Plane Conversations

The beginning of online travel created new business models that changed the dynamics and relationships with buyers.  Now with the advent of social technology the dynamics are changing again.

instead of the traditional travel site being the brand the brand has become the traveler.

As a result, the present online travel bazaar has become a race to become more social. Technology and savvy buyers have dramatically changed online travel over the past two years. The app market, for instance, has swelled from virtually nothing to billions of dollars in just a few years, and smartphone owners love their access to a gaggle of Wi-Fi finders, flight status updaters, local restaurant finders, budget booking assistants, translators and more.

Websites offering unique travel-oriented services have made a strong showing, too. They include Wanderfly, a personalized travel recommendation travel engine à la Hunch and Pandora; and GTrot, a site that allows travelers to share their itineraries with friends and get travel advice within their networks.

Applications like these will continue to grow, improving the efficiency of the overall industry by improving the connectivity of air travel information between flights and friends.

Chasing the Lowest Common Denominator

While on-line applications enable travelers to connect and collaborate, few if any do anything to improve the travel experience. Commercial airline travel experiences are abysmal and getting worse. While the efficiency of commercial air travel for consumers and businesses has diminished could there be a better alternative emerging?

Social technology will not enhance the value of on-line travel sites enough to improve pricing.  Social technology has become a “must be” rather than a differentiator and it, by itself, doesn’t change the lowest common denominator, price.  Finding “best” prices has become easy given the power of search and the recent introduction of Google Flights.  Finding the best experience and the highest value has become difficult but may change soon.

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An airplane moves people and connects them with other people and things.

The internet connects people and moves things.

Airplane operators know that using aircraft can be an expensive proposition. Use of the internet is free. If you combined something expensive with something free what happens?

Do Private Jet Operators Understand The Implications?

There has been a saying in the private jet business: If you have to ask the price, you can’t afford it. People who use private jets generally haven’t hunted for the best prices because it’s a status thing. These two statements used to be foundational truths in the private aviation business. But things are changing.

There are a finite number of wealthy people and/or corporations who desire to own or use a private jet regardless of the cost. Most charter operators have chased all the wealthy people for a sale so operators end up chasing the same customer over and over. Even the wealthy are feeling the economic pitch and shareholders are questioning the cost of and need for private aircraft.  Now charter operators are being pressured to justify and lower their cost. Cost has become transparent thanks to the internet.  Yet most operators do not fully understand the implications of transparency and social technology on old business models and methods.

What Are The Implications?

Business travelers and affluent individuals are becoming disenchanted with commercial flights, crowded airports, flight delays, and inconvenient schedules. These travelers are looking for alternatives to save time and reduce the hassles of commercial air travel. So they go to the internet to examine private aviation alternatives. What do they find and see?  At most, Web.1.0!

When you do a search for “private jets” or “private aviation” what comes up on the first page are listings of jet brokers (those that don’t operate or own any jets). You also see lots of references to “cost per hour, fractional jets and a host of other terms that are foreign to buyers”.

So let’s say someone decides to click on any of the links. They end up on a static web page with pretty pictures of expensive jets and self- proclaimed accolades of how great this company is then an 800 number to call for a quote.

So if someone looking for an alternative to commercial air travel hasn’t already lost interest in their search then the next step is to actually make a call. Then someone answers the call and begins asking questions to the caller of which the caller has no idea what they are talking about. Not wanting to sound stupid the caller fakes their way through the dialog expecting to get a quote at the end of the call. Instead the broker/operator says “can I have your email or number so I can get back to you?”

If the buyer agrees it then takes the broker/operator at least half a dozen phone calls, faxes, or emails, before you can get a charter estimate which may or may not be correct. Then the operator/broker emails you the quote of which has so many disclaimers and its format doesn’t make any sense to the buyer. All this, and you have not boarded the plane yet.   Besides that all he buyer wanted to know is what is my seat cost and what I get for it.

By now operators are reading this saying “You don’t understand our business model, we don’t sell seats we sell jets”.  To which I would say “I know but every jet has a certain number of seats and the total cost is represented by a cost per seat, full or not.”

