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BUSINESS AND CORPORATE AVIATION MANAGEMENT On-Demand Air Transportation John J. Sheehan MCGRAW-HILL New York Chicago San Francisco Lisbon London Madrid Mexico City Milan New Delhi San Juan Seoul Singapore Sydney Toronto rM McGraw Hili Campenit's Copyright © 2003 by John J. Sheehan. All rights reserved. Manufactured in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher. 0-07-143600-6 The material in this eBook also appears in the print version of this title: 0-07-141227-1. All trademarks are trademarks of their respective owners. Rather than put a trademark symbol after every occurrence of a trademarked name, we use names in an editorial fashion only, and to the benefit of the trademark owner, with no intention of infringement of the trademark. Where such designations appear in this book, they have been printed with initial caps. McGraw-Hill eBooks are available at special quantity discounts to use as premiums and sales promotions, or for use in corporate training programs. For more information, please contact George Hoare, Special Sales, at george_hoare@mcgraw-hill.com or (212) 904-4069. TERMS OF USE This is a copyrighted work and The McGraw-Hill Companies, Inc. (“McGraw-Hill”) and its licensors reserve all rights in and to the work. Use of this work is subject to these terms. Except as permitted under the Copyright Act of 1976 and the right to store and retrieve one copy of the work, you may not decompile, disassemble, reverse engineer, reproduce, modify, create derivative works based upon, transmit, distribute, disseminate, sell, publish or sublicense the work or any part of it without McGraw-Hill’s prior consent. You may use the work for your own noncommercial and personal use; any other use of the work is strictly prohibited. Your right to use the work may be terminated if you fail to comply with these terms. THE WORK IS PROVIDED “AS IS”. McGRAW-HILL AND ITS LICENSORS MAKE NO GUARANTEES OR WARRANTIES AS TO THE ACCURACY, ADEQUACY OR COMPLETENESS OF OR RESULTS TO BE OBTAINED FROM USING THE WORK, INCLUDING ANY INFORMATION THAT CAN BE ACCESSED THROUGH THE WORK VIA HYPERLINK OR OTHERWISE, AND EXPRESSLY DISCLAIM ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. McGraw-Hill and its licensors do not warrant or guarantee that the functions contained in the work will meet your requirements or that its operation will be uninterrupted or error free. Neither McGraw-Hill nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission, regardless of cause, in the work or for any damages resulting therefrom. McGraw-Hill has no responsibility for the content of any information accessed through the work. Under no circumstances shall McGraw-Hill and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages. This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise. DOI: 10.1036/0071436006 DEDICATION To Peggy, my True Course. This page intentionally left blank. For more information about this title, click here. CONTENTS Foreword xi Acknowledgments Introduction xv xiii Chapter 1. Setting the Scene 1.1 On-Demand Air Transportation / 1.1 On-Demand Air Transportation Defined / 1.1 Personal Aviation / 1.3 Business Aviation / 1.4 The Beginnings / 1.7 Travel Is Important for Business / 1.9 The Reasons / 1.10 How Companies Use Aircraft / 1.13 Justifying Business Aviation / 1.19 Fortune 500 / 1.24 Safety / 1.25 The Future / 1.25 Aircraft / 1.27 Aircraft Characteristics / 1.27 On-Demand Aviation Methods / 1.33 Employee/Owner-Flown / 1.34 In-House Flight Department Using Owned/Leased Aircraft / 1.34 Management Company / 1.35 Joint Ownership / 1.35 Interchange / 1.35 Time Share / 1.35 Charter / 1.36 Fractional Ownership / 1.36 Choosing the Best Method / 1.37 Chapter 2. Determining the Need Air Transportation Needs / 2.1 Why Individuals and Companies Use On-Demand Air Transportation / 2.2 Defining the Requirement / 2.3 Air Transportation Analysis / 2.5 Travel History / 2.7 The Future / 2.9 Solutions / 2.11 Choosing the Method / 2.16 What Users Want in On-Demand Air Transportation / 2.16 Methods / 2.18 v Copyright © 2003 by John J. Sheehan. Click here for Terms of Use. 2.1 vi CONTENTS Running the Numbers / 2.27 Cost Components / 2.27 Evaluating the Options / 2.29 Chapter 3. Getting Started 3.1 First Things / 3.1 Aircraft Use Policy / 3.1 Chargebacks / 3.4 Oversight / 3.9 Staying Informed / 3.12 Owner/Employee-Flown Operations / 3.13 Purpose of the Business Aircraft / 3.13 Learning to Fly / 3.13 Role of the Owner/Employee-Pilot / 3.14 Acquiring the Aircraft / 3.15 Acquisition Assistance / 3.16 Insurance / 3.17 Flight Records / 3.17 Standards / 3.20 The Business of Safety / 3.21 Training / 3.21 Duty Time / 3.23 Limitations / 3.25 Maintenance / 3.25 Aircraft Charter / 3.27 Checking the Record / 3.27 Charges / 3.28 Evaluation / 3.29 Fractional Ownership / 3.30 Investigating the Service / 3.30 Managing It / 3.32 In-House Aircraft / 3.32 Finding the Right People / 3.33 Basing the Operation / 3.40 Acquiring the Aircraft / 3.41 Management Company / 3.44 The Contract / 3.44 Performance Measures/Reports / 3.46 Joint Ownership / 3.47 Other Methods / 3.48 Chapter 4. Running the Business It Really is a Business / 4.1 Organization / 4.2 Scheduling / 4.4 Personnel / 4.4 Policy / 4.5 Procedure / 4.5 Scheduling Software / 4.6 International / 4.8 Administration / 4.8 Administrative Practice / 4.8 Developing Practices / 4.9 Talking With the Folks Downtown / 4.11 4.1 CONTENTS vii Organizational Conflict / 4.11 Get Them on Your Side / 4.12 Making House Calls / 4.13 Finance and Accounting / 4.14 Taxes / 4.15 Financial Planning / 4.16 Budgets / 4.16 Building the Budget / 4.19 Capital Budgets / 4.20 Controlling/Tracking Budgets / 4.22 Budget Justification / 4.23 Personnel / 4.24 Hiring / 4.24 Motivation / 4.25 Communicating Expectations / 4.25 Performance Evaluation / 4.26 Human Resources / 4.27 Career Development / 4.28 Leadership / 4.29 Planning / 4.30 Mission Control / 4.30 The Plans / 4.31 Flight Department Performance / 4.33 Efficiency versus Effectiveness / 4.34 Ratios / 4.34 Tracking It / 4.35 Comparisons / 4.35 Presenting the Information / 4.36 Information versus Data / 4.36 Reports / 4.36 Flight Department Evaluation / 4.38 Saving Money / 4.43 Seeking a Better Way / 4.43 Optimizing / 4.44 Know Thyself / 4.44 Outside Help / 4.45 All That Glitters Is Not Gold / 4.46 The Payoff / 4.46 Image of the Department / 4.46 Advertising the Department / 4.46 Customer Orientation / 4.48 Customer Surveys / 4.49 The Tools / 4.52 Presentation / 4.52 The Sale / 4.53 The Small Flight Department / 4.53 Communications / 4.54 Support Staff / 4.55 Networking / 4.55 Think Backup / 4.56 Planning / 4.56 Chapter 5. Flight Department Management Management 101 / 5.2 The Basics / 5.2 Planning / 5.3 5.1 viii CONTENTS Execution / 5.3 Feedback / 5.4 No Shortcuts / 5.5 Theories of Management / 5.6 The Beginnings / 5.6 Behavioral Approaches / 5.6 Modern Theories / 5.7 Future Theories / 5.7 Learning It / 5.8 Management Skills / 5.9 Acquiring Skills / 5.10 The Flight Department Manager as a Business Executive / 5.11 Training the Boss / 5.15 Preparing the Next Generation / 5.16 Mentoring / 5.16 Teamwork / 5.17 Universal Mentoring / 5.18 Flight Departments in Trouble / 5.18 Normal Operations / 5.18 Warning Signs / 5.19 Bottom Line / 5.21 The Defining Moment / 5.22 Attention Getters / 5.22 Educating / 5.23 Communicating (Again!) / 5.23 It Only Takes Once / 5.24 Corporate Stages of Development / 5.24 Entrepreneurial Stage / 5.24 Growth Stage / 5.26 Consolidation Stage / 5.26 Mature Stage / 5.26 Decline, Renewal, or Acquisition / 5.27 Combinations / 5.27 Lessons Learned / 5.28 A Sense of Mission / 5.28 Standards / 5.29 Leadership / 5.29 Rapport with the Company / 5.29 Teamwork / 5.30 Chapter 6. Operations Overview / 6.1 Is This Any Way to Run an Airline? / 6.1 Accident Rates / 6.2 Compliance / 6.2 Risk versus Reward: Cautionary Tales / 6.5 Critical Elements / 6.6 Attractive Awards / 6.7 Flight Operations Manual / 6.7 Building It / 6.8 Excuses, Excuses / 6.9 Changes / 6.10 Every Situation? / 6.10 Singing from the Same Hymn Book / 6.12 International Standards / 6.13 Standards for Life / 6.13 Needing Them / 6.13 6.1 CONTENTS ix Predictability / 6.15 Development / 6.15 Procedure or Technique? / 6.16 Checking Up / 6.16 Operations / 6.17 Dispatch Control / 6.17 Setting Limits / 6.17 Flight Crew Scheduling / 6.18 Flight Crew Duty Time Limits / 6.19 How Many Pilots? / 6.20 Checklists / 6.22 The Tyranny of Automation / 6.24 Aircraft Airworthiness / 6.26 Noise / 6.26 Helicopter Operations / 6.28 Chartering Aircraft / 6.29 Knowing the Regulators / 6.30 Training / 6.31 International Operations / 6.33 Airports / 6.34 Security / 6.35 Professionalism / 6.38 Job Security / 6.38 Technical Challenge / 6.38 The Professional Approach / 6.39 Chapter 7. Maintenance Contract or In-House Maintenance / 7.1 Contract Maintenance / 7.2 In-House Maintenance / 7.4 Organization / 7.6 Small Flight Departments / 7.6 Larger Flight Departments / 7.6 Personnel / 7.7 Maintenance Operations / 7.9 Airworthiness Determination / 7.9 Maintenance Planning / 7.11 Maintenance Control / 7.11 Discrepancies / 7.12 Minimum Equipment List / 7.13 Maintenance Away From Home Base / 7.14 Aircraft Maintenance Reference Materials / 7.14 Parts Inventory and Control / 7.15 Duty Time / 7.16 Quality Control / 7.16 Maintenance Manual / 7.20 Aircraft Handling / 7.21 Security / 7.21 Evaluating Maintenance Performance / 7.21 Recordkeeping / 7.22 Regulations to Comply With / 7.23 Computerized Record Tracking Systems / 7.24 Training / 7.26 Maintenance Resource Management / 7.27 Passenger Handling / 7.27 Safety / 7.28 Safe Hangars for All / 7.29 Solo Technicians / 7.31 7.1 x CONTENTS Upstairs, Downstairs / 7.32 Know the Regulators / 7.33 Selling Maintenance / 7.34 Chapter 8. Safety 8.1 Safety Programs / 8.1 Crafting the Safety Function / 8.1 Model Safety Program / 8.5 Building In Safety / 8.9 Passenger Safety / 8.13 Accident/Incident Planning / 8.16 The Plan / 8.16 Elements of the Plan / 8.17 Implement It / 8.20 Chapter 9. Putting It All Together 9.1 Institutional Flight Departments / 9.1 Most Admired / 9.1 Profit and Loss / 9.3 The Excellent Flight Department / 9.4 Ways and Means / 9.5 Attainment / 9.6 Safety, Service, Value / 9.7 Safety First, Last, Always / 9.7 Service with a Smile / 9.8 Good Value Creates Job Security / 9.8 Hierarchies / 9.9 When in Doubt / 9.9 Appendix A. Business Aviation Background A.1 Appendix B. Air Transportation Requirements B.1 Appendix C. Owner Flown Procedures C.1 Appendix D. Budget Justification D.1 Appendix E. Employee Jobs and Performance E.1 Glossary G.1 Index I.1 About the Author I.10 FOREWORD Transportation is a necessary component of economic growth and improved quality of life. In Biblical times, King Solomon’s power was tied to his system of roads that enabled the peoples of his domain to be effective traders. Nations with the most capable sailing fleets dominated European trade in the centuries before trains and planes. The first U.S. president, George Washington, urged his newly formed Congress to build roads and canals, for to do so would reap rewards. President Lincoln pledged if elected in 1860 to complete the transcontinental railroad to bind the nation and advance commerce. In the mid-twentieth century, President Eisenhower championed legislation that resulted in the interstate highway system, which proved to facilitate significant advances in the nation’s economy and the well being of its citizens. Today, aviation is the principal form of transportation for business. No other means of communication supports the fast pace of commerce. Fax machines, cell phones, videoconferencing, and all the marvels of the communications revolution have not negated the need to travel. Rather, they have simply quickened the pace of business and necessitated the need to be face-to-face with a company’s customers and enterprise partners before someone from the competition gets there first. Think about your own business life. Has your cell phone caused you to slow down or travel less? Has your fax machine taken the place of a visit to a customer or potential customer? Are you comfortable building a bond of trust using the Internet? Do you want to launch your development plans using the telephone or e-mail? Nothing takes the place of face-to-face in keeping clients and growing your business. While there is universal acceptance that transportation is a necessity for economic development, many business leaders think only of scheduled airlines as a means of satisfying their travel needs. They have yet to understand and use a particularly advantageous form of travel known as business aviation. Scheduled airlines provide safe, secure, and frequent connections between major cities throughout the world, albeit lacking the flexibility to serve many less populated cities and ill structured to provide time-efficient travel itineraries involving multiple stops. Limited by the strictures of their self-imposed hub and spoke system, scheduled airlines provide frequent and timely service to about 10 percent of the 429 commercial airports that have scheduled operations