Growth Strategies

A Private-Aviation Checklist

Can you justify the cost of the corporate jet? One CFO’s checklist may help.
Marielle SegarraAugust 2, 2011

Private aviation could have a bumpy ride ahead. The corporate jet has become a political football in Washington, with President Obama calling for an end to a tax break for jets and Republicans dismissing the proposal. And starting in August, the Federal Aviation Administration will tighten its privacy program, making it more difficult for private-jet owners to block their planes’ real-time movements (including the sites of future M&A deals) from public view.

Finance chiefs may be wondering whether the corporate jet will soon become a liability. Even companies that lease private flight time and are not subject to these changes may have reason to hesitate, as budgets remain tight and private aviation continues to suffer public scrutiny.

But many companies say private aviation is a valuable investment. Leasing private airtime can be up to 30% less expensive than flying commercially, especially when employees travel in groups, says David Putt, CFO of Data Mail, a small direct mail–processing and computer-services company. Data Mail spends about $300,000 a year leasing flight time to transport its management teams to meet clients, check on sites, and verify vendors.

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Flying privately saves money in part because it allows Data Mail to shed the hotel fees and meal costs that come with overnight stays, Putt says. It also increases productivity by allowing employees to spend less time commuting and more time with customers, he adds. And the reasons to use private aviation “are only increasing” as airlines ratchet up their fees, he says.

But Putt doesn’t take the practice for granted. Rather, he periodically reevaluates the decision to fly privately with the help of the following checklist, which has been edited for publication.

1. Who should use the airplane? Consider which key customers and prospects will be better served by a private jet. Are there enough potential users to justify the expense?

2. How often should employees fly, and for what purpose?

3. Can we save money by flying commercial instead? Consider whether the locations you fly to are served by commercial air carriers, and whether private airports in these areas are closer to your destinations. The private jet could also save you money if employees fly to multiple locations on the same day.

4. Are more seats empty than occupied when we fly?

5. How much more productive are employees when they fly privately?

Since Data Mail leases private flight time, Putt also considers the following:

6. How many flight hours do we need per year?

7. What happens if we don’t use all our flight hours or need more flight hours?

8. Do we have the flexibility within a fractional share to interchange aircraft (trade down in size or type of plane) to meet a specific mission requirement, so we can lower operating costs when needed?

9. What length of financial commitment are we comfortable with? Consider whether the business cycle and cash flows are predictable enough to justify a five-year contract (the typical duration of a fractional share).