Business Aviation – An industry misunderstood

Throughout the years, business aviation has been wrongfully stigmatised on the basis of unfounded arguments and misconceptions. Allegedly, only high net worth individuals, celebrities or flamboyant individuals were associated with this essential form of travel. However, for executives of some of the world’s largest companies, business aircraft represent less of a luxury but more of a necessity.

Recently, a news story broke that Tesco, a huge supermarket retailer headquartered in the UK, has been transporting its executives with business aircraft around the globe at a cost of £25 million between 2005 and 2012. What was not reported in the news story however is that during this time, Tesco’s annual profits had doubled from £1.8 billion to £3.8b.

Let us take the example of Tesco. It is the second largest retailer in the world measured by profits (after Wal-Mart) and is represented in 14 markets across Asia, Europe and North America. Its executives need to be able to reach multiple destinations at any given time as quickly as possible due to their commitments to the company’s shareholders.

With time being a priceless commodity to high level executives, business aviation can step in and become a vital tool. It is an uncontested fact that valuable hours can be lost reaching a destination that is not efficiently served by scheduled airlines or as a result of busy airports, heightened security measures etc. Once wasted, the time cannot be recovered and thus it must be managed wisely. As such, for businesses this means that travel time should be as short as possible and at the same time allow employees to meet, plan and work en route, while having the freedom to discuss proprietary information in a secure environment and without fear of eavesdropping or industrial espionage. Business aviation is effectively a time multiplier, allowing key employees to do more and faster thereby boosting efficiency and productivity.

With the world economies still recovering from the recession of 2008, one may argue that business aviation is a costly form of travel and considering the global economic climate, one that should be avoided as a cost cutting measure. However, a recent and compelling study conducted by NEXA Advisors and commissioned by NBAA (North American Business Aviation Association) clearly shows that those businesses that rely on business aviation not only did better during the recession; but are already doing better in the nascent recovery when compared to their ground-bound competitors.

The report analysed the contribution of business aviation to shareholder value for the Standard and Poor (S&P) 500 (large cap) and S&P 600 (small cap) companies between 2007 and 2012.

As testament to business aviation’s effectiveness during tough times, the report found that more companies than ever in the S&P 500 recognise and use business aviation today. From the report, facts emerged that in 2011, of the S&P 500 companies, business aviation users represented 84 per cent by number and accounted for 96 per cent of total revenue.

The report also cited key findings in several additional ‘best of’ lists in 2012 which reveal a remarkable correlation with business aircraft use. Among the “50 Most Innovative Companies,” a compilation produced by Business Week, 30 S&P 500 companies made the list. Of these, 100 per cent were business aircraft users.

It further stated that those companies that utilised business aviation during the recession “mitigated revenue losses and recovered more quickly than non-users. Further to this, companies using business aviation were quicker to hire back employees and have significantly grown their overall workforce since 2007, relative to non-users”.

In addition to the above, the ability to change departure time in accordance with executive demands, the ability to access remote or un-serviced destinations and the avoidance of delays should ensure that business aviation is regarded as a utility – not a luxury. And in this regard savvy companies use it for transporting goods that cannot travel commercially, teams of technicians from one plant to another, or delivering added value to clients.

Despite its proven credentials as a profitability enhancement tool, in the Middle East, use of private aircraft for such business purpose is limited. However, awareness in this regard is on the upswing as evidenced from the turnout and enthusiasm displayed at Middle East Business Aviation (MEBA) shows from 2006 onwards. With the industrial base of the region expanding and becoming a lot broader and more diversified, the need for business aircraft as part of a business’ asset is prone to become imperative to corporations in the region.

In sum, business aviation is a proven business tool and a very effective mean of travel and when used wisely and aggressively, business aviation can help a company’s business performance through the current tough economic conditions.