Broken Business Models

According to a Forrester’s recent report, there are about 53.8 Million socially engaged eBusiness travelers in the United States alone. A new market opportunity for private aviation. It’s all about the passenger – they have the money.

Certainly not all 53.8 million business travelers would consider private aviation as an alternative travel option. But let’s say 1% would which means 53,000 potentially new customers.

The private aviation industry couldn’t imagine having 53 thousand new customers because their mindsets are frozen in old business models and expensive archaic operating processes.  Today’s charter revenues barely cover the aircraft management and operational costs, and almost never reach levels necessary to cover an aircraft’s cost of ownership. At the same time in the charter world an aircraft flies empty 40% to 60% of the time.  What a waste!

It is time for a revolution in innovative private aviation business models if the industry wants to capture the significant growth opportunity fueled by demand from disgruntled business travelers looking for viable alternatives.

Old mindsets are saying “You don’t understand how we operate”. My response is “You don’t understand how to change the way you operate”.

-Ralph Waldo Emerson “Who you are speaks so loudly I can’t hear what you‘re saying.”

Stay tuned for “What Would Jet 3.0 Look Like?”

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When commercial airlines do not optimize seat sales they loose money. Historically airlines have looked for “lanes” that have high demand thus insuring increased sales of seat capacity. Now they are using social media to fill seats.

Some airlines say that social-media outlets, such as Twitter and Facebook, are beginning to disrupt the traditional sales cycle. Some airlines are sending sales out directly to customers at all hours, making pricing far less predictable each day.

Social-media sales of  airline seats has just begun and it will change the way airlines have traditionally sold seats. After all empty seats represent leaving revenue in the air.

What About Private Jet Charters?

Private jet charter operators seek buyers who will pay for the entire plane regardless of how many seats are full. Those who charter jets pay the round trip cost of a jet whether they use it round trip or not.  The process creates what is known as “empty legs”. Empty legs are usually one way trips flying empty and yet already paid for by somebody.  Most Private operators try and sell the empty leg at full charter prices and thus few ever sell an empty leg.  Empty legs represent seats unused leaving revenue in the air.

A recent New York Times Article titled “Fly a Private Jet at Public Prices” states “The dirty little secret of the industry is, about a third of our flights are empty,” said Alex Wilcox, chief executive of JetSuite, based in Southern California, which recently began posting last-minute $499 deals on Facebook for empty legs on the company’s four-passenger Embraer Phenom aircraft. “Say a Gulfstream pulls into San Francisco and is going back to Vegas empty,” he said. “A few years ago, if you were to say, ‘if I give you $500 will you take me and my family?’ you would get laughed at.” But the recession changed such attitudes, Mr. Wilcox said. Now, he said, more companies are saying, “Sure, it’ll help pay for the gas.”

Revenue Is Revenue to Some

Allen Howell, CEO of Corporate Flight Management, looks at empty legs as an opportunity to expand his market of consumers and gain incremental revenue. Allen Howell says ” If I have a plane flying empty from one city to another I am a fool if I don’t open the seats on that leg to paying customers.”  ”Think about it, the value we create by selling the seats on empty legs is five fold:”

1. We increase the potential of building relations with future charter prospects
2. We provide consumers with an experience that exceeds all expectations
3. We create incremental revenue streams that go right to bottom line profits
4. We increase and expand our circles of influence by leveraging the power of social media
5. We begin to create repeat customers that are common to travel circles we service

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Alfie Kohn, author of  No Contest:The Case Against Competition writes:

Noncooperative approaches . . . almost always involve duplication of effort, since someone working independently must spend time and skills on problems that already have been encountered and overcome by someone else.

Sound familiar?  Look around and in almost every industry you see competitors beating each other into the ground while reducing the end value to the customer and increasing cost.

Julie Browser, of IBM writes “The traditional concept of business as a “winner takes all” contest is giving way to a realization that in the networked economy, companies must both co-operate and compete. Termed “co-opetition,” this new perspective requires companies to create business strategies that capitalize on relationships in order to create maximum value in the marketplace.

