Stall Alert – The Business Case for Corporate Use of Private Jets

 The Business Case for Corporate Use of Private Jets

StuWiley

Private air travel leaves several different impressions on the public and business travelers, depending on their respective uses and roles. The public has bought into the PR negativity regarding the Big 3 automakers traveling to Washington via private jets to testify at congressional hearings – coupled to massive government bailouts of these firms.  This is understandable, however may actually be a red herring.  The focus should be on executive compensations and less on the travel mode. 

Still, the animosity provoked led to a quick exodus of many businesses from the private travel world altogether, as flight departments could no longer justify the ROI in failing economy.  Yep, when the world falters – many people end up walking or taking the bus, or otherwise downgrading their modes of travel to something that fits a more affordable model.   

This includes the Jet Set.  Ever read Grapes of Wrath?   ”Sorry, they aren’t worth what you are asking.  Not right now. ”

The Playboy imagery that stems from movies has not helped. Have some executives likely abused the privilege of flying on the company jet?  Absolutely.   Sending wives or girlfriends off to a shopping trip in Paris isn’t exactly a cost effective corporate plan, nor can it be justified by any stretch of the imagination for a publically held firm.  AGAIN – it’s the perks packaging vs. legitimate travel that should be scrutinized. 

Be a good example and don’t let the jet get photographed sitting in the Bahamas.  Gossip and perceptions can hurt you.  That said -

Business cases aren’t built on hearsay, but on strategic analysis and fundamental mathematics. 

It’s one thing for Bill Gates to use his own money and jet, quite another for a bankrupt company to continue such ludicrous financing for executives who actually created the bankruptcy.   At Microsoft, if you screwed up after having been rewarded heavily – stock vesting was taken away.

GM are you listening? How about you Bankers ? 

The same shift in philosophy occurred when the Seattle Supersonics pro basketball team attempted to hold the city hostage for a new stadium. Overwhelmingly the public told them to pound sand, requiring the players to put their own millions of dollars into building and running their own house. “Then if we decide you are any good- we might actually come pay to see you play”.  Put up your own collateral and earn the business, just like every other venture. Earn it.   Prove the value by performing. 

Even the Sonics weren’t stupid enough to incur public rath by using multiple jets when one Boeing Heavy does the job for the annual schedule.  Did the players suffer through consolidation? No.

Is this a legitimate use of private aircraft? YES.   

When it comes to business travel, the case for flying privately vs. commercial is a strong one. 

CAVEAT:   DEPENDING on the business case supports and the financial variables.  There are no absolutes.  Can solid business cases be constructed? YES. 

This is simple Cost Benefit and Alternative Spend Analysis.  Private air travel can be done at a breakeven (it’s not a revenue source) as long as the costs of the flight department and uses are strictly monitored and managed, just like any Cost Center on the balance sheet.   

Do you have a legitimate use case? Can you PROVE it? 

OK, let me play devils advocate against some typically heard arguments.  I want to make a few points and assign actions.   

Just-in-time or on call flights and flying to locations not otherwise served by commercial carriers can save time, and reduce general logistics costs for all employees required to travel – not just the executives.  This is The Nimbleness argument.  Is it valid?  

If you intend to use “Nimbleness” as your business case, you’d better get your facts straight. If any portion of this travel segment could have been handled by using electronic meeting methods – you just blew a huge hole in your logic. There are many things that are faster and more flexible than aircraft.  The online and electronic world increasingly relegates face to face meetings to critical events only, and is a far faster and more cost effective alternative. Be solid with your policies and definitions, and your argument will withstand acid tests.   

Then there is The Prestige Argument.  Bi-coastal Hollywood has been trying to use this argument for years, but for anyone other than a mega star with global commitments, what percentage of trips really keep a studio in the black?  Yeah, Bentleys are cool too.  But are they profit building corporate assets?

Does brand imagery require and justify the expenditures?  If so, you’d better be prepared to prove it.  

What about The Increased Executive Productivity Argument?  That depends.      

