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Business Aviation - No Plane No Gain

Issue: 06-2009

While the US battles negative public perception, now would be the most judicious time to buy a business jet. SP’s European correspondent Alan Peaford enumerates why.

Plummeting sales of private jets has virtually paralysed the world of business aviation, in particular its largest market, the US. The industry took a hammering last November when leaders of America’s automakers at a Senate hearing admitted they had flown in company business jets to appeal for a government bailout. No matter that their journey from Detroit could not have been made commercially in the same timeframe, nor could the executives have conducted highly confidential meetings or planned presentations if crammed into the economy section of an airliner. The perception of ‘corporate fat cats’ abusing their privileges has stuck in the minds of the American people, effectively bringing the growth of private jet ownership to a grinding halt.

Forever envied, business jets have suddenly developed an image problem. Everybody nevertheless wants the convenience, comfort, speed and efficiency only they can deliver. Unarguably, desire for what a business jet can bring to the working and personal life of corporate and government leadership has been the driving force behind the industry. It has fuelled record growth in sales over the past many years and pushed the boundaries of what was for long a predominantly American activity to encompass the rest of the world.

Aspiring to a business jet is a good thing. But the actions of a few mavericks in the heartland of corporate America have converted it into a much derided object of excess. This new attitude in Washington and the American media has frightened soundly managed, profitable companies who use their airplanes to extend and grow their business, but are now worried they will be put in the same category as those abusing their company assets and shareholder wealth. Business jet flying hours are way down and profitable companies are worrying about new airplanes they have on order. Even in Asia and the Middle East, the effect has been a slowdown. The global economies are down, but the impact on business aviation is much greater than the figures warrant.

Time the other side of the story is told
To combat the misperception of business jets as wasteful, the industry, led by America’s General Aviation Manufacturers Association and the National Business Aviation Association, has launched a programme titled ‘No Plane No Gain’. Initially aimed at US politicians, American media and other opinion leaders, the educational drive has spread around the globe.

Examples being cited in the US, with probably the most sophisticated aviation network in the world, apply around the globe. For instance, most Americans weren’t aware that scheduled airlines serve only about 500 airports across the whole of continental US—and that number is shrinking everyday as airlines contract their routes to cut costs and maximise efficiency. Worse, more than two-thirds of all flights operate to fewer than 30 airports. In other words, thousands of cities have no air service at all, except for general aviation.

Across the emerging economies of India, China and Africa there are far fewer airports and far fewer airlines servicing direct city-to-city routes. “Of course, it is easy if your business takes you from Mumbai to Delhi. But what if you need to visit three or four regional manufacturing centres in different cities? If you use a business jet, you can do it in one or two days. With scheduled airlines, you need to plan for a week away,” says Dubai-based business consultant Ketan Shah. When a city doesn’t have a scheduled air service, its businesses lose access to markets and suppliers. Community growth slows because it’s just that much harder to reach a town without air service.

“We think it’s time the other side of the story be told, and that support be given to those businesses with the good judgement and courage to use business aviation to not just help their businesses survive the current financial crisis, but more quickly forge a path toward an economic upturn,” said Cessna Chairman, President and CEO Jack Pelton. “Today, we are demanding business leaders and managers work at their absolute peak to turn their companies, and our economy, around,” Pelton said. “Business aviation provides the means to do just that. A business aircraft is a tool of industry, and one that should see its highest and best use during times of fiscal crisis. Anyone who has ever seen managers board a business aircraft at dawn and return well after dark, having visited multiple cities and attended countless meetings in one day, can attest to the fact that business aviation allows companies to get the most out of every minute of every day—exactly what is needed to work our way toward economic recovery.”

Pelton pointed out that the reality of business aviation is that some 85 per cent of aircraft used by businesses are used by small or medium-sized companies, and that the large majority of the passengers are middle managers and technicians. The aircraft, for the most part, are single and twin-engine propeller and turboprop aircraft or small or medium-sized jets. “The reality of business aviation is a far cry from the misconception of CEOs flying in large luxurious airplanes,” Pelton said. “Most of these aircraft are fairly spartan, designed for business, with a cabin about the size of a minivan or SUV interior.”

Hawker Beechcraft has been making the point to its government that general aviation contributes more than $150 billion (Rs 7,19,300 crore) annually to the US economy and is one of the few remaining American industries that maintains a positive balance of trade with nearly 40 per cent of the country’s total 2007 production of $12 billion (Rs 57,545 crore) worth of aircraft exported.

Now, Get an Aircraft Quicker
‘No Plane No Gain’ is also calling attention to the humanitarian and medevac missions that only general or business aviation can provide. Where would organ transplant be without a general aviation airplane to move the recovered organ within the very short time necessary for a chance of life-saving success? Abu Dhabi’s Royal Jet now has Boeing Business Jets and large Gulfstreams available as flying hospitals. “This is the great thing about a business aircraft,” said Mike Creed, the Vice President Sales of Project Phoenix, the converted Canadair regional jet specialist operating out of Dubai. “The only limiting factor is your imagination. A business jet is ideal for entrepreneurs because they can use their aircraft as tools. Charter companies are finding markets for fast conversions from executive transportation to being able to transport their urgent packages, or small corporate shuttles to move employees to remote locations.”

Even as the US hurts, opportunities to buy are mushrooming. Ray Jones, head of International Sales for Bombardier Aerospace, says there is more interest coming from India, China and the other emerging economies. “Of course, there have been cancellations and so there are aircraft on the production line that can be moved forward. This means people can get aircraft quicker. There are also deals to be done,” he says. Pete Bunce, President of the General Aviation Manufacturers Association, says business jet operators can fight back against the negative perception of business aviation, citing JP Morgan as an example. The troubled financial services giant defended its order for two Gulfstream G650s by steadfastly arguing that the jets would help it compete globally and promising not to take delivery until it had repaid federal bailout funds. The media initially latched onto the story but backed off when JP Morgan took a stand. “They did it right,” Bunce said. What this recession has done is halt the investment in research and development and, in turn, the introduction of new models to the market. First, Cessna put its super midsize Columbus on hold. This was followed weeks later by Dassault deciding its Super Midsize would also go back to the drawing board.

While sales have faltered in the US, Asia and the Middle East are continuing to buck the trend, proving this is the time to buy. Aircraft, like the super large Project Phoenix, are dropping in price from $20 million (Rs 96 crore) to $18 million (Rs 86 crore)—the value stays the same when it adds productivity to an organisation’s management.