Plane Conversations

“Systems Thinking” is important in aviation.  No single event acts alone from complex air traffic control to complex mechanical aircraft and complex weather systems. Economics is a complex system and markets are complex systems, human behavior is displayed in complex social systems.  This is the way that Social Flights approaches business – we are a ride sharing “system” for private jets

It is not surprising then that Google identifies 5 stages of the consumer travel system.

The following is from Trent via Statistics and Research Studies for Travel, Tourism & Lodging:

More than 87% of travelers expect to take the same or more number of personal or business trips in 2011 versus years past. This outlook is positive, and with the rise of mobile, social and video behaviors, we are now seeing seeing travelers move through five key stages of travel. Here are some insights within each stage:

Dreaming: 68% of business travelers watch travel-related online videos. Among them, 68% are thinking about a trip.

Planning: The average traveler visits ~22 travel related sites during 9.5 research sessions prior to booking.  85% of leisure travelers consider the internet their main source of travel planning.

Booking: 37% of leisure travelers report that the internet prompted them to book, up from 28% two years ago.  53% of travelers plan to increase comparison shopping this year.

Experiencing: 70% of business travelers check into their flights/hotel with their mobile device. Almost 1 in 4 hotel queries come from a mobile phone.  Over 50% of travelers use mobile phone or device for travel-related information.

Sharing: About 1 in 3 business travelers have posted reviews online of places they’ve been.

At Social Flights we have argued that there is a great need for travel related information to be made available for private aircraft and charter jet inventory.  As such, we are developing tools such as our “Instant Quote” feature, and inventory listings to supplement travel information on line. Here’s why:

62% of personal travelers use search engines as the number one source for travel information. 

51% of business travelers use mobile devices to get travel information, more than double the rate of two years ago. 

46% of personal travelers are watching travel-related videos, versus 36% two years ago. 

The quantity and the quality of information that a travel company can provide is directly proportional to the relevance in the 5 stages of consumer travel activity.  The effort is paying off.

Social Flights will soon announce several deals with municipalities that are tired of being stranded by airlines

Social Flights will annouce a deal with a major vacation spot that is tired of getting gouged by brokers

Social Flights Instant Quote feature continues to disrupt the “secret handshake” of the charter jet industry

Social Flights will soon announce major deals at world class events where we shuttle people to the doorstep of the action

Social Flights is opening travel circles across the US for people to share their experiences and plan their adventures

At Social Flights, we are aviators, we are system thinkers, we are fully aware and intentional about the system that we are building.  We thank all those who are helping, from our pilots to our partners to our investors and to our followers.  Together we are developing a Social Flying System

Amazing new innovations continue to appear in the travel segment.  This is understandable.  When a person leaves their home, all the things that a home provides can now be offered up as a product. From sleeping comfort, to safety, to community; “home-on-the-road” is big business.

Planning a trip is getting easier and faster.  The problem is that there are so many options available that YOUR best options rarely appear in the first few pages of a Google Search.  Increasingly, the traveler needs to interface with someone who really knows your “home-on-the-road” as if it were their own.

via Stay.com Takes Social a Step Further This Week – {Travel Daily News}.

Norwegian travel guide/trip planning startup Stay.com has just announced a new set of features to an already award winning travel platform. Named Time Magazine’s top travel site of 2010, Stay offers a new take on DIY trip planning. This week’s news centers around travel guide building using tips from various social networks.

The idea is that people can find all of their needs at the destination of interest, download their “tourist map” to their cell phone, and then ask their friends on social networks for recommendations. It would seem that Stay.com tends to favor larger metropolitan areas where more people have visited as well as the more famous landmarks rather than that perfect hole in the wall.  What happens when you get competing or conflicting recommendations? I also wonder if a wide social network converges to a more focused assessment of quality, or diverges to less focused assessments.

