Plane Conversations

4 in a 4 part Series:

In the previous posts in this series, we discussed the gaps in Price and Time between Private Aviation and Air Mass Transit travel.  This time we are going to look at the gap in customer experience.

It is easy to measure price in terms of actual dollars and in terms of the value of our time, which we can use as an offset of the price gap. The more difficult gap to measure is the difference in the experience of the two forms of travel. To date, I am not sure if anyone has been able to accurately quantify the difference in the traveler’s experience. The ability to measure the traveler’s experience on either a private aircraft or an airline and compare that to the alternate experience, would give us a more meaningful comparison between the two.  That comparison could then be quantified and translated into a monetary measurement, which would go towards offsetting the price gap.  I believe that offset would be a valuable tool in selling private aviation services.

Here is what we know for sure!

Those who have experienced private aviation as a form of travel often justify the high price by speaking of the better experience as opposed to traveling by air mass-transit.  Call it the Hassle Factor of the airlines: the anti-social behavior of the passengers we share space with in an airliner, the rude treatment we sometimes receive, the lack of control over where we go and how we have to get there, the uncomfortable feeling of being compressed into a space that is measured in inches of seat pitch, the food served (or mostly not served) on the planes, the baggage abuse (bags don’t have feelings but I don’t like my stuff being abused) and on and on……

You get the point.

Stack that against the experience of private aviation.

Not one single person I have spoken to in 28 years of being in this business has ever said to me, “I can hardly wait to go back to traveling on the airline since I can’t afford to travel in a private aircraft anymore.” Not one. Every aircraft owner, charter customer or private pilot / aircraft owner pilot cites the better experience of flying by private aircraft as the number one reason to close the price gap. They don’t know how to quantify it but they know what they know. How good would it be for our industry to develop a tool that measures the experience, quantifies it and then translates it into dollars?

As consumers, we purchase experience with our hard earned money every single day. We pay more for an iPhone than for a Blackberry because we like the experience. We ride in a luxury car rather than in a compact car because of the experience. Both serve the same purpose since we arrive at the same time regardless of the type car, but what a different experience to ride in a nice driving, luxury car as opposed to a compact.

If we can ever measure and quantify the experience and then communicate that measurement to the market we might be able to come a long way in bridging the price gap that has prevented the many from experiencing the joy of travel by a mode that the few have become accustomed and maybe even addicted to!

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Our company sells refurbished turboprop regional airlines all over the world. In the last 18 months, in the middle of the worst aviation recession in memory, we have sold and delivered aircraft to Nepal, Canada, Columbia, Venezuela, Haiti, Dominican Republic, Australia,and Zambia to name a few.  All of this in a time when used aircraft sales in the United States came to a screeching halt and have yet to recover.  And the sales could have been higher.  Had small airlines who are looking to expand their fleets been able to get financing, we would have sold twice again what we were able to sell around the world. Albeit there is risk associated in financing aircraft for small airlines in other countries, most of the businesses we deal with are well run and not as highly leveraged as the big airlines in Europe and the United States. These small businesses have not had the luxury of obtaining financing for new aircraft and so they typically pay cash,after saving for years, or finance a very small portion of the purchase.

A December 10 article in The Wall Street Journaldiscusses ExIm bank’s effect on Boeing Commercial Airliner sales. The number quoted is that one in four of Boeing’s sales are funded though the ExIm Bank guaranties. Without this government-backed financing Boeing would not be where they are today.

Recently our company was introduced to the process of working through the  ExIm program as an opportunity to get backing on the sale of aircraft to a small airline in Central America.  ExIm works much like other US programs that guarantee loans for loan underwriters to induce the underwriter to make a loan they might not otherwise make.

In a theoretical sense I believe in the free market economy, but a free market economy needs a level playing field, with rule sets that apply to everyone in the market. In the case of most international trade, and especially in aviation, governments across the world intervene to the benefit of their national industries. So if Airbus gets help from the European Union and its home country of France, but Boeing gets no help in any form from the United States is that fair trade in a freemarket economy?

