My SOAR point with VET Student Loans for Flight Training

Recently SOAR Aviation went into voluntary administration. It collapsed owing over money to creditors, and leaving more than 200 disgruntled students without a licence, and with a lot of debt.

Many might believe that COVID has expedited the collapse of SOAR, but the seeds of the collapse were firmly planted from the beginning. The history and ongoing problems of SOAR Aviation point to a systemic issue with the VET Student Loan program. 

To put it bluntly, over the last 10 years, it has become evident that many flight schools use the VET Student Loan as a gravy train of easy money, with little regard for the students and the effect that this debt has on the students’ future.

This is not just my opinion; I have had lots of students drop out of VET Student Loan-funded schools to move to self-funding at our school, as they had experienced appalling customer service and training standards. There are also reputable VET Student Loan schools doing the right thing, but they are in the minority.

Before I dive into how I believe we can resolve this issue, let’s look at the history of SOAR Aviation as an example of the systemic issues with VET Student Loan, and see how SOAR got into this mess in the first place.

One Scoopon or two?

In 2013, SOAR Aviation was started by a 22 year old flight instructor by the name of Neel Khokhani, after he gave some unsolicited advice to his employer. The CFI took it personally and said:  ‘If you think you can run a flying school better than me, then go and start your own.’ I remember reading about this five years ago in an interview in The Daily Mail. Neel stated that he sold $180,000 worth of flying vouchers on Scoopon before he even had an aircraft or flying school. He used this money to purchase his first aircraft and start his school at Moorabbin Airport in Victoria. You might call this entrepreneurial and ballsy, however if we really think about this carefully, what he actually did was potentially fraudulent; selling a voucher for a product or service that does not exist yet.

Two years later Neel changed his story in an article in Smart Company stating that he actually raised the money by crowdfunding with no mention of Scoopon. I would suggest the first article is closer to the truth.  Scoopon is a discount site not a crowdfunding site and I’m sure the buyers of those Flight Vouchers would not have purchased them if they knew no aircraft or flight school existed.

I remember thinking at the time, not how confident Neel was to actually do this, but how brash he was to admit to doing something so unethical and perhaps illegal. I believe this attitude potentially set the tone of how the business was developed from then on, and highlights the owner or founder’s intention from the start.

The real growth started when SOAR partnered with Box Hill Institute in 2016, which provided theory courses and VET Student Loan funding from the government. Another SOAR flight school was also started at Bankstown near Sydney.

The rise of the rock star CEO and private equity

Eight years later, Neel Khokhani was included as number 51 in the  Australian Financial Review’s  Young Rich List. His net worth was reported to be around $66 million. He was celebrated in the media across the country as the founder of a very successful flight school.

We as a culture are obsessed with the rock star CEOs who can turn a small amount into millions or billions of dollars. The reality is that great companies are built by great teams; the CEO is the head coach, but it is teams of people which build great companies. It is up the CEO to set the standards. There is a great quote by Todd Whitaker which states, ‘The culture of any organisation is shaped by the worst behavior that the leader is willing to tolerate.’ 

While the media applauded Neel’s entrepreneurial success, they did not mention the serious aircraft accidents that SOAR had been involved with or the growing number of disgruntled flight instructors and students who were not happy with the level of flight training offered by the school at the time.

I am sure this rock star status and his impressive sales skills helped Neel sell a 50 percent stake in SOAR and raise $20 million from a private equity firm, The Growth Fund. This injection of cash was meant to be used to upgrade the school’s aircraft fleet and help with the school’s expansion.

Aircraft accidents

On 5 October 2018 SOAR Aviation suffered a near-fatal aircraft accident when one of its training aircraft apparently lost control and spun into a field at Black Range, Victoria. Both occupants were critically injured in the crash.

On 12 December 2019, one of SOAR’s basic trainers flipped upside down at Moorabbin airport on a student’s solo flight seriously injuring the student pilot.

On 5 November 2020, one of SOAR‘s training aircraft crashed near Carcoar, NSW, killing the instructor and student.

This is three major accidents, one fatal, the other two serious, within a two-year time frame. This in itself is a huge concern in relation to the standards in flight training. The first two accidents were not mechanical in nature and were human factors-related while the third is still under investigation.

The last accident is tragic and one can only assume this may have been avoided if steps were taken earlier to close down the school.

Class Action

The Age reported in  May 2020 that over 200 students had taken a class action against Box Hill Institute, including one student who was seriously injured in one of the accidents. The class action is due to Box Hill and SOAR Aviation not adequately supporting the needs of their students. Many of the class action students were left with more than $100,000 in VET Student Loan debts without passing their CPL flight test. A further investigation from the Australian Skills Quality Authority (ASQA) into SOAR and Box Hill Institute revealed that the CPL completion rates were well below minimum accepted standards in the industry.

