L3 CTS Security Bond Explained

Introduction...

DISCLAIMER NOTICE:
The information contained in this section is derived from both my own knowledge and former trainees whom have opted to receive bond repayments. Please understand that like all content on this blog I have striven to ensure the facts are presented to you, but, I can not accept responsibility for any inaccuracies. Additional information is provided to trainees on the security bond within their eventual airline employment contract. Thanks for your understanding and I hope this information is useful.

During my time in Southampton I helped out at about three or four open days and there was a common set of questions you received at pretty much every single one. If they weren't general questions or those related to applying to CTC, passing selection or funding your course with loans such as those from BBVA Bank then they were focussed on the CTC Aviation Security Bond. Thus, in having written detailed posts about the former three items I felt I'd pen one for the bond itself in the hope it removes any confusion. All of the information I provide here is both from my contract with CTC Aviation (although not explicitly listed) and from former pilots whom are now flying the line for selected carriers.

First things first...

There are many misconceptions on this topic so i thought i'd say this right at the top of this article. The bond IS NOT as clear cut as the eventual repayment of your training. It's a far more complex matter than that. The bond exists both as tax advantage and as a top-up to reduced salaries. This will all make sense if you read this article in its entirety as the only true benefit is reduced income tax and national insurance linked to adjusted taxable income which may or may not provide a few extra pennies in the bank. Virgin Atlantic is a key example here where the full course cost is bonded with repayments alongside a significantly lower first officer salary.

So.. what exactly is a bond?

That's a great question and is typically asked by both prospective cadets and their families alike and I was no exception to that. Many people typically associate the term bond with financial services such as premium bonds or corporate bonds but it can also used in other areas too! In the case of pilot training the trainee pays in to what's called a 'Security Bond'. Here's a definition:

A security bond offers a guarantee to a company that the recipient of its' goods/services will make use of them as per the terms of an associated contract. Likewise, the recipient is provided an incentive to comply in order that deposited funds are returned to them at a later date. Should the recipients fail to meets their obligations this can result in them forfeiting all or part their deposited funds.

To make this easier to understand let me provide you with an example of a very common use of Security Bonds outside of flying. John Doe wishes to hire a campervan for his travels and in addition to his rental charges is asked to deposit a £1000 security bond for damages. John's contract states that on returning the campervan the £1000 will be returned to him minus any repair costs. He is then provided an incentive to not trash the vehicle and the hire company can rest easy in that they have the £1000 to use should such an event happen and thus not be out of pocket. 

CTC Aviation's implementation of the Security Bond is a tad bit more complicated than that, but hopefully this explanation sets you up for the rest of this post.

Why does CTC Aviation use a bond?

To help answer this question I'll give you a rundown of CTC Aviation's structure, as above. If you need to enlarge the tree just click/tap it to open it in a new tab. CTC Aviation sits within the Commercial Training Solutions division of L3 Technologies but breaks down the delivery of training into two organisations, as below.

L3 CTS Airline Academy Training Limited (L3-CTS)
Provides both ATPL Theoretical Knowledge Training (Groundschool) & Foundation Flight Training.

Airline Placement Limited (APL)
Sponsors cadets accepted on to 'Wings' branded courses and thus provides:

• Basic and Intermediate stages of training
• Upset Prevention & Recovery training
• Accommodation in UK, USA, NZ
• Return air fare to international training locations
• Uniform & Equipment (calculators, protractors, headsets, etc)
• Examination & Licence Issue Fees
• Airline Placement Pool
• Performance Protection
• Type Rating Courses (airline/course dependent and may require additional deposit)

Splitting things up in this way is particularly clever as in order to complete a CTC Aviation Integrated course you must have both components. It's also worth pointing out that CTC Aviation's biggest selling points, Performance Protection and the Airline Placement Pool, are also inclusive in the sponsorship. In order to 'unlock' sponsorship a potential trainee must first demonstrate they are to the 'CTC Wings' standard as part of the Dibden Manor Selection Process. 

