Plane Conversations

News of the past two weeks indicates some signs of recovery in travel overall and maybe even the beginning of a recovery in the business aviation sector of travel.

But, is it a real recovery across the entire industry?

USA Today reports that business travel is up, and surveys of travel executives indicates that their company’s people will travel more in 2011. Even though travel will be up there is a new mindset that is more frugal about how travel dollar are spent.

Excerpts from the USA Today article:

The economic downturn has left its mark. The ACTE survey finds that 54.1% of corporate travel executives in the U.S. are “encouraging or mandating” alternatives to travel, such as videoconferencing. And a survey by Egencia finds that 56% of North American travel managers say they increased advanced-ticket bookings in the last year to keep expenses in check.

“In general, travel managers and purchasers have decided this new frugality is working well, and it’s allowing them to do a lot with a limited travel budget, and they’re sticking with it,” says Noah Tratt, vice president, supplier relations for Egencia Americas.

That can mean squeezing two or three clients into a trip. Corporate fliers are more likely to be sitting in coach when criss-crossing the U.S., though they might be able to book business class for flights overseas. And business travelers may be asked to use the frequent-flier points they’ve accrued on business trips if they want to upgrade to a premium section.

A NY Times article reports that Gulfstream orders in the 3^rd quarter were the best since 2008 and deliveries are up over last year. The catch here is that the majority of Gulfstream aircraft now are being sold outside the US.

The good news is that people still need to travel to grow business. Video conferencing has not yet totally replaced the face to face meeting.

The bad news is that Cessna laid off another 700 employees in September and slowed production so the recovery is not across the board here in the US. Used aircraft prices are still depressed indicating a lack of demand. The manufacturers think, or hope, this will change in 2012.

It seems to me that the US Business Aviation market is going to be stuck in a no growth mode for 2011 with maybe some recovery in 2012, barring a major economic game changing event.

Where the growth seems to be is in Asia, India and Latin America. There is great opportunity in China where there are only about 1000 GA aircraft in the country of 1.4 billion people compared to 200,000 GA aircraft here in the US.

Has the US Business Aviation market reached maturity in its life cycle?

If so, then we must find ways to reinvent the business if we want growth.  Or move to China.

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A September 27 press release  by the National Business Aviation Association applauds the President for signing a piece of legislation for small business that includes a provision for bonus (accelerated) depreciation for strategic business purchases. The provision includes new aircraft and major aircraft components such as new avionics, interiors and engines.

 This law is good news for small businesses in the aviation services sector as well as manufacturers of business aircraft. For companies considering the purchase of a business aircraft, or doing upgrades on their existing aircraft, there has never been a better time to make the purchase decision. Manufacturers and service providers are hungry for business.  The combination of aggressive pricing, and the tax advantage of this new legislation, will hopefully stimulate spending for those who are close to the decision already.

I don’t want to sound negative at this point, but this legislation is more of a band aid to a problem than a cure. The business aviation industry in the US has a chronic and severe cold and bonus depreciation will relieve the symptoms for the next year which will make us all feel a little bit better. It will not cure the problem.

For the manufacturers in Wichita it will keep people employed, and for those of us in the maintenance business it will hopefully generate sales of aircraft equipment upgrades.

What we really need is a cure for the root problem which is lack of demand.

Until more business and leisure travelers can afford to fly in private aircraft the industry will continue to languish or at best have a slow growth that mirrors the economy we are in.

A few percentage points of growth as a best case, or stagnation as a worst case, does not put people back to work in long term jobs.

Travelers who use business aviation are passionate about the experience, benefits, and value of flying by private aircraft. The limiting issue seems to be price. Everyone I talk to wants to fly in the private jet but not everyone can afford the price.

Over the long haul, if we are to cure the problem of demand, we must solve the price problem in our industry. A lot of manufacturing and service jobs in aviation are at stake, so it is worth thinking about a solution.

The technology sector of our economy has solved this problem of price and now everyone can afford mobile computing devises with computing capacity that could only been dreamed of a few years ago.

Surely our industry of business aviation can solve this problem as well.

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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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Delta’s new way of booking airline and charter flights together through Delta Air Elite.

There is not much in the way of innovation in business aviation to report or discuss in the past 30 days. Innovation in our industry seems to be coming in increments measured in inches not miles.

Apple is on a constant innovation track with a new I-Phone this week and the I-Pad has sold over 2 million in a couple months. It seems that every few weeks new functionality comes into the mobile computing market to enhance productivity.  Innovation in the technology sector continues to happen at an ever increasing rate, and meanwhile our industry of private aviation creeps along. Isn’t aviation supposed to be about productivity much like computing technology?

Delta and its subsidiary Delta AirElite are making a valiant attempt at innovation with the announcement  that their customers can book segments on the airline and the private jet in a seamless transaction.

What Delta doesn’t say is that private jet travel is still expensive. More expensive than the majority of their customers can afford, so the announcement is really geared towards the users of private jet service to let them know they can also book their first class tickets to Europe at the same time they book the private jet to get them to the gateway airport. And at the end of the day airline service is still airline service working within a broken system – not the sole fault of the airlines in my opinion, but broken nonetheless.

If ever an industry was begging for innovation it is the aviation industry. Aviation is especially in need of innovation at the point of service delivery – that point where passengers get on the aircraft to travel.

On one side people are fed up with the increasing hassle of flying via the airlines and on the other side, where the experience of flying in a private jet is great, for most the cost is prohibitive.

It is really a shame that we can’t figure out how to bring the price gap closer.  Innovation on the private aviation side might even pull the airlines up a notch.  Especially if the airlines wake up and find the business traveler defecting to a different mode of air travel.

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