The Case For Business Aircraft

Hawker Pacific Manager-General Aviation Division, David Bell tells AUSTRALIAN AVIATION, ‘It’s about time someone came up with a document such as this – we believe this is the first time that business aircraft facts have been presented for the mutual benefit of the industry and the customer. ”

We concur, and produce salient points from the presentation in summarised form: The introduction to Business Aircraft In The 80s sets the scene by pointing out that business flying with owned and chartered aircraft captures twice as many hours in a year than all the domestics combined; and GA activities total more than six times the domestics’ flying hours.

Of the two million passengers carried by GA in the year 1978-79, more than a million travelled in business and charter aircraft.

Having laid a positive foundation for their documents, Hawker Pacs get straight into the nitty-gritty by proving that companies operating aircraft are financially more successful than their ground-bound competitors.

Several tables (one taken from Fortune) show that more than 50 per cent of the top 1000 companies in the world operate their own business aircraft.

The logic presented covers the entire spectrum, from the executive sector down to the humblest employee’s profit capability.

In the executive bracket, business aircraft improve management and executive productivity by directly reducing time lost in travel, and indirectly by widening operational scope and the span of control-plus increasing the flexibility of operation.

Taking into account the fact that the activities and decisions of top executives have the greatest impact on company operations, the document states that business aircraft have perhaps the biggest potential to sustain and improve that impact.

Facts presented in this section include the most-plugged statement that business aircraft win hands down in a time-saving contest with scheduled airlines. AUSTRALIAN AVIATION is constantly trying to answer the question, ‘OK, so we save time that way, but what about car travel from the airport to the office and back?”, and we don’t intend to get involved in that one.

Hawker Pacific goes on to say that, at a conservative estimate, travel time waste by RPT for only one visit weekly between two Australian east coast cities would take at least four hours from an executive’s working week – ten per cent of a nominal 40-hour week.

Alternatively, it adds another four hours to a demanding work schedule if the exec. travels outside working hours. Really relevant facts are presented in the section headed Typical Applications of Business Aircraft; major negotiations, where the need to tailor one’s discussions to the arrival and departure times of scheduled airline operations is sometimes a worrying factor. The fatigue factor.

Customer demonstrations, when it is often totally impractical to bring plant and factories to the customer, and the only way to do it is to take the client to the factory or field work in hand.

Controlling expanded and decentralisation operations; more often than not this is done by travelling needless hours in a car. Country sales; several towns can be covered each day by aircraft.

Hawker Pacs say that some Sydney companies doing business with Government departments in Canberra regularly fly senior executives there and back by company aircraft, for discussions. They can leave at 9 a. m. , have discussions in the national capital and be back in Sydney for lunch – an impossibility in the same time by scheduled airline flights.

A section entitled Effective Management Requires Effective Communications gives a table of communication media used by managers. Broken into three main sections – Written Word, Electronic Media and Face-To-Face Spoken Word-it presents a strong case for business aircraft to slot into the face-to-face section.

Many businessmen today find that the isolation of depen- dence on ‘remote’ communication (telephone, telex, electronic mail etc. ) is progressively putting them completely out of touch with that vital factor, the face-to-face situation which is the only means possible of ensuring an easy-flow and instant decision- making situation.

The section headed Cost/Benefit Analysis For Business Aircraft involves a neat table, using a number value as a guide.

AUSTRALIAN AVIATION reproduces part of this section to ensure readers capture the full import of perhaps the most crucial question asked by potential customers-How much, and what will it show on the bottom line?’

Savings in travel costs are only part of the benefits of operating a business aircraft. Relatively few companies will have a situation where savings in travel costs will cover the costs of operating an aircraft. A business aircraft is not just a convenient alternative means of travel, it is a management productivity tool and should be assessed accordingly. The major benefits of a company aircraft are related to increasing the productivity of management executives, an intangible item but one which is vital to the progress of an organisation.

In effect, a business aircraft increases the utilisation level of management executives. Just how valuable this additional management capacity is depends on how a company uses it. The key to the successful introduction of a business aircraft is to determine and plan the use of the additional management capacity it releases. Some companies have used the business aircraft to increase the management span of control and thus restrain the increase in organisation hierarchy levels not only a saving in personnel costs, but a more effective organisation. Others have used it to expand their marketing activities by increasing sales coverage and/or geographic market scope. The important thing is to plan how to get the maximum benefit from the use of the aircraft.

Justification of the purchase of a business aircraft will depend on the scope of vision for the future of a business and the role that the aircraft will play rather than just a simple comparison of alternative travel costs.

Aircraft used in business applications range from single-engine aeroplanes costing $60,000 up to a fan-jet costing $15,000,000. Even within a given type such as a twin turboprop. Prices vary over a wide range, as does performance.

As a quick initial check, if a business has one or more of the following characteristics, then it probably can use a business aircraft to its advantage and should make a more detailed assessment of the use of a business aircraft.

• More than 300 hours of total travel time per year by key executives.

• Decentralised operation with country facilities. Clients in country towns or remote locations.

• Need for on-demand air travel.

• Management executive resource constraints.

• Need for inflight privacy and security.

