Finance
Business Aviation: Tools of Success
In today's business landscape, an aircraft is best viewed not as an entity that flies, but as an extension of the business. A capital improvement, not a capital expense. For it is not what the aircraft is, but what the aircraft does that is pertinent. What it does is deliver mobility.
Over the ages, mobility has been vital to success, and the people who used the right tools for mobility succeeded. Elephants gave Hannibal the mobility to cross the Alps. Ships gave Columbus the mobility to discover America. Tanks gave Gen. George Patton the mobility to help end World War II in Europe.
Today, aviation is the right tool for business to gain the mobility to succeed. Those who use this tool will gain the flexibility required in today's dynamic business landscape. They will maximize time. They will capture opportunities. They will succeed.
During the past decade, the face and pace of business intrinsically changed. Barriers to trade dissipated as political, economic, and social structures adapted to foster free enterprise. The resulting economic growth generated tremendous opportunity, and the businesses which benefited were those that could act quickly.
More than ever before, business aviation is delivering the required mobility. According to information from AvData Inc. published in the National Business Aviation Association's (NBAA) 2001 Business Aviation Factbook, the use of business aircraft in the U.S. rose more than 40% between 1991 and 2000. AvData reports more than 9,300 companies were operating nearly 14,080 aircraft last year.
It’s no surprise that 346 of America's most successful companies — the Fortune 500 — operate business aircraft. The investment has paid excellent dividends: According to a recent study by Arthur Andersen, businesses that operate aircraft are more profitable than their counterparts that do not.
Titled “Business aviation in today's economy: A shareholder value perspective,” the study probed the financial performance between 1992 and 1999 of 335 companies listed in Standard & Poor's 500. Of the 335 companies, 214 were aircraft operators and 121 were not. Operators earned 141% more in cumulative returns than nonoperators. Companies that started aircraft operations after 1995 returned 343% to shareholders vs. 177% for nonoperators.
“Our central finding is that business aircraft can make a substantial difference in how a company performs its mission, in many cases generating significant gains in the drivers of shareholder value. Increased mobility was at the core of these gains — satisfying management’s need for greater organizational agility, knowledge integration and transaction speed,” the report says.
These findings echo a similar report from Arthur Andersen for the period 1982-1992. That report found that companies acquiring business aircraft experienced 7% higher sales growth than companies not purchasing aircraft. Additional proof resides in J.D. Power’s 1999 report: Business Aircraft Utilization Strategies and in Louis Harris & Associates' 1997 survey of business aircraft users. More information on these studies is available on NBAA’s website at www.nbaa.org.
Ownership Options
Not only does it make good business sense to operate an aircraft, it also has never been easier. Options include full ownership, joint ownership, fractional ownership, charter, and rental.
Deciding which is right for your business is relatively simple, says Walter Kraujalis. An aviation attorney and consultant, Kraujalis is a member of NBAA’s Corporate Managers Committee and also conducts NBAA’s Aircraft Resource Options Workshop.
The decision begins by analyzing how you will use business aviation. Who will fly and where you will fly determine which type of aircraft. How often you fly will determine which ownership option makes the most sense. “If you will fly less than 50 hours a year, chartering or renting is best. If you fly 50 to 250 hours, consider a joint ownership or fractional situation. If flying more than 250 hours, full ownership is probably best,” he says.
Kraujalis highly recommends chartering as a way to try out different aircraft and become accustomed to business aviation. Then seek advice from a consultant or good broker to help you decide the level of ownership for your business.
As for airplane type, the good news is plenty of choice exists, thanks in part to a renaissance in manufacturing. Since 1995, aircraft manufacturers have certificated no fewer than 40 new models, from the lightest pistons to the most spacious jets. And there are even more new aircraft on the horizon.
A similar renaissance has occurred for avionics. The technologies once exclusive to military cockpits have migrated to general aviation. Today’s avionics combine digital electronics and glass-cockpit displays to deliver highly integrated systems. The bottom-line benefit to businesses is that the new avionics greatly reduce pilot workload and contribute to safety. Moreover, they are very affordable.
Digital technology is also apparent in the cabin. Endowed with computer connections and telecommunication capabilities, cabins have become offices in the sky. Telephone, fax, e-mail and video access are all at hand.
Today’s business aircraft offer many benefits to those who use them as tools for success. The following profiles are representative of the kinds of people using business aviation today. These real-life examples demonstrate how different sizes and types of companies use different aircraft in their business to help them be more competitive, more successful, and more profitable. Heed their voices. It may be some of the best business advice you’ve ever received.