by air carriers. In fact, nearly three-quarters of all airline passenger enplanements occur at fewer than 50 locations. Business aviation, the use of general aviation aircraft for business transportation, provides safe and secure access to about 5000 locations within the United States and many more internationally. With the ability to transport employees in a timely fashion, unencumbered by limited airline service and inefficient schedules, companies are able to enhance the productivity of a firm’s two most important assets—people and time. Increasingly, business leaders and planners are looking to business aviation as an effective tool for enhanced productivity and growth. No longer misunderstood or maligned by the specter of an uninformed press, business aviation has emerged as an important travel resource that should be part of a company’s travel equation. Over 10,000 U.S. companies own business aircraft, and about 90 percent of the public companies that return the highest xi Copyright © 2003 by John J. Sheehan. Click here for Terms of Use. xii FOREWORD dividends and capital gains to shareholders employ some form of business aviation. Worldwide, nearly 14,000 companies own company aircraft. Knowledgeable travel specialists, however, suggest that the number of companies that could employ some form of business aviation advantageously exceeds 100,000. Business aviation complements rather than competes with scheduled airlines. Members of the National Business Aviation Association (NBAA) are the most active users of business aviation in the world, yet they purchase over $10 billion in airline tickets annually. Companies need to travel, and the most enlightened firms use the airlines when it is most efficient to do so and employ business aviation when that form of transportation is most productive. Thus, understanding business aviation and determining how it can be applied profitably to serve a company’s travel needs is a challenging yet beneficial management task. Also, business aviation comes in several forms, ranging from chartering an aircraft for occasional use, through owning a fractional share of an aircraft managed by a fractional ownership provider, to full ownership by a company and the establishment of a corporate flight department. The enlightened user has access to all aspects of business aviation, selecting the form that best satisfies the company’s varying needs. Thus the company with an established in-house flight department also should know when and how to select supplemental lift using charter, for example. The availability of business aviation options reflects the sophistication of this form of business transportation. Business and Corporate Aviation Management by John Sheehan is a most appropriate and authoritative reference for the company or individual seeking a full understanding of business aviation and its capabilities. Authored by an aviator, educator, and lecturer with 40 years of relevant experience, this handbook encompasses John Sheehan’s considerable knowledge of the business aviation community gleaned from years of consulting with the world’s safest and most successful flight departments. In his role as a safety auditor over the past 20 years, John has earned the respect of business aviation’s leading practitioners. He has prepared and presented seminars on flight department management for the NBAA for more than a dozen years and is scheduled for continuing activity for NBAA members in the areas of business aviation operations. Good management concepts and techniques are essential to capitalizing on the benefits of business transportation. I recommend Business and Corporate Aviation Management by John Sheehan for seasoned flight department managers as well as for company travel department personnel who are exploring how business aviation can benefit their company. This handbook also should be required reading for students seeking to grasp the breadth of transportation capabilities inherent in business aviation. Furthermore, John Sheehan covers the elements of business aviation as a transportation resource in a comprehensive and insightful manner that adds to the handbook’s value. John W. Olcott President National Business Aviation Association November 2002 ACKNOWLEDGMENTS The following people made material contributions to this book through their ideas, experience, and encouragement: Roger Phaneuf, of PAI; Jack Olcott, David Almy, Bob Blouin, and Greg Jackson, of NBAA; Jim Cannon, Rich Messina, Steve Nielsen, Jim West, Len Beauchemin, Pat Cunningham, and Steve Hawkes, flight department managers par excellence; Walter Kraujalis, Bloomer DeVere, and Mark Twombly, of WestWord; Frank Hofmann, of IAOPA; Dennis Wright, of FlightTime; Steve Quilty, of BGSU; and Shelley Carr, of McGraw-Hill. In a larger sense, all my clients and workshop participants through the years actually wrote this book; I just recorded their experiences and observations. A special thanks to my wife, Peggy, without whose ideas, encouragement, editing, and moral support, this book would never have seen the light of day. xiii Copyright © 2003 by John J. Sheehan. Click here for Terms of Use. This page intentionally left blank. INTRODUCTION WHY THIS BOOK WAS WRITTEN This book was written as a consequence of 13 years spent helping individuals and companies to choose the types of aircraft they needed to fulfill their on-demand air transportation needs and to evaluate their flight departments. Certain central themes and patterns of success in business aviation operations have emerged over the years, ideas that I felt should be shared with those desiring to engage in on-demand air transportation. Finding the Right Aircraft and Method of Delivery The advantages of having one’s own aircraft are evident—creating your own travel scheduled, time saved, security, and the ability to go many places that the airlines cannot are all compelling reasons to use on-demand air transportation. Yet few people are sufficiently familiar with the breadth and detail of this form of aviation to choose efficiently among the options available. Deciding to use on-demand air transportation consists of two tasks: selecting an aircraft and the method of delivering the service. Choosing the aircraft is not as simple as buying an automobile; there are many different types of aircraft, each incorporating a variety of features not apparent or well appreciated by the novice buyer. Seating capacity, runway performance, range versus payload tradeoffs, and interior appointments and amenities all make a difference in how the service is delivered. The days of the boss asking the board of directors for $30 million to buy a Gulfstream aircraft without justification are a fond memory in most companies; the board and the boss want to know what they are getting for their money and what the downstream consequences of their purchase are. Likewise, an individual selecting an aircraft and delivery method is faced with a wide variety of choices and combinations much too complex to absorb at a single inquiry. The common issue left out of the aircraft acquisition equation is, “What are my/our on-demand air transportation needs?” Many acquisitions are made on the recommendation of a trusted acquaintance, senior corporate officer, or aircraft broker, none of whom have a good idea of your total transportation needs or those of the company or what value the aircraft will bring to the equation. An air transportation analysis must be done to determine the types and number of aircraft needed and how the service should be delivered. While thousands of individuals and companies own and operate aircraft worldwide, other options exist: charter, aircraft management companies, fractional ownership, joint ownership, and combinations of these. Service levels and both capital and operating costs vary widely depending on the type of transportation delivery method chosen. Unfortunately, many of these essential points are lost in the rush to acquire an aircraft or sign up for a fractional share. xv Copyright © 2003 by John J. Sheehan. Click here for Terms of Use. xvi INTRODUCTION The first three chapters of this book address these important issues, attempting to provide insights that will be useful in creating a substantial understanding of how people and companies use their aircraft and decide how the service is to be delivered. Operating the Flight Department Running a flight department effectively and efficiently seems to be easy for some but difficult for others. My evaluations originally consisted of examining flight departments for compliance with Federal Aviation Administration (FAA) regulations and the operator’s policies to ensure that they were safe. While this was a major responsibility (and the principal factor in causing the evaluation to take place), my work increasingly looked at the business side of the operation. Management, business skills, handling people, administration, reports, planning—all the elements necessary for the effective operation of a flight department became increasingly important in my evaluations. Not that the safety and compliance aspects were any less important, but it soon become evident that there were some clear distinctions between the good and the not-so-good departments I visited. The single element that made the difference between the two types of departments boiled down to management. The desire to take the department's operations beyond tomorrow's flight schedule and the ability to systemize processes, to create control mechanisms, and to handle people well—all these elements of management became evident either by their presence or absence shortly after my arrival at the departments. At first, it seemed so simple—to detect the differences, catalog them, prescribe remedies, and rapidly leave town. However, it slowly came to me that many of the people with whom I left my remedies did not understand the management process. They had never been trained, never been expected to create order out of a complex operation, did not appreciate the value of control and feedback, and never worked in a corporate environment. Many of the flight department managers, chief pilots, and directors of maintenance were winging it! These people were fish out water, out of their natural environment. These good people were used to thinking in terms of flight plans, weather forecasts, air traffic control clearances, maintenance inspection schedules, life-limited parts, and recordkeeping—not budgets, reports, human resources, and long-range plans. With very few exceptions, these people were bright, well-motivated, sincere people; I knew they could be helped. How best to help them? Some had had elementary management training at a point in their past, some had business degrees, and some had no training at all. There was little common ground from which to start. Thus I fell on the idea of writing a book that would link the theoretical tenets of management with the practical needs of dayto-day flight department operations. Over the past 11 years, I helped to develop and present workshops for the National Business Aviation Association (NBAA) on developing flight department maintenance and operations manuals and managing small flight departments. These workshops provided me with a wealth of information as a consequence of facilitating thousands of participant interactions about how flight departments should and should not be operated. The result of my observations and interactions, which you hold, represents my learning experiences from working closely with people in hundreds of aviation organizations over the past 13 years. This is a composite of large and small aviation organizations, low and high usage operations, companies with large jet transports and those with a single pistonpowered twin, and one-person departments and those with more than 100 people. I have attempted to draw on the best practices from each segment of the aviation community, but in doing so, I must issue a note of caution: There is no single right way to make any orga- INTRODUCTION xvii nization work effectively and efficiently. Rather, there are as many ways as the human imagination and creativity can conjure; there are literally thousands of right ways. Flight department management must constantly evaluate the organizational culture, economic environment, personnel assigned, mission, and resources to adapt their operations to meet user needs. It is this ability to adapt, to reorient, and to intelligently change the organization and its procedures that makes the difference between the good and not-sogood departments. However, adherence to core value systems and cultural norms is necessary to provide substance and integrity to any organization. Therefore, it is the balance between maintaining values and adjusting to the demands of the environment that can mean the difference between success or failure. THE AUDIENCE This book was written with two basic types of people in mind: Individuals seeking information about how to get into the on-demand air transportation business, whether for business or personal reasons ❷ Flight department managers, their bosses, and those who would become