A look back at the warning signs of the Silver State debacle.

I don’t know all the details about the rise of Silver State Helicopters (SSH) because I wasn’t looking for training when it began its phenomenal growth. Once I caught notice of it and learned more about how its training program worked, I began to suspect that it was what I refer to as a pyramid scheme. Not wanting to get myself in trouble with SSH’s legal department — and frankly, not sure if I was right — I kept my opinions to myself. I did, however, try to warn people to take a close look at what a helicopter training program would give them before signing up for one.

The purpose of this article is not to say “I told you so” to the folks who are now suffering from the demise of SSH. The purpose is to shed some light on what may have been going on and the realities of the helicopter industry.

A Look at SSH

If you’re unfamiliar with SSH — not likely but possible if you’re considering a career as a helicopter pilot — here’s a bit of background information.

SSH was a helicopter training organization that used a “program” approach to training. For a set fee of $70-$80K (I’ve heard several dollar amounts in that range), SSH would provide training that would take you through the following helicopter pilot ratings: Private, Instrument, Commercial, and Certified Flight Instructor (CFI). I’m not sure if it included a CFII rating (that’s for CFIs to do instrument training); perhaps someone reading this can clarify.

SSH attracted potential students by holding seminars in large auditoriums. It would come to a city and hold a seminar. Advertisements on the radio and elsewhere promised to explain to seminar attendees how they could become helicopter pilots earning $80,000 a year. This was enough to attract quite a few potential students. After all, what could be a cooler job than a helicopter pilot? And $80K/year is a great paycheck.

SSH arranged for financing at the seminars. So if you came and liked what you heard, you could apply for a loan on the spot and sign up. This immediately put you in debt. I believe money was drawn out to SSH in 1/3 increments, but I’m not certain how that worked. Again, I’m hoping someone intimate with the situation will clarify in the Comments here.

SSH grew incredibly fast. Founded in 1999, it reported revenues of $40.7 million in 2005 and was ranked number 12 on the Inc magazine 500 list of the nation’s fastest growing small businesses(1). They had training centers in 17 states and over 2,000 students enrolled. I heard a rumor that they tried to buy a fully year’s production of Robinson helicopters one year. (Can anyone substantiate that rumor with a reference?) Helicopter pilots were talking about SSH online and in person. And, unfortunately, many flight schools saw a formula that worked and began limiting their training to a “program” as well.

The Program

Many knowledgeable helicopter pilots had a problem with “the program” and the promises made by SSH. My biggest concern was the salary promise: telling people in their seminars that they could get an $80K job as a pilot. I never heard the promises firsthand, and I worried that they were leading people to believe that they could get that salary immediately after the 18-month training program ended. As I explained in “The Helicopter Job Market,” this is simply not the case. The comments on that post — many of which were written by experienced pilots — support my claims.

Then there was the quality issue. I received this comment on my August 2004 post, “Thoughts About My Summer Job“:

I have a question for you. I am looking at begining training, I already have my PPL fixed wing, and I have been looking at a few schools. But have you heard of helicopter academy? Look them up Helicopteracademy.com
0-300hrs. for 50k and a job offer after that. Your opinion would be great or if you have heard anythin about them. Thanks and thatr offer still stands for me to jump in your new bird. lol

(Oddly enough, the flight school he was referring to is the same one my friend Dave works for as the Chief Flight Instructor. And the post he was commenting on was a direct response to a question Dave had asked me. Small world.)

I responded to his comment with a lengthy comment of my own. In it, I listed a bunch of things a potential helicopter flight student needs to consider when evaluating a “too good to be true” deal on training.

At SSH, there were some problems with how quickly students could get through the program. They were supposed to finish in 18 months, but not all of them could do it so quickly because of other job responsibilities or shortages of aircrafts at SSH locations. There were also some problems with check rides — some students simply were unable to pass a check ride on the first try because of their lack of knowledge or skills. Although the FAA says you only need 35 hours of dual time to get a helicopter rating, not everyone can do it so quickly. (It took me 70+ hours; I like to think it was because I did it part time over 18 months and took a summer off.)

I also worried about the affect of releasing so many new pilots into the helicopter job market. If SSH was graduating 1,000 students a year, where were they all going to work? There simply weren’t enough helicopter jobs out there for all of them. As someone who likes to fly for someone else in the summer time, I saw a lot of potential competition for the usual entry level jobs.

In addition, having too many pilots to fill open positions could negatively impact pay rates. Why pay $700/week when you can easily find someone willing to take $500/week? I also saw a decline in helicopter pilot salaries because of a glut of pilots.

SSH Closes Its Doors

On February 4, 2008, SSH declared Chapter 7 bankruptcy. For those of you who don’t know the individual chapters of the bankruptcy code, Chapter 7 is the bad one. It means you’re definitely out of business for good and are liquidating assets. This action put over 700 employees out of work and left 2,000+ students in various stages of completion of their program, some of them owing $70K or more to a lender.