This brings us to the answer of the question. In order for CTC Aviation to provide its' graduates with the best possible chance of employment via the placement pool or with the airline to which their program is associated with, it needs a guarantee that each and every cadet will put nothing short of 100% into the process. Thus, with APL providing all of the above, how can they ensure you'll leave with a strong record all whilst helping to retain CTC Aviation's reputation? Well, the answer to that lies in a financial commitment. 

You have to step back every so often and appreciate that CTC Aviation is a business and without protecting themselves they probably wouldn't be as successful as they are today. Therefore, each and every one of us Wings cadets be us on Whitetail, Virgin MPL, easyJet MPL or otherwise must deposits funds into a 'Security Bond' under contract. The funds are then held by APL whilst we train and form part or all of your course fee.

How does the sponsorship/bond work?

The APL security bond will equal all or part of your course fee depending on the course you're on. At the time of writing the Whitetail course is split into a foundation fee of £24,800 paid to L3-CTS and £69,000 deposited in monthly instalments to your APL bond. The first instalment is paid a month or so before you start and the remainder are made as per the payment schedule outlined by CTC Aviation alongside your contracts. I have chosen to fund my bond deposits using BBVA Bank and they equate to roughly £5,300 a month until you've paid it. Other courses/programs will vary, such as Virgin Atlantic's MPL where the course consists only of a security bond for the total amount of the course.

You are sponsored by APL from the moment you commence your training and are provided everything in the list above, namely Performance Protection should it be required, in exchange for your agreement to the terms of the sponsorship. At this point the thought of terms probably sounds horrific and are enough to scare you but they're not that bad and are all in place to ensure you do well. I can't list the true terms of the agreement as that in itself would breach confidentiality, but at the time of enrolling in a CTC Wings Program you essentially agree to become a full-time trainee who devotes all of their time to the cause thus refraining from employment elsewhere. You also need to retain a level of flexibility - which pilots must have anyway - in that training plans may change at any time. The latter of which happened to me, so don't get too caught up on your training location as it can change at a moments notice.

The biggest benefit to the sponsorship is that APL will fund additional training as per Performance Protection, should your performance at any point drop below the standard required for them to place you with an airline. However, if despite remedial training you don't improve then APL reserves the right pull your sponsorship and terminate your training. If this was to happen and you have consistently demonstrated nothing but your all in terms of effort, then a Performance Protection process exists whereby APL will consider the refund of all your training fees minus a £5,000 administrative fee (your original deposit). I guess you could consider that an insurance against your own ability. 

Up 'til now I'm sure this sounds all well and good, but there's been no mention of the typical repayment of the security bond as per my vehicle hire example. But, fear not, for this also exists in the world of flight training too. This was certainly a HUGE factor in my decision to choose CTC Aviation as my preferred school. Read the next section to find out more.

How does the bond get repaid to you?

Fast forward to the end of your training at CTC Aviation and not only have you completed Ground School with strong results, but passed both your CPL/ME/IR and AQC to an equally high standard. You now find yourself swimming in the hold pool. Hoorah, all of that hard work has come to an end and now, with support from APL's Airline Placement Team you begin applying to opportunities available with partner airlines. After a period of time in the pool you attend a few interviews with different airlines and land the job of your dreams flying the Airbus fleet around Europe. Yes! - It's what you've always been waiting for. But wait... what happens to the bond? Well... it's transferred to the airline and the airline pays CTC Aviation a finders fee for them providing them with a pilot. 

All of a sudden the bond which initially provided you with APL sponsorship and formed part of your training fees, has now become owned by your employer. As a result, the airline now has security against your employment in a bid to provide financial incentive to prevent you from wanting to jump ship. As part of your employment contract you will receive terms for the return of your security bond in exchange for a number of years service of which the typical duration is around 7 to 10 years.

