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Measuring Worth

Last month David Wyndham discussed the reasons for having the Business Aviation function run like any other corporate business unit. This article addresses what reports effectively communicate the department’s air transportation mission.

David Wyndham   |   1st February 2014
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As an Instructor Pilot in the U.S. Air Force- Dave's responsibilities included aircrew...
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Establishing Metrics for the Aviation Business Unit. 
Last month David Wyndham discussed the reasons for having the Business Aviation function run like any other corporate business unit. This article addresses what reports effectively communicate the department’s air transportation mission.

If the business unit is a profit center- is producing something- or delivers a service for which the corporation derives revenue- reporting metrics are clearly defined and universally accepted. What is the deliverable cost per unit to produce- and what is the revenue per unit? Such metrics demonstrate whether the business unit is actually returning a profit.

Functions such as Legal- Human Resources or IT (which are cost centers rather than revenue generators) have been around long enough that within each of those corporate functions there are clearly measurable goals; the cost to deliver the end-product can be measured and reported.

For many corporations- however- aviation is an outlier in this regard. The general mission may be something like 'The safe and efficient transportation of persons in support of the corporate goals”. The aviation unit does have a budget- thus the cost to deliver the end product is known and is typically high.

The goal associated with the high cost of service- however- often is not clearly identified or easily measured. The lack of definitive metrics presents issues. How does the business aircraft create value for the corporation? The Business Aviation unit needs appropriate metrics in order to be managed at the executive level as well as at the department level.

 

Classic Flight Department Metrics 
Typically the aviation department employs two measures: hours flown and total cost per year. The aviation manager reports- for example- that the company aircraft flew 350 hours in 2012 and 400 hours in 2013- resulting in a total cost of $1.6 million in 2012 and $1.5 million in 2013. From those two meager measures- the Board might observe that in 2013 the aviation unit flew more hours for less cost that it did in 2012.

Should the unit receive kudos for doing more with less? If hours flown and annual costs are the only two metrics reported to management- then perhaps they should- but those two important metrics do not give you enough information to show how well or how efficiently the aviation business unit performed.

Back to our hypothetical aviation business unit: How did flying increase? For what reasons did the flying increase? Costs went down in 2013 as compared to 2012- but why? How well did any of that flying support the company goals?

 

Aircraft Move People- Not Hours 
If the mission of the business aircraft is to fly people- then people flown should be a major metric. Corporate policy may direct aircraft usage to the most senior leadership- but how much are they on the aircraft? Were flights available where mid-level management or technical support personnel could have been flown efficiently to serve corporate objectives?

For every flight- the aviation unit knows who is on board the aircraft and how many seats are filled. Tracking those metrics over time and adding up how many passengers are carried per month and per year is easy- and informative. Along with persons carried- metrics should include the number of trips flown and the length of each trip in miles as well as hours. If the distance from A to B is 800 miles- then the required mission is carrying people 800 miles. Depending on the aircraft speed it may take two hours or three hours. Doing one trip in two hours versus three is indicative of the efficiency of the particular aircraft in reducing travel time.

Since we know who- how far and how often- we can develop a very fair and telling metric: passenger-miles. Flying one passenger one mile is a passenger mile. Flying 10 passengers 800 miles is 8-000 passenger- miles. As the aircraft is used to fly passengers over a number of miles- passenger-miles flown is a far better measure of aircraft use than is hours flown. Combining passenger miles with hours flown is a telling marker of business aircraft efficiency and productivity.

 

A Revealing Insight 
Back to our company: Let us look at the details of the department’s operation. The aircraft flew 350 hours in 2012 and 400 hours in 2013. And it produced 700-000 passenger-miles in 2012 and 600-000 passenger-miles in 2013. The total cost of the aviation unit was $1.6 million in 2012 and $1.5 million in 2013. Thus- the total cost per passenger mile is $2.29 in 2012 and $2.50 in 2013.

With cost per passenger mile- we see that 2013 was more costly than 2012. We then can add a metric for average passenger load (five in 2013 versus four in 2013) to discover that fewer people flew in 2013 even though the hours flown increased. Adding in how often the airplane flew without passengers (deadhead trips) may round out the picture. In addition to being measurable- metrics must be useful in determining how effectively the business aircraft is performing its assigned mission.

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