If you’re interested in more facts about the rise and fall of SSH, here are some excellent references on news sites:

• “Tracing Silver State’s Demise,” March 1, 2008, MySanAntonio.com
• “Closure of flight school ‘nightmare’ for students,” February 12, 2008, AZCentral.com
• “Helicopter School Closes, Leaving Students in Lurch,” February 13, 2008, NYTimes.com.

The “Pyramid” — Or Borrowing from Peter to Pay Paul

My background is in accounting — indeed, I have a BBA in Accounting from Hofstra University. I was an auditor and financial analyst for eight years. So I think about numbers and I know how people can manipulate them.

When I first heard of SSH, my immediate thought was pyramid scheme. This is probably the term I used when discussing it with fellow pilots. In fact, however, it’s more of a case of Robbing Peter to Pay Paul.

What I saw going on was this: SSH was collecting money up front from students, supposedly to cover their training costs. But it was probably using this money to pay the bills on previously purchased goods and services. So it was always a step behind with payments and it always relied on new student revenue to keep the business afloat.

This would be fine if (1) the inflow of new students remained constant or increased or (2) SSH finally caught up with its debt and began paying current expenses with current revenues.

Unfortunately, neither of these scenarios developed.

The rise in interest rates soon discouraged the smart students from signing up. I was shocked in November 2007, when I read a comment from a reader on my “The Helicopter Job Market” post from earlier that year. In it, he queried:

I’m curious, has anyone ever heard of Silver State Helicopters? Are they reputable?

Also, how is someone to payback an $80K loan at 19% on an entry level salary of 30K/year? That’s a freakin’ house payment each month without having a house! My “off-the-cuff” figuring say’s that equates to about $800 a month for 20-30 years!

I pushed his numbers through Excel and came up with $1,271 per month over 30 years — which I find difficult to believe they’d offer. The total payments over that time would exceed $450K. Hell, he could buy a helicopter for that!

While I still find it difficult to believe that financing terms were that bad, it does tend to explain why SSH’s sign up rate declined to a slow trickle. It also explains why they closed their doors two days after their last seminar, which was held in Florida.

So SSH got to the point where there wasn’t enough new revenue in to cover their debts.

I got an inkling of their serious financial problems in the fall of 2007 when SSH did a major reorganization that eliminated several middle management positions. Later, in January 2008, I was told by a SSH employee that SSH was unable to pay overhaul centers to get their helicopters back from overhaul. As a result, they were running out of helicopters to do training in. Indeed, the Glendale, AZ location had a timed-out R22 sitting in the hangar because they worried that if they sent it to the overhaul center, they’d never get it back.

How I Know So Much About It

Even though I saw the writing on the wall, I had a relationship with SSH that began in 2006. Needing a qualified R44 mechanic for my helicopter, I made arrangements for SSH’s Mesa, AZ location to do my maintenance. The folks there were friendly and helpful and the mechanic did a fine job at a reasonable price. (He’s now looking for work; let me know if you need a full-time R22/R44 mechanic and I’ll put you in touch.)

When I decided to get my instrument rating, I spoke to the folks at Mesa and they set me up with their chief flight instructor in Glendale, which is much closer to where I live. After several false starts, I began my training in January 2008. I accumulated about 12 hours of instrument flight time — 10 of which was in a simulator — before they abruptly shut their doors.

I was surprised, although not shocked. I knew the end was coming, but didn’t realize it was so close. I was lucky, though. I’d been on a pay-as-you go program because of my unusual relationship with them and was paying by credit card in $2K installments. I’d used up my first $2K and had just paid my second $2K for the next month’s training. When I got the call that SSH had closed, I got on the phone with my credit card company and initiated a chargeback. It took three weeks for them to process it, but the money was recovered.

So I managed to emerge unscathed. I wish I could say the same for the rest of the SSH students.

[A side note here: I was notified of SSH’s shutdown by the FAA. My contact there knew I used SSH for maintenance and was worried that my helicopter was locked up in their hangar. His first question to me when he called was, “Do you have possession of your helicopter?” That’s a weird question coming from the FAA.]

Let This Be a Lesson

I hope this post teaches its readers a thing or two about the situation. If we learn from this experience, it’ll help protect us from being victims of similar situations in the future.

In short: if something sounds too good to be true, it might just be. Think things through, do your homework, be aware that not all promises are kept. Don’t sign on the dotted line with your eyes closed or seeing only half the picture.

One last word: I’ve tried hard not to bash or blame any specific person for what has happened and I will not tolerate any bashing or finger-pointing in the comments to this post. If you have something to say about your particular situation or experience, do use the comments feature to share your thoughts. But if you use them to personally attack anyone, your comment will be deleted. This isn’t a helicopter forum and I don’t tolerate the high school mentality that’s so common there.