Corporate Aviation - Chapter 2 Notes

Business Aircraft Uses

Business aircraft serve corporate needs by providing efficient and flexible transportation for personnel, cargo, and time-sensitive materials. Companies use them for corporate shuttles, emergency response, aerial surveys, and public relations. They enhance productivity by reducing travel delays and enabling access to remote locations. Additionally, business aircraft support lobbying, goodwill efforts, and specialized projects, offering significant operational advantages.

Business Aircrafts are used for:

• Corporate Shuttles
• Priority Cargo, Parts, or Mail
• Projects
• Public, Press, and Investor Relations
• Personal Travel
• Emergency Evacuation/Response
• Goodwill
• Lobbying

Corporate Shuttles

Companies with multiple operating bases sometimes institute scheduled flight operations between those bases to save time and money relative to airline service. Airline schedules often don't fit the daily commute nature of many work requirements, leading companies to establish their own private airline. Time savings in airport processing delays with the airlines greatly reduces an employee’s availability to accomplish work productively. A private shuttle may reduce this wasted time by as much as $80$ percent.

Shuttles are most appropriate for larger companies with decentralized operations and facilities or for companies with repetitive tasks, such as safety checks, management reviews, ongoing employee training, or a need to make airline connections from rural locations. Shuttles are not always permanent, often operating for short periods for specific projects or startups.

Priority Cargo, Parts, or Mail

Many companies use aircraft to carry high-value cargo, replacement or spare parts, or interoffice mail. This practice is common and often unquantified but of substantial commercial value in displaced overnight delivery charges. Any material that cannot be moved practically by conventional shippers due to size, weight, susceptibility to damage, or other physical limitations, and particularly those which need to be delivered within hours, are often best transported via business aircraft.

Projects

Usually, business aircraft are used for infrequent or “one shot” projects, such as multi-location advertising photography “shoots” involving a multi-disciplined team of experts. The combination of both personnel and an unusually large amount of project-specific equipment can trigger business aircraft use as the most efficient and cost-effective travel alternative, specifically for transporting delicate equipment of extreme value to the project.

Examples:

1. National Geographic's Photo and Film Expeditions Project:
   • Teams frequently conduct remote, multi-location shoots for documentaries and magazine features.
   • Example: For the documentary “Free Solo” (Oscar-winning), the film crew had to travel to remote cliffs in Yosemite National Park and other global climbing locations.
   • Business Aircraft Use: Charter jets were used to transport the film crew, elite climbers, and highly sensitive camera equipment that needed secure transport.
2. Formula One Racing Teams Project:
   • The F1 racing calendar takes teams to $23+$ countries annually.
   • Example: Teams like Mercedes-AMG Petronas and Ferrari use private jets for personnel and air freight for time-sensitive race components.
   • Business Aircraft Use: Business jets carry team engineers, strategists, and drivers between race locations, often with sensitive telemetry and IT gear.

Public, Press, and Investor Relations

Companies often manage opportunities to project a positive corporate image using business aircraft either as a symbol of efficiency or as simple transportation to facilities or events to further this purpose. Publicity generated by the use of aircraft for noble purposes, such as the rapid delivery of relief supplies after a natural disaster, can be of substantial public relations benefit.

Example:

• Elon Musk’s whirlwind first week at Twitter: $8,304$ miles by private jet in 1 week (26-Oct-2022 to 03-November-2022).
• Flight data shows the $70$ million Gulfstream jet crisscrossing the country as Musk bounced around from meetings to parties.

Personal Travel

Just because the aircraft is operated by a company does not preclude its use for personal transportation. However, the company must define personal-use policies and provide methods for employees to pay for these services.

Emergency Evacuation/Response

Business aircraft are also used to remove company employees from harm’s way, usually as a result of a medical emergency, natural disaster, civil strife, or other security threat, particularly in areas of limited or uncertain scheduled airline service. Similarly, the ability to place key personnel at the scene of an oil spill, manufacturing plant fire, or tornado-damaged office site rapidly makes good business sense. Getting to the scene early with the right people may save additional damage and costly downtime.

Example:
The Ministry of Defence revealed: "We can confirm that during the operation to recover civilians from the Libyan desert, one of our C130 aircraft appears to have suffered minor damage consistent with small arms fire," it said. "There were no injuries to passengers or crew and the aircraft returned safely to Malta."

Goodwill

Business aircraft are also used for personal customer or employee needs, such as travel associated with family emergencies, or as a favor. There is not always an immediate, tangible business benefit from the use of business aircraft for customers or employees with special needs or for public officials. A longer view, however, may suggest that the company’s strategic interests can be best served by this practice depending on individual circumstances.

Examples:

• “Nike Extends Support for Kenyan Athletes, Providing Emergency Medical and Rescue Services”
• Nike announced a partnership with rescue.co to provide emergency medical and rescue services for the brand’s athletes in Kenya.
• The partnership provides Nike athletes round-the-clock support from rescue.co’s best-in-class emergency call center and network of ambulance and air transportation providers.
• The new safety initiative underscores Nike’s commitment to listening to the voice of the athlete and creating positive change through sport.

Lobbying

Business aircraft can be used to transport elected or appointed officials. The use of business aircraft for the carriage of public officials is common at all levels of government. Legal restrictions also can limit the availability of sponsored travel for certain government employees. All travel of this type is routinely and publicly reported. In rare instances, business aircraft also are used to carry government officials to company-sponsored events. These can be unusual and invaluable opportunities for information exchange.

