business aircraft

  • Tracey Cheek posted an article
    Tips To Get The Best From Your Business Jet see more

    NAFA member David Wyndham with Conklin & de Decker offers advice on three things to keep in mind that will help you get the full benefits of a business jet.

    Though it’s impossible to prepare for every situation, it is possible to prepare for things to change and to learn what’s needed for adapting and managing those changes.

    The business aircraft is one of the tools that enables and enhances your ability to act, manage and react to the changes within your business. To get the full benefits of a business aircraft, however, it pays to keep the following three things in mind…

    1. Different Aircraft for Different Missions

    Throughout my career as a consultant, the 100% solution (that is, the aircraft capable of flying all the missions you may need) is most often the costliest. Over the long run, it may also be one of the least effective solutions too.

    To illustrate, I once had a client who was looking at a Mid-size jet.

    • This jet had the runway performance to manage the required short trips into smaller airfields, but with a light passenger load.
    • It had the seats for the handful of longer trips with six or seven people.
    • With full seats, however, its range was limited.

    One larger cabin business jet offered the short runway performance and the range with full seats the client wanted, but the acquisition and operating budget was beyond what the board would approve.

    What proved to be a better fit for the client was a turboprop for the short-range, short-runway trips and a fractional share of a Mid-size jet for the longer-range missions. That Mid-size jet fractional share could also be upgraded to a Large jet for the two or three trips annually that required eight to ten seats.

    It’s vital to remember that owning your business aircraft does not prevent you from using other options (such as charter, jet cards and fractional). These lower utilization alternatives can give you the second aircraft for the few times its needed or expand the capability when occasionally needed.

    2. Re-evaluate Your Options Regularly

    How does the business aircraft you use support your current strategies for managing your business and your time? You will need to regularly re-evaluate your options. Planning is necessary for your company, and that includes forward-planning with regards to the aircraft.

    It may be running nicely and not costing a lot of money to operate currently, but you should not wait for a major expense to arise before evaluating your options.

    • Are you looking to grow into new markets in the next five years?
    • Are you in the Mergers and Acquisitions market?
    • Can the current aircraft support the future company?

    An aircraft replacement can take 12-18 months to plan and execute, especially if you’re acquiring an aircraft that will need to be outfitted to your specifications. It’s advisable to have a written plan for when, and how to upgrade or replace your aircraft. Review the plan and revise it as your company changes, grows or develops into new markets.

    3. Numbers Don’t Tell the Whole Story

    While they can help you make an informed decision, a spreadsheet alone should not make the decision for you. So, what are the other factors that need to be considered in the decision? I’ve had several clients where the optics of owning the aircraft were a concern.

    One was a defense department supplier of technology. My analysis showed them that a Light jet was the most efficient for their travel in terms of cost and speed, but they chose to purchase a slower single-engine turboprop that lacked the non-stop range for about 40% of their trips.

    Their decision was based upon appearances. If the Generals saw the supplier with a turboprop single, they believed it would give the impression of frugality in their business and that their technology solution would also be judged as the cost-effective choice.

    Another client upgrading from a Turboprop chose a Mid-size jet over a Large-Cabin jet. The lower cost Mid-size jet would still meet 85% of their needs but also look appropriate to their shareholders.

    But it’s about more than just optics. Comfort plays a role, too. Another client evaluating Large-Cabin jets preferred the slightly smaller cabin alternative as it offered more cabin width, which felt roomier.

    The costs of the applicable options were similar, but in addition to having the slightly wider cabin his choice also had less range. Nevertheless, as the client was going to spend 400 hours per year on board, this was the right choice for him. Comfort was the deciding factor in this case.

    Business aircraft owners and operators all have slightly different criteria that they use for evaluating subjective qualities like comfort. When evaluating different aircraft, it’s important to decide in advance what criterion are important to you.

    Remember that numbers are very helpful but leave some room for the subjective.

    This article was originally published on AvBuyer on August 23, 2018.

  • Tracey Cheek posted an article
    Top Five Jet Maintenance Thoughts (Before You Buy) see more

    NAFA member, Brendan Lodge, Advisory Services & Aircraft Specialist at Jet Support Services, Inc. (JSSI), offers tips on how to understand an aircraft’s maintenance costs, and budget accordingly - before buying.

    Purchasing the wrong aircraft has potential to be economically and operationally disastrous.  

    Whether new or used, different models should be considered like knives in a chef’s drawer—they each have different capabilities depending on the budget and mission profile of the buyer.

    Once a decision is made to purchase a used aircraft, most buyers start narrowing down the models that will meet their needs. However, many may not focus on how operating costs can vary greatly depending on the aircraft.

