Strategies, Options & Perspectives: Time to plan for future growth

 - August 11, 2008, 9:49 AM

As AIN launches this column, “SOP: Strategies, Options & Perspectives,” I find myself in the new capacity of NBAA president emeritus, self-employed entrepreneur based at Morristown Municipal Airport in New Jersey and commenter on the passing scene. This column will contain perspectives on the state of business aviation as seen by someone who is convinced that this community is an integral component of transportation and vital to economic development. Where possible, it will offer a seasoned look at strategies and options flight-department managers might consider to communicate and enhance the capabilities of their business aviation activities. And it will be a sincere effort to serve AIN readers by addressing their need for meaningful information.

As for the state of our community’s health, it is strong. Furthermore, I believe the opportunities for those engaged in business aviation are excellent. True, the manufacturing segment of business aviation is suffering, as are other providers
of capital goods in our nation’s multi-year economic downturn. But hours flown by corporate flight departments are up compared with 12 and 24 months ago, reflecting the basic need for safe, secure, timely and efficient transportation. Suppliers report continuing sales of spares and replacement items, and maintenance providers are busy. International operations have increased significantly as companies explore the global marketplace. Flight activity by established departments either grew or remained strong as our country dealt with difficult economic times.

While we often use the number of new aircraft deliveries as the indicator of our community’s health, flight activity is the true measure of well being. As long as companies are flying, eventually they will be buying. Thus manufacturers, as well
as operators, should have confidence in the future.

We can note with pride in the present and confidence in the future that during this recession business aviation has not collapsed as it has done in previous economic downturns. AvData of Wichita reports that the number of flight departments continues to grow. While the number of new aircraft delivered this year will be down from recent highs, sales are still impressive.

Business Aviation’s Mission Is Sound

Business aviation is enduring these difficult economic times because our community is meeting a fundamental need for using time efficiently and enhancing the productivity of a company’s employees. More so than ever before, companies have recognized the value of business aircraft as business tools. They appreciate that when business is tight, business men and women must work harder and smarter to hold every customer, support key business partners and seize market share from competitors that retrench in the face of adversity. Business aviation helps such strategies by transporting the right person or team to the right place at the right time.

Business aviation is all about time. It’s about minimizing time spent traveling from an employee’s initial point of departure to his or her ultimate destination, be that destination a customer’s facility, another office within the company’s complex or the location of a business partner. Multiple destinations can be reached in the same day, a feat that is difficult if not impossible with today’s hub-and-spoke airline service.

Since a business aircraft is in effect an office that moves, business aviation is also about using travel time productively. Users of business aviation report that the privacy of a company aircraft enables them to hold company-sensitive discussions with associates and to work uninterrupted as effectively as if they were still in their office back at headquarters.

It is precisely because people and time are a company’s most important assets, and because business aviation enables a company to maximize the productivity of people and time, that the operating segment of our community is strong in this weak economy. Even the cynical business media that hardly missed an opportunity to malign the use of company aircraft has come to respect their value. Acceptance for business aviation is growing. Furthermore, there is ample potential for growth as more companies recognize the value of business aviation.

The strong showing by operators during these difficult economic times, as well as the challenges felt by manufacturers and sellers of pre-owned aircraft, presents unique opportunities for flight-department managers.

While communicating the advantages of business aviation to management is always a wise strategy, now is a particularly good time to emphasize how your flight department helps your company and its shareholders during a slow economy. Lead from strength. Emphasize the value of time and how a business aircraft allows people to use time more productively. Economists agree on very little, but they all agree that the way to combat recession is through increased productivity.

Also, now is an excellent time to plan for future growth. Buying opportunities may never be this good again. Severe downward pressure on used aircraft prices is showing signs of reversing, which clearly suggests that values for pre-owned equipment may be at an all-time high.

Buying opportunities for new aircraft, new engines, avionics packages and capital upgrades to aircraft are also excellent, thanks to the Jobs and Growth Tax Relief Reconciliation Act of 2003. This recently passed legislation entitles the purchaser of qualified property to take a one-time bonus depreciation of 50 percent during its first year of service. According to manufacturers, the 50-percent bonus depreciation is as attractive to purchasers as was the Investment Tax Credit (ITC) that existed during the 1970s but was eliminated in the mid-1980s. The benefits of bonus depreciation, however, will cease after Jan. 1, 2005.

And with the economy showing signs of recovery, interest rates may not be this low for many a year.

Yes, these are indeed challenging economic times. They are also exciting times of great opportunity for the strategically oriented flight-department manager with a strong belief in business aviation and its future.