The collapse of SOAR effects the entire industry

How many private investors lost money and how many flying students have had their dreams destroyed though a lack of proper management of SOAR? Not only this, it actually affects the entire General Aviation community by instilling a lack of trust in flight schools as an investment type for private and public investors. It tarnishes the entire industry.

Where are all the publicly listed flight schools? There is a reason you do not see too many flight schools (if any) listed on the stock exchange and the reason is that flight training is extremely hard to scale. It is a weather-dependent type of business which utilises specialist training, in depreciating machines, with high- risk student pilots. Most commercial flight schools are heavily tied to economic conditions and ride the boom and bust airline-style economic cycles. It’s not really a great model for a blitz-scale style publicly listed business.

What is the intention of the business?

I firmly believe that every business owner should be asking themselves why they started their business and what drives them to keep going. If the answer is ‘to make a ton of money’ then I know that business is never going to be successful in the long run and it’s not going to have a lasting meaningful impact on individuals or society as a whole.

There is nothing wrong with wanting to make money – and it is vital for a successful business – but if money is the only reason why you are in business, then you are on shaky ground. The founder or CEO needs a meaningful ‘why’. I don’t personally know Neek Khokhani, so I can only guess as to what his WHY was. From an observational point of view, it would appear that he was driven to grow as big as quickly as possible and to become successful as quickly as possible. 

What if Neel Khokhani had a meaningful reason for why he wanted to start a flying school and was not in a hurry to be successful? What if he made quality training his passion, and making money was secondary? What if he decided to only open one flight school and have a more hands-on approach to the day to day operations of flight training? What if he focused on making that the best flight school possible? What if he decided that VET loans were actually more of a curse for his school and not a benefit?

It is possible Neel started the school with altruistic intentions. Early success can derail us when ambition overtakes a meaningful intention. It is easy to judge after the fact, however the warning signals were actually present from day one. I really do hope the flight training industry and government can learn from the collapse of SOAR (and the downfall of Neel) and look at overhauling the VET Student Loan program to better benefit individuals and the industry as a whole.

Too late for many

For those who have lost a loved one in the SOAR accident, I am truly sorry, and I am also sorry for all those students who have had their dreams of becoming a commercial pilot crushed. My hope is that we can all learn from what has happened with the collapse of SOAR so it does not happen again. While training standards and business management are likely to blame for half of the issues that plagued SOAR, I still believe VET Student Loan is to blame for the other half. There is a supportive Facebook Group for ex-SOAR students here.

The easy availability of VET Student Loan can corrupt

I believe the current VET Student Loan system for flight schools can eventually corrupt even the most ethical management team running a flight school. If a student is successful in obtaining VET Student Loan but halfway through their flight training, the flight school realises that they are not commercial pilot material, how many VET funded flight schools would cut them loose, tell them to take up sailing instead, and wave goodbye to another $50,000 in revenue?  We can accept that not everyone has the skill set or temperament to be a brain surgeon, and the same goes for being a commercial pilot. Not everyone can do it, no matter how long they train.

I believe that for most schools, it is easier to be honest with a student who is self-funding their flight training, because the managers or owner of the school knows they have worked hard for that income. For VET Student Loan funded schools, the money is seen as coming from a huge pile of government money.

I have heard a lot of stories from students who have reached the end of their training, having spent $100,000 pf their  VET Student Loan, only to be told they do not meet the CPL flight test standard (and they may never reach it.)

One possible solution

I believe the VET Student Loan program should be offered to both Recreational Flight Schools and General Aviation Flight schools and not just RTO-approved schools. As we have seen, just because a school is  RTO-approved, does not prove that the school is offering high quality flight instruction.

My idea is:

  1. The student can only apply for VET Student Loan funding if they have passed their CPL theory exams and paid for their initial flight training to get to solo standard (about 15 hours of flight training).
  2. Once the student has achieved solo standard and passed their CPL theory exams, they can then apply for a VET Student Loan for each stage of flight training: RPC or RPL; PPL; Command time; then CPL; and Instructor or Instrument Rating.
  3. The student cannot apply for the next level of funding unless they have passed the previous course. 
  4. The student can also transfer the funding to another school if they are not happy with the level of training at their flight school.

This would put customer service and training standards back at the top of the priorities for flight schools plus it would sort the serious pilots from those who are not totally committed.

I feel that students who learn to fly with VET Student Loan loans do not really have a full comprehension of the amount of money that they are using. They do not have a real understanding of the amount of debt that they will have to pay back at a future date. The student signs a contract and the flights magically get paid for by the government. How good is that when you are 19 or 20 years old?

If you had to earn each flying dollar with your own sweat, at a less-than-ideal job, then you are going to make sure you squeeze every last ounce of value from that dollar.

What’s wrong with paying for flight training yourself?