    The ongoing maintenance costs (scheduled and unscheduled) are the most significant operating cost after fuel and can be a real budget-breaker. A thorough examination is therefore required before buying an aircraft, and appropriate management is necessary thereafter.

    Following are five critical areas from a maintenance perspective that should be understood and budgeted adequately for before purchasing a used aircraft.

    #1: Advice

    Firstly, hire expert advice. Whether it’s a professional broker that you mandate exclusively to work for you without conflict, or a recognized industry consultant to support your Flight Department, you should budget for this expense. The investment will be worth every penny! Crucially, the advice needs to be independent, and entirely unbiased.

    There are also helpful software tools available from independent sources that can help you compare aircraft and develop a thorough budget. Input should include an analysis of the maintenance status of the aircraft to evaluate and appraise the maintenance adjusted value, as well as to account for any challenges or costs associated with the potential transfer of registration to another country or state.

    #2: Engine Status

    Know the condition or status of the engines and their value and be informed of where the engines are in their maintenance cycles.

    If the engines are on a “hard-time” inspection program, you need to know how long it is until the next major maintenance event and whether it is a hot section inspection or an overhaul. If the engines are on an “on-condition” inspection program, you need to know when the next borescope inspections are due and account for these in the budget.

    Are the engines covered by a maintenance program and, if so, what exactly is covered by that program? These programs vary and it’s best to contact the program provider to understand the details of the coverage. Some programs can be sold with the pre-enrolled aircraft and some cannot.

    Sometimes owners want to take the equity in the maintenance program and transfer it to a new aircraft, so those benefits would not be available to the aircraft with the sale.

    In addition, you should know what provisions are in place for payment or coverage of loaner engines whenever off-wing maintenance events are required. Most operators do not want the airplane grounded while major engine maintenance is happening.

    Accordingly, loaner engines are common practice, but sometimes there is limited availability for specific engine models, which could drive the costs up. It’s always better to plan and budget for these events in advance.

    #3: Airframe Inspections

    All aircraft will be subject to frequent airframe inspections and, for larger cabin aircraft, the major airframe inspections can easily exceed $1m. It is crucial that you know when the next major inspection is due as part of the due diligence before making an offer on an aircraft.

    When significant expenditure is due it will affect the aircraft value.

    Other considerations include the time it will take to do the inspections. Unlike engines that can be removed and replaced with loaners, the aircraft is not available while major airframe inspections are in progress and many owners will make plans to charter or contract supplemental lift during this time. This is another item to add to the budget.

    Ongoing airworthiness directives (ADs) and service bulletins (SBs) that may be issued for your aircraft can also impact the budget. You must check for these before purchasing a used aircraft. It is always wise to ask if there is an airframe maintenance program enrollment and if it covers any of these costs.

    #4: Unscheduled Maintenance

    Unexpected maintenance events will happen no matter what type of aircraft you choose and can be a difficult expense to calculate over the lifecycle of the aircraft. Your advisor or trusted consultant will give you a budget estimate based on factors including make, model, and time on the engines and airframe.

    Keep in mind that the OEM’s warranties do not cover all the unexpected costly repairs that may be needed in the first 5–10 years of a business jet’s life. Once again, enrolling the aircraft onto a maintenance program could be the best way to budget for such expenses.

    #5: Regulatory Requirements

    In addition to current airworthiness regulatory requirements, there are future mandates that come along and require upgrades or changes to the aircraft that will impact your budget.

    In the US, many aircraft on the market are not yet compliant with the new Automatic Dependent Surveillance-Broadcast (ADS-B) or Future Air Navigation System (FANS) 1/A requirements.

    As we approach the January 1, 2020 deadline, slots at maintenance shops are filling up fast and, just like any other supply and demand cycle, the cost of getting this work done rises with each passing week.

    It is undoubtedly a good idea to look for an aircraft that is already compliant, or at least budget for a premium cost for any aircraft that is not yet compliant.

    Supplemental Type Certificates (STC) are usually required for aftermarket equipment upgrades and these associated costs should also be accounted for, including the acceptability of existing STCs between different aircraft. When an STC is not acceptable to the new register the solution can be very costly in terms of both time and money.

    In Summary

    There are countless items to consider when purchasing an aircraft but with the right tools and expertise, you can ensure the right aircraft is purchased for your mission profile and budget.

    More information from www.jetsupport.com.

    This article was originally published in AvBuyer on July 20, 2018. 

  • Tracey Cheek posted an article
    Whole Aircraft Ownership: Is It Right For You? see more

    NAFA member, David Wyndham with Conklin & de Decker, highlights the benefits of sole ownership of a business aircraft.

    If control over your company’s transportation is paramount, sole ownership of a business aircraft is particularly attractive. With high enough utilization, it is also very cost effective. 