The argument that private flying increases the “productivity” of senior executives is highly challengeable, and can only be made into a solid business case by using highly tracked activity accounting.  There is simply no possible way that this kind of generalization can be made otherwise. There are too many variables to consider. It simply depends on how the time and energy is used and what the alternative costs and benefits might be.  I’ve been all around the world with executives who used the time to get hammered as much as they did to get actual work done.  Work : Play Analysis. 

The argument that private jet flights COULD be used to increase efficiency gets this business case argument off the ground. The proof is in tracking of dollar cost to ACTUAL gains, not perceived benefits.  Convenience has a valuation, and there are numerous formulas. Run the numbers, don’t assume.

Ground time, open seats and deadheads to base can kill an otherwise breakeven budget. Face it, jets are only financially viable when they are in the air and utilized at optimum capacity. Talk to an experienced financial modeling firm.

Many business travelers will tell you that they’re more productive on the aircraft than they are in the office. So, make them prove it.  Run tests.  For some, the travel time might be “office” time, for others – rest and recharge.  Measure the benefit.  Sometimes a simple commercial upgrade is enough to streamline ground logistics, and flight clubs actually offer decent amenities at a cost effective rate.

The Security Argument. Granted there are times when the single issue of security justifies a private aircraft plan, however you should avoid this as the main pillar for building a business case. Security has many forms, ranging from privacy to protection – and should be applied on a case by case basis.  

Simply avoiding commercial lines and screening lines isn’t good enough for an investment case. 

(I can beat a flight time any day of the year by simply using electronic meeting methods, which are far more secure and cost effective than ANY aircraft and lack all of the insurance liability posed by physical travel.  If you plan on using Security as a business case and basing it on a commercial airport security screening argument <hassle factor and time waste>, you are mounting a paper tiger. ANY executive security company will tell you that stationary is far more secure than travel exposure.)  

The Market Reponsiveness Argument.  In what is now an incredibly fast paced business world, the ability to react and move quickly is essential. This is why I’ve spent the past 2 decades empowering businesses and individuals with computer, mobile, and internet capabilities.  Forget the hyperbole put forth within the industry and do your homework.   In my world responsiveness is measured in minutes, yours may be in hours or days.  Create policy criteria to fit the situation, but be realistic.  Unless you are in the critical health care business, it is unlikely your kidney needs to be someplace immediately.   

ALWAYS question presuppositions offered by pundits in their arguments.  Your business case depends on avoidance of hyperbole or rhetoric.

“Even the most novice traveler knows that flying on the commercial airlines is a nightmare. Do we really expect that we’ll be better off forcing senior executives of troubled companies to spend ten hours flying commercially, sitting in airports waiting out long delays, missing connections, etc. to take a trip that can be accomplished in two hours flying privately?”    The Let Them Eat Cake Argument.

The presumption that commercial flying is a “nightmare” is ludicrous. Likewise, there is no coercion factor for “troubled company executives”.  They are not being water boarded  when they travel like the rest of the populace.  If anything, this may give them an opportunity to see how the other half lives and get into some dialogue with real customers.  Get real and stop claiming “victimhood” or “privilege” at the expense of others.   There may be a reason for these executives being out of touch.   

As for managing a troubled company, that is their own doing.  The market owes them nothing.

If the flight is a two hour hop, and execs are running a negative balance sheet overall, perhaps they should use the telephone instead.   If Execs are running a company into the ground, perhaps travel is the least of their concerns and they should be seeking revenue gains and cost efficiencies elsewhere. On the other hand, I firmly believe that profitable companies should do everything possible to increase time and work efficiencies using every means available – as long as they can afford them.   

Earn private jet use by making revenues, don’t expect it when you aren’t profitable.  

I’m sure you’ve heard aviation insider hyperbole that flies in the face of supply and demand economics.

“Pressuring companies into divesting their aircraft at this time will only hurt them. The market for private aircraft, like other markets, is down. With many sellers and buyers waiting for prices to fall further, forced sales no doubt will mean substantial losses for these companies. From a market perspective, this is exactly the wrong time to force companies to sell their aircraft.” 