At Social Flights we have a mirror-image situation.  We search for all the people who want to know more about a certain subject, opportunity, or location and we seek to match them with people who know a great deal about that subject, opportunity, or location.  Then we’ll use our private aircraft to bring these people together for a truly valuable experience.   Together, such person matching represents supply and demand in their own private economy.  This is the same situation that hotels, restaurants, and tourist attractions have.  I would imagine demand for such a service would be stout.

When social media applications learn how to form and use a knowledge inventory, home-on-the-road applications will deliver an everlasting travel experience as well as an ever expanding and relevant social network. Our bet is that innovative companies like Stay.com will eventually arrive at this magical place of perfect information.

Over the last year, I have frequently been asked how it is going in our business. To be honest, it has been a rough ride for most of us in aviation.  These sincere questions that I get about our business and the industry we work in come from vendors, customers, friends and family.

My answer is usually something like “it feels like treading water with concrete filled boots …. but we are still above water.” Most of our peers in business aviation and many in other industries say the same things. Never have we worked so hard just to stay even or dig out of the hole.  

Two years into the toughest economic conditions I have seen in business aviation, the media reports that we are no longer in a recession.  That may be true, but progress seems to be measured in inches rather than in nautical miles.

Flight activity reports from Avinode and industry trade associations are optimistic, showing slight increases. Fortunately, businesses and individuals have not stopped flying in business and private aircraft; so, our part of the world seems to be picking up nicely in the third quarter of this year.

But when I speak with friends who are out there selling new aircraft, peers in the charter and aircraft management business, and vendors who supply our industry with fuel, aircraft, parts and support services I get different feelings about recovery. While we may be seeing an uptick in charter, ask the aircraft manufacturers in Wichita if the recession is over.  If not for government related aviation spending and international demand for new aircraft, the aircraft manufacturers would be hurting even worse than they are.

It seems that not too many businesses are buying new aircraft in the US, and the reversal of this trend could be years in the making. There is a huge inventory of used aircraft right now and the prices are lower than at any other time in the last 30 years, at least in relation to the price of new aircraft. Manufacturers are discounting new aircraft off of list price, something that was practically unheard of in this industry even as recently as three years ago.

So what is the solution, short of accepting that we will just be here in the trenches for the next few years and will have to slug our way out of the aviation recession?

I don’t know the answer, but the question is certainly worth considering by those of us who don’t want to accept that the current situation is what must be.

It seems that in the history of the United States, game changing innovation has spurred major growth. The railroads connected the country, opening up new markets.  Mass production and the automobile opened and connected the country even further, creating millions of good jobs.  And in the last few decades, technology innovation created a whole new economy.

The barrier to growth in business and private air travel seems to be price. To surmount that barrier, either more people need to attain the financial ability to take advantage of private aviation or the price has to come down. Either solution works just as well for growth in business aviation..

We can’t do much to affect the affluence of the overall population; but, we can innovatively lower the price of private aircraft travel to bring in a bigger audience.  Three decades ago, Southwest did this in the airline industry and changed the demographics of airline travelers. I don’t know that private aviation can do exactly what what Southwest did; however,  there must be a combination of solutions that, in aggregate, will change the pricing of business aviation to bring in a larger customer base. 

One thing I feel certain of is that the growth and restart of this economy, in general, and of the business aviation economy, in particular, will not come from any government program.

So, let’s not wait on the politicians for the answer. Let’s create our own recovery!

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Every time I do something outside my normal routine, I learn something new (or at my age, get reminded of something that I forgot). This is true of my most recent trip to the British Virgin Islands on business. We were delivering an aircraft to the island of Tortola for BVI Airline, an up and coming company delivering air carrier services amongst the BVI. We also were returning on another aircraft which was due for some major inspections.  The inspections were  to be accomplished through our capable maintenance staff at Corporate Flight Management. We also, in a whirlwind fashion, dropped into San Juan to conclude some business with another carrier. The trip was a three day turn around on BAE Jetstream 32s.  Given the time constraints and amount to be accomplished, it was a trip that could only have occurred on private aircraft.

Here are a couple of lessons learned or remembered.

Pre- plan your communication needs.

