Business Jet: Nomenclature Says it All

There is a perception among many, particularly those in government circles that business jets are for the rich and famous with no contribution to the economy. This is far from the truth

Issue: BizAvIndia 1/2016By R. ChandrakanthIllustration(s): By Anoop Kamath

A luxury yacht or a Lamborghini are certainly a rich man’s toys. They do not add any business value in any way to either the individual or the business enterprise. They are personal choices. A business jet also is a personal choice of an individual or a corporate entity, but it certainly adds value to the individual or to the business enterprise, as the case may be. By its nomenclature, ‘business jet’ it is self-explanatory.

Nevertheless, there is a perception among many, particularly those in government circles that business jets are for the rich and famous with no contribution to the economy. This is far from the truth. This perception exists even in the United States which has the highest concentration of business jets and the most number of exclusive general aviation airports in the world. So one can imagine, how those in the government in India could be reacting to jet ownership. While it is true that the aviation industry in general and business aviation in particular has cracked the market by first targeting the rich, but over the years has extended its reach to the vast middle class. While commercial airlines, with proliferation of low-cost airlines, have almost shed that image, business aviation is still strapped with this perception, though there are umpteen surveys which have shown how they (business jets) are in fact business tools.

Misconception

Sanjay Julka, Vice President of Business Aircraft Operators Association (BAOA), in a blog has aptly stated that it is indeed ironic that an industry where a Rs. 100 spend on aviation can result in Rs. 325 worth of total benefits for the country or where 100 direct jobs in aviation can result in 610 jobs overall (source: draft National Civil Aviation Policy 2014-15) is today facing a negative growth in the business aviation sector. The misconception, he writes, is also the prime reason why, despite positive pre-budget indications, the Minister of Finance Arun Jaitley in the last hour, failed to cut customs duties on private aircraft and give tax benefits to MROs. “Had he delivered on the market sentiment, almost all woes of this lagging industry would have fallen into place. The pilot project of the new government, ‘Remote Area Connectivity’ would have also taken off in the right earnest. Yet again, the misconception – business aviation for the elite ruled over.”

Various industry associations have been using several platforms to drive home the point that business aviation is part of an economic activity. In fact, it is not that these law makers do not know about it. Many of them use general aviation/business aviation during elections or when they have to go to places quick and fast and where scheduled airlines may not have connectivity. But yet, when it comes to backing the general aviation/business aviation sector they hesitate. It is the case everywhere.

By necessity, the airplane has become not only a flying office but also sleeping and eating quarters since employees are expected to arrive prepared to jump directly into meetings with their counterparts

The President and CEO of the US National Business Aviation Association (NBAA) Ed Bolen has in an article mentioned how it is important for stopping the political gamesmanship and mischaracterisations when it comes to business aviation and to give US companies every tool in their arsenal to compete globally.

Reaching multiple locations easily

“For many companies, having a business aircraft means the ability to quickly fly non-stop to virtually any destination in the country or the world, reach multiple locations in much shorter periods of time and use the time in between productively. Even in the Internet age, face-to-face communication is still the most effective way to open markets and solidify business relationships. That is particularly true in certain emerging markets. And, by necessity, the airplane has become not only a flying office but also sleeping and eating quarters since employees are expected to arrive prepared to jump directly into meetings with their counterparts.

“As a result, for businesses, an aircraft is as much of a necessity as a computer. That’s why when a company buys its own aircraft it depreciates in the same way as other comparable business investments, including cars, trucks, bulldozers and computers.

“Yet some in Washington are trying to score political points by characterising business aviation as a convenience, or even a luxury, rather than a necessary tool for competitiveness.” The US general aviation manufacturing industry is responsible for 1.2 million jobs and having more than $150 billion in economic impact. In India, the business aviation sector is not as gigantic as in the US, but it certainly has created thousands of jobs and has contributed in its own way to economic development.

Outperform non-aviation users

NBAA studies have indicated that companies that utilise business aircraft outperform non-aviation users in several important financial measures, including annual earnings growth, stock and dividend growth, total share price, market capitalisation and other financial yardsticks. From an environment perspective, business aviation has a small carbon footprint and an exemplary environmental record. Aviation emissions are only a tiny fraction of all transportation emissions, and business aircraft emissions are a small portion of those. The industry has a long history of continually leveraging technology to minimise noise and emissions, while improving safety and efficiency.

The NBAA study pointed out that only about 3 per cent of the approximately 15,000 business aircraft registered in the US are flown by Fortune 500 companies, while the remaining 97 per cent are operated by a broad crosssection of organisations, including governments, universities, charitable organisations and businesses – large, medium and small. Business aviation reaches 10 times the number of US airports (over 5,000 public-use facilities) than the airlines do. The majority of US airline flights only go to and from 70 major airports, and the total number of US destinations served by air carriers has declined. Business aircraft flights account for just 4 per cent of the total traffic at the busiest airports used by the commercial airlines. In India, there are 476 airports of which only 70 are in use and the general and business aviation sector has been asking the government to open up these airports for them by providing adequate infrastructure. However, the government’s priorities are first commercial airlines and now they are talking about regional airlines.

