This summer likely will bring a familiar mix of airport congestion, airline customer service complaints and questions about more effective ways for travelers to conduct business. Throw in the long-term potential for swarms of microjets on the horizon, and more businesses will at least take a look at one or more corporate aviation models as a means to improve traveler productivity, minimize reliance on commercial air transport and achieve operational flexibility.
Travel management professionals speaking here last month at an Association of Corporate Travel Executives conference shared details on the practical applications of private jets within their companies and provided pointers to delegates on how to effectively select, manage and evaluate such options.
"We use our corporate aircraft to provide us a competitive advantage through safe, reliable, efficient air transportation," said Wal-Mart travel services director Duane Futch.
Established in 1969, Wal-Mart's corporate aviation department today is among the world's largest. It operates 23 aircraft--primarily Lear jets--based at a dedicated facility close to corporate headquarters in Bentonville, Ark. A few additional planes have been deployed to Brazil, Canada and Mexico. Each Wal-Mart jet stops as many as six times a day and flies roughly 800 hours per year, more than double the hours logged by "a typical corporate airplane," Futch claimed. "They are constantly on the move."
In addition to its size, Wal-Mart Aviation's secrecy makes it an atypical corporate flight department, Futch explained. "We do not integrate corporate aircraft schedules with schedules over on the corporate travel side," he said. "We don't want anyone to know who is on the airplanes or where they are going."
There are tools available from global distribution systems and others that help companies integrate private jet options within corporate online booking systems, but Wal-Mart relies on coordination between personnel from both departments to most effectively use assets and travel department services.
Energy and gas company Dominion Resourcesof Richmond, Virg., takes a different approach in using its four company jets. "We manage the travel and aviation functions as one," said travel program director Donna Kelliher. "We have common meetings and goals, and we have been able to increase our load factors on the aviation side as a result of managing it this way. A lot of aviation departments operate on their own island, and that may work for some, but I believe very strongly that you integrate, and that you know who your travel manager is, or that you know who your chief pilot is. Many corporate travel managers have no idea who their chief pilot is."
Dominion has not automated corporate jet bookings within its corporate booking tool, but posts schedules to intranet sites accessible to certain departments and uses "field travel coordinators ... to make sure the right eight people are going and coming back," Kelliher explained.
Dominion and Wal-Mart use their jets for many of the same reasons, both with financial scrutiny and many similar policies. They both dispatch them in emergency situations--either for rescuing employees from or deploying necessary personnel into areas where commercial service has been severely curtailed or suspended for one reason or another. In certain circumstances, private jets also provide both companies with direct financial advantages, in addition to improved employee productivity and other conveniences.
"Richmond, up until the past two years, had been among the three most expensive airports in the nation to fly in and out of," Kelliher explained. "That drove a lot of our decision-making process regarding corporate aircraft," which Dominion began managing in 1994. "We do it based on cost per mile. On some commercial routes, we were paying in excess of $1.31 a mile. We were paying $800 for one traveler to go to Boston and back. So we zero in on the markets that make the most sense," in some cases running regular, shuttle-type service with Dominion jets for key project teams traveling to locations with little or no commercial service.
Futch also pointed to operational flexibility, and the possibility of bringing travelers home as soon as their missions are completed, which eliminates many hotel stays, car rentals and other travel expenses.
"In today's environment, the typical corporate airplane is not a royal barge. It is not just for the elite at the top of the company," Futch said. "The executives are not first in the pecking order. They come third, and we can bump them. Our operation folks come first, then regional vice presidents and divisional vice presidents, and then the executives. And then every other discipline after that--legal, accounting, merchandizing, procurement, logistics, etc. It really is to promote the needs of the company by getting the people who need to be in the field there in a timely manner."
Similarly, at Dominion, "our CEO has flown commercially so that a key team can fly on the corporate jet," Kelliher explained. "It is driven by business missions and not by who is who in the organization. Our aircraft are used by all levels of the company."
When senior executives at either company do use corporate jets, they are bound by policies ensuring that too many of them are not on the same flight, mirroring rules in place at many companies for commercial services. "It will be a difficult subject to discuss with them," Futch acknowledged. "A best practice, beyond the top executives, is that no more than 50 percent of someone's direct reports can be on the same plane."
Before Signing on the Dotted Line
If a company opts to buy a corporate fleet--rather than leasing, chartering or enrolling in private jet membership programs--it must consider a wide array of factors, ranging from warrantee options and aircraft types (speed, range, fuel efficiency and cabin interior) to operations (pilots, maintenance and Federal Aviation Administration requirements) and management (in-house versus an outside management company). "There are many questions to be answered before you sign on the dotted line to buy an airplane," Futch said. "Cost is last on the list."
Regardless of how a company answers those questions, it should involve risk management, legal and other internal departments. "Meet with managers and directors to see their demand," Kelliher added. "Stay ahead of the curve."
Kelliher and Futch also advised attendees to apply careful financial oversight in order to comply with various Internal Revenue Service and Sarbanes-Oxley regulations; rules around personal and political trips aboard private jets; and other corporate governance issues. "Regardless of what your corporate culture is, this asset needs to undergo the same scrutiny as any other asset that you purchase in your organization," Kelliher said. "For regulatory reasons, you must appropriately document every segment flown on corporate aircraft. There is a significant amount of administration that goes along with that."
Both Futch and Kelliher stressed that corporate jets serve only to augment commercial air service, and reiterated the importance of preferred agreements with large, network airlines. "The best model is a hybrid of both and you really need to figure out what makes the most sense in each of your markets, and that is continually changing," Kelliher said. "There is lots of information and it can be very overwhelming. Take one step at a time."
Related Resources:
National Business Aviation Association
National Air Transport Association