flight department managers ❷ While all these types of people are closely related, they are not necessarily close in outlook, immediate and long-term needs, or background. Yet they all need varying amounts of practical, real-world information to do their job; this is the factor that links them in their common quest for providing safe, reliable, and efficient on-demand air transportation. Individuals Whether visiting grandchildren, traveling to a vacation home, or talking with an advisor, individuals have found that going via aircraft and their own scheduled makes life simpler and enjoyable. The aircraft may work out to be a modest single-engine piston-powered four-seater or a medium-sized turbojet, yet selecting and operating the aircraft sometimes can be a confusing and lengthy task. Where does one begin to understand both the aircraft options and the methods of delivery? And once the decision is made, how is the service to be managed? Similarly, those who work with and advise individuals must understand these features if they are to properly assist their clients and friends. Business Executives The harried entrepreneur, chief executive officer (CEO), and senior manager are all victims of the same deficiency: not enough time. This is usually coupled with the need to visit with customers, deal makers, and company personnel who will make a difference for their future. They slowly come to realize that they must make more time for themselves. Doing so can be difficult, but if they travel frequently, cutting down on their travel time will enable them to get out and back more quickly, spend fewer days (and nights) on the road, and be more productive enroute. All these features are the reasons why businesspeople choose on-demand air transportation. xviii INTRODUCTION The chairman, CEO, and senior staff are prime candidates for this book, but others within the company will benefit as well. Foremost is the staffer charged with either seeking the right answers to the air transportation questions or attempting to justify the decision made regarding an aircraft type or delivery method made somewhere above his or her level. Such a staffer probably has not thought of all the potential uses of the service nor of the different means of providing it. In doing so, he or she will feel much better about his or her choice and confident about implementing it. Human resources, finance and accounting, risk management, planning, and legal personnel also need to understand why the company either has an aircraft or will soon get one. Theirs is a need to justify or comprehend the process but, more important, to assist the flight operation in succeeding in its mission. By understanding the operation and needs of the flight department, they can become partners in its success. Finally, for middle managers or salespeople who are desperately attempting to satisfy their pressing travel needs, this book will provide ideas about how to get management’s attention and justify their own on-demand air transportation needs. Business aircraft are not just for the few executives at the top of the company, they are business tools that should be used where they make the most sense. Flight Department Managers Flight department managers, including the department manager, chief pilot, head scheduler, director of maintenance, and chief inspector, are the front-line, buck-stops-here people who must produce reliable, safe, and on-time on-demand air transportation. Yet their one- or two-aircraft airline does not have the depth of personnel or virtually any other resource an airline has. They must keep a number of balls in the air constantly; they are master jugglers, with few assistants to relieve them of their many tasks. Before we become overwhelmed with pity for these poor souls, it is well to realize that they also have some of the most rewarding jobs in aviation. They are highly autonomous, operating in a location remote from the corridors of power and often with a financial independence that is the envy of their peers within the company. In the great majority of cases, they are “aviation junkies,” having risen through the ranks of pilot, scheduler, or aviation maintenance technician; they love airplanes and get paid to work with them. What could be better? This question takes on a new relevance when the CEO is waiting for a mechanical problem to be fixed on the only available aircraft, or the budget proposal is 20 percent over what the boss wants, or word just arrived that the Gulfstream’s left engine melted down and it is in Melbourne (Australia, not Florida)! As the old adage goes, this is why they pay the manager the big bucks. With privilege comes responsibility. With responsibility comes the need to organize, plan, foresee events, and grasp the big picture of where the organization should be in 1, 3, or 5 years. The pilot or technician fresh from the ranks, testing the heady mantle of boss, manager, or leader, may not have had the opportunity to practice the types of skills necessary to assume the responsibilities that accompany the title. He or she rapidly learns that the skills needed to run the show are considerably different from those required of one of the performers. The Boss This is person to whom the flight department manager reports either in a company or in private operation. This is the person to whom the CEO or principal casually assigned INTRODUCTION xix management and oversight of the aviation department, not appreciating that this person’s total aviation experience comes from enjoying the perquisites of the first class section of an airliner. In a significant number of cases, the addition of the aviation department to this manager’s already impressive list of tasks was not something for which he or she would have volunteered. These people are typically an executive vice president, senior vice president of administration, vice president of finance, or director of facilities. As far as they are concerned, taking on the aviation department is like assuming the job of elephant master at the circus; airplanes, pilots, and mechanics are strange and sometimes messy animals. However, the fact that they have been put in charge brings pressure to bear—how can they manage it if they do not understand it? Certainly, they must accept the word of their subordinates within the flight department, but this sort of trust only goes so far when the safety of lives and a $2 million annual budget are involved. What are they to do? The advice of getting smart fast about corporate aviation may be good but largely unattainable for most. The new reporting senior can talk to peers in other companies, talk to his or her friends on the golf course, read everything he or she can lay hands on, or hire a consultant. If only there were a single source of information about everything that goes on out at the airport. This book obviously does not have all the answers, but it will provide a sturdy foundation. Would-be Managers An axiom in the airline business states that if you take the most senior line captain and make him or her the chief pilot, you lose the best pilot and gain a lousy manager. This presumes that the captain never had any management training or experience—a reasonable assumption, given the normal career progression of a professional pilot. The same situation is probably not true for an aviation maintenance technician, since there is a logical progression of positions within the maintenance world that requires supervisory and management skills. All this spawns close parallels within the corporate flight department business. The existing flight department manager may receive a better offer, finally decides to retire, or cannot pass the aviation medical exam—this sets the stage for the senior pilot or technician to succeed to the throne. The call comes from the company reporting senior for a meeting, the offer is made and accepted, and yesterday's happy-go-lucky pilot or technician has just landed in the fire. It is likely, too, that this new-found manager has not been privy to the inner workings and hidden mechanisms that make the flight department run. In essence, this person’s new boss has unceremoniously thrown him or her into the deep end and told him or her to start swimming. The old adage that the best time to know an emergency procedure and the worst time to learn it is in an emergency applies here. If the fresh-caught manager has been preparing for this eventuality for more than a few months, he or she has a head start. With no preparation, the new kid on the block is at a real disadvantage. This book was not specifically designed as a cookbook to be used in the heat of the kitchen, but it will enable the new manager to keep the departmental potatoes from burning while the peas and chicken are tended to. Finally, the student who is taking a course in aviation management will gain valuable insights regarding the real world of business aviation by reading the book. Note that I said reading, not studying; this material may enhance and bring reality to a more basic text. Therefore, this book should be considered supplementary reading and not a primary text, since I do not cover all the basic elements associated with planning, finance, personnel management, and the like. With luck, I may convince someone starting in an aviation career to gravitate toward business aviation instead of an alternative. xx INTRODUCTION Satisfying the Needs Each of these people has a significant need to know how a flight department should be run and the tools required to make that happen. Much of what they use to accomplish this task comes from prior experience in aviation or outside it. In most cases, this experience is neither appropriate nor fitting to the job at hand. Thus this book attempts to describe a range of flight department operations and present alternative management methods that will enable the preceding classes of individuals to cope and perhaps thrive. However, this book alone will not solve all the needs or problems of those interested in business aviation and how it operates; this is just a beginning, a guide, a starting point for those would manage. It takes curiosity, tenacity, sensitivity, resoluteness, and vision—a wide range of characteristics and traits that mark both leader and manager. These are the skills that draw primarily from life experience, character, and values. The principal characteristic that makes it all work is the individual's will to manage or motivation to do the job; without these, this book is of little value. THE BOOK This book was written to be a practical guide for those who would undertake to manage an on-demand aviation operation, large or small. While the book contains some theory, the majority of its contents are very practical, based on a variety of observations and insights gained from my work with on-demand flight operations. Experiences gained from working with airlines, repair stations, and air taxi operations are used liberally throughout as well. I realize that there are many different ways to operate a flight department, some of which may be better or more appropriate to a specific situation than a suggestion made within this book. However, it is my intent to provide the uninitiated and those seeking solutions to problems with a starting point for many of the common situations faced by companies and individual operators. Some of the more significant situations described herein contain several alternatives in an attempt to provide flexibility and options, but many offer just a starting point. While the book may be read cover to cover as a conventional text, the real value should come from its use as a reference. Regardless of how the book is used, however, Chapters 4, “Running the Business,” and 5, “Flight Department Management,” should be read by all. These chapters serve as starting points for the neophyte and as a refresher for the old hand. Some sections of this book are more detailed than others, recognizing the fact that some aspects of the manager's job have proved to be either more important or more interesting to managers. Sections as diverse as small flight departments, budgets, safety, working with people in the parent company, and marketing the flight department have been chosen for special, extended treatment. Choosing these aspects of running the flight department over others was difficult, but it is these subjects that have given flight department managers the most trouble or provided the greatest advantages. The Index should lead readers to the desired topic, if not the general subject area. Readers are encouraged to seek answers to questions in several different topic areas rather than just a single one. The Glossary is designed primarily for those not experienced in aviation issues, attempting to give them a head start in the arcane and voluminous jargon endemic to the world of aviation. For those wishing to cut to the chase, to get to the real answers of how to run a flight department successfully, see Chapter 9, “Putting It All Together.” There I try to sum up the superior performance and wisdom I have witnessed over the years to portray the best methods of serving your company