Let me take this back down to the small business level where most of the jobs in this country are created. In the case of our company a big percentage of the payroll is tied to buying, refurbishing and reselling these used regional airline turboprop aircraft. We have yet to receive any handouts from the government for anything. We haven’t asked for any handouts. We pay our taxes (hard to count how many different ones) like everyone else. So, is it wrong to go to ExIm and ask them to back loans to sell small aircraft to airlines in developing countries who will use these aircraft to develop their own transportation infrastructure?

I don’t know the default rate of the ExIm program’s backed loans. I am not sure it is published and I’m certainly not suggesting a  process that encourages bad loans. I am simply suggesting a process that provides capital for transactions that are sound in business principle but outside the realm of traditional banking sources.   

Without capital it is hard to grow the economy, both here in the US and abroad. For the case of our small business, when other small airlines around the world can obtain the capital to grow, jobs and profits are created here in the US.

Not a  bad proposition?

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Aviation supports a role in society that is analogous to the Internet itself. While the hard work gets done at the points on the ground, Aviation provides the diversity of ideas that can congregate.

Sure, Twitter, Facebook, and Linked in are great for broadcasting across the globe, but nothing can happen until the rubber meets the tarmac. Emerging trends in the Last Mile of Social Media portend opportunities for Private Aviation.

The following video describes how the components of the next economic paradigm must act locally, but share globally. For anyone wondering what to do next or where the great opportunities are, think about building out the Last mile of Social Media.

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Part 4 in a Series on Social Media and Business Aviation: Written In Collaboration with Jay Deragon

Over the past few weeks I have posted several articles on social media – the new method of communicating to the market. I am an admitted novice in the world of social media and technology, but my eyes are starting to open to the possibilities created when social technology and business aviation collide.

We have discussed the opportunity social media presents to fight the war the airlines have declared on general aviation by getting our message out in an unfiltered way.  We have also discussed social media as a means to increase our visibility to the market as well as to communicate with that market in order to innovate and better meet its needs on its own terms. All of these are game changing strategies.

So now I want to ask some what ifs!

What if there was a social grid or network built for the purpose of becoming the e-marketplace for private and business aviation travel solutions? What if this social network allowed, encouraged and facilitated the market to come together to aggregate a demand that is currently outside of the supply that  traditional channels of distribution make available to the market?

What if the market could then go to the suppliers of private aviation and request trips or routes of travel where individual travelers could buy seats, filling the aircraft, driving the price down?  Maybe the price would still not be as low as mass transit airline travel, but still would be much lower than today’s pricing of private aircraft flights.

What if travelers could input their travel profiles into the social grid in such a way as to speak to the entire market and to form affinities around common travel patterns? Would travelers be willing to share their travel  information with the market in a profile, sharing where they go, when and how often? Would travelers talk to each other about their travel needs if those conversations led to more new, innovative and efficient travel solutions than have ever existed before?

What if all air charter providers and small scheduled airlines (niche airlines) could input supply into the grid, including empty legs?  What if on-demand charters were quoted instantly so that the market had real time visibility to the solutions they need? What if all of these suppliers could participate on a level playing field and in a system that costs the users only when a transaction takes place?

What if the other parts of the business travel supply chain were able to participate as well? Would the hotels, resorts, rental car and limousine services have an interest in participating in the grid?

What if private aviation operators could collaborate to create a bigger market?  What if we woke up someday and realized that we’ve been monopolized by technology controlled by some organization that isn’t even in our business? What if we all created a new collective “social grid” in which the general market of travelers realized they could use our system rather than the old commercial system?

What if we could collectively reinvent ourselves as an industry with the aim of serving the larger market? What would be required? Who would agree to collaborate? Who would agree that if we don’t, someone else will?  And we’ll all lose when we should have been leading all along?