Technology and services are a great boon to travelers – if you know what your capabilities are. I have a new service and a new plan and for my telecommunications and found out I was pretty much in the dark.  It wasn’t that I couldn’t communicate, it was just that I didn’t know my plan well enough to know how much it was going to cost me – an important consideration to my CFO soul. As I downloaded email and text to my phone –I wondered, “how much this was going to cost me?” People around me had a lot of suggestions and ideas as to what it might cost. I found out later just how wrong they were via my monthly statement. I could have avoided that if I had called my provider, told them my itinerary, and found out what were my best options. Next time!

Know what time it is.

I traveled from Central Savings Time to Atlantic Time. My new cell phone did a wonderful job of changing with the time zones. I knew exactly what time it was – or so I thought. My business associates and I scheduled a breakfast meeting at 7:30 AM. But what wasn’t discussed was time was relative on the Islands. When they said 7:30, they meant Eastern Time.  I thought they meant Atlantic Time.  I wish I had known about the use of time zones because I sure could have used that extra hour of sleep! Turns out other members of our entourage were an hour late. Next time…… we will synchronize our watches, always a good practice.

The business trip was a great success and new business for the company was developed. As we went through the various customs offices, I was reminded of how wonderful it was to travel through non- airline means. Through the whole trip we went through only one metal detector and we didn’t have to stand in line for it!  The trip schedule was our choice.  The time on the aircraft was pleasant because the travelers were co-workers, and we were able to plan our next meeting en route. Additionally, the time together was useful as new ideas for travel processes for our customers.  Since we experienced what our customers experienced while traveling international destinations, we got a better perspective on process improvements.  These discussions occurred simply because we had both time and opportunity.  Without planning the conversations, we informally discussed various ways we could improve on what we do as a company simply because we had the time and the privacy to do so.

What did I really learn and remember when I stepped outside my routine? The value of private business travel is worth the price.

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In any family dynamic, each member has a role to play.  Until the invention of Trivial Pursuit, my role was to lose at every single board game we played.  It didn’t matter which game it was, I stunk equally badly at them all; but, I was okay with that.  It’s just how it was.  When I went to college, my liberal arts studies did not include Game Theory; so, in spite of its 50 year history, this business decision making tool is new to me.

In a July 24, 2010, article in Financial Post, Michell Osak highlights both the strengths and the weaknesses of using Game Theory in the strategy development process.  The theory is ideal, he says, in “strategic situations where competitive or individual behaviors can be modeled.”  However, the theory’s flaws are that it assumes that “the players act rationally and in their self-interest” and that they “act strategically and consider the competitive responses of their actions.”  Osak goes on to quote The Economist magazine which said, “Managers have much to learn from game theory provided they use it to clarify their thinking, not as a substitute for business experience.”

It seems to me that wholesale flight department liquidations were an example of a time when Game Theory was substituted for business experience – to the detriment of an entire industry.

Studies have shown that companies which either own or use private aircraft tend to pay larger dividends to their shareholders.  Yet, some of those very same companies dissolved their flight departments.  Those decisions were not based on months of study, but, rather were a knee-jerk reaction to negative press reports.  Game Theory said that a company using a business aircraft would look wasteful when compared to a similar company that didn’t.  Game Theory predicted a negative public relations issue.  Game Theory dictated that companies jettison one of their most useful business tools.

It’s time to start making decisions based on business experience again and leave the board games for family night.

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Business aviation has taken a beating in the past two years.  While we are now seeing some signs of recovery, we must remember that those signs do not constitute prosperity. We can blame industry difficulties on the government or on the economy, but the reality is that we need to quit following the old business models. In many areas, we are doing things today just as we have for the past 30 years.

If we look to the technology sector of our economy as a possible success story to emulate, we see a constant flow of innovation in the market. Computing technology gets not only faster and more productive by the day, but it also gets cheaper. Social Technology has taken on a life of its own with changes happening faster than even the social media gurus can keep up with.

Those of us in aviation know that we cannot change or innovate as fast as the technology sector of this economy. Or can we?