and ensuing flight department survival. INTRODUCTION xxi The Chapters Chapter 1, “Setting the Scene,” provides a background to on-demand air transportation, relating reasons for its existence, its definitions and characteristics, and a means for justifying it. An attempt is made to predict the future of the genre, done with more enthusiasm than precision. Each method of delivering this service—employee/owner-flown, in-house flight department, charter, fractional ownership, etc—is further defined and explored to provide a brief idea of how each one works and might be used to satisfy a company’s air transportation needs. The big issue of determining the shape and size of the air transportation need is discussed in Chapter 2. The air transportation analysis process, evaluating the options for service delivery and evaluating the costs of the venture, is examined. Most important, advice on how to select from among the alternatives is presented in a straightforward manner. “Getting Started” is the title of Chapter 3, showing in brief form how to begin one of the several types of aviation operations. Emphasis and detail are given to owner-flown and inhouse methods, since these are the most common types of operations. Practical advice on finding the right people, setting up a schedule method, and arranging for maintenance is provided. Chapter 4, “Running the Business,” examines the planning, administrative, human resources, and financial details of operating a flight department. A special section is devoted to the small flight department, those operating two or fewer aircraft. This is the most common form of flight department and the type with the greatest burden because of their many tasks and few people available to complete them. “Management 101” may be a better title for Chapter 5, “Flight Department Management.” This covers the background and elements of the practice of management, attempting to show how they can best be used in the context of running a flight department. The chapter examines the flight department manager as a business executive, putting this person into the larger corporate frame of reference. How the flight operations details of the department work is the subject of Chapter 6, “Operations.” It is in this chapter that the details of the flight department are explored: scheduling, standard operating procedures, security, training, and safety. Particular emphasis is placed on the subject of standards and limits to be used in a flight department. “Maintenance,” Chapter 7, is a short but meaty chapter. While much of the glamour associated with flying goes to the operations end of the hangar, maintenance is what really makes it go. The somewhat obscure but essential issues regarding maintenance are covered to provide perspective for technician, pilot, and nonaviation manager alike. Safety is given special treatment in a chapter of its own, Chapter 8. The enviable safety record of business aviation does not happen by accident; dedicated staff and a conscious adherence to safe operating procedures make it happen. The chapter provides a number of insights and sampled safety programs to use. Chapter 9, “Putting It All Together,” attempts to take all the information imparted in the previous chapters and put it into perspective, attempting to achieve the maximum utility from the more detailed sections of the book. Skim this chapter first, since it contains many of the valuable insights my clients have taught me. Finally, a Glossary and Appendix provide useful reference sections. And then, for research, the Index permits fast access to the variety of information provided in the body of this book. No one book can possibly contain sufficient material to cover a subject it in its entirety. This book is no exception, primarily because of the great diversity of operations represented within on-demand aviation. However, this book also contains references that will lead readers to a variety of other, more comprehensive material on the subject. Again, no one work can be truly comprehensive; this is just a beginning. xxii INTRODUCTION Being of a mindset that I should continue to improve my work until I get it right, I would sincerely appreciate reader comments about this book. I would especially be grateful for comments concerning the mix of information and appropriateness of material included for all types of flight departments. You can reach me through the publisher—the second edition will be better because of your comments. John J. Sheehan Wilmington, North Carolina November 2002 CHAPTER 1 SETTING THE SCENE Four years ago we had four plants and today we have eleven and the only way we have been able to expand our company and to get these locations has been in our own aircraft. —CORPORATE CEO ON-DEMAND AIR TRANSPORTATION Within all forms of transportation there are two basic divisions, scheduled and nonscheduled. Scheduled is self-explanatory and well understood. Airlines, railroads, buses, and ferry boats operate according to set schedules. Nonscheduled requires further explanation; the term expresses a sense of randomness or irregularity, concepts not useful when attempting to define the process. However, on-demand transportation is a more descriptive term, signifying that the transportation should be available when requested or needed. Therefore, the purpose of this book is to describe the various types of on-demand air transportation and to tell readers how they can best choose and use the methods comprising it. Many different people use on-demand air transportation: Individuals, corporate executives, technical troubleshooters, sports teams, entrepreneurs, and families all benefit from the advantages brought by this form of flying. The object for all is to travel to some distant point as safely and comfortably as possible. Some wish to do so in high style, others more economically; some rapidly, others at a more leisurely pace; some doing the flying themselves, others leaving those tasks to professional flight crews. However, all do so because they want to create and maintain their own schedule and control their lives more fully. This book will examine this form of aviation from two basic perspectives: personal and business aviation. This distinction is made because of the fundamentally different motivation for each, one to serve a personal lifestyle and one to create efficiency in the workplace. On-Demand Air Transportation Defined The International Civil Aviation Organization (ICAO) states that all civil aviation operations are divided into three categories: commercial air transportation, general aviation, and aerial work. They are defined as follows: ● ● ● Commercial air transport. An aircraft operation involving the transport of passengers, cargo, or mail for remuneration or hire. Aerial work. An aircraft operation in which an aircraft is used for specialized services such as agriculture, construction, photography, surveying, observation and patrol, search and rescue, or aerial advertisement. General aviation. An aircraft operation other than a commercial air transport operation or an aerial work operation. 1.1 Copyright © 2003 by John J. Sheehan. Click here for Terms of Use. 1.2 CHAPTER ONE For the purposes of this book, we will consider only the first and last types, since they both provide on-demand air transportation, with the fundamental difference being whether the operation is conducted for compensation or for hire (Fig. 1.1). On-Demand Air Transportation—The transportation of passengers and cargo by aircraft from one point to another in a manner and at a time designated by the person exercising operational control. Personal aviation may be provided by the owner-operator’s own aircraft or by a commercial venture supplying air transportation on demand. Therefore, personal aviation may be a subset of either commercial or general aviation. Civil Aviation Aerial Work General Aviation Commercial Air Transport Scheduled Recreation Nonscheduled Personal Personal Business Business Cargo Employee Flown Corporate FIGURE 1.1 Civil aviation elements. O n D e m a n d SETTING THE SCENE 1.3 Business aviation covers all types of aircraft operations flown in pursuit of business matters. Within this broad classification are employee-flown and corporate operations. Employee-flown operations are predominately owner-flown aircraft, yet these flights may be piloted by any employee, carrying other employees or customers. The key factors involved in employee-flown operations are that the aircraft is operated by a company using a pilot or pilots not specifically employed or compensated to fly the company aircraft. Corporate aircraft operations are distinct from employee-flown operations in that they are operated by a company for its business purposes, using professional pilots (normally two) compensated specifically for their piloting duties. The National Business Aviation Association (NBAA) defines corporate aviation as “aircraft owned or leased and operated by a corporation or business firm for the transportation of personnel or cargo in furtherance of the corporation’s or firm’s business and which are flown by professional pilots receiving a direct salary or compensation for piloting.” Note that in either employee-flown or corporate methods, the aircraft does not necessarily have to be owned or leased by the company; it can be rented or even borrowed (some restrictions apply to these operations, however). Aircraft charter and fractional ownership also may be used to satisfy business requirements for on-demand air transportation. Personal Aviation The best means of explaining this segment of air transportation may be via an analogy. Both buses and automobiles are available to people wishing to travel, yet the automobile dominates our ground transportation for obvious reasons: comfort, convenience, and schedule. The automobile provides ground-based on-demand transportation to individuals and groups willing to pay for the service. This is preferred to public transportation for the reasons listed. Perhaps the most important reason for our preference for the automobile is that we wish to create our own schedule and change it at will. Buses (and airliners) seldom permit us this luxury. There are approximately 350,000 general aviation and aerial work aircraft worldwide, of which an estimated 150,000 are used at least in part for personal transportation. Perhaps one-third of these are used for true on-demand purposes, possessing the ability to fly in weather and to carry two or more passengers. Therefore, personal air transportation constitutes a significant worldwide activity, complementing other forms of transportation that support the needs of individuals. Whether it be a family seeking the fastest and most hasslefree transportation to the ski slopes, an individual flying to a mountain retreat, or a person seeking the best shopping venue in a major city, personal aviation has come of age. These are just a few of the reasons individuals, families, and friends use aircraft. Some people use an aircraft for recreational, sightseeing, or sport purposes, but these do not constitute on-demand air transportation because transportation, i.e., flying people or things from point A to point B. Personal air transportation uses a wide range of aircraft, from small, four-seat, singleengine, piston-powered aircraft to large, multiengine turbojets carrying scores of people over intercontinental distances. However, in this book I will concentrate on three broad classes of personal air transportation: owner-flown operations, those provided by a company as a service, and in-house flight departments using professional flight crews. Personal and business aviation are separated by a single factor: purpose. The organization, regulations, and mechanics of the two operations are essentially the same; only the motivation for the on-demand air transportation services is different. At the lower end of aircraft types used, single-engine aircraft capable of carrying more than two passengers during instrument meteorological conditions (IMC), personal aviation generates an estimated 80 percent 1.4 CHAPTER ONE of usage worldwide; at the upper end of the spectrum, turbine-powered aircraft are used an estimated 90 percent of the time for business purposes. Yet both types are organized, regulated, and operated in a similar fashion—the principles are the same. Therefore, within this book, business aviation will be used as the predominant example because it often requires the highest level of organization and standards, therefore making it the form more inclusive of the factors to be considered in many aspects of ondemand air transportation. Where differences exist, they will be discussed. Our aircraft has enabled my family to be together more frequently and to more fully enjoy those times. —AIRCRAFT OWNER Business Aviation In an average year, hundreds of millions of people travel for business purposes worldwide. This is done in an effort to establish firm connections between businesses, to communicate ideas, to act on opportunities, and to establish a face-to-face connection. While many interbusiness communications can be made by