Why are AK heli operators not refunding money or giving credit for future trips

[TahoeJ]

^^ I was about to post the exact same thing. Yes those numbers are correct. Whoever on the Wimbledon board that made that decision is feeling pretty good right now. Someone deserves a raise!

My friend is a broker for large events and colleges, etc. and his phone is blowing up with requests for future pandemic coverage. Premiums are going up for sure after this.

[f=ma]

Business Interruption Insurance would be one avenue.
Don't know if standard policies would cover interruption due to pandemic. In a recent example, the BI policy SXSW had did not. OTOH, I believe I read that the US Tennis Open's policy does...

Also don't know what the pricing would look like - again depends on the covered risks.

Paging Conundrum...

Probably not, business interruption insurance is for when your kitchen catches on fire and forces you to close your business for a month to rebuild. It's hard to imagine an insurance company that would cover government mandated shut down across entire sectors for a full quarter or more of lost revenue.

The premiums for pandemic insurance are insane. Could they? Sure. Would they? No

Yup. When actuaries have infrequent data points (one a century pandemics), the they will overprice the risk accordingly.

Heard the other day on radio so my figures may be slightly incorrect.
Wimbleton has been paying 2 million a year for the last six years (since SARS).
This year they collected. 120 million. Lloyds took a beating there.

Don't think a low rent Heli Op could afford the premiums.

I heard, not verified, that Wimbleton did not have pandemic specific insurance. They had a custom policy and their underwriter company agreed to it, I think? Anyways, spending money on pandemic insurance is foolish, imo

[summit]

Seems like most heli trips are booked ahead. Full trip costs are paid ahead by the customers. Operator Costs are significantly reduced by not actually paying staff and turning rotors, and the operators have the full trip fares in their accounts to sit on for a year if thyr give rainchecks, minus fixed costs, contracts, and lost last minute bookings. I'm sure it's a boatload of back office financial juggling and headaches.

Guides are laid off and don't see tips. Hard on the guides.

[TahoeJ]

Yeah, I mean, I can totally see not giving your clients a refund but offering them FULL credit for a future trip. There's a pretty big distinction there IMO.

[f=ma]

I'm sure when they figure out their solvency problems, they'll reach out and work something out.

[romeo tango]

....FULL credit for a future trip....

the Future has been canceled too

.

[Lupolicious]

Just to give you a data point: helicopter fuel is less than 5% of your overall trip price. And even that is bought/delivered well before your trip. Cant sell fuel back to the provider once it leaves their tank. And it only has a shelf-life of 6 months.

If anyone thinks that heliski operators are driving Ferraris during the off-season, then you are highly mistaken. The one guy I know personally drives a 10-year old F-150.

[romeo tango]

.... If anyone thinks that heliski operators are driving Ferraris during the off-season, then you are highly mistaken....

im pretty sure NOBODY here thought that ....

.

[goldenboy]

My only AK heli trip, the heli crashed and we were happy to be alive. When we talked to the owner, he was like "you don't understand. You're the first group of the year. I might make a profit on the last group of the year. your money is gone. But I'll credit you your heli time."

[skideeppow]

My only AK heli trip, the heli crashed and we were happy to be alive. When we talked to the owner, he was like "you don't understand. You're the first group of the year. I might make a profit on the last group of the year. your money is gone. But I'll credit you your heli time."

I guess that puts it in perspective.

[summit]

Just to give you a data point: helicopter fuel is less than 5% of your overall trip price.

You are implying you have some knowledge of the industry. Perhaps you could help us understand cost breakdowns better since you say fuel is <5%? I have heard that fuel is a large chunk and that maintenance labor and parts can also account for 30%+ of costs.

And even that is bought/delivered well before your trip.

How far ahead is fuel delivered? Weekly?

[AdironRider]

My only AK heli trip, the heli crashed and we were happy to be alive. When we talked to the owner, he was like "you don't understand. You're the first group of the year. I might make a profit on the last group of the year. your money is gone. But I'll credit you your heli time."

How do you not own the fucking company at this point? They literally crashed and still didn't refund?

I don't think GB is supporting this theft, but the amount of water carrying by others here for the Brills, under some bro code disguise, is kinda absurd.

When you play with helicopters you don't get to play the poor card. I'm sorry that is just a fact. Credit towards next year is the absolute minimum they should be doing, and I'm guessing are going to sued into oblivion for not doing refunds. You fuck with the .1% they will take you down for sport, it isn't about the money.

[Lupolicious]

The AS-350B3e (Astar) helicopter uses about 50 gal/hr of flight time. Figure the price of jet fuel is $5/gal. So you are spending about $250 per hour of flight time in jet fuel. Divide that by four skiers, so the direct cost is $62.50 per person per day of heliskiing. Flight times per day are about an hour, maybe slightly more for six runs. The average cost of a day of helicopter skiing is about $1200, maybe more with some of the outfits that provide lodging. So maybe the cost in fuel of heliskiing is somewhere around 6-7% on the high side.

You are implying you have some knowledge of the industry. Perhaps you could help us understand cost breakdowns better since you say fuel is <5%? I have heard that fuel is a large chunk and that maintenance labor and parts can also account for 30%+ of costs.


How far ahead is fuel delivered? Weekly?

[TahoeJ]

I think a lot depends on the operation. I would assume in many cases the majority of the expense is the mortgage on the various lodges / buildings constructed. And then staffing, probably. Insurance has to be expensive too?

[Buke]

There are lots of comments in this thread about what should be done but a lot of it seems pretty presumptuous to me.