When it comes to the aircraft design and regulation compliance that make our industry safer, admittedly we cannot go any faster than the government allows. New aircraft designs are also limited by the allocation of capital and have long cycles from initial investment to development to payoff. The tech sector can crank out new smart phones every six months, but we can’t just crank out new jets that fast.

Aircraft design and safety compliance timing may be out of our control, but that should not stop us from innovating.

Innovation starts with conversations. Doc Searls coined the term “the market is conversations” in his 1999 book The Cluetrain Manifesto.  With consumers self-aggregating and expressing intentions online, why can’t we engage in the conversations and meet those intentions?

We need to expand our market by engaging the larger audience of travelers in conversations about the value proposition of business aviation and even leisure travel by private aircraft. It starts online these days and ultimately moves to face-to-face contact.

We also need to challenge our market and our industry to start conversations on how to deliver business aviation at a reduced cost. The solutions must come from the entire supply chain, with everyone involved in business aviation as a part of the solution.

I have yet to hear anyone say they would like to go back to riding on the airlines after experiencing travel on a private aircraft.  What I have heard, hundreds of times, is that they can’t afford what we offer; so, they grudgingly go back for more of the misery of air travel by mass transit.

What are we going to do about it?

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If you do then something is wrong with the airline system or your employees.

I will vote for a broken airline system.

Thinking about a recent NY Times article by Lisa Galst entitled “Rewarded for Flying Coach” makes me smile as I write this.

What is the world coming to when you have to pay your employees extra for the misery of riding in the back of the aircraft in the cheap seats as opposed to booking the more comfy seats up front? Sounds like hazardous duty pay to me.

I have never heard any of our clients having to incentivize their employees to take a flight on a private aircraft. In fact it is sometimes the other way around. Last week when talking to one of our good clients he was telling me that he uses the flights he books to see his clients as a morale booster for his employees. Those who travel with him are excited about the experience and when they get back to the office everyone else hears about how cool it was.

With all that is happening in the airline industry:

• reduced capacity resulting in high load factors which equals crowded airplanes
• oversold flights and increases in denied boarding
• cancellations due to the new tarmac rules
• a la carte fees for everything the ticket no longer buys you

Is it any surprise that people just don’t want to do this anymore?

And the federal government has the idea that they can step in and solve the problem with legislation to make it against the law to provide bad service.

Private aviation and business aviation are sitting on a gold mine of opportunity.

What if these companies took the money they are spending to incentivize their employees to fly coach and used it to fly more in private aircraft?  They would get happier employees and gain a lot of productivity by not sending them through a hub that is cheaper to save a buck. Besides, with business aviation there is no such thing as routing through a hub. Its all point to point.

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A business aircraft is a productivity tool. It is no different than any other tool we use in business to become more productive. It has a cost and it brings, or should bring, value. The value has to exceed the cost. If it does then we get a positive rate of return on the investment. If the value does not exceed cost then it is not a good investment.

All of the mainstream and social media conversations about the “extravagance” or “corporate excess” associated with the business jet play well with the anti big business crowds and populist politicians, but they lack substance. So far, these conversations have had nothing to do with the reality of what a business aircraft does to enhance the productivity of a company and its most valuable assets – its people.

The discussion about the value of business aircraft should be all about productivity. If using business aircraft increases the productivity of an organization, and the measured gain in productivity exceeds the cost, then it makes sense. Bottom line!

I just purchased an iPad. I can use this device to increase my productivity in internet research and communications or I can play games on it. How I choose to use it doesn’t make it inherently good or bad. How I use it does determine its value in my personal and business productivity.

In that way, a business jet is no different than an iPad.

Those of us in business aviation need to do a better job of first understanding, and then selling the value proposition of business aircraft as a tool to enhance productivity.

Billions of dollars have been spent in research and development of new high technology aircraft that will take us higher, faster and further on less fuel.  All the while, business aviation has invested very little in the technology to truly measure the enhancement of productivity gained by flying in a private aircraft. It is not just the time saved that we need to measure and quantify. What about the social and physiological experience of travel and its effects on human productivity and creativity?

