Airlines’ woes make the case for business aviation options that help companies outperform
By Kathryn B. Creedy
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 democratize the industry and increase corporate users’ efficiency and profitability. These new, more affordable approaches report 60 percent or more of their passengers are new to business aviation. 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 manifest. One sarcastic adage coined at the dawn of aviation went “If you have time to spare, go by air.” Today’s airline hassles have given a whole new life to these words.
“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.”
In a 2018 survey of companies using general aviation aircraft, nearly half of all missions were to airports with either infrequent or no air service and 31.5 percent were to airports that never had commercial service. Some 51.6 percent of business aircraft flights enabled passenger to keep business schedules that could not be met efficiently on airlines or other modes, and 42.2 percent of trips involve stopping at more than one location.
More road warriors 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 lobbying group Airlines for American (A4A) calculates at $49 per hour.
“Assuming $49 per hour as the average value of a passenger’s time, 2017 delays are estimated to cost air travelers billions of dollars,” says A4A, in advocating for 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 2017 to be $26.6 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 201 million additional passengers flying on US airlines in 2017 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 1.6 million fewer flights in 2017 than in 2005. In the coming decade, USTA predicts many airports across the nation will be at preThanksgiving congestion at least twice a week.
“Ultimately, those who travel want to save time when possible, be productive and have a pleasant experience while accomplishing their business goals,” says Global Business Travel Association COO Michael McCormick. “A better understanding of the routine challenges business travelers face can help organizations better serve their road warriors as they diligently work to provide the right tools, resources and policies.”
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 and 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.