This is how I see the situation:

I know absolutely nothing about the finances of a heli ski operation but for kicks and giggles, let's just make a few back of the napkin assumptions using purely fictional numbers.
- Let's say a heli trip costs $10k.
- Let's assume that $6k represents the costs that the heli company pays in advance to suppliers (like the lease of the helicopter, fixed costs on lodging, insurance, etc)
- Let's assume that $3k represents the costs that get paid out at the time of service (like wages, food, etc)
- Let's presume that $1k is business profit (a 10% profit margin is a little low but probably not unrealistic in a tight margin venture like heli-skiing is purported to be).

So, using these numbers, if you've pre-paid your $10k, then theoretically, the business only has $4k left to give back (assuming that the heli op doesn't need to leverage some of that profit to secure next years leases). Furthermore, they can't offer a heli-ski package for less than $9k next year. So, if they only have $4k to give back and they can't offer you heli-skiing next year for less than $9k, then it's probably not possible for them to give you full credit for next year. They could probably give you a $4k credit. Maybe they can negotiate favorable rates with their suppliers (like discounted heli leases) and give you an even better discount, but it's probably not feasible to give you a 100% credit. This line of reasoning makes Silverton's email sound even more reasonable. They're trying to figure out how much cash they actually have. Can they get some money back from those prepaid expenses? Is there any insurance? What's the government going to kick in?

Thinking about this another way, my small business has pretty simple finances with really low overhead (professional services, our overhead is the cost of a computer, an internet connection, rent, etc, we don't have products that we have to buy in advance and then sell). We can weather a couple of months with no income and then we're done. We don't have huge piles of cash laying around. The margins are just too thin and the market is too competitive. If we have a banner year then I bonus my employees to reward them for their good efforts. Now, think about a seasonal operation with high overhead like heli-skiing. If they have a season with no income (aka, if they give full refunds to all those people that prepaid), that's the equivalent of a normal business not working for a year with the added problem of having to still pay a big chunk of your overhead. I don't know any business that operates in the normal confines of reality that could survive in those conditions (I'm excluding tech startups that seem to operate in an alternate universe where super wealthy people are willing to speculate on outlandish idea). It would be sweet if travel businesses had high enough profits to be able to make all of their customers whole in the event of a 100 year pandemic. I don't think that's a realistic expectation though.

[BFD]

I think a lot depends on the operation. I would assume in many cases the majority of the expense is the mortgage on the various lodges / buildings constructed. And then staffing, probably. Insurance has to be expensive too?

it is about 50% of helis in AK own their lodges. As far as I know the two in question here do not own lodges. Due to Silverton's mobile operation plan I would be surprised if they have any staffing other than that involved directly with skiing.

[tmokes]

I’m guessing they put up their Silverton operation as a collateral if they got any loans for the AK operation.... hopefully they don’t have to get to the point they were forced to sell their Silverton operation to Vail...


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[m2711c]

yeah.... this was vails plan all along. those bastards.

[jfost]

...But this is America, where people happily walk away from houses when they're under water, even when they can easily keep paying on the mortgage....

Apples to oranges, in the mortgage mess it spells out exactly what happens when you can’t or won’t pay, and the banks have it under control.

This is about paying for a service that you ultimately don’t receive, but really people should just read their contracts-all the answers are right there.

[Pass Rat]

You are implying you have some knowledge of the industry. Perhaps you could help us understand cost breakdowns better since you say fuel is <5%? I have heard that fuel is a large chunk and that maintenance labor and parts can also account for 30%+ of costs.

Fuel is surprisingly not that expensive. An A-Star burns about 48 gallons/hour. The cost of Jet A in Alaska is about $5.50/gallon. That’s an hourly cost of $264. To use Silverton’s own price of $7880 for a six day trip with 5 hours of helicopter time for a four person group. In five hours the helicopter will use about $1320 but that’s split over 4 paying guests. The cost per guest for fuel is about $330 or 4% of the total cost. However, fuel is not the expensive part of a helicopter. Helicopters are extremely labour and parts intensive to maintain. The total hourly cost of an A-Star is upwards of $700. So over a five hour helicopter time trip the cost of the helicopter will be about $900 per person or about 11% of the trip cost to use Silverton’s trip.

For remote places fuel will often be delivered once at the beginning of the season. Some operations also pre-place remote refuelling points in their tenure so that less fuel is burned moving the helicopter around the tenure to refuel if they’re operating further away from the base. Jet fuel is substantially more stable than automotive gasoline and can be stored and used for years if properly stored. It becomes more problematic the older it gets because it needs to be tested to ensure it continues to meet quality requirements but it doesn’t go nasty nearly as easily as automotive gasoline.

[summit]

^ thank you!

[ak_powder_monkey]

Heli Operations in AK don't really make a profit.

That being said, never prebook a heli trip unless you can live without a refund. If you can fill a bird they will fly you.

[farmguy]

I think most of those operations can apply for some money thru the SBA grants/loans that are rolling out right about now, maybe after they follow thru on that, refunds or even partial refunds might become available.

[RiderX]

At a straightline camp a number of years ago, I spoke to Gordy about skiing in AK. His advice - if you aren't comfortable lighting a match to 10K, don't go. There are no guarantees. In fact the first time I went, I was weathered out the whole week except for one half day. I was also there a few years later for the Mt. Redoubt explosion. No refund in either case. Minimal rollover. So I wasn't expecting much this year. After reading this thread, I feel lucky as it appears VSHG was much more generous than other operations.

VHSG offered two options. Full roll over to next year at 2020 price and can book the trip at any time or 50% refund and roll over the remainder to next year. However, with option two can't book until January of 2021 and have to make up the price difference if there is a price increase in 2021.

Due to the uncertainty of even having a season next year, the fact that I haven't worked for 6 weeks, and the charge was still on my card, I took the 50% refund.