the area of the business that is most profitable. An

appropriate investment in information technology will help to facilitate

this.

Although Threshold seems to focus on the fact that they have the

lowest fuel prices in the area, a small survey of local fuel prices

revealed otherwise. In Appendix A, it is easy to see that Threshold’s

fuel prices are ether directly above (100LL) or directly below (Jet A)

the median fuel price in the area. Threshold’s fuel prices are

competitive, but are not the lowest. Due to the fact that there is a

small profit margin on fuel and other FBO services, it is apparent that

this is not a growth area for Threshold, but rather a means to attract

customers to other areas of the business.

There is nothing Threshold can do directly to control the economy.

However, they can take advantage of the investment opportunities

that are available as a result of the weakened economy. Although the

value of aircraft has declined, this also creates the opportunity to

purchase used aircraft at a lower price for the purpose of

reconditioning and reselling. Because of the large amount of profit

that is possible for these jobs in comparison to FBO services, I

believe that Threshold should focus their efforts in this area of the

business.

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With little to no advertising, Threshold’s customer base is primarily

built on word of mouth from repeat customers. Customer

recommendations are largely based on their reputation for very high

quality work. That being said, it is critical that they retain the skilled

labor necessary in order to continue providing the level of service that

built their reputation. According to a 2012 article, “As the business

aviation industry slowly and haltingly starts to emerge from a long and

deep recession, a search for labor begins to for skilled labor to fill the

growing number of openings” (Harrison, 2012). Implementing

realistic standards with possible incentives for meeting goals could

provide employees with the motivation needed to keep these jobs

within budget and on time. This would benefit Threshold by not only

allowing them to complete jobs faster and increase profit, but also

help them to increase employee morale, thus contributing to

employee retention.

Sources

Harrison, K. (n.d.). Retrieved from http://www.ainonline.com/aviation-

news/ainmxreports/2012-01-18/technician-shortage-key-issue-

aviation-industry

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Recommendations

Threshold needs to make an initial investment in information

technology in order better utilize the strengths within their

organization. The biggest deficiency in this regard seems to be the

need to share information among departments. The knowledge base

at Threshold is very spread out and there is no central database that

employees can use to gather information when working on a project.

Rather, the different departments seem to communicate this

information to each other upon request, whenever it is needed. At the

very least, they need to have a database that shares information

among billing, accounts payable, inventory and customer service.

However, although the database is the foundation, they also need a

program that will take care of integrating these departments and

hopefully provide some form of automation for invoicing, inventory

and accounts receivable.

The easiest way for Threshold to accomplish this would be to

purchase a pre-packaged system, such as Total FBO

(http://www.totalfbo.com). Total FBO has been around since 1987

and offers a business software package that utilizes a SQL database

with modules that will accommodate every facet of Threshold’s

business. Total FBO even offers a version that utilizes a web portal to

access the software, which takes the burden of network and

database management off of the customer. There are many different

packages available, but for a 5-user license, the initial investment

would be roughly $10,000. My recommendation would be to purchase

the web portal version. This would save Threshold money by not

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having to invest in any additional hardware to implement the system.

It would also be possible to have a new system built from the ground

up, customized to Threshold’s specifications, but this would require a

much larger investment than a pre-packaged system.

Threshold could also make some smaller investments, such as

900mhz radios that would increase the effectiveness of

communication throughout their facility. These radios would facilitate

communication between employees that are working in different

hangars and/or different areas of the facility. A purchase of ten of

these radios would require and investment of roughly $1500 but could

greatly improve threshold’s level of customer service.

A computer workstation in the repair hangar would also be a wise

investment for the company. This would allow mechanics to access

electronic copies of the repair manuals that are essential to

Threshold’s business. A simple workstation, including peripherals,

could be purchased for approximately $ 2000. I would also

recommend that Threshold transfer all of their older repair manuals

that are not available in electronic form to PDF files. There are

several companies that will perform this service on-site without

having to ship the repair manuals anywhere. I believe that this is

critical due to the fact that many of these repair manuals are

irreplaceable. A service like this can run anywhere from two to eight

cents a page, depending on the level of difficulty involved in scanning

the manuals. The estimated cost for scanning a manual that is 500

pages would be $25.

