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Right-Sizing Your Corporate Jet
A practical approach your Shareholders will applaud. Balancing cost-saving with time-saving is of key importance in today’s economy. Jeremy Cox invites you to consider whether the corporate jet you currently fly is as efficient as you think. If not- perhaps it’s time to ‘right-size’ your company airplane…


Many individual cities throughout the U.S. are located within 200 to 500 miles of two or more of their neighbours. Examples include: New York City- with Boston and Washington- D.C.; San Jose- with Reno and Los Angeles; and Dallas- with Houston and Little Rock. Unfortunately- with the exception of major population areas- direct airline service between many nearby city pairs is sparse- and/or inconvenient.

As an extremely flexible- time-saving mode of travel- it’s not uncommon for Companies to utilize Business Aviation to visit plants in such city-groups efficiently (potentially three or four different plants in the same day- still returning to the home base for the night).

Perhaps you enjoy the many benefits of business aviation- but face pressures to make it more efficient to your bottom line. Following are two invented- but realistic examples illustrating how that might be achieved.

THE SHAREHOLDER DEMAND SCENARIO
First we visit XYZ Industrial Tool Company (XYZITC) based in Joplin- Missouri. Having owned a business aircraft for many years- this company realized soon after expanding its manufacturing plants in different parts of the Mid-- and South-western U.S.- that it was impossible to maintain quality and profitability if it didn’t make weekly plant visits.

Its first aircraft was a light twin-engine Beechcraft Baron piston airplane (four passengers)- then a medium- twin engine Beechcraft King Air 200 turboprop aircraft (six passengers). After spending many nail-biting hours dodging summertime thunderheads- the company bought its first jet; a mid-size Hawker 800XP (eight passengers)- which it flies 450 hours over the course of its business year.

None of the flights made by XYZ-ITC in its Hawker 800XP are longer than the weekly trip between its home-base in Joplin- and Clovis- New Mexico- where its largest satellite plant is based. This trip is 517 statute miles - 60 minutes by air; or 578 statute miles - 10 hours by car. Normally four employees make the trip.

Since the financial meltdown- the XYZ-ITC Board has been under increasing pressure from prominent shareholders to do a better job of managing its expenses and resume repaying its investors in dividends again. The company aircraft is fast becoming a favorite target of those outspoken shareholders. Something must be done!

If the company aircraft were axed- many weeks of employee time would be squandered on highway travel. No viable airline links now exist between the city pairs that XYZ-ITC currently operates from. It’s time for this company and its Directors to seriously consider ‘Right-Sizing’ their Jet. Staying in the Hawker Beechcraft aircraft family- XYZ-ITC could move out of its Hawker 800XP- and into a smaller Beechjet 400A (seven passengers).

Having owned its Hawker for more than 10 years after buying it in a ‘used’ condition- XYZ-ITC’s airplane is now fully depreciated. Its market value is $3.5m U.S.D- and the company can purchase a similar- age Beechjet 400A that has a comparable total-time to its new aircraft for only $1.8m instead.

By Right-Sizing its aircraft- XYZ-ITC will instantly put almost $2.0m back into the company treasury- while only extending the Joplin to Clovis trip by 1 minute. In addition- XYZ-ITC will still be able to fly above the weather while skimming more than $100-000 from the Flight Department’s Annual Operating Budget.

Of course- by Right-Sizing into the smaller jet- there will be a compromise on seats and space (305 cu ft vs. 604 cu ft)- but with the longest trip requiring only 61 minutes of air-time (in a cabin that still boasts a private lavatory and refreshment center)- the offering is still far ahead of the tightly-packed confines of a full-size car or SUV (and 10 hours road-time).

PROFIT MARGIN CONSTRAINTS
Next we visit ABC Energy Systems Corporation (ABC-ESC) of St. George- Utah which has utilized a used Citation Excel almost 400 hours annually- for the past eight years.

ABC-ESC does business with small and mid-sized cities- and instead of investor pressure to cut costs to reinstate a dividend- ABC-ESC is continually having to lower its profit margin to satisfy diminishing budgets that the city leaders have available to spend on the technology that ABC-ESC sells them. Again- if the company aircraft were axed- many weeks of employee time would be squandered on highway travel with no viable airline links existing between the city pairs that ABC-ESC currently operates from.

The longest trip made six times each month is from St. George to Redding- California at 525 statute miles (64 minutes by air); or 729 statute miles (13 hours by car). Normally five employees make these trips. By staying in a Cessna aircraft- the Corporation could move out of its mid-size Excel (seven passengers)- and into a small-size CitationJet (five passengers).

Again assuming the Excel is fully depreciated- its market value is $3m U.S.D.- and a similar-age CitationJet (with comparable total-time to the Excel) can be purchased for just $1.5m. By Right-Sizing- ABC-ESC will instantly put $1.5m back into the company treasury- while reducing its Flight Department’s Annual Operating Budget by more than $250-000.

Again- ABC will be giving up seats and space (210 cu ft vs. 400 cu ft) - but with a longest trip length of only 76 minutes of air-time (just 12 minutes extra over the Excel) in a cabin that still boasts a private lavatory and refreshment center- when compared to the confines of a full-size car or SUV (13 hours-plus road time) there are clear advantages.

We close with the simple question: Is it time for you to Right-Size your Corporate Jet?

Jeremy Cox draws on a wealth of experience as a pilot- an aircraft engineer/mechanic and an aviation writer. He currently serves as Vice President at JetBrokers- Inc - a professional aircraft sales company. More information from jcox@jetbrokers.com

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