Additionally, we should invest in the technology to learn how to better utilize the business aircraft to bring the costs down. How do we cut the inefficiencies of business aviation without reducing the experience?

An industry-wide increase in the efficient use of the business aircraft coupled with a measurable understanding of the value would do more than just silence the naysayers. More importantly, it would grow the industry that supports business aviation and bring an innovative increase in the productivity of our economy.

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What about travel by private aircraft?

AAA says that over 32 million of us in the US are on the road or in the air this weekend, which is the beginning of the summer vacation season. That is an increase of 5.4% over last year. That’s good news for the travel and tourism industry.  

Even in a shaky economy that is struggling to recover, we still spend money to get out of town and go to the beach, or see something new, or go see friends or family in another city. 

Of the 32 million travelers, most of us travel by automobile in this country. The love affair with the auto that began early in the last century remains today – the freedom to go where you want to when you want to in a personal vehicle. Maybe 10% of us travel by air. Of that 10% maybe 5% of them travel by private aircraft – aviation’s version of the “ go when you want to where you want to” automobile.

If my assumptions are anywhere close that means that ½ % of people who travel use private aviation.

That leaves those of us in the business of private aviation (business aviation, air charter, flight schools, personal and business aviation manufacturers and all of the businesses that support private aviation) a big opportunity for growth. If we move just ½ a percent of the market of travelers to use private aviation, we double the size of the industry  

Based on what we all hear in the market of conversations, people only travel by airline because it is just too far to drive, not because they enjoy the experience. If we can make it in the car in a reasonable time frame we drive to eliminate the hassle of air travel. In many cases a 400 mile trip can be done as quickly in a car as traveling by airline.

I grew up flying everywhere in small single engine aircraft, and I can tell you that it is more fun and less hassle than driving or flying the airlines. Over the years of travel on busy holiday weekends, I remember many times looking down at the interstate I would have been driving on and seeing the traffic jams, all the while cruising along at 200 mph on the way to Alabama to see family. I don’t ever remember being stuck in a traffic jam on the busiest travel weekends when I was flying a small aircraft.  With the rare exceptions of waiting out bad weather I can not remember traveling in a small aircraft ever being a hassle.

If we in our industry can come up with solutions to make travel in private aircraft more affordable, is there any doubt we will grow by leaps and bounds?

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In a recent meeting of shareholders, Berkshire-Hathaway executives reported that NetJets has returned to profitability after big losses in 2009. The company reports that NetJets had a pretax profit of $ 57 million (US) in the first quarter of this year which is compared to a $ 96 million (US) loss last year.

Warren Buffett attributes the turn around to putting David Sokol in charge. David Sokol also runs the company’s energy – utility business, MidAmerican, and is a candidate to take over Berkshire Hathaway’s operating businesses as a successor to Buffett.  

We have posted a couple articles on NetJets over the past few months regarding the viability of their business model built on fractional jet operations. NetJets is a key leader in our industry and how they fare will make a big difference in the future of private jet travel.  

The key will be if the company can sustain profitability over the long haul. If they can, then it proves they have a working business model. One quarter of profit or even one year of profit does not make a business. You can cut overhead and get most any business profitable if there is some present sustainable revenue stream, but can you grow it in the new economy? Will more people line up to buy fractions of business jets as they did in the last 15 years?

A lot of new business jet orders were canceled in the downturn of the economy. Will NetJets start ordering new aircraft again? Will they operate under a similar business model as they have in the past or will they have to come up with a new way of structuring their fractional business to make it work in the future?

It costs a lot of money to own and operate a business jet and there are fewer companies today than there were two years ago who are willing to spend the money, whether it is a whole aircraft or a fraction. NetJets may get new business from companies who overreacted by shutting down their flight departments last year; but, that will be limited.

Unless business jet travel innovates to the point where the occupied seat cost is brought down significantly, the NetJets client will remain the high end business user and elite traveler. That market is small in comparison to the rest of the travel market.

So where does the new client for flying on a business jet come from?

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