July 5, 2011 By Hal Weitzman
US companies are increasingly using business aircraft to fly executives to meetings, heralding the revival of an industry that was demonised during the downturn as a symbol of capitalist excess.
Use of corporate aircraft was up 12-14 per cent in the first half of this year from 2010, according to data compiled by JSSI, the US’s biggest provider of maintenance work for business aircraft, whose clients include Saks Fifth Avenue, the retailer, and Steelcase, an office furniture company.
Although the market for new and second-hand jets has yet to recover, the sharp increase in flight hours is seen as a leading indicator for the industry, as well as for a wider rebound in US corporate confidence. “This is the canary in the mine for business aviation,” said Lou Seno, JSSI chief executive. More
JSSI’s data, which track the number of hours business aircraft are in the sky, are supported by figures from the Federal Aviation Administration showing that international flights on business jets rose by more than 21 per cent in May, while flights on business aircraft overall – including US domestic flights – rose by nearly 9 per cent, the fastest growth this year.
First Source Bank, a regional commercial bank in South Bend, Indiana, that recently upgraded from a turboprop aircraft to a jet, is on course to double its use of its aircraft this year from 2010. “It’s a business tool that helps us maximise value for shareholders,” said Allen Qualey, head of the bank’s speciality finance division.
“It saves time – we can make more trips to clients, and send out teams including more senior people.”
During the recession, many companies made less or no use of their aircraft.
US domestic business jet flights dropped by 12 per cent in 2008 and more than 20 per cent in 2009, according to the FAA. Corporate jet travel was a standard part of the pre-recession business lifestyle but the industry took a hammering after the chief executives of General Motors, Chrysler and Ford were pilloried for flying their companies’ aircraft to Washington in November 2008 to ask for government bail-outs.
The use of business jets is a hot political issue. President Barack Obama attacked Republicans last week for refusing to scrap a tax preference giving corporate aircraft a more attractive depreciation schedule than commercial jets. Combined with the effect that the recession had on demand, stigmatisation helped push the business jet market into a multi-year slump, as customers cancelled orders for new equipment and companies that owned aircraft put them up for sale, creating a glut in the second-hand market.
While use of business aircraft remains about 10 per cent lower than the recent highs of 2007 and 2008, Mr Seno says the industry is on track to hit those levels again by the end of the year. “We’re now almost three years since the auto executives flew to Washington,” he said. “Some of the effect that had is starting to wear off.”
Nevertheless, many companies are still reluctant to talk about their use of corporate aircraft, while others stress that they only use business jets when it is the most cost-effective means to travel – a difference from the pre-recession years when corporate aircraft were often used primarily because of convenience.
“I always try to weigh when it makes common sense to utilise our aircraft and when to use the airlines,” said Larry Stoddard, chief executive of RelaDyne, a medium-sized oil and lubrication distributor based in Cincinnati, Ohio.
Scott Moore, aviation department manager at Luck Stone, a stone supplier based in Virginia, said it cost the company on average 85 cents per mile to fly executives on its aircraft, versus 55 cents per mile for driving, making flying more cost-effective on almost all trips because it saved executives’ time.
Source: FINANCIAL TIMES