Sorry -It’s called over supply.  Perhaps someone was too opportunistic with forecasts or expected a permanent boom market.  I can tell you from experience, even DotCom and Real Estate bubbles pop.

What makes aviation exempt? The high cost of the capital asset?  The Plantation Owners Argument

When the entire world is unloading assets at bargain basement rates because the market valuation has fallen and they need the cash for survival – why should the corporations referenced or the suppliers of travel related services be any different?  Wrong time for whom?  Why should my profitable company be forced to subsidize a company going bankrupt, by purchasing a devaluated asset at a fictitiously inflated rate?  Yes, a lower price received is part of the deal. If a company cannot afford an asset, they need to sell it at the prevailing market rate.  Or they need to find an alternative use case.   Period. 

The accountability lies with the management executives, not the public or the possible buyer. There is no reason we as the public need to foot the bill for GM when our lives that have been equally inconvenienced by their poor product planning and management practices – contributing to a global economic slide.  While not all risks can be forecast – the automotive industry has been in denial for half a century and we all know it.  Producing products that are energy inefficient or otherwise not something the public wants to purchase is THEIR FAULT alone. Thankfully, the center of the world is not Detroit. 

The Value Argument

Understanding and appreciating that there is a lot of resentment and anger in the country, the private aviation industry must make the case for business aircraft use on the merits that private aviation works to the benefit of corporations.  That business aircraft are justified because they add to the bottom line in clear and demonstrable ways.  This is the ONLY viable business case available.  Add value or be gone.

HOW?  By producing business cases with numbers and usage metrics as PROOF.   

NOBODY on the outside understands the Value Proposition or the supportive business case metrics and measurements.   Had you been doing this, the business cases and use cases would already be widely known and publically supported as efficiency enhancements. 

The industry and these companies must demonstrate that these aircraft are REVENUE GENERATING assets, not toys for spoiled executives.  Not one of the big 3 auto firms has a publically transparent travel and travel asset policy, and very few public corporations do.  The problem is owned by the Aviation industry.  WHERE HAVE YOU BEEN?  Apparently on autopilot.

There is very little public information relative to business case development for private aircraft. The NBAA has no whitepapers, and there are very few resources for the public to draw from.  Until the industry starts changing public perception – private jet travel will be perceived as a luxury item and boondoggle enablement.  Less than serious business assets. 

What can be done? 

Instead of taking a protectionist position and trying to defend the status quo we help aviation clients think outside the box.  It is incumbent on the aviation industry to take on the challenges of education to change public and private perception. It can’t just be an Arnold Palmer or famous celebrity campaign either, but a true business balance sheet expose.

We can help you avoid the boneyard.  Give us a call and we’ll help you understand how.

 Frankly, you should be doing everything possible to support the value of aircraft and aircraft use perceived value and price. 

What’s your strategy?      

Enterprise 2.0 – Sports Marketing and Sponsorships

Enterprise 2.0 – Sports Marketing and Sponsorships
Consider the multiplyer effect of combining tangible marketing efforts and traditional marketing with the reach, speed and penetration of online CPM.  Even negative events drive attention online much more rapidly than in traditional media.  (Dominos, United Airlines etc.).  While both of these are also brand & reputation examples, the real key is in the viral activity that was created and the rapidity of the spreading message.    

Combining online marketing with traditional marketing generates substantial leverage for sponsors, teams, and fans/consumers alike.  The ability to identify, reach and penetrate markets and niches in ways never before possible and with measureable and quantifiable results as compared to traditional spends is the reason individuals like Chad Hurley (YouTube-Google) have become involved at the highest levels of motorsports. Social Media represents an infinite number of channels for reaching and interacting with groups and individuals that affect your business.  

Online media channels offer the ability to interact directly with costumers and business interests that drive corporate revenues and YOUR brand, using a variety of media and quantifiable micro channels.  Online strategies can provide your company with new sales opportunities, promotional leverage, and even Voice of the Customer influence on product designs and purchasing decision making – increasing revenues at very cost effective margins. 