    As a generalization, when your flying needs come close to (or exceed 200 annual hours), whole aircraft ownership can be more cost effective than fractional, charter or membership programs. Whole aircraft ownership offers the following benefits.

    Freedom: With whole aircraft ownership a company has the freedom to select the best aircraft to satisfy its needs. Within safety and operating regulations, that aircraft can be operated as the owner requires.

    Customization: When a company acquires its own aircraft, the outfitting of the aircraft can be done to suit its operational and travel requirements.

    Options for colors, seating, carpeting materials (and more) are able to be matched to your needs and preferences. The larger the cabin size, the more flexibility there is in how the interior can be configured.

    Service Levels: The aviation department personnel are the owning company’s employees. Not only is that company able to shape their training and manage their competence, it can affect how they interface personally with passengers.

    The ability to hire the employees that fit the organization can be invaluable, and this service level generates a rapport that is effortless and comforting.

    Control: In the US, Federal Aviation Regulations (FARs) allow the most flexibility and opportunity for control to not-for-hire operations flown on behalf of the aircraft owner. A company-owned aircraft that is used in support of the business of the company falls under these rules.

    While all aircraft must be operated safely, the sole owner of a business aircraft has greater influence over operations than either a charter customer or a fractional owner. Factors influencing safety and security are within the operator’s control.

    A whole-aircraft owner has the highest levels of privacy. You can discuss sensitive business, or leave important corporate documents and personal items on board the aircraft.

    Responsibility: With this high degree of control comes an equally high level of responsibility. While the FARs state that the pilot in command is the ultimate person responsible for the safe operation of the aircraft, the owner is responsible for the hiring and training of that pilot. The owner has liability for the actions of its employees, and this extends to the aircraft operation.

    The owner can manage this risk via high-quality training and insurance. The crew should be trained to the highest appropriate levels of competence. Maintenance engineers (if applicable) also require regular training.

    An individual or company owning or leasing their own hangar is also responsible for ground safety. The owner shares the risk by properly insuring the aircraft and crew.

    Managing and directing the detailed operation of aviation activities requires individuals versed in management and Business Aviation - a skillset commonly accomplished either by having an in-house aviation manager/director, or by contracting the management of the aviation operation to a management company.

    The Role of Management Companies

    A management company can offer a turn-key approach of contracting the function and oversight of the aviation operation. These companies specialize in flight operations.

    For a first-time owner of a business aircraft, we usually recommend contracted management for starting the aviation operation. In additional to providing flight crews and functional oversight, the management company can provide economic benefits as well:

    • Fuel can be purchased in bulk on behalf of multiple aircraft owners;
    • Discounts can extend to maintenance (the management company with multiple aircraft should be able to negotiate discounts for spare parts);
    • The management company can purchase insurance for its group of owners at rates that can be lower than for a single aircraft.

    While management companies tailor their services to meet an owner’s unique requirements, they typically offer the following oversight:

    • Hangaring the aircraft
    • Managing the aircraft records
    • Hiring and training the flight crews
    • Managing the maintenance of the aircraft
    • Handling the billing and verification of all variable operating expenses (including fuel, maintenance, etc.)
    • Ensuring that all regulatory requirements are met by the aircraft and crew
    • Refueling the aircraft
    • Cleaning and cosmetic upkeep of the managed aircraft.

    Offsetting the Costs of Whole Ownership 

    If you, as the owner, desire to further reduce your total costs, a management company can charter the aircraft when you’re not using it, provided the firm has authorization under FAA Part 135 (or its equivalent in non US countries).

    This relationship is complicated as there are regulatory restrictions governing operational control of any aircraft used for commercial service. The general terms are as follows: 

    • The aircraft owner pays all the operating costs (fuel, maintenance and other aircraft operating expenses).
    • The crew may be billed as salaries or as an hourly fee.
    • The aircraft owner gets a set percentage of the charter revenue. 

    The charter revenue the owner receives should be more than enough to cover the operating costs, but will not be enough to cover all of the fixed expenses, debt service and depreciation. The charter revenue is shared between the charter operator and aircraft owner. Rarely, however, does a chartering arrangement with a management company produce a profit for the aircraft owner.

    The relationship with the management company is as much a personal relationship as a business relationship. Communication and shared goals are important. If you want control, fly enough hours and accept the responsibility, whole aircraft ownership can be very rewarding.

    This article was originally published in AvBuyer on May 14, 2018.

  • Tracey Cheek posted an article
    Tips for Comparing Aircraft Operating Costs see more

    NAFA member, David Wyndham, Vice President and Director of Business Strategy at Conklin & de Decker, details the process of a Life Cycle Cost analysis and underlines its importance to any aircraft buyer. 