Transporting men and material

Business aircraft have a safety record that is comparable to that of the major airlines. Business aviation enables companies to safely transport tools and materials that cannot be carried aboard airlines. The sectors that can easily transport equipment, though not huge, along with passengers are mining, pharma, etc.

It is interesting to note how business aviation is flourishing in the US, though there are efforts to tax them unduely. Reports indicated that about 59 per cent of the companies operating business aircraft have fewer than 500 employees and seven in 10 have less than 1,000 employees. Business aircraft users have a dominant presence on ‘best of the best’ lists for the most innovative, most admired, best brands and best places to work, as well as dominate the lists of companies strongest in corporate governance and responsibility, revenue growth and market share, indicating that business aviation is the sign of a well-managed global company.

Many companies use business aircraft to transport personnel and priority cargo to a variety of far-flung company or customer locations, including sites overseas. Business aircraft often are used to bring customers to company facilities for factory tours, product demonstrations or sales presentations. Companies and individuals, such as salespeople and doctors, use business aircraft to cover regional territories within several hundred miles of their home bases. While the overwhelming majority of business aircraft missions are conducted on demand, some companies have scheduled operations, known as ‘shuttles.’

NBAA has listed the reasons why organisations use business aviation to meet their transportation challenges include:

Saving employee time: Efficient employee scheduling and employee time-savings are possible because business aircraft have the ability to fly on demand and non-stop between smaller airfields that usually are closer to a traveller’s destination than a major airport.

Increasing traveller productivity, safety and security en route: When travelling on business aircraft, passengers can meet, plan and work in a secure office environment, free from interruptions and distractions, which enables them to discuss proprietary information without fear of eavesdropping, industrial espionage or physical threat. Travellers can strategise before meetings and debrief afterwards or conduct meetings en route. Also, many aircraft are outfitted with advanced communications technologies – including phones, e-mail and Internet access – that enable travellers to remain in constant contact throughout their flight with colleagues on the ground. Most importantly, business aircraft are engineered and built to the highest standards and are typically flown by two-person professional crews, all of which has enabled business aviation to achieve a safety record comparable to that of the major airlines.

Reaching multiple destinations quickly and efficiently: Companies that need to reach multiple destinations in a single day use business aviation because that type of mission is nearly impossible to accomplish using any other mode of transportation.

Accessing communities with little or no airline service: Business aviation serves 10 times the number of US airports (more than 5,000) than commercial airlines (about 500). The ability to use smaller, less congested airfields located closer to one’s final destination is a vital part of the utility and flexibility of business aviation aircraft. It means companies can stay or establish plants or facilities in the growing number of small towns or rural communities with little or no commercial airline service.

Scheduling predictability: About 3 per cent of all commercial airline flights are cancelled, but nearly one quarter more are delayed. If a commercial flight cancellation or delay causes passengers to miss an airline connection, the odds of getting on the next flight are substantially reduced. Also, some companies are located in towns with very low frequencies of airline flights, leaving company employees with few or no alternatives if a flight is cancelled. These types of concerns over delays or cancelations are virtually non-existent on business aircraft.

Supporting the travel needs of many types of company employees: Surveys in the US have indicated that over 70 per cent of passengers aboard business airplanes are non-executive employees. Companies often send teams of employees to a given destination on a business aircraft because it is the most cost-effective means of transport.

Moving vital equipment: When companies need to immediately ship sensitive, critical or outsized equipment, business aviation is often the best solution.

Exercising management control over scheduling: The neartotal scheduling flexibility inherent in business aircraft – even changing itineraries en route – can be a powerful asset. Business aircraft can arrive and depart on the passengers’ schedule, typically waiting for them in the ordinary course of business. Thus, meetings can be moved up, back or extended without penalty, risk or unnecessary scheduling pressures. In today’s business environment, companies need to be nimble. Business aviation provides flexibility for companies that need to ensure employees can respond quickly to changing demands and circumstances.

Minimising non-business hours away from home: Business aircraft enable flexible scheduling and quick and easy access to meeting locations, thereby minimising time away from home and office.

Providing a return to shareholders: Studies have confirmed that companies that use business aviation to solve their transportation challenges return more to shareholders than companies in the same industry that do not utilise business aviation.

Supporting humanitarian and charity efforts: Business aviation supports people and communities in crisis by flying people with illnesses to centres for treatment, transporting blood and organs to hospitals, connecting military veterans with their families, and providing emergency relief services to victims of natural disasters.

Indeed, it is time that the powers that be looked at the various benefits mentioned and give business aviation the necessary impetus like any other industry without any discrimination.