“Co-opetition”– a model in which a network of stakeholders co-operate and compete to create maximum value — is one of the most important business perspectives of recent years. Internet and mobile technologies have made it even more necessary for companies to both co-operate and compete, by enabling relationships through information sharing as well as integrating and streamlining processes.

In today’s networked economy, co-opetition is a powerful means of identifying new market opportunities and developing business strategy.

Take the private aviation industry.  Everyday thousands of private jets fly empty. Those who charter jets pay the round trip cost of a jet whether they use it round trip or not.  The process creates what is known as “empty legs”. Empty legs are usually one way trips flying empty and yet already paid for by somebody.  Most Private operators try and sell the empty leg at full charter prices and thus few ever sell an empty leg.  Empty legs represent seats unused leaving revenue in the air.

What if these private jet operators shared all their empty legs with the public and sold seats on those legs?  By cooperating they would expand their markets, create value for consumers and generate more revenue.  But many won’t do that because they view themselves as competing with each other rather than cooperating.  In the meantime revenue is lost to the air. In this case they end up doing less alone rather than more together.

Business is both competition and co-operation

In the past, people saw business as a “winner takes all” or “zero-sum” game. The networked economy moves away from these purely competitive plays to recognize cooperative relationships that leverage value created by those in the network. Competition — the other aspect of co-opetition — occurs after businesses have created new value in the market and expand the value proposition through quality and creativity.

Social Flights business model is about creating cooperation with private jet operators with the aim of expanding the market and creating new value for all parties involved. For it to work the suppliers must cooperate in order to gain increased market share through new value offered to travelers who in turn create new revenue.

So, will you consider cooperating?

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There’s an old song from the World War II generation that says, “Wishing will make it so…”.  Buddy DeSylva’s lyrics speak of hope, optimism, and belief.  Yet wishing can’t give you more hours in a day, or more productivity while travelling, or access to places difficult to reach.

Flying can make it so.

That being said, we need to tell our stories, ways that aviation assists us daily in carrying on our various activities and work.  This is partially because we gain strength and synergy when we see that there are others much like us who know and understand the real benefit of flying.  This doesn’t have to be a $20million dollar corporate jet.  It can be as simple as a Diamond DA-40.  It’s the story of the DA-40 that I want to pass on to you today.

Last week our company’s CEO, VP of Sales, and I took a DA-40 to visit a customer in Jonesboro, AR.  We then had a pop-up visit with a lead in Little Rock, AR.  We then lunched in Tunica, MS on our way home (no gambling, just food) and returned home in time for a local Chamber event in our hangar.

The plane, by business aircraft  norms, was really modest.  In fact, a LearJet pilot teased me as I preflighted my plane parked next to his.  The only refreshments were in the small cooler I packed with green tea, water, and peanut butter crackers on my way to the airport that morning.   The only in-flight entertainment was an iPad.   And the air conditioning?  On this 97+ degree day, it was inoperative.  So we climbed until we felt comfortable at 60 or so degrees at 7,000 feet.

And yet, even in this basic small aircraft we were able to condense over 14 hours of drive time into 6.2 flight hours.  Had we driven we would have certainly been out overnight in order to drive and have time for our meetings.  And while it was a long day, it was an easy day.  So we made our rounds, saw our clients, and returned before dark.

Yes, aircraft are fun.  Some aircraft are luxurious.  Some aircraft are expensive and some are not.  But for the businesses that operate them, they are tools.  Their value in time savings and multiplied productivity is astonishing.

Flying can make it so.

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From our first article with Plane Conversations, we have advocated for general aviation, pointing out how aircraft charter can be a logical solution to travel difficulties and why corporate flight departments and private aircraft ownership are far more than the corporate excess Main Stream Media supposes.  However, we realize that while we have said that air mass transit is not always your best solution, there are particular instances when it does  makes the most economic sense.  In those cases, travelers have to suck it up and deal with the hassles and inconveniences of scheduled air service.