Example:

• Boeing and the U.S. Government Event: Boeing, a major aerospace manufacturer, has used business aircraft to transport government officials to company-sponsored events, such as military aircraft demonstrations or defense procurement meetings.
• Purpose: Boeing has transported U.S. government officials and military leaders to its manufacturing facilities for private tours and discussions, showcasing its latest innovations in military aircraft or defense technologies. These events are important for shaping the direction of military spending and influencing decisions related to defense contracts.

Other

Any need to travel can be accomplished safely, reliably, and efficiently with the company aircraft. After beginning to use their aircraft, companies rapidly discover many collateral uses. The only limit on these uses lies in the minds of the users.

Justifying Business Aviation

Most businesspeople identify quite well with the advantages of on-demand air transportation, yet the inevitable question becomes, “Isn’t all of this rather expensive?” The answer is a qualified “Yes.” Much of what a company does requires large quantities of investment capital and operating funds to achieve desired goals and objectives. Yet there is a vision behind every capital and operating expense that permits the company to move ahead and compete effectively in the marketplace. Granted, the company always must be cognizant of bottom-line and rate-of return concerns, but it is the vision of an individual or small group of individuals that carries a winning project forward to its destiny; such is the case in most companies when the concept of safe, reliable, and efficient transportation is being considered. In evaluating transportation alternatives, tangible and intangible benefits must be defined to begin to realize the value of on-demand air transportation.

Tangible and Intangible Benefits

Business aviation creates a number of benefits for individuals and the company. Some can be measured, and others elude quantification. Nonetheless, all these factors are very real and should be considered when evaluating on demand air transportation options. The most obvious and quantifiable advantage of on-demand air transportation is the amount of time saved for the passengers. Access to $10$ times the number of airline airports, fewer check-in formalities, direct routing, landing near the business destination, and no waiting for luggage save major portions of days for single trips and full days for multiple-leg trips. The time saved means more time on task for employees, greater productivity enroute, the ability to confer with fellow travelers enroute, and fewer distractions during the entire travel process that detract from focus on the issues at hand.

Operational flexibility, or the ability to react intelligently to changing business situations, often serves companies well. Being locked into an inflexible airline schedule and lack of alternative flights at the last minute serve as sources of frustration for business travelers. Schedule changes, even in-flight, can be arranged easily for on-demand transportation. While often perceived to be more important to the traveler than to the company, the number of days and nights spent on the road are important to both. The company needs its key personnel to be operating at maximum productivity as much as possible; nights in motels and days in airline terminals seldom make it possible to achieve this goal. The preceding items are quite important features of business life and are measurable.

Safety

Companies engaged in business aviation activities choose to operate or contract for their own aircraft as an alternative to the airlines and charter operators. In doing so, they expect that their operations will be as safe as or safer than the public transportation option. Therefore, company aviation operations work under safety programs that provide the desired level of safety. Most corporate aviation flight departments voluntarily exceed the minimum operating standards imposed by their national regulatory agencies (such as the Federal Aviation Administration) for their type of operation. In fact, corporate operators’ standards and limits closely resemble those used by the airlines and charter operators. Two experienced pilots, certified to airline standards, fly company aircraft and undergo recurrent training in airline quality simulators; maintenance technicians use state-of-the-art techniques and materials to keep the aircraft in first-class condition; and all personnel are trained in ground and flight emergency procedures. Companies and their pilots, technicians, and support personnel demonstrate their pride in safety through the NBAA Flying Safety Awards. Each year at the NBAA convention, hundreds of individuals and companies receive recognition for their many years of safe operations.

Fortune 500

The Fortune 500 is an annual ranking published by Fortune magazine that lists the largest companies in the United States based on their total annual revenue. It includes both public and private companies that submit financial data to government agencies. This list highlights the most powerful and influential businesses across various industries such as technology, retail, healthcare, and energy. Being part of the Fortune 500 is considered a mark of success and prestige in the corporate world. Companies like Walmart, Amazon, and Apple often appear at the top due to their massive revenues. The list is widely used by investors, analysts, and job seekers to understand the economic impact and market leadership of major firms.

Fortune Global 500

The corporations on our annual list of the world's $500$ largest companies posted near-flat, but still record-breaking aggregate revenues of $41$ trillion in $2023$, with a year-over-year increase of $0.1$%. Walmart remains No. $1$ for the $11$th consecutive year, while Amazon reaches a new high and claims the No. $2$ spot (up from No. $4$ last year). Saudi Aramco falls to No. $4$; however, with $121$ billion in profits, it was the most profitable company on the list for the third year in a row. For the first time since $2018$, the U.S. presence ($139$ companies) on the Fortune Global 500 surpassed that of Greater China ($133$ companies). The U.S. companies generated $13.8$ trillion in aggregate revenues, a $6$% increase from last year.

Fortune Global 500 Ranking (2024)

• Walmart
• Amazon
• State Grid
• Saudi Aramco
• Sinopec Group
• China National Petroleum
• Berkshire Hathaway
• Apple
• UnitedHealth Group
• CVS Health

Only about $3$ percent of the approximately $15,000$ business aircraft registered in the U.S. are flown by Fortune $500$ companies, while the remaining $97$ percent are operated by a broad cross-section of organizations, including governments, universities, charitable organizations, and businesses – large, medium, and small.

Business aviation reaches $10$ times the number of U.S. airports (over $5,000$ public-use facilities) than the airlines do. The majority of U.S. airline flights only go to and from $70$ major airports, and the total number of U.S. destinations served by air carriers has declined.