If we could simply start to build a dialog around all of these questions what could we do? Should we do it? If not, then let’s not even try to answer these questions.  Let’s keep doing what we’ve been doing. Einstein once said “insanity is doing the same thing over and over and expecting different results.”  What happens if we all decide to be sane?

If you think we need to do something else then join me and invite others to join us in creating a new future where we can all win.

Who will jump into the dialog? Who will invite others to do so as well? Is there anyone out there?

Where are the answers to all of these “what ifs”? Could they be out there in the market of conversations that could create the new system that creates the answers?

The answers are out there in the minds of people wanting to create a new future. Are you one of them?

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Private aviation is feeling the effects of the economic downturn with growing job losses and plummeting business confidence. This has translated into cuts in private aircraft usage; so, many in the private charter brand category are looking for ways to reach the business market in a more cost-effective way. In a departure from traditional marketing practices, private aviation brands ought to be  increasingly turning to the web for promoting their proposition as well as seeking out new audiences that would like to find alternative ways to travel. The problem is that although private aviation businesses all have web presences now, many fail to realize the full potential of this new thing called social media.

Since private aviation is considered a luxury, one wonders whether  other luxury brands are using social media. According to the Luxury Institute the trend towards e-commerce is already happening in the US:

• In 2008, 33% of luxury brands had e-commerce sites.
• In 2009, 66% percent had e-commerce sites.
• Luxury consumers are individuals who make $419,000+ per year.
• 48% of them are on Facebook, and 14% of them are on Twitter.

How Does Private Aviation Stack Up?

While all private charter businesses  now have established websites, generally their approach to digital marketing (specifically, search, social & target marketing) is often sub-optimal and fails to unleash the full potential of this channel and the related technology. This is because the aviation industry has failed to educate itself as to the power of this thing called social media.  This is evident by:

• Insufficient senior management buy-in (e.g. formal corporate KPI’s for digital marketing)
• Organizational ‘silos’ causing disconnects between ‘digital initiatives’ and ‘physical initiatives’ – for example the industry continues to use old media channels and chases the same old audience rather than trying to expand the audience.
• Lack of clarity around the objectives (selling vs branding vs engaging) – this then reflects as a lack of an online strategy, leading to confusion and a total lack of knowledge and understanding
• Small marketing budgets, if any, allocated for online activities while still using expensive off-line channels to message a shrinking market of listeners
• Within the online budget, poor use of distribution tools and conversational content. The Aviation Industry needs education on various other channels that would produce much better outcomes (such as search and social).
• A tendency to consider this thing called social media as something buyers of charter service don’t use. Wrong again, the largest adoption of this new technology is from people in the age bracket of 45 – 55 and their average income is in the high six figures.  Does that sound like a market operators should reach?

From my prospective, while the private aviation industry moans about a depressed market, few if any show evidence of innovative ways to expand their market and reach a larger audience.  Many operators take the attitude that their service is too costly for the larger audience.  Really? Then how about leveraging a larger user base, fill your seats and subsequently lower your cost per seat, per leg?   Doing so would enable your market to expand and applying the innovation afforded by social technology would allow you to reach the larger audience efficiently and effectively.

There is an old saying “If you keep doing what you’ve always done you’ll get what you’ve always got but today you’ll get less.” How are those old ways working for you?  Not good huh? Then innovate!

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Private aviation uses the term “legs” to indicate lanes of travel from point A to B. In order to optimize the productivity of an aircraft the destination flight needs to be booked as well as the return flight. However, most return flights from B to A go empty and the originator of the charter has to pay for unused “legs and seats”.

Seems to me that such a scenario represents sub-optimization of the aircraft. Sub-optimization is a waste of an asset and increases the cost of using the asset; thus, limiting the market of users of the asset. Make sense?

Now if we examined new methods aimed at optimizing use of private aviation the answer lies in filing both legs, or expanding legs, and seats with business travelers wanting to go from different points within a “leg” to another point.  The model is exactly how commercial aviation maximizes sales of seats within legs they have determined as “used frequently” by the general public.