telephone, e-mail, fax, and mail, the deals are made, the problems solved, and new frontiers forged by people meeting in person. Twenty years ago, technology mavens were forecasting a dramatic decrease in business travel due to the advent of cell phones, the Internet, and teleconferencing. Their theory stated that face-to-face meetings were no longer necessary due to the superlative new communications devices; teleconferencing was the next best thing to being there. While these new communications devices did relieve the more routine travel needs, a strange thing happened: Both teleconferencing and business travel increased. Productivity gains provided by communications technology generated the opportunity for more business, which, in turn, generated more business travel. The two connectivity methods worked together to help the productivity of such countries as the United States, Germany, and Japan become the highest in the world. The need to be face-to-face in the business world never seems to decrease, only increase. New and important deals are made in person, seldom over the phone or Internet. Customers are cultivated, pampered, listened to, and helped in-person, and new product and services are introduced in-person; business travel is a long-term growth industry. However, there are other means of getting business travelers to their destinations via air. Most business travel, perhaps two-thirds, is accomplished via the airlines. Every year the world’s airlines carry an average of 1 billion passengers domestically and 550 million passengers internationally, with roughly one-third of these people traveling for business purposes. The airlines serve thousands of airports, providing frequent, safe, and fairly reliable service to the world’s business travelers, yet there are alternatives. With frequent airline service available to the far corners of the earth, why do we need other aircraft to transport a few people to many of the same destinations? Isn’t this much more expensive that the airlines? And how safe is it? These are just a few of the questions asked by both the curious and the critical when considering business aviation. As this book is being written in 2002, more than 13,000 operators fly in excess of 21,000 turbine (turbojet and turboprop) aircraft worldwide in support of business (Table 1.1 and Figs. 1.2 and 1.3). Three-quarters of the operators and aircraft are located in North America. In the United States, each of the approximately 14,000 turbine aircraft flew an average of 450 hours, transporting an estimated 18 million business travelers in 2001.1 Interestingly, four-fifths of U.S. business flight operations have just one aircraft (Fig. 1.4). 1.5 SETTING THE SCENE TABLE 1.1 Business Aircraft by Country, 2001 United States Brazil Canada Mexico France Germany Venezuela United Kingdom South Africa Argentina Australia 14,079 667 656 540 431 378 288 283 247 216 213 Source: International Business Aviation Council (IBAC). 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 North America FIGURE 1.2 Europe South America Aircraft Operators Other Turbine-powered business aircraft distribution. (NBAA.) Of the Fortune 500 companies, only 29 percent choose not to operate at least one corporate aircraft. The productivity, net income, and sales of companies operating corporate aircraft dramatically exceed those of comparable nonaircraft operators. These companies use their aircraft as productivity tools, as a means of controlling their busy travel schedules, and as a convenience for their executives who need to pack every ounce of productive work into each day. In essence, the aircraft becomes a time machine, a modern magic carpet to safely and rapidly transport executives to the next business opportunity. On-demand air transportation has become a part of corporate culture and promises to be a fixture in the business world for the foreseeable future. It did not take long for companies to discover that having an aircraft of one’s own created advantages that the competition did 1.6 CHAPTER ONE 25,000 Aircraft 20,000 15,000 10,000 5,000 0 1980 2001 USA FIGURE 1.3 International Total Business aviation turbine-powered aircraft. (NBAA.) Three 5% Four + 5% Two 13% One 77% FIGURE 1.4 Average aircraft per company. (NBAA.) not have. The time savings, flexibility, efficiency, privacy, and security that corporate aviation offered were convincing enough to justify aircraft devoted to a company’s exclusive use. However, softer, more intangible benefits accrued to its use too. Increased time at home, the ability to reach even the most remote locations directly, comfort, and fewer airport hassles became sufficient reasons for most to gravitate toward this type of transportation. SETTING THE SCENE 1.7 The real clincher, the reason that keeps the board of directors and stockholders happy, is the ability of corporate on-demand air transportation to increase productivity for its executives. The corporate aircraft becomes a time multiplier, offering convenient access to as many as 5000 airports in the United States (compared with just 500 that airlines serve) with turbojet speed and an ease not possible on the airlines. It makes little sense to consume 2 days in getting star corporate performers to and from a remote location when the corporate aircraft can get them there, provide a half-day on site for business, and have them home for dinner, all in the same day. It is this measurable productivity multiplier effect that keeps selling corporate aviation every day. Even the accounting department realizes that business flying makes sense. Studies show that companies using their own aircraft have better sales growth, earnings per share, longterm return to investors, and productivity (sales per employee) than companies that do not use business aircraft. The evidence is compelling: Business aircraft are good for the bottom line. The airlines continue to drive executives to corporate aviation in increasing numbers. As scheduled air transportation is forced to restrict and segment its schedules and routes to be more competitive, as airlines overbook and bump passengers in increasing numbers, and as airline terminals become more unmanageable, corporate aviation can only increase in importance; the airlines may be the best reason for using corporate aircraft. As the global village increasingly becomes a nation’s marketplace, the use of corporate aircraft will facilitate this transition. Intercontinental corporate aviation has been a reality for some years and increasingly will serve our interests abroad. Corporate turbojets having nonstop New York to Tokyo and Los Angeles to Paris range are a reality and the hottest-selling aircraft in the business fleet. The Honeywell Corporation, a leading Yet corporate aviation is not immune supplier of turbojet engines and avionto the business cycle. The health and ics to corporate aviation, predicts that well-being of the company flight depart7600 new business aircraft, valued at ment may be directly tied to the state of $121 billion, will be delivered between the economy, with boom times signaling 2003 and 2013. increased aviation activity and recessions creating not only less activity but also fewer aircraft, hours, and people as well. There will continue to be good times and bad as the economy pursues its mood swings. Despite the bad times, corporate aviation will persist and become stronger as the concept of on-demand air transportation becomes more deeply entrenched in many corporate cultures. The Beginnings Personal aviation began with the Wright brothers in 1903. Their objective was to provide a new form of transportation that would enable people to get from point A to point B as rapidly as possible. Their initial 129-ft trip signaled the beginning of personal air transportation. Before the end of the first decade of the twentieth century, individuals were using the airplane as a legitimate, although limited, form of transportation. It was the initial desire for individuals to travel by air rather than groups in larger public aircraft that drove early aviation forward. While interrupted by World War I, personal aviation continued to grow and grow steadily until Lindbergh’s transatlantic crossing in 1927, a watershed event for all aviation. Business aviation began shortly after World War I. Plentiful war-surplus open-cockpit, two-seat biplanes were used to promote various companies’ wares via barnstorming trips and advertising courtesy of product logos painted on the fuselage. Hearty entrepreneurs flew or rode in these aircraft to sales opportunities around the country. Yet the rigors of 1.8 CHAPTER ONE open-cockpit flying and less-than-reliable engines kept these risky trips to a minimum through the 1920s. The world’s oil companies, Standard Oil, Texaco, Continental, and Royal Dutch Shell, became the pioneers of true business and corporate flying in the 1920s, using the first multiengine, usually trimotor transports to service their far-flung drill sites. Standard Oil’s chairman, Robert W. Steward, concluded that the advantages of airplane versus train travel “…more than compensate for the expense and make the airplane an economical method of travel…as safe and comfortable as transcontinental train.”2 Despite this glowing endorsement, relatively few companies took advantage of business aviation until the late 1920s. It was the simultaneous availability of closed-cabin monoplanes (with more reliable engines) and Charles Lindbergh’s solo transatlantic flight in 1927 that served as the basis for corporate aviation as we know it today. The Lindbergh flight, combined with national authorities regulating civil aviation, gave travelers new confidence in this fledgling form of transportation. Airlines suddenly sprouted, proving to the world that air travel was safe, efficient, and mostly reliable. Business executives and entrepreneurs, ever seeking a competitive advantage, immediately saw company operated aircraft as a means to facilitate their business activities. The 1930s saw the availability of aircraft specifically designed for business applications, including small single-engine and medium-sized multiengine aircraft. Oil companies again took the lead, using fleets of aircraft, including airliners, to service their international business activities. The growth of business aviation during the 1930s is remarkable in that the great depression curtailed much other business expansion. Similarly, personal aviation benefited greatly from Lindbergh’s transatlantic flight, turning all eyes to the skies. During the 1930s, scores of new aircraft were introduced with the thought of providing personal transportation for the masses. Despite the constraints of the poor economic conditions, light aviation flourished and grew. Business aviation and the airlines provided the new developments and the infrastructure that benefited personal flight. World War II called a temporary halt to civil aviation development, but in a very real sense, it prepared the world for the aviation boom that followed the cessation of hostilities. Hundreds of thousands of people learned about and became acclimated to the concept of air transportation during their wartime service, leading them to transfer their skills and knowledge of aviation to the business environment. Postwar boom times and the availability of surplus military transports fueled a rapid growth in both personal and business aviation. Significantly, the rapid advances of wartime aviation technology made civil flying much safer, more reliable, and even practical. Improved communications and navigation equipment, more reliable engines and aircraft systems, and the beginnings of a real air traffic control system facilitated the move toward business and personal aviation. While business and personal (general) aviation grew substantially during the 1950s, it was introduction of the business jet at the end of the decade that made the industry take off. In 1957, the Lockheed Jetstar made its first flight and ushered in a new era of speed and convenience for corporate travelers. Fast, comfortable, and practical, “airborne board rooms” became a reality with the jet age. Followed shortly by the Sabreliner and Hawker/deHaviland 125, the jets provided a quantum increase in business travel effectiveness and efficiency. Then, in 1964, the first Learjet brought jet travel within economical reach of most corporations. The Learjet cost $550,000 and provided speeds of up to 485 mph over distances as great as 1800 mi, accommodating up to seven passengers. Business aviation had arrived. Commercial helicopters were available as early as 1946, but it was the advent of the Sue-Est Alouette turbine-powered helicopter in 1958 that brought a practical rotary-wing aircraft to business applications. While thousands of business helicopters are used worldwide for business aviation, their numbers remain small relative to the number of fixed-wing aircraft working for business. Yet their importance for specialized applications make them valuable and permanent assets in the corporate transportation inventory. SETTING THE SCENE 1.9 Personal aviation benefited from these developments, taking