How much is an executive’s time worth? We have seen various estimates in corporate aircraft documents, but believe Hawker Pacs to be just about as near middle of the road as possible; this is what they say about it: The chief executive of a company engaged in rapid expansion through mergers and acquisitions would obviously have a much higher opportunity value per hour than, for example, the sales manager of a company division. The ratio of opportunity value (revenue generation potential) to executive cost (compensation plus executive-related costs) could be of the order of 1010 20 for the chief executive and 3 to 5 for the sales manager. This ratio is often referred to as the ‘productivity factor”.

On the basis of 45 nett working weeks per year at 40 hours per week, a chief executive costing $100,000 p. a. would have a cost rate of $100,000+ 1800 $56 per hour and an opportunity value of $560 per hour if we take the lower productivity factor of 10.

On the basis of only one return trip per week between Australian capital cities on the east coast a saving of executive work time of at least four hours per week could be expected with a business jet, i. e. an opportunity value of $2240 per week, more than $100,000 in a year.

The opportunity values for executive time and the time savings through use of business aircraft for several Australian companies greatly exceed the conservative figures given above.

Use of a business aircraft can enable management to extend its span of control and the savings in staff costs and overhead can be calculated and added to the credit side of the aircraft evaluation. There are, in fact, companies that make an increase in span of control a condition for approval of a company aircraft purchase.

Intangible benefits of great importance remain to be evaluated but no general approaches to assigning dollar values can be put forward. The value of an intangible benefit such as having ondemand air travel available may completely outweigh all other considerations for some organisations. The importance of being able to reach a remote high capital investment plant quickly with experts and parts can be a deciding factor for some organisations.

The section headed Aircraft Evaluation proves to be an absorbing, commonsense document, interleaved with sample points-scoring pro formas.

The thing that struck us while reading through the entire series of documents was that Hawker Pacific has presented many facts that would otherwise take up valuable interview time with a ‘prospect’ in the client’s office or Company board room.

In other words, the customer can study what he is to look for BEFORE a discussion with a distributor, rather than try to sustain his concentration during a long verbal preamble.

The basic reason for buying a business aircraft is to help make money, not necessarily to save money – this is the basic philosophy heading up this section.

Downtime: points to watch include design and construction; structural strength, including undercarriage when a client’s operations include off-bitumen work; TBOs; uptime: taking into consideration the added security advantage of being able to discuss delicate company matters in flight without the people in the seats nearby overhearing; and other factors.

From our experience, not enough credence has, in the past, been given to executives’ grey matter, their power to absorb semi-technical data when it comes to choosing the right sort of aircraft.

Most executives we know are perfectly able to digest things like structural integrity, TBOs, seat miles and other things – even the efficiency mark of their corporate pilots.

The safety factor is touched on in this section – and again in the last section, headed Business Aircraft And General Aviation. Again AUSTRALIAN AVIATION makes the point that top executives aren’t dolts – they are well aware of the GA accident rate as opposed to road carnage and APT fatals.

A detailed breakdown of what constitutes the various factors outlined is included in Aircraft Evaluation, right down to passenger seating measurements, ergonomics in seating and range matched to payload – this last point is always a difficult one to explain to some executives, when they want to take that extra suitcase on a stopover. . .

‘One of the hardest things we’ve had to explain to some of our more traditional clients is the fact that although business aircraft fall into the GA category, they aren’t those “light aircraft” the client immediately thinks about,’ says David Bell.

And in the third document, entitled Business Aircraft And General Aviation, Hawker Pacs prove their point. . .

Tables giving valuable statistics back up the document’s assertion that business flying is the safest way to travel; in Australia, the 1980-81 figure for hours flown show that business aircraft flew 254,000 hours, charter taking up 320,000 hours. Domestics flew 279,000 hours. . .

Interesting figures produced during this rundown include State-by-State business and charter hours: New South Wales business aircraft flew 76,000 hours, with Queensland coming up a close second with 64,000. Then came Victoria (37,000), WA (32,000), SA (23,000), Northern Territory (12,000), Tasmania (3000) and ACT (500).

Queensland hit the front in charter hours with 84,000 logged; NSW 66,000; Victoria 53,000; WA 55,000; Northern Territory 28,000; SA 25,000; Tasmania 6000 and ACT 2000.

While there are no detailed world statistics on GA safety, there are enough to draw broad conclusions, says Hawker Pac.

World hours flown by GA are probably 55 million each year, and these produce about 1000 fatal crashes, but one must be careful to extract the business aircraft category from the GA figure.

Business aircraft suffer fewer than five fatals per million hours, compared with domestics which average out around two per million.

The third document ends with a very detailed and valuable rundown on regulatory requirements, showing the client what he can and cannot do regarding crewing, operations and other facts.

Once again, AUSTRALIAN AVIATION congratulates Hawker Pacific Pty. Ltd. for producing such a series of documents. They will undoubtedly prove valuable during seminars for business aircraft clients, in offices or board rooms during preliminary discussions on the need for such aircraft – and for all company personnel engaged directly or indirectly in the subsequent use of a company aircraft.

We have seen many corporate documents listing business aircraft, but never one as broad and impartial as this series. The only hint of brand name in the entire series is in the case history section. . .