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Are Business Jets Really Cost Effective
Should you use your corporate jet for your next flight or would airline travel be more cost-effective? Given all the variables involved-the number of people traveling, availability of commercial flights, value of executive time, price of airline tickets and inevitable overnight expenses-that's never an easy question.
Flight departments have access to sophisticated software that can track and schedule crews and maintenance, compute an aircraft's hourly and life-cycle costs and calculate optimum flight profiles based on forecast winds, en route fuel prices and other factors. But because of the complexities involved, no commercial vendor offers software that definitively answers the question of whether it makes more sense to travel commercially or on a company airplane.
Yet such software does exist. It is called Travel$ense and is available from the National Business Aviation Association.
What It Does
Travel$ense calculates the real costs of flying by business aircraft and by airline for any given trip. This is not a simple online calculator. Employing some 2,000 data points in each trip analysis and highly detailed user-defined parameters, Travel$ense provides a sophisticated, customizable solution.
"A lot of companies do their own internal analysis, very tailored to their operations," said Ed Bolen, NBAA's president and CEO. "Travel$ense represents a standardized template. Companies have to weigh a huge variety of factors, and there are a number of them that can be overlooked."
Travel$ense doesn't tell users which flight option to choose; it simply details the costs so companies can make enlightened decisions. The key to the program's comparative power is its ability to determine and factor in the value of travelers' time throughout the journey, the most critical component in determining true costs.
Launched in the mid-1990s, Travel$ense grew out of NBAA's research into productivity-tracking tools, which was based on work done in the flight departments at Frito-Lay and Amoco/Houston. The association's initial goal was to identify the true costs of both business and commercial air travel to demonstrate the value of corporate aviation. The software quickly attracted a cadre of dedicated users.
"At that time, there wasn't anything to help you put a value on time," said Kent Ramquist, a flight operations manager and chief pilot at a Fortune 500 company who began using Travel$ense soon after it first came out. "We were trying to quantify the aircraft's value to the company," he said of what first drew him to the program, "to give some sense of what it was really costing the company if we
didn't use the airplane."
Prior to the 1990s, of course, users didn't have the computing power at their fingertips to run such a program, nor did they have a way to interface with airline databases and import real-time data on fares and flight schedules as Travel$ense does. More than a decade later, it's still the only game in town.
"Travel$ense is the only program I'm familiar with that really does the job to compare travel modes and time cost between company aircraft and commercial [flights]," said Don Baldwin, president and CEO of Baldwin Aviation, which provides operations support to corporate flight departments. "I think it does a very good job."
How It Works
Travel$ense runs on practically any Windows-based PC, accessing airline data via the Internet. New users begin by creating profiles of company aircraft and passengers. They can store profiles of multiple airplanes, so the travel costs using various business aircraft-including fractional and chartered aircraft-can be compared with those of commercial flights.
"It's not a difficult program to get your arms around," said Ramquist, "[but] it does take some time to run through a couple of scenarios. Also, a lot of information has to be input. The learning curve depends on the user and how motivated he or she is."
Once the profiles are created, users simply plug in the destinations and schedule for a prospective trip and Travel$ense retrieves information and creates itineraries using both business aircraft and commercial flights. Itineraries include a cost analysis, benefits analysis and schedule comparison. Ground travel time, lodging, dining and other expenses are automatically entered as dictated by the itinerary.
With the value of travelers' time accounted for, the comparisons can be stark. For example, the Travel$ense Web site (www.nbaa.org/prodsvcs/travelsense) features a hypothetical trip from Des Moines, Iowa, to Chattanooga, Tenn., and then to New Orleans and back to Des Moines for three people traveling by midsize business jet and by commercial flights. The biggest single cost is employee time. On this trip, total nonbusiness time away from home is 20 hours 36 minutes with the corporate aircraft and 87 hours using the airlines. The true total cost of the trip was calculated at $9,637 using the business jet and $25,068 going by the airlines. Cost saved by opting for the business aircraft would therefore be $15,431.
Ancillary Benefits and Challenges
Besides comparing travel costs, Travel$ense provides summary reports and business aircraft performance reports and tracks cumulative productivity and efficiency gains. The program is available from NBAA for $795 ($595 for association members); there are no ongoing support or subscription fees.
Bolen and other bizav advocates note that beyond quantifiable cost advantages, business aviation provides intangible benefits that even Travel$ense doesn't track: enhanced security; the ability to attract and retain key people; increased post-trip productivity concomitant with reduced travel fatigue; and the ability to keep payrolls lean by multiplying the reach of personnel. Given these attributes, it's not surprising that publicly owned companies that use business aviation have historically provided greater return to shareholders than companies in their industries that do not use business aviation, according to the NBAA.
A recognized challenge for Travel$ense users is the reluctance of some corporations to give their flight departments salary information that is needed to calculate the value of employees' time. And anecdotally at least, executives can be surprisingly blind to anything but the airplane's operating expenses in calculating travel costs.
"The companies our management team has worked for don't have any interest in validating the value of their time," said Baldwin about his efforts to introduce the "value of time factor" to clients trying to get a handle on their flight-ops accounting. "It was strictly setting up the cost per mile or per-hour cost, or some variation of that formula."
And for some users caught in the current economic downdraft, the value of business aviation-however it is calculated-may take a back seat to more immediate financial concerns.
"If the company is in a cash crunch, the value of time saved may decrease," said David Wyndham, a partner in the business aviation consulting firm Conklin & de Decker. "They may ask themselves, 'In these uncertain times, can we afford [the upfront expenditures required] to be that productive?'"
Bolen, however, thinks the difficult economic climate may make the case for business jets even stronger. "Companies are looking at ways to maximize all their capital assets, all their tools," he said, "and a number of utilization strategies involving business aircraft can help."
For anyone who wants to prove that point, so can Travel$ense.