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Value & Efficiency in Business Aviation

M.O.V.E. - a system to capture BizAv’s actual value & efficiency...

David Wyndham   |   20th October 2015
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David Wyndham David Wyndham

David Wyndham is vice president, Conklin & de Decker, a JSSI Company, where his expertise in...
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David Wyndham proposes measuring and documenting the benefits of operating business aircraft using a protocol he calls MOVE.

Flight Departments are no longer just in the business of ‘safe and efficient transportation’. They need to demonstrate how well they are serving corporate goals and enhancing shareholder value. Hours flown and passengers carried are not enough. We need appropriate aviation-centric metrics, which are in fact Measures of Value and Efficiency. For the sake of identification, we will call the metric MOVE.

In past articles we have discussed why the Flight Department needs to be treated like any other business unit. One of the ways we manage a business unit is to have metrics that accurately and fairly measure its effectiveness. For a business unit that produces a product or service available for sale, initial metrics center around the Return on Investment (ROI).

Flight Department’s ROI

The initial investment is easy - we have the asset of the aircraft, the facilities, and to those elements we must consider expenses of operating the aircraft along with salaries and overhead for relevant personnel. If we think in terms of an Income Statement, the cost of obtaining and operating the company aircraft is on the expense side of the ledger.

Since the in-house Flight Department typically does not produce a product or service that is sold outside the company, what is missing is the ‘income’ produced by providing transportation via the company aircraft.

Aviation is like many other corporate units such as Human Resources and Legal that perform critically important functions in allowing the company’s profit centers to operate successfully.

The aviation department also allows the profit centers to perform efficiently by transporting the right person to the right place at the right time. Such mobility is in fact the ‘product’ of the aviation department, and the value or ‘income’ derived from that product should be measured and documented.

The aviation department can develop a metric for capturing the ‘income’ it makes possible. Aviation Managers should develop a metric that assigns a value to trips where passengers use the company aircraft to build new business, renew existing contracts, solve supplier problems, keep assembly lines functioning, etc. The aircraft allows corporate passengers to generate profits for the company by using their time efficiently in support of business goals. Travelers on business aircraft use their travel time as they would use time in their office. Furthermore, they apply their talents and skills where they are most effective. The challenge is to assign realistic values to those accomplishments.

Identifying Value

Start with why: why does the company have a business aircraft? There a many reasons, and those reasons define the appropriate MOVE metrics. For a multinational company with a high-profile leadership team, the enhanced security offered by business aircraft, especially in global hotspots, is a must. The number of sensitive trips flown, the avoidance of fuel stops, and perhaps even the security rating of the various FBOs used can all be measured and come into play.

Passengers carried (or passenger-miles flown) is not the most useful metric for the effectiveness of a security program. It is difficult to place a value on security, but a place to start is assessing the losses that might occur if security was breached.

The company that uses the company jet to shuttle employees between various plants needs high passenger loads. Trip frequency, passenger loads, and passenger-miles flown are all useful MOVE metrics for a shuttle. The goal is to keep or improve load factors. And of course, cost per passenger-mile flown for a shuttle is critical. Eliminating the cost of multiple airfares, however, is only a small part of the “income” provided by a company shuttle. Time saved is the big payoff as well as allowing passengers to interface while en route without fear of disclosing company plans or trade secrets.

Do you use the business aircraft to support sales and cultivate your top customers? How often do you fly these customers, what is the sales volume to your company, and does changing the number of trips impact yearly sales volume? How often is the business aircraft used to cultivate new customers or support existing clients? What is the company’s expansion (as well as the aviation department’s growth) based on how often, where, and how many passengers the aircraft transports? What does your lead passenger or authorizing executive believe is the value of a particular customer visit? Using a methodology that is accepted by the executive overseeing Business Aviation, document sales trips flown each year.

Also, note that not all sales trips have the same value. One that is instrumental in securing a significant order should be valued higher than a routine customer visit.

Flight logs, especially if digitized, can provide valuable data for a MOVE metric. In addition to the basic flight parameters of destinations and flight times, they can also collect passenger lists, business department affiliation and purpose of the trip. Depending on the length of the trip, these data can also be used to calculate overnights avoided. It may be possible to add custom fields that further define the business purpose and nature of customer-support or revenue-generating travel.

The general raison d'être for air travel is to make the best use of time. A useful MOVE metric is to assign a value to the time not “wasted” versus less efficient methods of travel. The NBAA used to sell a program, Travel$ense, that allowed your travel department to compare the time and cost of the business aircraft versus the airlines. That program is no longer supported, but the methodology can be replicated. Rather than do it for every trip, do an analysis for the most frequently flown trips.

Time saved via the business aircraft then needs to have a value assigned based on the value of the travelers. An employee, whether an engineer or CEO, is worth a multiple of their base salary. Assign values to the categories of travelers’ time along with a calculation for time not spent in travel.

Summary

The concept of MOVE is to establish a yardstick or measure for the various ways in which a business aircraft generates ‘income’ for the company. Some will simply be time saved. Greater returns flow from the business derived because passengers are more effective in accomplishing their jobs. Such success should be measured using a metric that has been vetted by the executive overseeing Business Aviation and accepted by users of the company aircraft.

Just as an income statement is prepared for traditional business activity, a similar approach applying MOVE metrics should be used to demonstrate the business success of the aviation department.

MOVE metrics must relate to corporate goals. The value of a business aircraft can be connected along the lines of productivity, customer service, sales growth, security, etc. Developing MOVE metrics start with the basic data all aviation departments track but need to expand to those results that connect to the corporation’s goals.

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What is the biggest benefit your Flight Department provides?  Please comment below.


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