Applying New Methods To Private Aviation

Private aviation has a much larger reach in terms of probable destinations for business travelers.  The private aviation industry serves a larger scope of available destinations than does commercial aviation. The problem is that each operator runs their “legs and seats” in a silo of distribution and market awareness. Most operators serve regular customers and wait for the phone to ring to initiate a flight. In other words, operators usually wait until the market comes to them rather than going to a larger market of probable travelers needing to get to and from a destination.

Each private aviation operator runs a sub-optimized system and, given today’s economic climate, they are all feeling the reduction of old utilization models and have assets sitting around waiting to be used. The collective waste of all these sub-optimized systems represents billions of dollars annually and many operators will not survive.

What If?

What if there was a new system aimed at optimization of all available equipment, planes, legs and seats? What if  each operator’s individual system was effectively and efficiently communicated to the general market of business travelers? In other words, if an open source grid of  legs and seats were made available to anyone and everyone, and said grid was effectively communicated to the general public of business travelers, what would happen? The likely results would be the the ability to lower the cost of private aviation, which would expand the market to the general public of business travelers. Subsequently, operators would have the opportunity to optimize legs, seats and related assets. The general business traveler would be given the opportunity  for a much more efficient and accommodating experience than commercial travel and while saving time and money. While the cost may be slightly higher than using fixed routes on commercial aircraft, the time saving and experiential factor would easily justify the increase cost.

Sound crazy? Not really when you consider the power and reach of social technology which could easily communicate available legs and seats to a very large audience.  The technology to create an entire private aviation social grid is readily available and the use of social technology would provide the reach to the general business traveler.

Can you tell I want to go back to using private aviation vs. commercial? I am trying to stir thinking out of the box and collaboration for the benefit of all. Leadership and innovation would be needed to capture market opportunity. Does this make any sense?

What say you?

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Business leaders in numerous markets are betting that their market will come back and spend. Many choose to believe that the economic crunch is temporary and things will rebound. Maybe it is time for a reality check and especially for private aviation operators. The world is changing and much of the change could be permanent. Just consider what has happened in the last twelve months to our financial markets.

The real crisis is in the DNA of the industrial economy — and it’s just as lethal as ever. Most businesses are socially useless. They’re about as useful to society (to paraphrase Gloria Steinem) as bicycles are to fish.

Sound controversial? If it does, it only underscores just how out totally of touch with real value we’ve gotten. (Here, for example, are Paul Krugman, Simon Johnson, and Lord Turner all discussing social uselessness.)

What has socially useless business cost just over the last five years? $12 trillion at a minimum. Those are the costs of the various bailout packages for socially useless banks.

Socially useless business is what has created a global economy on life support. Socially useless business is what has created a jobless “recovery” and mass unemployment amongst the young. Socially useless business is why we don’t have a better education, healthcare, finance, energy, transportation, or media industry. Socially useless business is a culture in shock, reeling from assault after assault on the fabric of community and comity. Socially useless business is the status quo — and the status quo says: “You don’t matter. Our bottom line is the only thing that matters.”

To answer it, you’ve got to stop thinking in yesterday’s terms. Forget the decades-long obsession with business models for a second. It’s time to think anti-business models. Anti-business models are models companies use to profit without doing anything socially useful.

I’ve put them in terms that a certain generation of beancounters can understand — in the hopes that, before it’s too late, and awesomeness rains down on them like thunder, they change their ways.

Does This Apply To Private Aviation Operators?

The private aviation industry has been hit by a shock wave. Reductions in charter business are down 20,30,40, 50% and more. Why? because the entire economic climate has changed and isn’t likely to return, ever.

Private aviation operators basically have two choices. Continue to believe it will come back to the good old days and you’ll likely die. The other option is to reinvent yourself and your entire industry with innovation that expands your market and plugs you into “social business models based on collaboration, communications and innovation.”

Your legs and seats are empty. Time to downsize your operations and look for ways to go lean and mean while expanding your market opportunity. Frightened? You ought to be. Think this is hype? Well, just wait and see. Your inventory just may be on the auction block and your balance sheet will won’t be worth the paper it is printed on.

