At a time when some see business aviation as an unnecessary extravagance, a new study sponsored by NBAA, the General Aviation Manufacturers Association and others has concluded that over a broad range of uses, business aircraft can materially benefit shareholders.
“Evidence of the value provided by business aircraft use can be seen in remarkably consistent correlations in the aggregate performance of companies and industry sectors using business aircraft measured against those which do not, and among influential lists of the best performing companies,” a white paper titled “Business Aviation–An Enterprise Value Perspective” notes.
The report was compiled by Nexa Advisors, led by managing director Michael Dyment, who also led the team that authored previous NBAA/GAMA shareholder value studies prepared in 2001 by Arthur Andersen.
In that year, NBAA and GAMA sought to investigate whether business aircraft contribute to better operating or financial performance and, therefore, to higher shareholder value. Andersen produced a “landmark study” providing evidence that business aviation contributes to corporate America’s drive for greater shareholder and enterprise value.
Nexa said its report updates and revalidates the previous study’s conclusions. It found that among the Standard & Poor’s 500 companies it studied be-tween 2003 and 2009, users of business aircraft outnumbered nonusers by three to one, which it called a “significant” finding.
“Importantly, users found ways to deploy this unique asset, driving increased revenues, profitability and efficiency by wide margins over nonusers,” the white paper said. “Most surprisingly, we found that business aircraft users had a dominant presence, on average of 92 percent, among the most innovative, most admired, best brands and best places to work, as well as dominating the list of companies strongest in corporate governance and responsibility.”
Nexa warned that the failure of America’s business leaders to grasp important business aviation concepts and value drivers could lead to value destruction of the most admired, innovative and successful companies.
Recent setbacks for business aviation are reflected in a precipitous drop in new aircraft orders, the ballooning of used aircraft inventories and layoffs of highly skilled people. Among business aircraft operators, some publicly traded companies have reacted to the economic downturn by canceling new aircraft orders or shuttering their flight departments. Due to negative publicity, many companies that retain flight departments work to keep their existence out of the public eye.
“Yet, aside from the drift in public opinion, nothing has changed the fact that business aviation is a significant economic contributor to the health and vitality of America’s businesses, and an essential business tool,” the Nexa study confirmed.
A key finding of the white paper is that a company’s culture often determines how effectively it uses and benefits from business aircraft. These benefits include facilitating critical transactions, fulfilling time-sensitive requirements, managing and executing far-flung operations and lengthening the workday without sacri- ficing employee family time.
“Our study and findings confirm that under the right conditions (mission, competitive market position, management style, cultural orientation and other factors included) using a business aircraft can improve a company’s bottom line performance and the value delivered to its shareholders,” Nexa Advisors concluded.
It added, “In our CFO surveys, more than 75 percent of respondents confirmed that disposing of their business aircraft could, for the same reasons, potentially harm their company’s value.”