    What is a Life Cycle Cost analysis and why does it matter when buying a new business aircraft? David Wyndham explains the process…

    A consulting client I worked with was evaluating Large Cabin business jets. Initially the client was more concerned with minimizing the operating expenses and less concerned with the capital costs. As long as the acquisition price fitted within their $25m budget, they would be satisfied.

    Yet those evaluating business jet ownership should be concerned with more than just the acquisition costs. They should also factor operating costs (variable and fixed), amortization, interest, depreciation, taxes and the cost of capital. Items like depreciation, interest and taxes – for example - can add as much as 60% to the Aviation Department’s costs depending on the value of the aircraft.

    Furthermore, you should also consider when the costs occur.

    General Methodology for Life Cycle Costing

    When analyzing the potential acquisition of a whole aircraft or a share of one, Life Cycle Costing ensures that all appropriate costs should be considered.

    The Life Cycle Costing includes acquisition, operating costs, depreciation and the cost of capital. Amortization, interest, depreciation, and taxes also play a part in what it costs to own and operate an aircraft and can be included in the Life Cycle Costing as appropriate.

    The first step is to know what aircraft to evaluate. This is achieved with an understanding of the key missions and the technical analysis of all potential aircraft. You need to be sure you are not buying more (or less) aircraft than you need.

    There should be no room for assumption in the process. The costs should cover a specific period and take into account the aircraft’s expected value at the end of the term of ownership.

    Comparisons of two or more aircraft should cover the same period of time and utilization, ensuring an apples-to-apples comparison is provided.

    On the subject of utilization, you are advised to use miles if the aircraft is flying point-to-point and convert each aircraft to hours based on their speed. To have an accurate comparison, you will need to measure performance using the same criteria. Different aircraft fly at different speeds. Using a mile-based measurement accounts for the speed differences between aircraft.

    I also recommend that you have a baseline. If an existing aircraft is to be replaced, that aircraft becomes the baseline. If you charter or own a fractional share in an aircraft, then continuation of that charter or fractional share would be the baseline.

    The baseline essentially forms a basis for the comparison, establishing whether the new option under consideration costs less than the current baseline or more. If the cost will be more, what is the value of the increased cost?

    Net Present Value Analysis

    A complete Life Cycle Cost accounts for the time-value of money in a Net Present Value (NPV) analysis. Using NPV enables the differing cash flows from two or more options to be compared and analyzed from a fair and complete perspective.

    An NPV analysis takes into account the time value of money, as well as income and expense cash flows, type of depreciation, tax consequences and residual value of the various options under consideration.

    When an expense (or revenue) occurs can be as important as the amount of that item. This is useful in the comparison of Cash Buy vs Lease vs Finance options for the same aircraft.

    Business aircraft do not directly generate revenue except for the sale of the aircraft. Thus, the NPV results are typically negative.

    When comparing negative NPVs, the "least negative NPV" is the more favorable. In other words, if Option A has an NPV of $5m and the NPV of Option B is $6m, Option A has a better NPV.

    You may want to run several scenarios. For example, what if you owned the aircraft for five years? How about ten? What if utilization was increased? What is the break-even point to move from fractional ownership to whole ownership? There may be many possible best alternatives when you adjust the important criteria.

    In Summary

    Regarding the client mentioned above, we evaluated new and used business aircraft and found several options that were at the top of the acquisition budget had lower total life cycle costs than aircraft with lower acquisition prices.

    A Life Cycle Cost analysis is an important decision-making tool, but it is not the answer all by itself. I like to use the term "Best Value" in combining both the capabilities and the costs of the various options analyzed.

    Run the numbers and use them in your decision - but remember: Never let a spreadsheet make the decision for you

    This article was originally published in AvBuyer on June 25, 2018.

     

  • Tracey Cheek posted an article
    Global Jet Capital Reveals Importance of Financing in Driving Shift to Larger Aircraft see more

    NAFA member, Global Jet Capital, estimates the value of financing biz jets almost $23bn!

    New analysis from Global Jet Capital, a global leader in financial solutions for business aircraft, has revealed the important role financing is playing in driving the growth in business aviation.

    Since the beginning of 2016, Global Jet Capital estimates that there have been over 8,600 new and used business aircraft transacted around the globe, with the value of financing used to support those purchases totaling almost $23bn. Notably, over 60% of that financing, some $14bn, has been towards acquisitions of new and used large/heavy aircraft.

    This financing has helped increase the proportion of larger aircraft within the global fleet. Since 2016 the total number of mid-sized aircraft around the world has fallen by 8%, or 415 planes. However, these aircraft have been almost exactly replaced in number by larger models as the heavy/large jet segment has grown by 419 aircraft, a 6% increase.

