Is Business Aviation Worth It?

Ever since the decline of the economy started over 5 years ago, business aviation was one topic that was consistently debated over and over throughout the country. A company that was short on funding aimed its sights upon the flight department as a quick way to cut costs. This decision was made to reduce the amount of expenses while struggling to increase the amount of income. It was an all too common theme that was seen from car companies to smaller firms.

This topic is an immense issue throughout the general aviation industry that can carry immense consequences. From a business aspect, it seemed to the nation and also to myself that if the company was to cut spending, then the flight department was a logical contender for the “necessary” sacrifice. That was until I read a recently published article on Forbes.com that revealed some interesting facts about business aviation. According to this article, a study of the S&P 500 companies by Virginia-based consulting firm NEXA Advisors LLC found that over a five-year period, companies that used business aircraft had twice the total shareholder return of companies that did not. As quoted from Lars Thrane, founder of Denmark-based global satellite communications company Thrane & Thrane ,“You have the freedom to operate on your own schedule. That’s a necessary part of our business. That efficiency and flexibility is an essential factor in our success.” Companies that did employ a flight department saw significant, positive differences between those companies that did not employ a flight department.

The future of this topic is certain. There will always be a need for business aviation. This is due primarily to the world we live in today. Businesses must be able to operate within a moments notice, and the freedom and security that business aviation allows is the perfect remedy to this need. These aircraft continually drive down operating costs for the business as a whole long-term. Even though the short-term expense to operate these aircraft is relatively high, income has shown through history that these necessary expenses will increase the income of the company long-term.

This topic is significant to my career because it will allow a left seat to always be open. With the majors pushing a hiring boom for the next ten years, this will allow even more left seats to become available as the years progress. Companies will always be in the need of generating income, and with the abilities of the flight departments and business aviation being a viable option, these businesses can and will rely on these positions for a long period of time.

China General Aviation

On February 28, 2012, China Aviation Industry General Aircraft Co. Ltd. (CAIGA) purchased the Duluth-based aircraft Cirrus Design. Cirrus was previously majority-owned by Arcapita, a Bahrain-based investment company which acquired the stake in 2001. The relationship between CAIGA and Cirrus first began by the sharing of a worldwide growth vision. According to Cirrus CEO Brent Wouters, CAIGA has the resources that will allow Cirrus to expedite its aircraft development and to accelerate the global expansion of Cirrus. This may have ramifications here in the United States. Now along with the major car manufactures, another American company will be developing their products in a foreign country. With the debates about patriotism and commercial sales here in the States at a rise, this company will be added to the increasing list that is sending their shares to another country.

There are many reasons for the rapid growth of the Chinese general aviation industry. First and foremost, nothing like this previously existed within the country. There were only a very few registered aircraft throughout the years prior to this expanse. The Chinese government has recognized this expansion and has been developing numerous policies including opening low-altitude airspace specifically for general aviation operations. Another reason is the demand for business aircraft. Corporations and citizens are in the need of additional modes of transportation and aviation is a booming sector. This will result in a much needed supply of a national airspace system that is used by not only the Chinese military.

I feel that the Chinese must use a stable, proven platform to develop their expanding general aviation industry. The United States has had a viable system in place for years and the Chinese would like to use this as an example. The problem will be the integration of the military and the civilian general aviation, which was the problem here in the States as well when it too expanded its general aviation after World War II. This will also allow manufacturers to limit their production costs. With the car makers leading the path, the general aviation manufacturers will follow suit. 

I feel that career opportunities will be limited within the continental United States due to the outsourcing of general aviation manufacturers. The less jobs will mean less profit being generated here within the States. On the other side, there will be a sharp increase in the career opportunities that will arise within other counties. These developing infrastructures will require qualified personnel to maintain their daily flight operations. Certified Flight Instructors will be needed on a global scale teaching many people that are brand new to the aviation industry. This is cause an increase in available jobs worldwide, but also a decrease of available pilots within our own borders. 

Goodbye Comair!

Comair was founded in 1977, flying three propeller-driven Piper Navajo aircraft. It started operating as Delta Connection in 1984 and became a wholly owned subsidiary of Delta in 2000. It was founded by Patrick J. Sowers, Robert T. Tranter, David Mueller and his father Raymond in Cincinnati. Under its parent Comair Holdings, it became a public company in July 1981 to support the growth and capital requirements to upgrade their fleet.

According to Don Bornhorst, senior vice president of Delta Connection and a former Comair president, “It ultimately was a cost issue; it wasn’t a quality issue with Comair.” The 50-seat regional jets that Comair operated just was not cost efficient to the company as a whole.  The aircraft used were not fuel efficient and the cost to maintain the fleet increased as the fleet aged. This would pose a problem for any company, especially to an air carrier such as Delta. With the profit margins as slim as they are throughout the airline industry, it would make sense form a business standpoint to eliminate the weakest link. In the eyes of Delta, this unfortunately meant Comair. 

I feel that the overall financial status of the regional airlines is being limited by the day. We see new laws that will require additional time for newer pilots, and those pilots will only follow the airline route if the regionals increase their starting pay. Unfortunately, this is very difficult to do due to the weak economy. The status of the regionals will have to change drastically within the next few years or we will be seeing a rapid decrease of available pilots along side an increased demand to operate the regional carriers’ flights or else the industry as a whole will lose profits. 

According to an USA Today article, 53% of all commercial flights are conducted by regional air carriers. What opportunities will arise to the regionals? With the ability to outsource shorter, more direct flights by use of these regional carriers, I think that there will be even more of a demand for these companies. Airline travel has doubled from 2000 to 2010, resulting in a predictable demand for regionals. This demand must be met with some sort of supply or else the system will not be able to support itself. 

After doing research online, I found that Piedmont Airlines is currently hiring pilots. The job listing was updated in June of 2012. Starting pay for first officers in both the DHC-8 Dash 8 and the DHC-8-300 Dash 8 is $27/hour. Additional information can be found by on pilotjobs.com

Airline Travel a Luxury?

I feel that the ability to be transported on a commercial airliner should be affordable to the general public. Due to today’s economy, the “romance” and “luxury” of air travel has been degraded to merely a means of getting to point A and point B. The technology to be able to transport people across the world at a high rate of speed was once only the dream of engineers and designers. This thought was then brought to a reality once we discovered the technology needed in order for us to accomplish this. I feel that the public has gotten so use to the fact that they now have the ability to cross the globe in a few hours rather than weeks, that the luxury is a thing of the past.  Air travel is now a necessity rather than a royalty.

The reason behind the fact of traveling by air for a less expense than driving is due to the economy. The airlines are struggling to make ends meet and by providing less of a cost to their customers will allow them to fill seats of the aircraft. They are a business with the goal of making money. If they have prices higher than those in the market, then this will lead to less seats filled by paying customers since they feel that the price is too high. 

I feel that if the airlines raised their prices we would not see a vast change in airline customer traffic. We would only hear about how people are unhappy with the fact they are paying more for a ticket. But the fact remains that they will still fly. There has been a steady increase in airline travel for decades now and the airlines are aware of this and are structuring their business plans accordingly. According to the break down of Southwest Airline’s financial reports, there has been an increase in growth rate and revenue since 2010. This is a result of an increase in passenger travel and in ticket pricing.