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BTE – Value Play

Value PLay

BUSINESS JETS VS BUSINESS CLASS

A sea change in travel man­agement is rising to the surface driven by frequent business travelers’ needs and the quest for corporate profitability. This change can be seen in the growing use of both commercial airline premium cabins and business aviation.

Despite the higher cost of such travel, businesses are weighing new factors such as a tight labor market and the resulting necessity to extract every ounce of produc­tivity from travel while ensuring employees do not burn out. In fact, a recent study by Airline Reporting Corp challenges the wisdom of emphasizing cost savings over return on travel investment.

“Cost savings are roughly one percent of the economic value added by road warriors, so it makes much more sense to focus on how to increase the road warrior’s value-add,” says Scott Gillespie, ARC’s head of analytics. “This means increasing the road warrior’s trip success rate and their willingness to travel, and decreasing their burnout and attrition risks.”

Reed & Mackay group CEO Fred Strat­ford agrees. “With work-life balance now ranking among the top priorities for candi­dates, travel policies have taken on a new level of significance,” he said in a recent European CEO column. “As such, there is a commonality to the frustrations we hear from travelers: Don’t make me wait at the airport, give me the best flight times so that I can reduce my days away from home, and make sure I have decent WiFi so that I can actually work. Business travelers are time-poor, which often means jam-packed schedules with high-value meetings.”

Many would be surprised to learn who is flying business aircraft. 

“Most users are small companies employing 500 or fewer workers and have only one aircraft,” says David Krane, senior consultant for Harris Insights and Analytics.
500 or Fewer Employees
70%
501 - 5000 Employees
13%
5000+ Employees
17%

Business aviation missions often involve multiple destinations

Percent of multi-leg flights

25 % or Less
35%
61% - 75%
34%
26% - 50%
34%
> 75%
13%

DEMOCRATIZING TRAVEL PERKS

There is no better example of industry changes than a report in The Wall Street Journal which concluded travel perks are no longer for the highest earners. In fact, corporations are using big data to rethink travel.

“Topaz International, a firm that au­dits airfare spending for companies, has launched a program for clients to identify road warriors, evaluate their value to the company and rearrange travel policy to make travel easier,” reported WSJ. “Easing travel friction can save money. Losing employees and recruiting and training replacements can be far more expensive. And company travel policies have become a competitive benefit for workers.”

Business aviation is one tool corpora­tions are using more and more to ease the pain of travel. However, the business jet is not just for CEOs and sales people. Users include middle-management customer service and technical representatives responding to client needs. Companies are also turning to business aviation after realizing business aviation users are far more successful than their non-user coun­terparts. 

“Users have greater revenue, market share and profit growth, asset efficiency and customer and employee satisfaction,” says Ed Bolen, president of the National Business Aviation Association. “Increas­ing employee productivity and efficiency drives straight to the bottom line,” Bolen says, citing results of the organization’s latest survey, Business Aviation and Top Performing Companies, which examined financial performance of the S&P 500 from 2012 and 2017. “It is not a surprise that America’s most innovative and most admired companies, best brands, best corporate citizens and best places to work use business aviation.”

JetNet IQ, which tracks business aircraft usage worldwide, reported aircraft logged a 49.3 percent jump in flight hours in the past three years, the result of changing business needs increasing flight demand.

“People think flying private is much more expensive but they don’t consider the pro­ductivity and other benefits they get which can be seen in the surveys of business travelers flying commercial,” according to Greg Raiff, Private Jet Services CEO. “It is all the uncertainty surrounding airlines. Delays, cancellations and the resulting in­ability to get to your destination are major problems. Even the General Accountability Office reported that full flights mean get­ting another seat to your destination can take three days.”

Compounding this uncertainty is the dramatic loss of air service to many small and medium-sized communities. Nearly a quarter of respondents to a new Harris Poll survey cited the complete lack of air service and more than half cited the ineffi­ciency of using airlines. 

Krane cites results of a Harris Poll that shows the role of business aviation filling the gaps in commercial airline services. Most aircraft fly to towns with little air ser­vice with 31.5 percent 

A main reason for business aircraft use is scheduling flexibility

Reasons for using business aircraft

Support business schedules that could not be efficiently met using scheduled airlines
52%
To reach locations that the scheduled airlines do not serve
23%
For industrial or personal security reasons
11%
To make connections with scheduled airline flights
2%
Other reasons
13%

of flights to airports without any commercial service,” Krane says. “Users cite schedule flexibility as top drivers with 51.6 percent noting travelers keeping business schedules that could not be met by scheduled airlines. A significant portion of users are technical specialists, managers and company employees as well as customers.”