    As the average purchase value of new aircraft in this larger segment was over $48.2m between 2016-2018, compared to an average of $12.5m for the balance of the market, this focus on larger aircraft provides a significant boost to the overall industry. Indeed, the overall value of deliveries of new large or heavy jets since 2016 totals $26.4bn, compared to a total figure of $14.3bn for the balance of the market.

    Global Jet Capital estimates that operating leases to the value of over $5bn are held against new and used aircraft transacted since 2016. The company has seen a significant increase in inquiries for operating leases, with clients attracted by advantages including flexibility and reduction in residual risk. Global Jet Capital expects to see growth in operating leases of over the coming five years, helping drive further aircraft acquisition.

    Of all global regions, only Africa has seen a drop in the size of its large aircraft fleet with a 2% decrease since 2016. The Middle East has remained static over this period, while all other regions have seen growth, the most significant in Latin America and the Caribbean, North America and Asia Pacific (with 8%, 7% and 6% increases respectively). North America has witnessed the largest increase in real terms, adding 317 aircraft to its large and heavy fleet, consolidating its position as the global leader for business jets.

    Dave Labrozzi, chief operating officer at Global Jet Capital said: “The figures provide a clear focus of where we are seeing expansion in the sector, and the importance of financing in supporting industry growth. The flexibility afforded by operating leases is especially beneficial in helping clients move on to higher value new model aircraft without having to remarket their existing aircraft.

    “There are significant long-term advantages in increasing the number of larger business jets in the global fleet. These obviously provide greater capacity per aircraft and therefore offer the benefits of business aviation to a wider population, something which can be particularly important for corporate owners. In addition, the increasing importance in developing new international trade links is resulting in growing demand for aircraft able to undertake longer distances to destinations which may not currently be well served by commercial airlines.”

    This article was originally published by Global Jet Capital on October 17, 2018.

  • Tracey Cheek posted an article
    Tips for Comparing Aircraft Operating Costs see more

    NAFA member, David Wyndham, Vice President at Conklin & de Decker, details the process of a Life Cycle Cost analysis and underlines its importance to any aircraft buyer.

    A consulting client I worked with was evaluating Large Cabin business jets. Initially the client was more concerned with minimizing the operating expenses and less concerned with the capital costs. As long as the acquisition price fitted within their $25m budget, they would be satisfied.

    Yet those evaluating business jet ownership should be concerned with more than just the acquisition costs. They should also factor operating costs (variable and fixed), amortization, interest, depreciation, taxes and the cost of capital. Items like depreciation, interest and taxes – for example - can add as much as 60% to the Aviation Department’s costs depending on the value of the aircraft.

    Furthermore, you should also consider when the costs occur.

    General Methodology for Life Cycle Costing

    When analyzing the potential acquisition of a whole aircraft or a share of one, Life Cycle Costing ensures that all appropriate costs should be considered.

    The Life Cycle Costing includes acquisition, operating costs, depreciation and the cost of capital. Amortization, interest, depreciation, and taxes also play a part in what it costs to own and operate an aircraft and can be included in the Life Cycle Costing as appropriate.

    The first step is to know what aircraft to evaluate. This is achieved with an understanding of the key missions and the technical analysis of all potential aircraft. You need to be sure you are not buying more (or less) aircraft than you need.

    There should be no room for assumption in the process. The costs should cover a specific period and take into account the aircraft’s expected value at the end of the term of ownership.

    Comparisons of two or more aircraft should cover the same period of time and utilization, ensuring an apples-to-apples comparison is provided.

    On the subject of utilization, you are advised to use miles if the aircraft is flying point-to-point and convert each aircraft to hours based on their speed. To have an accurate comparison, you will need to measure performance using the same criteria. Different aircraft fly at different speeds. Using a mile-based measurement accounts for the speed differences between aircraft.

    I also recommend that you have a baseline. If an existing aircraft is to be replaced, that aircraft becomes the baseline. If you charter or own a fractional share in an aircraft, then continuation of that charter or fractional share would be the baseline.

    The baseline essentially forms a basis for the comparison, establishing whether the new option under consideration costs less than the current baseline or more. If the cost will be more, what is the value of the increased cost?

    Net Present Value Analysis

    A complete Life Cycle Cost accounts for the time-value of money in a Net Present Value (NPV) analysis. Using NPV enables the differing cash flows from two or more options to be compared and analyzed from a fair and complete perspective.

    An NPV analysis takes into account the time value of money, as well as income and expense cash flows, type of depreciation, tax consequences and residual value of the various options under consideration.

    When an expense (or revenue) occurs can be as important as the amount of that item. This is useful in the comparison of Cash Buy vs Lease vs Finance options for the same aircraft.

    Business aircraft do not directly generate revenue except for the sale of the aircraft. Thus, the NPV results are typically negative.