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Projected Costs

Computer Software $10,000

900 mhz Radios $1,500

Computer Workstation $ 2,000

Scanning 30 Manuals to PDF $ 750

________________________________________

Total Cost For All Recommendations $ 14,250

* Due to a lack of financial information, a Cost Benefit Analysis

cannot be provided.

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Appendix A

COMPETITIVE ANALYSIS

FACTOR MY BUSINESS STRENGTH WEAKNESS COMPETITOR

A

COMPETITOR

B COMPETITOR C

IMPORTANCE

TO

CUSTOMER

Name Threshold Aviation

Southern

California

Aviation

West Coast

Aviation Clay Lacy Aviation

Price FBO-lowest in So-Cal

Very

Competitive

with their

prices

No fuel station available at

location

Fuel Services at both

locations

Quality

Charter

Selection

Charter- Gulfstream IISP

Gulfstream IITT

2 Citation IIs Falcon 10

Lear 55

Charter

selection is limited

No Charter

King Air

C90GT King Air 200

King Air 350

Cessna

Citation CJ3

Learjet 40XR

Cessna

Citation Excel

Hawker 900XP Challenger

604

Challenger

601-3A

Challenger

601

Premier 1A King Air

B200SP

Learjet 35

Gulfstream G400

Hawker800XPJet

Embraer Legacy

Gulfstream G200 Learjet 35

Hawker 800XP

Embraer Legacy

G200

Very

important.

Customers like

to have

options to

choose from

Service

Maintenance/Management Charter

FBO

Sales

Rental Cars

Interior

Hangars Available

Offer

numerous of

services that other places

don’t

Maintenance

Hangars Available

Charter

Maintenance

Sales Hangars

Available

Maintenance/Management

Charter FBO

Interior Departmet

Avionics Team Sales

Astrovision

Hangars Available

Reliability All services

available 24/7 No weakness

Services

Available 24/7 Available 24/7 Available 24/7

Stability

Expertise

Gulfstream,

Falcon, Hawker,

Cessna &

Challenger

Specialist

Learjets

Citations

Challengers

Astrajets

Falcons

Beechcraft Bonanzas

Beechcraft

Barons

Beechcraft King

Airs

Beechcraft

Premiers Hawker HS 125

Series

Company

Reputation

Great Safety

Record

FAA

FFA

EASA

Can store more than 300 aircraft

Award-winning

Class 4

maintenance

repair station

(FAA Diamond

Award)

The Wyvern

Standard

Location Chino, CA Slowly growing as a company

Only one location

Victorville, CA Long Beach and Santa Ana, CA

Los Angeles, CA and Seattle, WA

Appearance

Sales Method

Website has

page with

airplane pictures,

sales price and

other info.

Website has

page with

airplane pictures,

sales price and

other info.

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Appendix B

Source: https://www.airnav.com/fuel/local.html

Loca on FuelType-100LL FuelType-JetA

FullService FullService

ChinoAirport PricePerGallon PricePerGallon

Encore $5.75 $4.42

Threshold $5.84 4.47

FlyingTigers $4.43

OntarioInterna onalAirport

AVFuel $5.65 $5.65

CableAirport,UplandCA

CableAirport $7.06

RiversideMunicipalAirport

FreemanHoldingsofRiverside $5.52

MarchAirReserveBase

AmericanAirportsCorp $5.52

SanBernardinoInterna onalAirport

Epic $6.42 $5.62

Bracke FieldAirport,LaVerneCA

AVFuel $6.15 $5.20

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$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00

Encore

Flying Tigers

Threshold

AV Fuel

American Airports Corp

Epic

Guardian Jet Center

Price Per Gallon/

Full Service Jet A

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$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 $7.00 $8.00

AV Fuel

Freeman Holdings of Riverside

Encore

Cable Airport

Threshold

American Airports Corp

Guardian Jet Center

Price Per Gallon/

Full Service 100

LL

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Appendix C

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