I decided a long time ago that I never wanted my flight school to be registered as an RTO and I never wanted  to offer VET Student Loans, due to the potential issues I have outlined above. All of our students are self-funded and the flight school is still busy and growing. I also know that all of our students are committed because they are paying for their training with their hard-earned money.

Why do so many individuals think the only way to complete flight training is with VET Student Loan? There are other ways. I worked as a cook and kitchen-hand between the ages of 15 and 20, to pay for my flight training to CPL level. I did it because I had had a passion for flying and did not want to get into debt when I was young.

Becoming a commercial pilot without using VET Student Loan

Changing government regulation is a long and arduous process and while I offer a solution I am not hopeful that these changes will come about before the next pilot shortage. My best hope of changing the system is to encourage individuals not to get into debt and to self-fund their own flight training. 

If you self-fund your own training and you are not happy with the level of service the flight school is offering, it is easy to take your business elsewhere. It is really hard to change with a VET Student Loan. If you are really passionate about flying you will find a way to do it without a VET Student Loan; it just might take you a bit longer to get there. I truly believe that in most instances you can always get what you want when you have a meaningful and powerful reason; the only variable is time.

Due to COVID we now have a lot more time before the next Pilot Shortage, so if you’re reading this and are wondering whether to self fund or go VET Student Loan, I ask you to consider self funding. If it takes you four years of working in a job you don’t love, so what? If you don’t feel that it’s worth the sacrifice, then your heart may not really be into flying. 

Why get into debt with a VET Student Loan full time pilot course, when there most likely still will not be pilot jobs when you finish in 12 months time?. 

If you’re still in doubt, ask yourself this question: would I prefer to finish my training in 1 year with $120,000 of debt with no job, or should I complete my training over four years and come out with no debt and a possible job?

Time is now on your side, use it wisely.

Damien Wills, January 2021

To read more of Damien’s blogs, click here.

 

7 Responses to “My SOAR point with VET Student Loans for Flight Training”

January 10, 2021 at 9:03 pm, Matt Venus said:

There are no shortcuts. Play the long game.

Reply

January 12, 2021 at 8:08 am, Simon Perkins said:

Hi Damian,
I completely agree with your approach on self funding. There is time to self fund and without that level of commitment the person is unlikely to take on the challenges to come.

Thanks for putting in the time to publish this.

Reply

January 12, 2021 at 9:48 am, Thor said:

Hi Damian, some good points made there. I think aptitude testing would go a long way to weed out those not suited though. I don’t think that one’s ability to self fund is a good marker of commitment. There are plenty of 19/20 year olds out there who have parents with plenty of money who would pay.
I completed my CPL last year through VET-FEE and tipped in some of my own money for endorsements on top. I work a job that is ‘ok’ and I can afford to pay off the loan. Lucky me! That said it would have been a struggle to self fund. Academically I’m capable, and have shown that I can pass a CPL flight test. I’ve recently passed my IREX too however, my bug bear now is how to fund MECIR??? Why shouldn’t I be able to access a school through VET-FEE to complete the flying portion?
It’s an interesting discussion to have going forward regarding flight training.
I think the elephant in the room is those folk who peddled the lie of the pilot shortage. I know plenty of pilots. I know very few multi-engine jet pilots though……

Reply

January 12, 2021 at 11:32 am, Ian Mooney said:

Thor, I think your current situation is exactly what Damian is suggesting. You start out self funding to an RPC/RPL type level and pass the theory tests. Then the door opens for you to access VET type funds to complete Next levels of training. A gated process where you need to pass 1 before more funds are released for the next.

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January 12, 2021 at 12:16 pm, Thor said:

Absolutely Ian, that would be a great solution, still using VET-FEE though. I self funded small portions of my flight training but the bulk was as above. The expectation though that the majority be self funded isn’t realistic for everyone.

Reply

January 12, 2021 at 2:59 pm, Marshall said:

As someone who has come through the system as a VET-FEE help assisted pilot. I think you’re spot on with your suggestions.

When I finished school and was waiting to get citizenship for the government funding, I spent some of my own money getting a few hours; I got up to circuits before I was accepted into the course and was forced to start from scratch.

I think my skills would be so much more enhanced if I were required to complete the theory components up to an including CPL, and then truely began the flying journey with a broader understanding, and deeper appreciation.

I think back now how much I wish I had a portion of the $160,000 debt I have and how if I were more efficient at the beginning, using the remainder enhancing the more technical flights as IFR and Multi engine flying.
There is no way I could afford to try keep MEIR current now.

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January 13, 2021 at 10:07 am, GoFly Student said:

Thanks for your response Marshall. You make a very good point with the CPL courses including a Multi engine instrument rating that most likely will not be used until you gain 1000 hours plus experience in single engine aircraft. By the time you will need it you will be required to complete almost half the instrument rating again to get current. Best to do your instrument rating once you have gained some valuable single engine experience and are likely to get a multi engine job.
Damien

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