Measuring Business Aviation’s Value to Shareholders

In light of the COVID-19 pandemic, traditional airlines have focused their services to their Tier 1 markets, refocusing on hub flying and avoiding non-stop flights to Tier 2 and Tier 3 markets. Unfortunately not every business flyer is traveling to a Tier 1 market.

With commercial airline schedules becoming more and more unpredictable, and global airlines adjusting their operations to cover half their normal routes with only one-third of their jets, larger companies are turning to private aviation and purchasing their own business jets.

Benefits of private aviation include:

• Faster door-to-door travel
• More productivity during flights
• Ability to respond faster to market opportunities
• Improved customer retention
• Capability of exploring new markets

Even Smaller Companies Benefit from Private Aviation
While it’s obvious that the largest corporations benefit greatly from private jets, smaller companies do, too.

According to a study by The Real World of Business Aviation, companies with 500 or fewer employees are the majority of business jet owners and flyers. Companies with 1,000 or fewer employees represent 70 percent of private aviation users.

Even these smaller companies are able to afford a private jet for sale because of the value owning and flying in one adds to their business.

Business Travelers Are Less Productive On Commercial Flights
Lowered flight capacity on airlines has negatively impacted the productivity of business travelers. Infrequent flight times, flight delays, extra layovers, and more make flying more time consuming and even less convenient than before. No one knows what the future holds; these issues could worsen over time during additional waves of COVID-19, or for other, unrelated reasons.

Additionally, due to confidentiality or privacy concerns, not all work can be completed aboard an airliner or at the airport gate. And it’s especially frowned upon to participate in conference calls or virtual meetings in such public places. So, scheduled airline travel is known to diminish revenue growth, profitability, and earnings.

Private Jets Enhance Productivity
Flying in a private jet optimizes revenue growth opportunities, facilitates face-to-face interactions with customers and remote teams, and provides flexibility in scheduling.

Increased mobility of executives and managers allows them to visit multiple destinations in a single day, meaning they’re able to get more work done than if they had to wait in the airport for their next flights or stay overnight in a hotel between site visits.

Correlation Between Shareholder Value Creation and Business Aviation
It can be difficult to measure enterprise value creation of a business aircraft operation. Most tend to assess the quantifiable benefits and costs. If the quantifiable benefits are more than the costs, then business aircraft are said to create shareholder value.

To fully understand how shareholder value correlates to your company’s private aviation operation, you’ll need to identify the drivers of growth and efficiency that are used to measure how well your organization is growing based on how it uses its assets and resources.

Example: Revenue and Market Share Growth
To measure revenue and market share growth, company executives should evaluate all new product and service development activities and the strategies they’re using to optimize the sales or equivalents. These factors propel corporate growth.

Next, executives must consider how quickly their products or services reach the market, producing economic benefits to the corporation.

Finally, understand the extent to which the business has grown faster because of the use of private jets for business travel. This might include factors like the ability to reach new sales territories and resolving customer concerns in-person.

Additionally:

• Focus on profit margin and Earnings Before Interest, Taxes, Depreciation, and Amortization growth
• Evaluate profit margin growth associated with aircraft ownership
• Think strategically about the relationship between top-line revenues and costs
• Measure how lean the management structure is as a result of using a business jet, and how that reflects quantifiable employee time-savings (and thus financial savings)

Consider Asset Efficiency in Your Assessment
Although productivity is important and a key benefit of flying in a private jet for business use, how effectively your company uses its assets and the capital investment necessary to grow the business is just as important.

You’ll need to evaluate:

• The impact of customer and employee satisfaction, and the strategies that enhance them
• Price earnings, earnings per share, return on equity, asset turnover, return on assets
  

The Final Step
The last step of your study should be comparing your company value creation with that of your competitors. Is your company performing better or worse than the industry average?

Choose three to five competitors to measure performance across a number of economic cycles, using the same drivers you examined in your own business. This evidence will show just how meaningful private aviation is to your business, regardless of the number of employees on your team.

Where to Find a Private Jet for Sale
If your business is in the market for a business jet, the first thing you’ll want to do is take a look at AircraftExchange.com. AircraftExchange lists all the best, most reputable aircraft for sale around the world, and connects you with dealers and brokers who will help facilitate this important purchase.

You can trust AircraftExchange because all the listings of private jets for sale are from International Aircraft Dealer Association (IADA) Accredited Dealers. Every listing is carefully vetted, and the dealers are held to the highest standards of ethics as part of their IADA membership.

Browse our jets for sale, or contact a dealer near you.