One of those hassles is airport security.  As I have said before, while I am not a fan of the process, I recognize the need for it and I understand that it is a necessary evil.  In July, a woman was arrested for disorderly conduct at the Nashville International Airport when she refused to allow her teen-aged daughter to go through the body scanner.  This meant that the girl had to be screened using a standard pat-down, a procedure far more thorough than it looks on Law and Order.  The mother wasn’t happy with that, either.  She proceeded to complain loudly, repeatedly and abusively enough that the airport police finally put her under arrest.  She has now achieved some kind of bizarre martyr status in the Main Stream Media.

This absolutely blows my mind.

Her attitude reflects  a common sentiment, though.  The traveling public insists on government protection for fliers. Snicklefitz Traveler cries, “Keep me safe!  Keep me safe!  But do it by screening that other guy, ‘cause I’m not a threat.”  “Keep me safe, but handle it in the way that I want, even though I don’t really know how the whole process works.” “Keep me safe, but don’t inconvenience me.” “Seat me next to people like these….”

Security measures are not created out of a vacuum.  They are in response to a specific threat or incident.  Thanks to Richard Reid, we have our shoes screened.  Thanks to Umar Farouk Abdulmatallab, we have our bodies scanned and our groins checked.  Organizations all over the world use both women and children as soldiers and terrorists.  Security screening is a thankless job and the TSA an easy target for criticism; but, the fact is, the TSA has to get it right every time – or as close to every time as humanly possible –  because the cost of being wrong could be catastrophic.  The terrorist has to get it right only once to achieve that same catastrophic effect.

Flying is a privilege, not a right.  To take advantage of the privilege, we must agree to abide by the rules of the airlines, airports and related agencies.  If you disagree with the measures in place, you don’t have to fly.  People crossed the oceans in ships.  They settled Utah using hand carts.  There are other ways you can get to your destination.

By the way, the attractive, harmless people in the photos are Alyssa Bustamante, a 15-year-old who strangled, stabbed and cut the throat of her nine-year-old neighbor and Anders Breivik who murdered 77 people in Norway.

If Timothy McVeigh taught us nothing else, he should have taught us that evil may look innocuous and that not all of those who would do us harm are from outside our borders.

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Recently I was talking with a friend about business flying.  He is not in business nor is he a pilot.  But he had trouble getting around the notion that business aircraft are all about excessive luxury for the super-wealthy.  I commented that there might be some merit to his claim if the majority of business aircraft owners were all super wealthy individuals.  But they aren’t.  This opinion also belies a scarcity mentality that assumes if someone “has” then it is because they have taken it from someone who, as a result, “has not”.  Funny, but we forget that the vast majority of the world lives on less than 2$ per day and considers anyone who has an automobile to be “rich”.  Perspective and assumptions are often overlooked in these discussions.   Personally,  I reject the idea of a closed economic system and the resulting scarcity mentality that accompanies it.  But, alas, I digress.

Yes there are aircraft owned by the super-wealthy who utilize them mainly for pleasure.  But that is the exception (as well as their prerogative, by the way.)  However, according to a 2009 study from the National Business Aviation Association (NBAA) small businesses own the majority of business aircraft.  Less than 1 in 4 passengers on business planes are top level leadership.  More often, 70% of the time, business aircraft are used to transport mid-level mangers, sales, support and technical staff. 1  The image of the aircraft being utilized only by the CEO or COO as a luxury is simply not factual.

The practical uses of business aircraft are many.  You can more efficiently fly into airports not serviced by the airlines and reduce the expense of hotel stays and car rental.  Employees can work during the flight and not waste precious time standing in line at security or waiting for standby flights because their original flight was cancelled.  Those travelling on business aircraft said that they felt 20% more productive on the plane than in the office and felt that on the airlines they were at least 40% less effective.2

The larger businesses that operated corporate aircraft are reguarly among the most profitable (which means, in turn, they are able to hire and employ) and respected in our country.  NEXA Advisors, LLC, conducted a study to see if business aircraft ownership actually had a correlative effect on the health of the business operating the aircraft.  In short, yes, it did.  It made a solid positive difference in these companies.  The report’s conclusion was, “Business airplane users continue to outperform nonusers in terms of revenue growth, profit growth, and asset efficiency.” 3