    When comparing negative NPVs, the "least negative NPV" is the more favorable. In other words, if Option A has an NPV of $5m and the NPV of Option B is $6m, Option A has a better NPV.

    You may want to run several scenarios. For example, what if you owned the aircraft for five years? How about ten? What if utilization was increased? What is the break-even point to move from fractional ownership to whole ownership? There may be many possible best alternatives when you adjust the important criteria.

    In Summary

    Regarding the client mentioned above, we evaluated new and used business aircraft and found several options that were at the top of the acquisition budget had lower total life cycle costs than aircraft with lower acquisition prices.

    A Life Cycle Cost analysis is an important decision-making tool, but it is not the answer all by itself. I like to use the term "Best Value" in combining both the capabilities and the costs of the various options analyzed.

    Run the numbers and use them in your decision - but remember: Never let a spreadsheet make the decision for you.

    This article was originally published Conklin & de Decker in AvBuyer on June 25, 2018.

  • Tracey Cheek posted an article
    Business Aircraft: How to Quantify the Time Saved see more

    NAFA member, David Wyndham, Vice President and Director of Business Strategy, with Conklin & de Decker, discusses the need to consider QUALITY of time saved with business aircraft.

    Business aircraft provide many advantages for busy CEOs. Yet David Wyndham demonstrates that simply measuring time savings does not give the full picture…

    The July/August edition of Harvard Business Review published the results of research looking at how CEOs spend their time. The study collected, coded and analyzed data for over 60,000 CEO-hours in 15-minute increments. The average annual revenue of the companies these CEOs run is $13.1bn.

    The data was well researched and quantified, and it proved what seems obvious: CEOs are busy people. What also should become clear is the benefits that a business aircraft can have for these busy individuals, when used effectively.

    To fully grasp those benefits, however, we need to consider more than just the time saved by using business aircraft. We need to consider the quality of that time, too.

    The Travel Need

    One take-away from the study is that where CEOs choose to spend their time is critical to their own effectiveness and signals the priorities for others within the company.

    According to the research, about half of the polled CEO’s work time was spent outside the company headquarters – so with the CEOs averaging 62.5 hours a week, about 33 hours are spent outside of headquarters.

    Face-to-face communication is the best way to learn what’s going on and to demonstrate to the entire organization what’s important. Spending time with frontline employees, on the factory floor, in the showroom and out in the field demonstrates more than any well-crafted email or video that everyone has an important role to play towards the success of the company.

    These frontline visits also enable the CEO to get reliable information as to what is going on. Sales are an indicator of the health of a company, but so is talking with the sales clerk at the store. CEOs need to meet with investors, senior leadership teams, divisions heads, the board of directors and more.

    More than one-third of a CEO’s time was found to be spent reacting to and dealing with unfolding developments. This could be a crisis (i.e. a fire shutting down a factory, a developing trade war impacting future costs, a strike), or an opportunity to purchase a competitor or complimentary organization.

    Meanwhile, spending time with customers is also considered important, though the study showed that CEOs only spend about 3% of their time with customers, relying on others within the organization to be the interface.

    The CEOs polled within the research felt this was too little time.

    All the above should indicate clearly that a CEO is on-the-move, needs to be in many places, and plenty of travel is required to enable them to be face-to-face. The use of a business aircraft comes to mind of course, but why not just use the airlines?

    The Business Aircraft Travel Advantage

    We’ve highlighted many times before how the use of business aircraft results in less time spent traveling. Much of the travel time reduction is the result of being able to travel to airports located convenient to the facility or customer; direct, non-stop flights (avoiding the need for connecting flights); and the fact that the business aircraft departs and waits on the CEOs schedule.

    In studies I’ve undertaken with clients, the travel time differences can range from a few hours to several days. I had one client that could fly to their plant in Nevada, have a four-hour meeting, and return home in a 12-hour day on the business aircraft. Undertaking that same trip via the airlines would have cost the client two nights away from home, due to the poor Airline connections.

    Yet even with city pairs well served by the airlines (i.e. New York to Chicago or London to Berlin) the business aircraft can take less time – and given the demands on a CEO’s time even an additional two hours weekly can be worth their weight in gold.

    The Business Aircraft Quality Advantage

    Business aircraft add value in other ways that airline travel cannot, taking us into the realm of quality of time. For example, the Harvard Business Review’s study also discussed the urgent need for CEOs to find room to think, reflect, relax, exercise and eat well.

    For many CEOs the time spent in a business aircraft gives them the space and opportunity to think and reflect. Brain research is showing that this quiet downtime, which was once thought of as unproductive, is necessary for the human brain to function at its most effective.

    Little opportunity is provided in a security queue, sitting on a packed Scheduled Airline flight, or waiting for a cab for anyone to reflect and be thoughtful.

