loading Loading please wait....
Login

If you are a registered, please log in. If not, please click here to register.


Finalizing an aircraft purchase involves approvals at several levels. Gone are the days when all that was needed was a slap on the back and a friendly nod by someone on Mahogany Row- observes Jay Mesinger.

The process for acquiring a business aircraft reflects the growing acceptance of Business Aviation as an established resource for a company with sophisticated travel needs. Similar to evaluating other capital equipment- the decision to obtain a multimillion dollar company aircraft is done with painstaking deliberation and consideration. The justification process and discussions about value added are exacting.


Complex tax and regulatory standards also add a new dimension of detail. Optics being what they are today- the need for penetrating due diligence by the Board has never been higher. Usually the Chief Financial Officer (CFO)- as requested by the Board- leads financial modelling and projections of benefits derived from the mission profile. Costing methodology as well as tax treatment for the purchase is at the direction of the CFO. Assumptions and projections are vetted for accuracy and authenticated for meeting specific corporate needs. While the CFO may not be the final authority- the findings of the CFO and Staff are pivotal to the final decision-maker.

FROM CFO TO CEO
What happens next is often a hand-off to the office of the Chief Executive Officer (CEO). This is- in many cases- where the rubber meets the road— where the final questions are asked and buying priorities are discussed. This debate tends to be less about financials (since that piece of the process has already been developed) and is more focused on the specific aircraft.

Decisions are needed regarding key issues such as how the aircraft will be equipped to provide maximum efficiency for passengers while traveling (i.e.- the broad issue of “connectivity”)- where the aircraft will be based- and which areas of the firms will have access to the equipment. Particularly with long-range business aircraft that are capable of being aloft for 12 or more hours- the ability to work while traveling is ever-more critical. Passengers need a communication bridge between the aircraft and their home office as well as their clients.

Furthermore- passengers need to arrive at a destination rested and informed so as to be able to hit the ground running upon landing in what may be a far off and unfamiliar destination. That capability is of utmost importance to the CEO. Work station seating and berthing seats are all very important priorities for the CEO as well as other passengers.

Please do not think for even a moment that the input of the CEO in this process should be considered non-essential. In fact- for this ‘office-in-the-sky’ to be of high value to the company- the business day must not end when the aircraft door closes and the flight begins.

LINES OF RESPONSIBILITY
So as we look at the different levels of decision making within the company- we see distinct lines of responsibility. The acquisition process touches many levels of decision makers. Each executive and analyst adds value and justification management to the final decision- and each contributes according to his/her specific job title.

The Board starts the discussion and directs the CFO to build the financial model of the acquisition. Once that piece is produced and findings presented to the Board- the CEO is engaged to add the ‘office-in-the-sky’ components to the process. The CEO typically makes the presentation to the Board for final sign off and purchase authority. The CEO is the person who takes final responsibility for asking the Board to approve the purchase. Once all sectors have been engaged and have provided their respective conclusions- the wheels go up and the value begins!

 

Related Articles