Contrary to the general notion around business aviation industry, owning or chartering a private jet has notably been a more viable option in view of economic efficiency of the businesses
Luxury, opulence, grandeur, extravagance, money are some of the terms that come to our mind the moment we spot or think about a private business jet. Owning a business jet has always been looked at as a very wealthy person’s affair. We often assume that it’s mainly meant for only celebrities or rich businessmen who have too much money to spend. However, what if we told you that business jets could actually make better financial sense even if the ownership amounts to millions and millions of dollars? It doesn’t sound quite right, isn’t it? Let us help you understand the above statement better and give you reasons why owning a private jet is not just about having those extra pennies to spend, especially for companies.
The ownership of a private jet has often been overpowered by societal explanations rather than the economic ones. However, the advancement of globalisation has been seemingly beneficial for the private jet market as businesses are now required to travel far off places and reach out beyond their local area. Especially as more and more companies are beginning to outsource manufacturing and other operations into developing countries, which don’t necessary have much air service, many companies have determined that private jets are a better way to get where they need to go.
If, for instance, one was to charter a Gulfstream from London to Dubai, it would cost about $55,000 at rack rate. However, if you fly Emirates First Class, which is almost similarly luxurious, you could fly between the two cities roughly twenty times for the same price. It thus comes across as a bit strange when businesses that are supposed to maximise profits for their shareholders are able to justify this enormous expense as worthwhile. How it that there’s still a class of people is are okay spending tens or even hundreds of thousands of dollars on just one single flight? It could practically not be just for showing off luxury.
This is so because, for CEOs (Chief Executive Officers) and other higher executives, private jets work as risk mitigators in a way. Private travel gets preference to ensure on-time arrival at a destination, and in the best possible shape (physically as well as mentally) accompanied by comfort. Busy executives on top levels of a company cannot afford to show up late for an important meeting or to feel sluggish due to the adversities of commercial travel. For them and their company, the cost of failure largely exceeds the cost of private jet travel.
Here are some reasons why private jets are an efficient way to conduct business and hence make more sense:
As more and more companies are beginning to outsource manufacturing and other operations into developing countries, which don’t necessary have much air service, many companies have determined that private jets are a better way to get where they need to go.
For huge companies like India’s Reliance Industries also private jets aid in better productivity. For instance, to expand their business, the manufacturing units or factories tend to be located in remote areas. The lifestyle in these places is poles apart in comparison to the life that an employee might experience in a metropolitan city like Mumbai. Hence, it becomes difficult to have a senior-level employee shift base to such an extreme place and start a life there. Instead of paying him more to convince him to stay there and help him with other amenities, it makes more sense for Reliance to have a group of senior executives travel in the private jet to that location for a visit and return back in a couple of hours and continue with their regular office and stay in the metropolitan area.
Another good detailed example of this can be illustrated with Walmart. Walmart has one of the larger corporate jet fleets of about 20 corporate jets which can be surprising considering that it is a company that is so focused on keeping costs low. Walmart is headquartered in Bentonville which is a relatively small city. Most of these jets are used frequently by the company’s regional vice presidents who are responsible for a specific area of the country and need to make frequent store visits within the region. The company has almost never has anybody spend a night away from Bentonville and try to day trips to the maximum possibility.
To understand the economics of this situation better, let’s say that one of these executive vice presidents is required to take a trip to three stores—one in Wyoming; one in Washington; and the last in Montana. Getting to Rock Springs in Wyoming from Bentonville would take about seven hours through Denver and the executive would reach at about 9:30 pm, already requiring an overnight stop. Then, the next day, they would do the store visit in the morning and since there are only two flights a day from Rock Springs, they would have to wait until 4:50 pm to catch a flight back to Denver than another one to Spokane in Washington. Hence reaching time would be about 8:30 pm local time, needing another overnight stop. After the store visits the next morning, they would again have to wait according to the flight schedules and are most likely to reach Great Falls in Montana at about 10 pm local time, thereby needing another overnight stop. After the next morning’s store visit, the executive would catch a noon flight to Denver and, after a three-hour layover, another to flight to finally get into Bentonville at about 8 pm. Hence this would take up to four whole working days.
If you fly private, you can save all the hassle and time needed at the airport for check-in, securities, and other formalities. All you need to do is arrive, get on the plane, and fly rather than having to navigate your way through a busy terminal for a fixed flight time
Now, let’s look at the scenario if this executive flew private. Leaving at 9 am, the first flight to Rock Springs directly would take an hour and 45 minutes, managing to reach at 9:45 am local time. After a two-hour store visit, the plane can take off again at about 11:45 am, and get to Spokane in an hour and 15 minutes to reach at noon local time. Following another twohour store visit, the plane would take off at 2 pm for a quick 45 minute flight to Great Falls and reach at 3:45 pm local time. After a final two hours visit at this store, the plane can take off its final time at 5:45 pm for Bentonville and 2 hours and 15 minutes later, the executive can land back at 9 pm local time. What was a four day trip on commercial flights becomes a day trip on private, and that’s why Walmart decided private jets are worth it for them. It’s all about valuing the time of their employees and also enhancing productivity. Of course, it also saves the alternative cost of multiple tickets, hotel, food, and airline transport costs. This also allows the company to send multiple employees at the same cost.
Hence if proper risk analysis and planning is done by a company, private jets could actually help the company grow its business, enhance its presence in the market and expand its reach. After all, the purpose of business aviation is to benefit businesses and not just be confined as being a luxury symbol for celebrities, politicians and other eminent personalities.