    That four-hour round trip on a business aircraft, combined with allowing the time for a morning run and still being home for the kids’ bedtime is incredibly valuable to a CEO’s mental health and well-being to manage the immense demands placed on them every single day.

    The quality of the time spent on the business aircraft in whatever way the CEO decides to use it may just be the secret weapon of the super-effective CEO.

    This article was originally published in AvBuyer on September 25, 2018.

     

     

  • Tracey Cheek posted an article
    Jetcraft Releases Fourth Annual 10-Year Business Aviation Market Forecast see more

    NAFA member, Jetcraft, has released the findings from its fourth annual 10-year business aviation market forecast, building upon the 2017 prediction of a new business cycle of steady, healthy growth and expanding revenues.  

    Jetcraft, the global leader in business aircraft sales and acquisitions, is today releasing its fourth annual 10-year business aviation market forecast.

    The annual market forecast reaffirms that steady growth in the private jet industry is set to continue, with predictions of 8,736 unit deliveries over the next 10 years, representing $271bn in revenues (based on 2018 pricing). North America will once again take the lead, accounting for 60% (5,241) of predicted new unit deliveries over the forecast period, with Europe expecting 18% (1,572), and Asia-Pacific 13% (1,136).

    Jahid Fazal-Karim, Owner and Chairman of the Board at Jetcraft, says: “2018 has been a real turning point for business aviation, as we have now successfully navigated through our industry’s most difficult period. This year’s forecast predicts the continuation of our current business cycle of steady and healthy growth, driven by an increase in wealth creation and the demand for larger and more expensive aircraft.”

    The increase in wealth creation over the past decade has spurred growth in family offices that are now offering a wide variety of specialized services, including business aviation. Together with the increase in block charter and fractional programs, this is exposing more UHNWIs to the industry than ever before.

    However, despite continued economic growth, Fortune 500 companies have yet to return to historical aircraft transaction levels, due to maintaining a focus on other financial priorities, such as share buybacks and paying down debt. This customer segment is unlikely to restart aircraft purchasing programs until well into the cycle.

    The forecast predicts that the large jet category, comprising super large, ultra long range and converted airline segments, will constitute 32% of total units (2,778) and 64% of total revenue over the next decade. All new aircraft model programs, both announced and projected, during the forecast period are exclusively widebodies.

    Fazal-Karim adds: “Predicted unit deliveries in the large jet category account for a huge proportion of total revenues in the industry, demonstrating the trend towards larger, long range aircraft to support today’s global business needs.”

    While the industry is set to embark on a period of substantial growth, its resilience during the challenges of the previous business cycle has prepared it well for expansion.

    Fazal-Karim concludes: “We’re confident that the lessons we’ve learned over the past decade will ensure sustainable growth for business aviation in the years to come. Ours is an enduring industry, and one with a buoyant future ahead.”

    Jetcraft’s full 2018 10-year Business Aviation Market Forecast is available to download here. Report graphs available for publication on request.

    This market report was originally published by Jetcraft on October 10, 2018.  

     

  • Tracey Cheek posted an article
    Private Aircraft Ownership - A More Productive Method of Business Travel. see more

    NAFA member, PNC Aviation Finance shares the advantages of private aircraft ownership.

    Private aircraft ownership can often invoke images of celebrities jet-setting to exotic locations around the world. In reality, purchasing a private aircraft can save money and offer enhanced opportunities for corporations and businesses owned by high-net-worth individuals.

    High-net-worth individuals and corporate executives want to save time and travel quickly to conduct business.

    Private and business aircraft ownership can have a positive impact by allowing executives to set their own schedules and grow their business without being at the mercy of commercial airlines. This advantage can save money and could potentially offset the cost of the private aircraft in terms of cost savings, the ability to generate additional business and enhanced travel opportunities.

    Rather than viewing the ownership of a private aircraft simply as an expense, in the right situation, it might actually provide a competitive advantage. 

    Access to Underserved or Remote Locations

    The ability to access locations that are “off the beaten track" and not adequately served by regular commercial airline service can be a key advantage of using private aircraft. If your company does business in these types of locations, using a private aircraft can save time wasted in airports, changing flights and renting a car to drive to your ultimate destination[1].

    If restricted to commercial schedules, it may be difficult to justify visiting prospects, clients or company locations in these areas on a frequent basis. This can negatively impact your business and affect potential growth opportunities.

    Privacy and productivity

    On a private aircraft, business can continue without the presence of strangers sitting in the next seat. This appeals to high-net-worth individuals who have privacy and security concerns that can't be guaranteed on commercial flights and at bustling airports.