Moreover, what is lost in the grandstanding on Capitol Hill and the media’s constant badgering of Business Aviation is how much business aviation contributes to our economy and to the success of companies that employ tens of thousands. Aviation and it’s related businesses directly employ more than 1.2 million people and infuse $150 billion into the economy.  Aviation is a signficant contributor to our nation’s health.4

The businesses operating their own aircraft were to be found on lists such as : Business Week’s 50 Most Innovative Companies, Fortune’s 50 Most Admired Companies, Business Week’s 25 Best Customer Service Companies, Fortune’s 50 World’s Most Admired Companies, and Corporate Responsibility Magazine’s 100 Best Corporate Citizens.5  Again, the caricature of the business jet operator is found to be just that -a caricature that does not accurately represent reality.

Without a doubt business aircraft have a degree of luxury about them.  And why not?  Do you chastise someone for having leather seats in their car?  An .mp3 player?  Satellite radio?  GPS?  But those things are pretty standard these days in our cars.  Perhaps one of the major issues is that business aviation stands in stark contrast to the miserable state of the commercial airline experience that we all know only too well.  If you had the choice of driving in a 76 Plymouth or a 2011 MKZ, would you really have to think long about the choice? (And for the record I drive a decade-old Ford Taurus with 140,000+ miles)  If it’s your car or boat or plane, why not make it comfortable and functional?  But at the end of the day, that’s not the point as my friend’s faulty assumptions illustrate.

Most businesses don’t operate aircraft because they simply like the luxury.  They operate them because they make practical and financial sense.  They don’t buy an aircraft so they can look cool and yet lose money.  No, they have learned that business aviation can make good business sense.  And the business aviation industry stands ready to be an integral part of the equation to help individuals and business achieve the success that, in the end, makes us all stronger.

1.  Real World Business Aviation 2009, page 5 (http://www.nbaa.org/business-aviation/Real-World-of-Business-Aviation-2009.pdf)
2. IBID, page 6
3.  The Bizav Advantage: The case for bizav, in dollars and cents Robert P. Mark, Business Jet Traveler, Oct 1, 2010
4. Aviation Week, Kansans Demand Obama End BizAv Rhetoric, July 22, 2011
5. IBID, Mark

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by Chris Findley, Aircraft Sales Specialist, CFM

It’s about time for our family to replace one of our cars.  I don’t relish the process, but I enjoy the results.  As we start to look at what’s available and for what price, we also begin examining things such as fuel efficiency, safety, maintenance and seating.  Of course, I also want a car that offers a nice driving experience.  Frankly, the more it reminds me of an aircraft, the better!

When we’re searching for the right car, we take into account a number of factors.  The same should hold true when we examine potential aircraft.  And like cars, there’s always a buzz from our friends or from slick advertisers that bring certain models to mind.  But because an aircraft works for Company A doesn’t mean in any way that it would be a good fit for Company B.  Just because there’s a really great ad that makes an aircraft look great and fun, doesn’t mean that it would be a realistically viable option for you.

So what are some the things to consider as you shop for a new or used aircraft?  This list is a summary and eventually you’ll drill down into more and more specificity, but this will help you begin the process:

• First of all, what are your travel needs?  Where do you need to go?  How often do you fly and how much is that currently costing you in terms of both direct travel cost (tickets/charter etc.) and indirect cost (lost productivity,  per diem, lodging etc.)   Try to establish whether you need an aircraft that will take you on repeated short trips or regular transcontinental trips.
• Secondly, and related to the first, how many people do you need to carry on a regular basis?  If 85% of your flights involve less than 4 people, you might not need to invest in the acquisition and operational costs of a 10 seat jet.
• Third, decide on what features are essential and what would just be “nice to have”.  Is a stand-up cabin a requirement?  Cruise altitude? What type of toilet facilities?  What size door and seating arrangement are preferred?  It’s important to work through these early so that you can focus on aircraft in your search that truly fit the parameters you want in your next aircraft.
• The fourth consideration is very important and that is performance.  Many people focus on range.  That is, “How far can this airplane take me on a single leg?”  But this is only a partial indicator of performance and is dependent upon things such as prevailing winds, air traffic delays and atmospheric conditions.  You’ll also want to consider speed.   For short hauls (say under 500 miles), a jet may not give you much of an advantage in speed/time over a nice turboprop.  Keep in mind too, that aircraft tend to perform less efficiently in high elevations on hot days.  So it is vitally important to examine the field elevations, weather patterns, and runway lengths from which you will operate your plane.
• Finally, after reviewing your basic needs, passenger requirements, features needed/desired and performance, consider the basic cost of the available aircraft that seem to generally fit this mold.  At this point, you are not getting too specific, but in a basic sense, what are the costs of the aircraft that can do what you desire.  Be sure to go past acquisition cost and consider operational, maintenance, and training costs.  Purchase price is a “one-time” cost while operating costs occur every time you start the engines.  As your search becomes more specific and starts focusing in on particular planes, you can work with your broker to develop a comprehensive picture of the likely annual cost of the aircraft.