aerodynamics, radio, and infrastructure improvements for its own. During the 1960s and 1970s, personal aviation grew rapidly, attempting to reach the dream of practical and safe flying for all. The late 1970s and early 1980s saw a peak in the number of pilots and aircraft produced, essentially realizing the dream within the bounds of economic practicality. Finally, small general aviation aircraft could be used as a practical form of personal transportation through most weather conditions and at speeds and distances that made sense to the consumer. Through the mid-1970s, business aviation aircraft growth was modest, with fewer than 100 turbine-powered aircraft being produced for the business community in 1972. Good economic times in the late 1970s and early 1980s produced a miniature boom in business turbine aircraft, with more than 400 such aircraft produced at the peak in 1982. During the same year, more than 2000 piston-powered light general aviation aircraft were produced, a significant number destined for business uses. In 2001, more than 1200 turbine-powered business aircraft were shipped worldwide, approaching the 1800 piston-powered airplanes produced in the same year; the emphasis is clearly turning to turbine-powered business aircraft.3 In 1986, some 14,000 turbojets and turboprops flew for business around the world; that number had grown to more than 21,000 by the end of 2002 (11,000 of these are turbojets), 50 percent growth in just 15 years. Importantly, 13,000 operators worldwide sponsored all these aircraft. The rate of increase is growing, perhaps as rapidly as 4 percent per year. Business aviation has earned itself a permanent place in the world’s corporations.4 Personal aviation has taken its place as a practical transportation alternative throughout the world with an estimated 150,000 aircraft used for safe, reliable, transportation. Travel Is Important for Business Corporations of all sizes increasingly focus on their travel expenditures, which often represent the third largest expenditure within many companies. As such, corporate stakeholders traditionally have viewed business travel from the narrow perspective of costs as opposed to its relationship to corporate productivity. Understanding the need to better define the corporate perception of travel and the role of travel management, the Institute of Business Travel Management (IBTM) commissioned an environmental scan to assess the value senior corporate executives place on business travel and travel management in meeting corporate goals and objectives. With participants ranging from chief executive officers (CEOs), senior vice presidents, vice presidents, and chief financial officers (CFOs) of Fortune 500 companies including Boeing, EDS Corporation, Johnson & Johnson, Microsoft, and The Limited, Deloitte & Touche conducted the first research project of the IBTM.5 Key findings included the following: ● ● Travel is important to meeting company goals and objectives, and travel management programs contribute significantly to companies. As a result of the combination of an increasingly global economy and increasing company growth fueled by the economic boom of the last few years, companies have strategically channeled more funds into the cost of conducting business. Like other business units, travel is expected to increase the corporation’s return on investment and increase process efficiencies. The findings of this study clearly indicate that senior executives value the role of travel and effective travel management. Further, the study found that senior executives believe that travel management programs make significant contributions to the corporation and support the achievement of corporate missions and goals. Few companies use sophisticated models to calculate the contribution of travel management to company bottom lines and shareholder value. While senior executives value 1.10 ● CHAPTER ONE the contributions of the travel management programs, the study found that few companies use sophisticated means to calculate the true value of their travel programs. Although executives implicitly understand that travel affects other areas of the company such as sales, marketing, and operations, most travel management programs do not employ measurements that effectively calculate travel’s bottom-line impact on the corporation. As a result, travel’s impact on the company is strongly recognized, but a mechanism to quantify its impact has not been fully developed. Senior management’s highest travel priority is to optimize time while being very sensitive to the balance between time and cost. While minimizing costs for any company is critical, the study found that those interviewed also understand that “time is money.” Thus, in crafting travel policy, entering supplier relationships, and developing performance measurements, travel managers should develop methods that integrate the time and cost elements of travel. The Reasons6 Deciding how to travel—via the airlines, via company or charter aircraft, or even by driving or taking a train—involves many considerations. While several of the benefits of business aircraft are tangible and measurable, some are challenging to quantify precisely. Progressive managers routinely consider all the costs and realistically evaluate all the benefits of every travel option before deciding how to go. According to the NBAA these benefits include the following: Saving Employee Time. Efficient employee scheduling and employee time saved are key advantages of business aircraft use. Because business aircraft have the ability to fly nonstop between any of the 3500 small, close-in airports—ten times the number of locations served by scheduled airlines in the United States—highly efficient employee time management becomes a very real benefit. Additionally, the value of employee time often exceeds its cost to the company by substantial margins, further increasing the importance of employee time savings. Simply stated, business aviation helps a company obtain maximum productivity from its two most important assets—people and time. Increasing Productivity Enroute. High levels of employee productivity enroute to a business destination—in a secure office environment that is free from interruptions, distractions, or eavesdropping—can have substantial value to an employer. A Louis Harris & Associates survey showed that executives felt that they were 20 percent more productive in the company jet than they were in the office. Conversely, they felt that they were 40 percent less productive in an airliner due to distractions and lack of privacy. Group productivity, maximized due to the common availability of club seating and tables, often is unique to business aircraft. Strategizing before meetings and debriefing afterwards are common practices facilitated and encouraged by business aircraft cabin configurations (Figs. 1.5 and 1.6). Minimizing Nonbusiness Hours away from Home. Family time before and after traditional business hours is critical to most employees. Because a stable, supportive family can have an acute effect on employee morale and productivity, scheduling that minimizes time away from home can be a key benefit. Ensuring Industrial Security. For many companies, the protection of personnel from uncontrolled public exposure alone is justification for business aircraft use. Avoiding 1.11 SETTING THE SCENE 140 120 Percent Productivity 100 80 60 40 20 0 Company Jet FIGURE 1.5 Company Turboprop Airline Jet Commuter Turboprop Office Productivity compared. (NBAA.) 45 40 35 30 25 20 15 10 5 0 Employee meetings Customer meetings Individual work Company aircraft FIGURE 1.6 Non-work Airliner Passenger activity aboard aircraft. (NBAA.) Rest 1.12 CHAPTER ONE eavesdropping, reducing travel visibility, and eliminating unwanted and unnecessary conversations and interruptions all support the use of business aircraft to safeguard company employees and the sensitive information they carry. Maximizing Personal Safety and Peace of Mind. Turbine-powered aircraft flown by two-person professional crews have a safety record comparable with or better than that of scheduled airlines. The peace of mind that results from complete company control over the aircraft flown, passenger and baggage manifests, pilot quality and training, aircraft maintenance, and operational safety standards is substantial. This benefit also can include the rescheduling of flights if weather, mechanical, or other considerations suggest that this is the appropriate course. Exercising Management Control over Efficient, Reliable Scheduling. The near-total scheduling flexibility inherent in business aircraft—even changing itineraries enroute— can be a powerful asset. Since aircraft can arrive and depart on the passenger’s schedule, typically waiting for them in the ordinary course of business, meetings can be moved up, back, or extended without penalty, risk, or unnecessary scheduling pressures. Overnight trips also can be avoided. If managed proactively, this benefit can improve business results. Projecting a Positive Corporate Image. For customers in particular and often for vendors, the arrival and departure of company employees via business aircraft are the sign of a wellrun company, signaling the progressive nature of an organization with a keen interest in efficient time management and high levels of productivity. If used for charitable purposes, significant public service contributions, as well as possible public relations benefits, also can be realized. Attracting and Retaining Key People (Customers Included). The right person in the right place at the right time can change everything. Finding and keeping such people can hinge on many factors, including the ability to maintain reasonable travel schedules, maximizing personal productivity and ensuring family time. Holding on to valuable employees also can prevent companies from spending time and resources on training replacement employees. Reducing Posttrip Fatigue and Increasing Posttrip Productivity. Schedules that require late-night travel or longer-than-necessary trips often result in posttrip fatigue, damaging productivity in the day(s) after the trip. Because they can facilitate more efficient scheduling, business aircraft can minimize this loss. Optimizing Payroll. Under “rightsizing” initiatives, many organizations have rediscovered the need to maximize the productivity of the same or fewer employees to accomplish equal or greater amounts of work and ensure their competitive position and long-term success. As business aircraft improve employee time management and efficiency, they can help eliminate the need for additional personnel, reducing payroll costs, and help to maximize a company’s competitive market advantage. Truncating Cycle Times. The compound effect of increased productivity and saved travel time is that more can be accomplished in less time. Consequently, many companies attribute reductions in cycle times—when facilities are brought online sooner and projects finished faster—to business aircraft use. Although it is challenging to quantify or attribute entirely to business aircraft use, this benefit often can be substantial. Charging the Entrepreneurial Spirit. By minimizing or eliminating many of the barriers to travel, business aircraft allow business opportunities to be considered and acted on SETTING THE SCENE 1.13 more readily. Business cultures and their strategies change as markets, facilities, and customers in rural areas of the country—once practically unreachable and unconsidered— are newly accessible. How Companies Use Aircraft 7 There are a nearly infinite variety of ways to use business aircraft. From the obvious, getting the executives out and back rapidly, to transporting teams of specialists, to going out and getting customers to witness your excellent manufacturing or service organization, companies have learned that these and other applications make sense. The NBAA has studied how companies use their aircraft. Here are just a few ways that organizations have discovered to use their aircraft (Table 1.2): Key Employee Travel. This is by far the most frequent use of business aircraft. Getting to essential meetings, conducting site visits, and keeping customers happy are all reasons for the right people to get to the right place in a timely manner. The timeliness of these trips means choosing the right time for the trip and then getting out and back as quickly as possible. We all know intuitively that the business adage “time is money” is true, so we try to maximize our time where it counts most. Spending time waiting at airports in security lines does not meet this criterion. Key employees can be anyone of any rank who is indispensable to a task, not just the CEO. Financial experts, attorneys, technicians, and quality control specialists are all candidates for using the company aircraft when hours count. Not surprisingly, an NBAA study revealed that top-level executives were not the most frequent flyers in company aircraft; middle managers were. TABLE 1.2 Business Aircraft Utilization Strategies (NBAA) Key employee travel. Getting the right person in the right place at the right time. Customer visits. Visit customers on their turf. Customer trips. Bring customers to you. Scheduled customer service. Routine trips to service customer accounts. Emergency customer service. Rapid response trips to fix what’s broken and “put out fires.” Humanitarian and charitable flights. Being a good corporate citizen; helping employees. Sales and marketing blitzes. Multiday/multicity sales trips covering a region or sales area. Charter revenue flights. Offering your aircraft for use by a charter operator. International flying. Regularly outside the United States. Helicopters. Used to go directly to specific destinations; not just between airports. Management teams. Transporting management teams to organization sites. Engineering teams. Transporting production or engineering teams to critical work sites. Corporate shuttles. Regularly scheduled flights between organization facilities or customer sites. Make airline connections. Making airline connections, particularly international flights. Carry priority cargo, parts, or mail. Special projects. Such as advertising shoots. For goodwill/lobbying. Transporting elected officials or candidates; going to lawmakers. Utilitarian purposes. Mapping, aerial surveys or inspections, etc. Market expansion. Evaluating new markets/sites. The airborne office. Working/conferring enroute. Personal travel. Employees and their families. Attract and retain key people. A tool to facilitate work or get people home more nights. Maximize employee safety and industrial security. Better than the airlines. 