Busy executives are finding the skies friendlier on private business aircraft

Global Finance, Dec 2001 by Green, Paula L

Delays, crowds and security risks make commercial air travel less attractive. By Paula L. Green

Time-conscious corporate executives are increasingly using business aircraft as a way to escape the maddening delays, crowded airports, and sheer terror that can be a part of air travel in the 21st century.The devastating aircraft hijackings that have decimated the bottom lines of commercial airlines since September 11 have so far largely spared the coffers of companies in the business aviation sector.

While commercial airlines saw their jets flying nearly empty after the attacks, the telephones of charter services and business aircraft operators were ringing off the hook as stranded passengers tried to get home and corporations with deals to seal scrambled to get their executives to farflung locales.

Record Sales in October

Even through October, as commercial aircraft were still flying with rows of empty seats after the airlines reduced their capacity by 20%, some business aircraft operators were reporting record sales.

"Our sales for Freedom Plan in October were 20% of our entire year-todate sales," says Michael G. Foliot, chief executive officer at FlightTime, an air charter service company based in Waltham, Massachusetts. The company began selling Freedom Plan, an air travel arrangement under which a corporation can buy a specific number of flying hours on a certain category of aircraft each year, in January.

Now, as corporations around the country prepare to close their books on an economically volatile year, the business aviation industry remains optimistic. While the global economic slowdown has tempered the sector's double-digit growth of the past five years, private aircraft operators and manufacturers are confident that the economic fundamentals that sparked the growth will remain in place.

"Once we come through the economic recession ... the same factors that led to the growth in air travel will still be there," says Bill Boisture, president and chief operating officer of Gulfstream Aerospace in Savannah, Georgia, referring to factors such as the growth in the global economy that has led to more international business travel and the deteriorating service offered by the commercial airline industry. I'm optimistic about what the future holds for us."

Moisture says Gulfstream, which acquired Galaxy Aerospace this year to offer midsize jets to the business aviation market, will weather the economic slowdown, which he believes will turn around by the second or third quarter of next year.

The aircraft manufacturer expects to build between 60 and 65 of its expensive aircraft-which sell for $32-32.5 million when fully equipped-in 2002. That's about 10% less than the number of aircraft built this year.With the addition of Galaxy's output, Gulfstream will sell between 100 and 105 aircraft in 2002, Boisture adds.

For Cessna Aircraft the economic slowdown that began earlier this year meant the cancellation of a few orders in its popular Citation series of business jets. But the company remains busy, with a backlog of $ 5.7 billion, down from $6 billion in 2000, and delivery of jets ordered today not expected until late next year. The September 11 terrorist attacks actually sparked business by prompting a number of customers to take earlier delivery of their Citation jets, which are generally used for business trips of about 500 miles.

"Those companies that are flying are now using the company jets not just to fly top executives but to fly as many people as they can," says Marilyn Richwine, vice president of corporate communications for the Wichita, Kansas-based company.

Cessna's fractional ownership company, called Citation-- Shares, experienced a 400% jump in inquiries about its service in the first 2-3 weeks after the hijackings. Citation-- Shares is a 50-50 partnership with Tag Aviation USA in Burlingame, California, a company involved in air transportation services.

Corporate executives intent on avoiding the hassles and security concerns of the commercial airlines were closing the fractional ownership deals in about one to two weeks-only a third of the time it normally takes to complete the business transactions, Richwine says.

Fractional ownership-- an arrangement by which a corporation buys a share in an aircraft-offers an alternative to companies that don't want to invest substantial sums in pricey flying machines. The seven jets in Cessna's Citation series run from $3.5 million to $18 million and usually seat five to 10 passengers.

"When business is slow, executives still have to travel to bring in customers and complete presentations, but a company may not have the income to go forward on a purchase of that size," says Richwine. "After September 11 companies are giving more serious thought to business jets as a means of travel."

Time=Money for Executives

John Zimmerman, president of Aviation Data Service, says a corporation whose executives and middle managers are flying at least 400 hours a year can benefit economically by purchasing an aircraft.