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BTE – Stars in the Sky

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AIRLINES WOES MAKE THE CASE FOR BUSINESS AVIATION OPTIONS THAT HELP COMPANIES OUTPERFORM

Delays, computer outages, hub-and-spoke route struc­tures, declining passenger experience, and the pilot shortage are all conspiring to diminish the value proposition of commercial airlines for corporate travelers – and to make a stronger case for business aviation. More important, studies among S&P 500 companies show users of business aviation are far more successful on any number of business metrics com­pared to nonusers. Millennials, responding to the increas­ing democratization, accessibility and affordability, are driving moves to business aviation. But there are other motivations for corporations to reconsider the role of business aviation in their travel policy to enhance both the wellbeing of their road warriors and the bottom line. All this is prompting a growing shift away from commercial to business aviation. The industry is now experiencing a resurgence as new ways of doing business emerge designed to increase corporate users’ effi­ciency and profitability. And new business models are only one arrow in the quiver to provide affordable solutions for almost any business travel budget.

FLEXIBLE FLIERS

The reasons for this growth are manifold. One old aviation adage, “If you have time to spare, go by air,” has given a whole new life by today’s airline hassles.

“Growing airline inconveniences are eating up traveler efficiency like a Pac Man on steroids,” says Private Jet Services CEO Greg Raiff. “Airline route changes eliminat­ed the out-and-back-in-one-day business trip and intra-regional air service. The number of nonstop destinations dropped dramatically with 400 communities losing air service since 2000. This is compound­ed by the pilot shortage which caused 50 communities to lose air service since 2013 and put another 200 at risk.”

Companies Using
General Aviation Aircraft

2018 Survey

To airports with either infre­quent or no air service
48.7%
To airports that never had commercial service
31.5%
Enabled passenger to keep business schedules that could not be met efficiently on airlines or other modes
51.6%
Involve stopping at more than one location
42.2%

More frequent corporate travelers are discovering affordable alternatives in business aviation. The vast majority of business aviation flights are for small- and medi­um-sized businesses getting the job done. In fact, nearly 60 percent of all companies using business aviation have fewer than 500 employees and only one aircraft.

Similarly, debunking the myth that the corporate jet is the exclusive domain of the executive level, the majority of missions carry mid-level employees who support corporate objectives, including technical specialists, middle managers and cus­tomers. The C-Suite uses these aircraft only about half the time. Users also credit business aviation for the ability to keep their company’s operations in locales away from higher-priced urban centers.

WHY BUSINESS AVIATION?

“The problem is most businesses don’t understand the value proposition delivered by flying private,” says Raiff. “The fact is business aviation is affordable. Just look at the return on the investment businesses make by flying private. These companies know business aviation is a sign of a well-managed company.” An earlier study of small and medi­um-sized companies on the S&P 500, entitled Business Aviation: An Enterprise Value Perspective, concluded companies that use business aviation services:
  • Drove higher revenues, greater profitabili­ty and improved efficiency
  • Enjoyed a significant competitive advan­tage both nationally and internationally through greater shareholder and enter­prise value
  • Were overwhelmingly represented among the most innovative, most admired, best brands and best places to work
  • Weathered recessions better and recov­ered quicker
  • Were more successful in returning value to shareholders with total return 245 percent higher than nonusers
  • Generated more income based on pro­ductivity and efficiency outperforming in both EBITDA and earnings at 230 percent and 219 percent higher than nonusers, respectively
  • Provided a higher return on assets, equity and asset turnover at 70 percent, 40 per­cent and 21 percent more than nonusers, respectively
  • Users were able to tap more business opportunities yielding 22 percent higher average revenue growth
  • Outperformed nonusers in share and enterprise value by 75 percent
Using business aviation alternatives enhances productivity as well. “Passengers on business aircraft spend on average nearly two-thirds of their time (63 percent) aloft engaged in work, including 38 per­cent of the time meeting with colleagues or customers,” according to the 2018 indus­try survey conducted by Harris Poll. “When they fly commercially, passengers on average work only 42 percent of the time. Two-thirds say they are more productive on business aircraft flights than when they are in the office.”

SQUEEZING PROFITS & PEOPLE

To compare the two transportation options apples-to-apples, companies need to con­sider the entire cost of using airlines. That analysis should include employee time, which airline advocacy group Airlines for American (A4A) calculates at $49 per hour. “Assuming $49 per hour as the average value of a passenger’s time, delays are estimated to cost air travelers billions of dollars,” says A4A, in promoting higher federal spending on aviation.


"FAA/Nex­tor estimated the annual costs of delays (direct cost to airlines and passengers, lost demand and indirect costs) in 2018 - the last full year for which statistics are avail­able - to be $28 billion. "

And then there’s the big squeeze as airlines install more seats and reduce pitch. 

Passenger numbers continue to grow; there were more than 300 million addition­al passengers flying on US airlines in 2018 than there were in 2005, according to the Department of Transportation’s Bureau of Transportation Statistics. 

But at the same time, US carriers actually operated 1.7 million fewer flights in 2018 than in 2005. In the coming decade, USTA predicts many airports will be at pre-Thanksgiving con­gestion at least twice a week.

At a time when the war for talent is intensifying, businesses need to calculate the impact of airline travel on employees. Road warriors find the time spent in transit the most challenging aspect of their entire job, according to a survey by the GBTA and Sabre. This same study showed 79 percent (and 88 percent of Millennials) said travel impacted their overall job satisfaction. Equally important, that same majority said the quality of travel impacted their busi­ness results.

In fact, 62 percent of Millennials believe the main benefit of business aviation is getting people where they need to go, when they need to get there, according to a recent study by the European Business Aviation Association (EBAA). The report, Expanding Horizons: How Millennials see the Future of Business Aviation, also noted this group sees it as more sustainable. In addition these digital natives like the ride-sharing options with 60 percent ready to book flight-sharing air services.

Airlines design their schedules specif­ically for their own efficiency; planners are not necessarily motivated by con­siderations of the impact their decisions have on business travel efficiency and the bottom line results for other organizations. Today businesses of all sizes are looking to be more competitive in their markets and better positioned to attract and retain great employees. The goal is higher productivity and better financial results. And for many, that means considering the entire value proposition of business aviation.

Users of these services have already discovered the cost of business aviation pays for itself in the end.

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Private Jet Services Group, LLC (PJS) acts as an agent for its clients in negotiating and facilitating transportation with duly licensed Direct Air Carriers. PJS is not a Direct Air Carrier and does not operate aircraft. PJS is affiliated with Direct Air Carrier Keystone Aviation, LLC d/b/a Elevate Jet (FAA# B8MA127H).

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