1.14 CHAPTER ONE Saving Time and More A control-valve manufacturer in Milwaukee was in the final stages of signing a major contract with a potential customer located in Asheville, North Carolina. A major sticking point arose over a number of issues, including final design, production rate, and costs. The situation was deemed “critical” by the company executive vice president. Clearly, a meeting of the minds was in order. A visit to the Asheville customer was planned. As is often the case, finding a 3-day window for the meeting for all concerned (at both locations) was difficult. Why 3 days for a meeting that should require at most 6 hours? Airline service from Milwaukee to Asheville was such that the five travelers had to depart the day before and return the day after the meeting. Therefore, the executive vice president chose the only day available to all and scheduled the company aircraft for the trip. The team rose early on the day of the trip, went to a conveniently located general aviation airport in suburban Milwaukee, boarded the aircraft on arrival (no waiting or processing necessary), and 1.5 hours later arrived in Asheville. Exactly 7 hours later (a little longer than they expected), they reboarded their aircraft and arrived back in Milwaukee in time for a stylishly late dinner. Not only did team members save an aggregate 60 productive hours, they also saved more than 120 hours of their personal time in the process. Moreover, the 3-hour roundtrip was used profitably in strategy and implementation meetings in the company aircraft. The best part: The cost of the company aircraft was 20 percent less than the combined fares would have been on an airline. Business aircraft are used commonly by key employees to ● ● ● ● ● ● ● ● Extend management control and bring operational areas to a manageable size Facilitate company, supplier, and/or customer meetings in multiple cities per day Take practical and routine daily on-site supervision of facilities in different cities Reduce, sometimes dramatically, travel times to multiple locations versus public transportation Facilitate emergency meetings, including those involving the board, partners, and customers Efficiently reach remote locations Strengthen relationships with customers through shared private time enroute to a destination Facilitate rapid action on mergers and acquisitions, particularly for companies in remote locations Customer Visits. Most businesses place customer contact at the top of their priority list. An integral part of such contacts involves face-to-face visits—visits to introduce new products, discuss existing product lines, explore new customer needs, and in general, be nice to the people who ultimately pay the bills. However, getting to customer locations, which frequently are poorly served by the airlines, can be a several-day chore. Since business aircraft have access to many more airports than do the airlines, a number of customer visits can be made in one day with the company “magic carpet.” SETTING THE SCENE 1.15 Visits via business aircraft can be used to ● ● ● ● ● ● ● Attend customer-sponsored events, such as a grand opening. Service more than one destination in a day. Efficiently increase face-to-face contact with the customer, relationship building, interaction between people. “They think more highly of us when they see more of us.” Facilitate a lean senior staff. “We have a lean management, so it has to cover a wide area quickly.” Consequently, business aircraft can facilitate senior management participation in selling. Enable a team approach rather than a one-person attempt. “If there is a new business opportunity that requires a team visit, we dispatch them out on that call.” Demonstrate capability; establish or reinforce an image Support a customer in trouble. “Being there sometimes helps.” Market Expansion. The attractiveness and potential of new geographic markets may be limited by a lack of physical access to those markets. Business aircraft can open potential new markets, including international ones, and provide dramatically improved access especially to rural areas. Market expansion is facilitated as much by attitude as by access. Business aircraft, because they can facilitate access, can lessen or remove perceived barriers to the management of new markets. Prospecting within new markets is the first step, often for potential local business partners. Business aircraft sometimes are used to facilitate meetings that take place at a halfway point into these new markets. A new class of business aircraft with nonstop ranges in excess of 7000 miles is making access to global markets practical and common. Almost every flight on business aircraft has an element of market expansion to it. Management Team Travel. Management team travel is the most common use of business aircraft. These teams provide a critical mass of expertise, talent, and experience that can be applied to problems and challenges not found at the home base. Getting these individuals out to the problem area and back expeditiously makes good business sense. Management teams have a substantial aggregate hourly value to their employers. The combined costs of air services, employee travel time (door to door), and other trip expenses (such as hotel, meals, rental cars, etc.) often compare favorably to airline travel between second-tier cities or rural locations. When the value of employee time is considered along with the value of productive time enroute and nonbusiness hours away from home (family time), the comparison of business aircraft travel versus public transportation often becomes problematic. Some progressive companies have or are installing conference facilities in corporate hangars to facilitate off-site meetings. Corporate hangars also are being equipped with transient manager offices that can be used for private conversations, study, or sending and receiving e-mail. Transporting Customers. A corollary to customer trips is the practice of bringing customers to your facilities to witness your excellence and to impress them with your knowledge and insight. Moreover, fetching customers in the company airplane makes a substantial impression on them; this means that they are very important people to you. The practice of transporting customers can ● Be used to pick them up, bring them to company facilities, meetings, cultural, entertainment, or sporting events, and then return them home as quickly as is practical, often on the same day 1.16 CHAPTER ONE ● Letting Them See Your Excellence A major office furniture manufacturer provides its products to a worldwide audience; however, most of its sales occur in the United States. Early in its life it saw the need for bringing customers to its Midwest headquarters, first by car and train and then by company aircraft. The investment in customer transportation has paid off, making the company a member of the Fortune 500 and a world-class provider of office furniture. “We can show them what we make in catalogs and showrooms,” says a member of the company’s marketing team, “but getting them on our turf and showing them how all the pieces fit together and how dedicated we are to quality is a powerful marketing tool. We couldn’t do this without the company airplanes.” ● ● ● ● ● ● Provide an opportunity to build relationships and ease communications Help those in need to restore service by moving their personnel and equipment Improve customer access in both directions Be used as a courtesy to correct for company-induced delays Engender goodwill Facilitate approvals for the delivery of products or services Facilitate customer contract signing International Trips. The allure of emerging markets—both as potential suppliers and as customers—in China, India, and Russia is of increasing interest. Hundreds of business aircraft fly every day between North America and Europe, Asia, Africa, or South America. A surprising number of the aircraft used for this purpose are small to midsized jets. Many companies transport management teams internationally for multicity visits, some covering dozens of cities over multiple weeks. Given the limited airline service in some regions, this can be a highly efficient practice. Importantly, as the teams travel, they have an increased opportunity to confer and plan during lengthy enroute legs because of the uniquely private and communicative environment provided by the business aircraft cabin. Canada, Mexico, Central America, and the Caribbean are the most frequent destinations for U.S. companies; many of these markets become closer via business aircraft than crosscountry U.S. markets. As major markets and producers move offshore, the need to get to those sources becomes increasingly important; business aviation provides ready access to these areas at greatly reduced cycle times. Specialty Teams. Teams of engineering, troubleshooting, survey, and financial employees are commonly dispatched to rural or remote areas to ● ● ● ● ● ● ● Rapidly restore service at “down” facilities or sites Monitor, inspect, and review construction progress Install, modify, or dismantle equipment Deliver and install emergency parts Evaluate potential construction sites Attend or facilitate critical meetings Visit suppliers Not only do the teams get there faster, using a business aircraft sends a message to the passengers and customers alike: This is an important job that deserves attention. SETTING THE SCENE 1.17 Team Efficiency A major U.S. catalog clothing retailer regularly ensures the quality of its products by sending quality control teams to its contractors’ manufacturing plants to inspect the operation. When the manufacturing took place within the United States, normally in the southeastern part of the country, these visits were relatively simple and quick, involving a week on the road, via airline, at most to cover four to six plants using a team of five to seven inspectors. However, when most of the manufacturing activity went offshore, primarily to Central America and the Caribbean, the inspection teams began to spend more than 3 weeks to accomplish their task. A chance meeting between the company flight department manager and head of quality control spawned a scheme to make the company more efficient and to get the inspection team home more rapidly. By using the company Learjet, up to seven team members could be taken to the offshore plants, sometimes two per day, in about half the time required by international airline travel. This scenario is now played out several times a year, allowing the company to visit its suppliers more frequently while reducing wear and tear on its inspectors. Importantly, using the company jet saves tens of thousands of dollars on travel and trip expenses. Sales/Marketing Campaigns. Sales and marketing blitzes can be of nearly any scope and duration, depending on the stamina of the participants and their families. Such blitzes can be highly efficient and concentrated direct selling opportunities. Because they are timeefficient, participants are able to spend more time in the office and less time in airports. In some companies, business aviation is the prevailing method used to get senior officers into a specific marketing territory to visit customers and vendors. Because time is so limited, multiday trips facilitate maximum exposure in a limited time. Sales and marketing blitzes can intensify seasonally, during new product introduction cycles, for initial public offerings (IPOs) or investment/investor swings, during downturns in the economy, or following a restructuring. Potential customers and distributors also can be the target of multiday trips. Attract and Retain Key People. Attraction: ● ● ● ● ● ● Companies commonly use business aircraft as recruiting tools to facilitate the interview and negotiation process for key prospective employees or business partners and their families. The greater the distance and the more rural the recruiting base, the greater is the apparent benefit of a company aircraft. Anything that helps motivate key employee recruitment is critical. The value of the first impression left on a prospective employee is very important. The use of business aircraft rapidly establishes credibility. Companies make regular flights to universities to recruit graduating students. Retention: ● ● Companies can keep personnel longer by making their days shorter. The use of business aircraft for commuting or other personal travel can be negotiated as part of a personal services contract. 