Using pilots I know at easyJet as the example, your bond will be repaid to you over 7 years of employment in addition to your basic salary and flight pay. This equates to £9,857 GROSS a year or £821 GROSS a month extra in your pay packet. Taxation on these bonds is a rather grey area but I have heard from many sources that it is free of tax. It's worth noting that these same sources have also told me that the airline reduced their initial salaries to accommodate for the bond repayment although when you then consider you pay tax on less GROSS pay it eventually works out that you earn more regardless.

To ensure this make more sense to all readers, here's this in a table to show you the side by side comparison of pay without the bond and pay with the bond from the same airline. I've used listentotaxman.com and the 2017/2018 tax year figure to aid me with this. I've also provided as much detail as I can as pay can be quite complex so accept my apologies if you've been working all of your life and already understand it. I hope that from this table it becomes quite clear that whilst on paper a new pilot would appear to take less home each month, the reduced annual salary and bond actually work in your favour by reducing your overall tax contributions resulting in an extra ~£200 per month.

* Phone users please note that this table is scrollable left-to-right *

If during the repayment period you do in fact leave the airline for another, then you will forfeit the remaining balance of the security bond and the airline will retain it. When it comes to it if I was to be placed with a carrier I could make a career out of then my overall training at CTC Aviation, with bond repayments considered - would have only ever cost me £24,800. Of course in reality there is also interest to pay on many commercial bank loans so it's not quite as black and white as this, although you are essentially receiving a significant chunk of your training fees back on top of your salary. In my eyes this put CTC Aviation above the rest. 

Surely there's a catch somewhere?

I wouldn't say the catch to the repayment of the Security Bond is necessarily intentional, but more down to the type of arrangement airlines have with CTC Aviation and/or the location to which said airlines will base you as one of their pilots. What's more, at the time of writing there are only a handful of airline partners - that I'm aware of - that accept the transfer and repayment of the security bond in the first place. To the best of my knowledge these include:

• British Airways
• British Airways City Flyer
• easyJet*
• FlyBe 
• Monarch
• Virgin Atlantic

I have heard on the grapevine that Thomas Cook and Thomson have previously accepted the bond, but I'm not 100% certain so take that with a pinch of salt. Nevertheless, if you find yourself being placed with any of the above carriers, on a permanent contract, it is likely your bond will be transferred and repaid in one form of another. However, if you secure employment with an airline which is not on this list or whom are not a partner airline of CTC Aviation - in the sense you go about seeking employment directly with an external airline - then your bond repayments are forfeit. With that said though, is is quite common to find that non-bond airlines offer higher salary/packages which some graduates have said effectively covers the bond and then some. Further to this, if you were to be placed with easyJet but not in a UK base and/or UK contract, i.e. in Paris on the French contract, then the bond will also be forfeit as this point.

Overall, it's swings and roundabouts really and I therefore would recommend you initially treat the bond as simply you paying for your training.. nothing more, nothing less. I wouldn't necessarily go into the process relying on its repayment as it is not always guaranteed. If, at the end of the process, you do in fact receive it then I guess you could consider it a plus and somewhat offset any loan repayments with it. 

*Note: easyJet typically employ CTC Aviation graduates placed in the UK bases through the CTC Flexicrew product and this means that said cadets will be on CTC Aviation's payroll in their first year of employment. As a condition of the bond requires cadets to be permanently employed by the airline then UK based easyJet cadets under Flexicrew will begin receiving payments on their transfer to easyJet's payroll in year 2 - 3 of employment. 

^ Deleted text no longer correct. Flexicrew has ceased to exist in the UK as of September 2018.

I hope this helped...

The bond was always an area which confused people and I hope that through this post you now have a better understanding as to how it works and it's overall purpose. If you found this post useful or have any further questions about it feel free to pop a comment at the bottom of the post and I'll try to answer it if I can. 

All the best,

George.