Questions concerning who should be able to use the company aircraft for business transportation arise from several sources. Top management may regard Business Aviation as essential to using their time efficiently. Development and marketing managers may see the company aircraft as the most effective way to reach new markets in remote areas or to reduce the time in transit compared with airline travel. The CFO and his/her accounting department may want to contain costs. The aviation manager may argue that moving more passengers is the best way of spreading fixed costs- and thus achieving greater return for the company’s investment in Business Aviation.
As Board Members tasked with corporate governance- Directors must set policy regarding who has access to the business aircraft. Corporate leaders may start the dialog- reasoning that Business Aviation is a way to get more boots on the ground using the tools that are already owned by the company. An existing aircraft may be an underutilized asset- and expanding access to include marketing and development personnel is worthwhile.
What may have started out with access only for top management- therefore- may begin to shift down into lower levels of management- as well as to sales. This shift down- or to the right in corporate structure can bring quick and positive results to the bottom line. But what considerations must the Board make when evaluating such expansion?
EXPANDED USE- NEW CONSIDERATIONS
The Board may need to review corporate policy regarding aircraft use and enact change to allow for this expanded access. Mission profiles will need to be analyzed and probably re-evaluated- as will budget allocations for the aviation department. Increased access may generate a need for more aviation personnel. Scheduling also will need to be addressed.
For instance- if the aviation department is now operating one aircraft and utilizing it 350 hours per year- then an increase to 500 hours per year may dictate an increase in head count for the department. Extra flight crew and potentially additional maintenance personnel may be needed to accomplish the additional hours. Such increased activity is not a bad thing- but it is a consideration for Board review.
Increased access by more employees may prompt a new look at the company’s mission profiles. Trip analyses from the past may no longer be relevant. New destinations may be added- and the existing aircraft may not be sufficient to meet the company’s expanded travel demand. It is therefore important to look at the aviation department resources as well as governance criteria.
Scheduling is another area that requires attention. Allowing expanded access to the aircraft can complicate the scheduling process. Cross bookings between different departmental users- seniority between departments and employees- light passenger loads that open unused seats are all topics to consider.
None of these issues- however- are reasons to avoid the overlying discussion about expanded access. The basic question for the Board to consider is how best to utilize the benefits of Business Aviation to serve the company’s Vision and Mission as an enterprise. The discussion centers on the value of the company’s business aircraft as a tool to create and retain business. As a Board Member- you have a fiduciary responsibility to explore fully this very exciting topic. Furthermore- I think it is vital to involve the flight department personnel in this discussion.
They have precise knowledge about Business Aviation; they are advocates and they can add tremendous value to the deliberations. The last consideration to expanding access is how use by more departments and employees might be internally reimbursed. Often departments have a reimbursement policy (usually called chargeback policy) that is applied to the aircraft operation as the aircraft fulfills missions department to department.
Often this hourly charge is subsidized internally by the company- thereby not giving the entire hourly operational cost to the user. This reimbursement policy is only legal in intra-company operations; it cannot apply to customers or vendors. Chargeback policy is a contentious issue- and it is subject to considerable debate within companies using Business Aviation. Indeed- it is a topic for one or more subsequent articles.
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