    In some business situations, executives want to ensure their privacy if they are traveling to a sensitive business meeting involving a confidential transaction, such as a potential acquisition or opportunity with a potential new customer[2].

    A private aircraft offers an environment conducive for working, conducting meetings with other employees or business associates who are also on the flight or transacting business via phone during flight. This additional productivity can be invaluable as preparation can enhance the chances for success in any business situation.

    For business executives, the cost of the flight and related expenses to maintain the aircraft can be more than offset by the convenience of being able to fly to a meeting on your own schedule. Sometimes, just showing up can be what it takes to land a new customer.

    Tax Advantages and Issues

    Purchasing a private aircraft can offer tax advantages, but this acquisition can be more complex than buying a piece of capital equipment or real estate.

    A key issue is the ability to justify that a private aircraft is an ordinary and necessary business expense and not just a luxury or convenience purchase[3].

    If an argument can be made that business is normally conducted in locations that have limited or no commercial service, a private aircraft is easier to justify. It can also apply if travel often occurs at the spur of the moment or at irregular times.

    Using a private aircraft to address legitimate privacy and security concerns for executives and employees can be another justification.

    There can be a number of taxes, such as potential sales and use taxes, associated with private aircraft ownership, one being how the aircraft is owned. Ownership by a separate entity other than the main operating business can lead to tax implications.

    Before purchasing a private aircraft, it is wise to have your tax and legal advisers conduct a thorough review in terms of the best ownership structure and the anticipated usage to ensure the best possible tax outcome[3].

    Additionally, there are distinct rules regarding the separation of business and personal use of the aircraft. This can extend to personal use as a perk for employees and even in the case of a spouse flying on an executive plane without a business purpose.

    It's important to establish rules for usage and to account for travel using a consistent process that meets both internal and external reporting requirements.

    The diligent maintenance of usage records and the reason for each passenger being on each flight is critically important[4].

    If properly structured and used, the cost of private aircraft ownership can be partially offset by tax benefits that can reduce the cost of ownership.

    We Can Help

    PNC Aviation Finance offers knowledgeable financing solutions to make private aircraft ownership possible and affordable.

    We offer custom-tailored financing packages based on business needs and circumstances. Our experienced aviation finance team understands and has extensive knowledge regarding private aircraft ownership requirements, FAA, insurance, operating leases, etc.

    We can help you look at the implications of each option and help you decide on the best option for you or your business.

    Learn how PNC Aviation Finance can help you fly higher by visiting pnc.com/aviation.

    This article was originally published by PNC Aviation Finance.

  • Tracey Cheek posted an article
    AMSTAT helping identify ADS-B compliant business aircraft globally. see more

    Tinton Falls, NJ – March 22, 2018:  AMSTAT, the leading provider of global business aircraft market, fleet and operator information, has worked with ADS-B Exchange, a co-op of ADS-B/Mode S/MLAT feeders from around the world to identify which business aircraft are or are not in compliance with the 2020 FAA ADS-B mandate.   

    The two companies cross referenced their respective global data sets and identified aircraft with or without ADS-B DO-260B (required to meet the 2020 mandate).  AMSTAT then added this data to its flagship service, AMSTAT Premier, for use by subscribers.  The data indicates that 39% of US based business jets and 38% of US based business turbo-props tracked by AMSTAT are currently known to be compliant.  The companies will continue to update this ADS-B information going forward.

    “The addition of this compliance data to the global fleet tracked in AMSTAT Premier will enable MROs offering ADS-B services to quickly identify which aircraft are not ADS-B compliant and market their services accordingly” said Andrew Young, AMSTAT General Manager.  He went on to add “AMSTAT remains committed to giving our clients a competitive advantage and this is another example of where our data is doing that.”

    For more information on using AMSTAT Premier to filter aircraft by ADS-B, please contact Jim Morford, AMSTAT Customer Service Manager on (US) 732-530-6400 x102 or jmorford@amstatcorp.com.  To subscribe to AMSTAT Premier, please contact Chris Skurat, AMSTAT Director of Sales on (US) 732-530-6400 x145 or chris@amstatcorp.com.

    About AMSTAT, Inc.

    AMSTAT is the leading provider of market research information and services to the corporate aviation industry.  Founded in 1982, and based in Tinton Falls, NJ, AMSTAT introduced the concept of providing researched information to corporate aviation professionals.  AMSTAT’s mission is to provide timely, accurate, and objective market information to its customers.  AMSTAT products and services provide aviation market and statistical information that generates revenue and delivers competitive advantage to brokers/dealers, finance companies, fractional providers, and suppliers of aircraft parts and services.

    Information:

    AMSTAT, Inc.

    Andrew Young

    New Jersey: (732) 530-6400 x147

    andrew@amstatcorp.com

    www.amstatcorp.com