1.18 ● ● ● CHAPTER ONE Extra “no cost” passengers can fill empty seats as a reward to high-performance employees and their families on certain trips scheduled for business reasons, although this type of travel may be taxable as personal income to those passengers. A company philosophy that stresses family-friendly scheduling—reducing nonbusiness hours away from home through the use of business aircraft for efficient day trips—can be very attractive. A surprising number of goodwill flights seem to be flown, typically very quietly, to facilitate employee medical treatments. Corporate Shuttles. Some companies with multiple operating bases have found it advantageous to institute a scheduled flight operation between those bases to save both time and money relative to airline service. Airline schedules frequently do not fit the daily commute nature of many work requirements, driving companies to establish what amounts to their own private airline. Time savings in airport processing delays with the airlines greatly reduces an employee’s availability to accomplish work productively; a private shuttle may reduce this wasted time by as much as 80 percent. Moreover, with just a modest number of travelers, significant cost savings may be realized with a shuttle. Shuttles are most appropriate for larger companies with decentralized operations and facilities or for companies with repetitive tasks, such as safety checks, management reviews, ongoing employee training, or a need to make airline connections from rural locations. Shuttles are not always permanent, often operating for short periods for specific projects or startups. High-priority personnel can be transported regularly via helicopter to several company locations in a major metropolitan area, saving many hours of tedious ground travel. Priority Cargo, Parts, or Mail. This subject has immense potential. Many companies use aircraft to carry high-value cargo, replacement or spare parts, or interoffice mail. This practice is common and often unquantified but of substantial commercial value in displaced overnight delivery charges. Any material that cannot be moved practically by conventional shippers due to size, weight, susceptibility to damage, or other physical limitations, and particularly those which need to be delivered within hours, often are best transported via business aircraft. Projects. Usually business aircraft are used for infrequent or “one shot” projects, such as multilocation advertising photography “shoots” involving a multidisciplined team of experts. The combination of both personnel and an unusually large amount of project-specific equipment can trigger business aircraft use as the most efficient and cost-effective travel alternative, specifically for transporting delicate equipment of extreme value to the project. It’s just essential for us to get out in the field.…Aviation is the most time-efficient way for us to do that. —MARKETING MANAGER Utilitarian. Business aircraft are used commonly as a convertible platform for mapping; aerial surveys, inspections, and photography; cattle ranching and herding; flying laboratories for airborne experiments or other research and development; educational laboratories; surveillance; and power-line and pipeline patrols, in addition to other uses. Public, Press, and Investor Relations. Progressive companies often manage opportunities to project a positive corporate image using business aircraft either as a symbol of efficiency or as simple transportation to facilities or events to further this purpose. Publicity generated by the use of aircraft for noble purposes, such as the rapid delivery of relief supplies after a natural disaster, can be of substantial public relations benefit. SETTING THE SCENE 1.19 Personal Travel. Just because the aircraft is operated by a company does not preclude its use for personal transportation. However, the company must define personal-use policies and provide methods for employees to pay for these services. Emergency Evacuation/Response. Business aircraft also are used to remove company employees from harm’s way, usually as a result of a medical emergency, natural disaster, civil strife, or other security threat, particularly in areas of limited or uncertain scheduled airline service. Similarly, the ability to place key personnel at the scene of an oil spill, manufacturing plant fire, or tornado-damaged office site rapidly makes good business sense. Getting to the scene early with the right people may save additional damage and costly downtime. Goodwill. Business aircraft also are used for personal customer or employee needs, such as travel associated with family emergencies, or as a favor. There is not always an immediate, tangible business benefit from the use of business aircraft for customers or employees with special needs or for public officials. A longer view, however, may suggest that the company’s strategic interests can be best served by this practice depending on individual circumstances. Lobbying. Business aircraft can be used to transport elected or appointed officials. The use of business aircraft for the carriag...
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Running head: TESLA COMPANY

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Tesla Company
Institution affiliation
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TESLA COMPANY

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Executive Summary
Tesla is an automotive manufacturing company with its operations based in Palo Alto,
California. It was founded in the year 2003 by Eng. Marc Tarpening and Martin Eberhard. The
aim was to generate electric vehicles which are better, faster, and more efficient. It would also
venture into the production of scalable clean energy generation and storage products such as
batteries and solar panels. The company is still growing, and it has not yet realized profits. It is
however optimistic that it will expand the 0.2% share market owing to the need by developed
countries future expectations of doing away with diesel and petrol powered engines. Deepak
Ahuja was appointed as the chief financial officer in 2017. He has good academic records and
vast experience in financial matters.
To boost the operations of the management team, the company seeks to adopt aircraft
travel and services in ferrying them to various places. This is due to many advantages accrued to
air travel. It is a fast, comfortable, and secure means of traveling. Thorough considerations have
to be made before the decision is put in place. The factors to be considered during this process
include the financial position of the company, the destinations, need, future company objectives,
type of executives, and traveling frequency. The company has to decide on the type of ondemand service it shall adopt and the particular aircrafts.

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Introduction
Deepak Ahuja has been the Chief Financial Officer of Tesla Inc. since March 2017.
However, he had previously served in the same position, in the year 2008 as the Principal
Accounting Officer, at the same company (Bloomberg, 2017). Ahuja earned his bachelor’s
degree in ceramic engineering from Banaras Hindu University. Later on, after he had moved to
the United States to further his studies at the Northwestern University, Ahuja earned his Master’s
in Materials Engineering. After working in the field for some time, Ahuja decided to pursue a
course in business earning his MBA from the Carnegie Mellon University.
Prior to joining Tesla in 2008, Ahuja had worked for Ford, first as a product line
supervisor, then as CFO for a joint venture between Ford and Mazda and finally as CFO for its
South African branch. Ahuja appreciates change stating that “Change forces you to push your
limits and discover your potential.” When he first joined the company in 2008 the company was
facing the possibility of bankruptcy. However, after laying-off a number of workers in order to
lower operation costs, increasing the roadster’s contributions and heightening their production
rate the company was able to break-even. Two years later, in 2010, the company released its
IPO. In his time he saw the unveiling of two vehicles, one a Sedan and the other a Sports Utility
Vehicle.
Tesla features a functional organizational structure as can be seen in their use of a
centralized global hierarchy with minimal regional divisions. Its structure enables strong
managerial control despite its growing number of international operations. Like many other
companies, Tesla has a Chief Executive Officer, a Chief Financial Officer, and other high-level
executives. Separate teams have directors and managers. Further down are the factory personnel

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which includes the production managers and supervisors. Tesla is still a growing company as
seen from the fact that it is yet to make profits despite increasing annual revenue.
Tesla, Inc. formerly known as Tesla Motors is an American automobile manufacturing
company based in Palo Alto, California. The company was founded by the engineers Marc
Tarpenning and Martin Eberhard in July 2003, with an aim of producing electric vehicles that
were better, faster and more efficient (Tesla, Inc, 2017). In addition to building electric vehicles,
Tesla also produces a variety of scalable clean energy generation and storage products such as
solar panels and batteries. Since its inception the company has produced several vehicles
including the Roadster, launched in 2008, featuring cutting-edge battery technology and an
electric powertrain, through which the company gained widespread recognition. This was
followed by the Model-S, a premium all-electric sedan which debuted in 2012, the Model-X
which was unveiled in 2016 starting production in July 2017 and the Model-3 which began
production in 2017.
Tesla’s mission is to accelerate the world’s transition to sustainable energy. The company
aims to be a world leader in the production of electric automobiles and other related products.
The emphasis on renewable energy can be seen, both from their vision and mission statements.
In this regard, Tesla has grown to become the second largest global producer of pure electric
vehicles after Renault-Nissan Alliance.
The company went public in 2010 when they launched their IPO releasing 13,300,000
shares to the public and becoming the first American car maker to go public since the Ford
Motor Company did this in 1956. Since 2012, Tesla’s annual delivery of vehicles has grown
from about 2,900 to 76, 243 in 2016. In addition, its revenue from the sales of automobiles rose
from $73, 000 in 2007, to about $148.5 million in 2011. In spite of this, Tesla is yet to record any

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profits, having a large number of expenses and close to $1 billion in debt. Surprisingly, Tesla’s
stock has continued to grow over the last few months, having been valued at one point at $45
billion, worth more than Nissan Motor Co. despite a lower annual roll-out of units (Forbes,
2017).
As of August 2017, Tesla helping 0.2 market share in the car and light trucks market in
the US. Tesla’s biggest competitors include Renault, Nissan, BMW, Ford, and Volkswagen
many of which had already established themselves as the world’s leading producers of diesel and
petrol powered vehicles before venturing into electric vehicles. The company is headquartered at
Stanford Research Park, Palo Alto in California but it has stores and showrooms all around the
world such as its European Headquarters in Amsterdam, Netherlands. The company produces its
vehicles at the Fremont factory in California. It also owns 2 ‘Gigafactory’, one in Nevada and
another in New York, which it uses for the production of batteries.
As stated in a recent report by the International Energy Agency titled Global EV Outlook
2017 “the global electric car stock surpassed 2 million vehicles in 2016 after crossing the 1
million the global electric car stock currently corresponds to just 0.2% of the total number of
passenger light-duty vehicles (PLDVs) in circulation.” The electric car stock growth, despite
declining in recent years is still high, currently at 60%, as the de...


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