It’s exciting to be in the market for a new or used aircraft.  But it is important to find the right airplane that fits your operational needs and makes solid financial sense.  If we can be of any assistance to you in this process feel free to contact us at CFM: 615-669-9393 or sales@cfmjet.com

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This is déjà vu all over again.  By now I would have thought our Congress would have come up with a long term funding authorization for a very critical part of our nation’s infrastructure.  All of us under the big umbrella of aviation (airlines and GA) don’t agree all of the time but for once we all agree to the necessity of funding the FAA and the development of airports and Next Gen air traffic control systems.  We have even accepted the idea that fuel taxes will go up to help fund these initiatives.

ATW online reports that our Congress just passed the 20^th short term extension for funding the FAA.  That’s right, 20 extensions.  If I ran my business finances like that I would have been fired a long time ago.  Somehow our nation’s lawmakers can’t agree to get anything done about this yet no one seems to hold them accountable.

Quoting from the article “FAA Administrator Randy Babbitt, Airports Council International-North America and airport directors around the US have been saying for some time that uncertainty over FAA funding, particularly the Airport Improvement Program that helps finance expansion programs, is causing disruptions to airport construction projects (ATW’s Airports Today, Oct. 5, 2010). “For over three-and-a-half years we’ve been operating on extensions,” Babbitt noted during a recent speech. “It’s been very difficult to run an agency on extensions … We need to restore long-term stability to funding.”

In addition to the disruption of airport construction projects and the stall in developing Next Gen, the FAA has basically shut down the certification of new Airlines and Charter operators. So how do we create any new jobs in our industry if startups can’t start? Those of us already flying are also having trouble getting anything done with an agency that doesn’t know where their next dollar is coming from.

The Democratic controlled Senate and the Republican controlled House can’t seem to figure this out. But this goes back to before the Republicans got control of the house. So it seems that doing nothing about an important issue is the way it goes these days in Washington DC.

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Ancient writers often referred to two types of time: kairos time and chronos time.  Chronos is linear time and measures things in a sequence.  First this, then that.  Kairos time can be loosely defined as the “right” time or the “opportune” time.  Think of it this way, if you stand over home plate and repeatedly swing a baseball bat in regular intervals, you are participating in a chronos event.  If, however, you wait and swing just as the baseball crosses the plate and make solid contact that sends the ball over the left field fence, you have just participated in a kairos moment.

In your business, which type of time do you prefer?

At Corporate Flight Management our motto is “Time Creates Opportunity”.  But it isn’t just any time.  It is kairos time that creates the opportunity.  Private corporate aviation can create this opportunity for you and your business.  It is about being in the right place at the right time, whether that is closing a critical deal or being home in time for that important family event.

If you’re trying to achieve this with the airlines, you’re stuck in their time –chronos time.  And you know that it is anything but opportune and eminently frustrating.  The good news is that there is an alternative to the norm of airline travel and it is far more available and affordable than you might imagine.

Corporate aviation can help you and your company manage the one resource you simply can’t create more of: time.   When you are able to manage your time and your company’s time more efficiently and cost-effectively, you generate many more kairos moments.

Don’t just swing and hope the bat connects.  Be in the right place, at the right time and swing for the fence.

After all, “Time Creates Opportunity.”

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