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A Saga of Success II: A Company Implements Its Use of Business Aviation

Posted on: March 28th, 2013 by Pete Agur

 

Part II of a three-part series that tracks a company’s use of Business Aviation.

This is the second in a series of three articles chronicling the real results of one company’s use of Business Aviation from launch, 18 years ago, to today.  The topics covered include the company’s decision to embrace Business Aviation, its early activities as it started to use business aircraft, and the results they have achieved.  The case is de-identified to maintain privacy.

Case Status

The Board had tendered its decision to approve the acquisition of a light jet in support of the business plan of their new CEO, Phil.  They hired him to transform the company from a mid-level player to an industry leader with revenues in the multiples of its historic highs.

Traditionally, the quickest way to grow any business is to acquire competitors.  But Phil knew such a strategy would be culturally damaging.  Furthermore, profits of the combined companies routinely failed to achieve expectations.  Instead, he intended to implement a different strategy: grow the business by entering new territories.  That is where the airplane came in.  Small teams of corporate executives and sales folks could conduct concentrated and highly effective roadshows in first and second tier markets.

Policy

Several Board Members voiced concerns about safety—specifically the risk to the company of carrying too many top people in the same aircraft, and the real and perceived costs of a company jet.  Phil asked our firm to recommend a set of approaches and policies to address these issues.  He provided the following parameters:

  • The aircraft must be a pre-owned to reduce the capital costs but sufficiently new to include the latest technology and have some remaining manufacturer’s warranty.
  • The aircraft should be placed on a charter certificate, which would create three benefits:
    • Outside charter revenue will defray some of the costs of the operation.
    • Additionally, charter revenue would alter the perception that the aircraft was strictly an expense.
    • Commercial standards are perceived to be higher than those of private aviation.
    • It was not realistic to restrict who could fly with whom.  The risk to the company must be mitigated by raising operational safety standards.

Business Aviation has a superb safety record that parallels that of the major airlines.  To match or exceed that level of performance, we made numerous recommendations. Note: To assure one high standard of performance, all flights (internal and outside charter flights) were to adhere to a single set of policies.  The following were among the most important recommendations we made:

  • Aviation services should report to someone in the C-suite to provide the authority needed.  That reporting point should not be the CEO so that there would be sufficient executive time for effective oversight.  This also assures a point of appeal, the CEO, for critical impasses between the aviation manager and the responsible executive.
  • The aircraft must contain current safety technology.  This included the latest anti-collision and terrain avoidance devices.
  • The aircraft must have at least two turbine engines.
  • All flights must be flown by two qualified captains.  Each pilot must have over 4,000 hours total flight experience, at least half of that time in jets, and at least 500 hours in that type of jet.  This assured at least 8 years of flight experience and exposure to all seasonal conditions in that type of aircraft.  Note: The accident rate for pilots during the first 100 hours in a new aircraft is dramatically higher than after that period of experience.
  • Training for the pilots must be done as a crew in a full motion simulator every six months to enhance the development of teamwork.
  • Frequent passengers must attend cabin safety training annually.  This training goes far beyond a normal pre-departure safety briefing.
  • The aircraft will be maintained to commercial standards.
  • The first passenger trip would not be undertaken until the crew had completed a series of familiarization flights to assure complete readiness to go “prime time”.

Implementation

Phil and the Board signed off on the aircraft operational policies.  The next question was whether aviation services would be internal or outsourced.  Our analysis showed there was little economic advantage to either (less than 4% of the annual budget).  Of greatest importance to the company was a desire for confidentiality and operational control.  Therefore, they opted for in internal aviation department.

With that decision made, the Board assigned the aviation start-up project to the executive to whom the department would report.  He put a team in motion to tackle various parallel activities.  That team included:

  • An aviation consulting firm (ours) to assist with:
    • Identification and selection of the staff.
    • Search for the aircraft, negotiation for the terms and conditions of purchase.
    • Oversight of the pre-purchase inspection.
    • Development of the operational and business processes and systems for the department (business management, financial, scheduling/dispatch, maintenance and flight operations).
    • An aviation attorney with specific expertise to support:
      • Aircraft purchase agreements
      • Hangar and office leases.
      • Corporate managers to support the process, including:
        • Human Resources
        • Finance.
        • Accounting.
        • Legal.

The project was given high priority and was executed at all deliberate speed.  Even so, due to the complexity of the effort, it was about four months from the time the company made the commitment to proceed until their first flight.

And so it went.  18 years ago they began the use of Business Aviation in pursuit of their goals.  In Part III we will chronicle the remainder of the saga.  I will describe the evolution of their flight operations as well as the corporate impact of Phil’s strategic choices, as they were supported by Business Aviation.

Continue reading Part III.

 


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