MORE, NOT LESS, EFFICIENT

“Increasing creature comforts for road war­riors does not address the inefficiencies which drive up the costs of flying commer­cial,” Raiff says. “The out-and-back-in-one­day airline business trip is a thing of the past. That means business aviation is now seen as an investment in time, not simply a cost. The hub-and-spoke system is great for airline efficiency but not for passenger efficiency and that is why more and more are turning to business aviation.”

" Business aviation is one tool corporations are using more and more to ease the pain of travel. However, the business jet is not just for CEOs and sales people... "

A survey from the Business Travel Coalition reported five out of six busi­ness travelers are cutting back on airline travel citing the fact it is more difficult and stressful, there are fewer nonstops and reduced flight frequencies.

Interestingly, the airline/airport hassle factor is cited as the number one reason for not traveling, which translates to rising missed-opportunity costs for businesses. Indeed, the US Travel Association, in sur­vey after survey since 2013, cited hassles as the reason 32 million trips are not taken each year, costing the US economy more than $24 billion. USTA also said in its latest survey, 53 percent of frequent business travelers and 55 percent of frequent leisure travelers said they would increase travel if airport hassles could be reduced or eliminated.

And, despite billions invested in the premium class experience, 82 percent say they have seen nothing that would make them travel more.

Raiff also pointed to changes driven by Millennials, saying their travel needs make the case for business aviation even stronger.

In fact, a European Business Aviation Association study Expanding Horizons: How Millennials See the Future of Business Aviation concludes Millennials – natives of the sharing economy – are embracing busi­ness aviation, with 62 percent of respon­dents believing it provides more flexibility and freedom.

The increase in business aviation is not just about using aircraft more, but bringing a broader range of customers in. A key indicator of that fact is the development of new business aviation membership models such as JetSuite, Surf Air and Wheels Up, which all report 60 percent of passengers are new to business aviation.

Raiff points out one of the greatest prob­lems with commercial aviation – the loss of the less-than-500-mile commercial flights. Most business aviation flights are between two and two-and-a-half hours, meaning the industry is clearly filling the void.

It is little wonder that corporations are turning to business aviation. Indeed, those companies that don’t are at risk of losing a precious competitive advantage, one that recognizes US businesses are not only competing against each other but against competitors in the rest of the world.

SAVINGS WITH SHUTTLES

Many companies, such as Intel and Ohio­based Cummins, Inc., leverage business aviation by developing corporate shuttles using 30- to 50-seat aircraft to provide regular air lift between corporate facilities or those in remote locations. There are now about 100 companies using corporate shuttles, according to Quality Resources’ Lucille Fisher, a member of NBAA’s Shuttle Working Group, who cites the limited com­mercial flights and airline inefficiencies for the rise in popularity.

“A shuttle provides a lot more control, reliability, privacy and security,” she told Business Aviation Insider. The publication described the commercial alternative -driving an hour or more to a commercial hub, a two-segment flight to a destination airport and then a rental car drive to the final destination which may be a stone’s throw from one of the 5,000 airports not served by airlines.

According to studies done by Bombar­dier and Embraer in the 2000s, corporate shuttles provide $53 million in travel cost savings over a decade compared to $30 million in costs of operating a shuttle over the same period. Annually, Bombardier pegged the total cost of a corporation’s shuttle service operations at $3 million compared to $5.3 million in commercial travel-related costs.

“Shuttles are not only convenient, they get employees home in the evening,” explains Jeff Moneypenny, vice presi­dent-sales for Ultimate Jet Charter. “They demonstrate the company is investing in employees, making an additional commit­ment to provide them with a higher quality of life.”

While corporate shuttles meet regular travel needs between facilities, they do not address the flexibility needed when moving hundreds of people to corporate events and having them arrive rested and ready to work, according to PJS.

The vast changes to commercial aviation networks have enabled business aviation to step up to put to rest the old aviation axiom that continues to plague commer­cial passengers: “You can’t get there from here.”

With the right business aviation resourc­es, now you can.

TOP PERFORMING COMPANIES ARE BUSINESS AVIATION USERS

Industry-sponsored studies examined the financial performance of the S&P 500 between 2012 and 2017, found S&P 500 companies using business aviation outper­formed non users, as demonstrated by a number of key metrics, including shareholder value.

Business Aviation Users Include:

The top 50 of Fortune's World Most Admired Companies
98%
Companies listed on 100 Most Trustworthy Companies in America
100%
Those on the Change the World Top 20
95%
The 100 Best Corporate Citizens
92%
The top 100 companies in Forbes' listing of 100 Best Places to Work
95%

The study also concluded:

The most significant net benefits - benefits offset by costs - includes

PRIVATE AVIATION IS ALL ABOUT ATTENTION TO DETAIL