What say you?

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In a survey commissioned by the General Aviation Manufacturers Association and the National Business Aviation Association and conducted by Harris Interactive findings show that the use of business aircraft is not reserved for the “fat cats” riding on big luxury jets. In fact, the profile of the business aircraft user is entirely different than many members of the press have portrayed.

Here are some interesting statistics from the survey based on interviews with pilots and passengers of business aircraft:

• 1.  59% of the companies operating business aircraft are small businesses with fewer than 500 employees.   In fact, 70% of them have fewer than 1000 employees.
• 2.  A large majority of flights (80%) involve secondary airports or airports with infrequent or no scheduled airline service. 

Small businesses around the country create jobs - even the politicians in Washington, DC, admit this.  In numerous speeches and interviews, our President has said that new jobs will come though small businesses.  The number quoted by President Obama are that small business will create 70% of the new jobs in this country moving forward. 

In this country and around the world, every day small businesses use business aviation to get to their markets and to their vendors. They use business aircraft because they are conducting business in cities and towns that have airports – airports that have insufficient or no airline service. They also use business aircraft because it makes sense economically, it makes them money by saving time. Unlike big government, small businesses do not have the luxury of being inefficient; so, if using business aircraft did not save money, small businesses would stop flying in them.  In addition to small businesses being the primary customers of general aviation, we are the primary suppliers, as well.  Of course, there are the industry heavy weights like Net Jets and Landmark Aviation,but for the most part, it’s small businesses like mine who provide services in the general aviation sector.

So the story is this - small businesses create jobs. Some small companies use business aircaft to grow their business.  Business and general aviation service providers are primarily small businesses.  Those of us who run small businesses have not gotten a bail out from the  government and we don’t ride around in the big luxury jets the media include in their reports.  We are not “fat cats”. We are the businesses putting people to work and paying our taxes. All of those taxes go into the big fund that pays for the salaries of those in Washington who represent us.  Additionally, those funds pay for the US transportation infrastructure, which includes highways and, yes, airports - including those 5000 airports the airlines choose not to serve.

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A recent study by the global research firm Oxford Economics that was reported by numerous travel groups including the Travel Industry Wire, establishes a link between business travel and business growth and profit.  The article states, “For every dollar invested in business travel, businesses experience an average $12.50 in increased revenue and $3.80 in new profits,” the study says.  ”It is the first time that the return on investment of business travel has been successfully measured.”  In this study, both executives and business travelers estimate that 28 percent of current business would be lost without in-person meetings.  Roughly 40 percent of prospective customers are converted to new customers with an in-person meeting, compared to only 16 percent without such a meeting.  Although these are estimates, we know that being face to face is still relevant, effective and necessary to grow any business because business is all about relationships.

Those of us who run businesses have long known that you have to get in front of people to build business relationships and close deals. We want to know who we are doing business with and then look them in the eye.  Some of us even like to share a meal with clients and get to know them better.  There is something good that happens to relationships around the dinner table that cannot be quantified or measured.  These simple truths may be ingrained into our very being because that is the way business and commerce has been conducted for thousands of years.  You can use social media, teleconferences and emails, but when you are trying to secure long-term business relationships (especially business to business selling) nothing can replace sitting across the table from your customer or vendor.  You just can’t shake hands through a phone line.

Even our government understands this, although some of them get misguided and off the track sometimes because of their political nature.  When people are face-to-face and get to know each other they don’t start wars, they start trading.  Our President should get it.  He has the world’s most sophisticated and capable business jet (Air Force 1) at his disposal and uses it well to meet face-to-face with other leaders in the world to promote peace and, yes, even commerce.

I am in this business of business travel, and even I have thought that maybe we should cut our own travel budget to help our bottom line at a time when our industry is taking a very rough ride through the recession.  I changed my mind today.  I say it is time to get back out and see the people we need to see to grow our business out of this recession.

How about you?

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