Online campaigning provides cost effective acceleration of CPM, as well as additional ways to establish loyal customer communities and evangelists that influence purchasing decisions that involve your brand. 

Technology enables companies to not only listen to discussions about their brand and offerings, but to actively participate in discussions WHILE purchasing decisions or comparisons are being made. 

For the first time in our lifetimes, business intelligence can be direct – and both the demand and supply sides enhanced using a combined offline and online medium of exchange.  Sales cycles can be shortened, analytics used to establish how a brand or sale message can be in the right place at the right time, and predictive calculations can even be applied to predict market and customer movements. 

For marketers – this means budgets can be more effectively allocated, results determined more accurately, and promotions and campaigns designed for maximum effectiveness.  Using online mechanisms and multiplyer effects, a traditional spend can be amplified and longer tails of interest created and sustained.

Online market analysis can also tell you what your competitor is doing, and how effectively.  It may even uncover hidden vulnerabilities at your company and theirs that can be owned by the first mover.  You may even discover stealth projects and product launches that you never knew existed, and if tools are run on yourself – you may know where your own investment efforts might be compromised in order to take protective measures. 

Do you know what your competitors are doing and where they have had successes or mistakes?  How would you like to accelerate your learning, and avoid the costly missteps? Have you considered how to use your competitors marketing spends to actually drive attention in your direction? 

Brand monitoring and market monitoring policies and procedures effectively protect brand equity and massively reduce risk profiles.   Pre-emptive measures can be established for your brand, and knowing a competitors vulnerability – you can determine whether exploitation of a weakness is appropriate or not. 

For the first time ever, customers have a voice and are requiring companies to listen and act accordingly.  Those who do not embrace the online medium are rapidly losing market share to those that do.  In a Darwinistic sense, obsolescence is being greatly accelerated as the world changes. 

Is your company evolving? 

Keep in mind that customers can instantly search for information about your company, products, prices, services etc.  It is far better business to produce, control, and participate in this information flow than to either have a competitor provide dis-information, or let your corporate identity online be created by the masses.    

Do you know what the world is saying about your company and how it is impacting your bottom line?

Social Media “yeah, we have that covered”

This is commonly heard in our Digital Media practice at CLS Global Solutions. 

The euphemism is a great qualifier because it indicates a level of understanding of the digital marketplace.  Often the comment is followed by an abrupt change of topic due to discomfort. 

We then ask – “What do you measure, how do you measure and in what units” and “what data analysis techniques did you use to substantiate the business case and prioritization?”  “Did your agency or web team ask these questions”?

Then it dawns on them.  These are prudent business questions the company had never considered prior to charging off to chase the online market.  With squirming in front of the execs. 
More feebly this time,  “I think we’ve got that covered.”

“We were told we needed to be X% on Facebook/Twitter. No we don’t have a quantified business case or justification.”  

Sound familiar?  

Social Media is NOT a channel, and goes far beyond Facebook and Twitter. 
There are literally infinite combinations to consider that might fit business objectives more exactly.  Knowing your state of readiness, capabilities, where your target audience is and exactly how to engage with them is critical. This means doing your homework, architecting a plan and implementing precise tactics.  

Success is by design, and market responsiveness comes from a solid architecture.    
Every market entry should have a plan with goals, objectives, and measurable performance.   Perhaps there is simply a lack of understanding of fundamentals, processes and measurements.  Sometimes “coverage” consists of randomly initiated and disconnected approaches resulting in an ineffective online presence borne of online trial by error, ad-hoc efforts, lack of ROI focus and gap in comprehensive oversight.  Many companies start with DIY (Do It Yourself) – and rapidly realize red ink. 

Survey the land, design and build the bridge to suit, THEN cross. 
What would it be worth to KNOW what types of online investments make sense?  Would you like to design in the returns that match corporate objectives or find out by accident that they don’t? 

Knowledgeable executives:
• Know the online world touches every aspect of their company.
• The pace and fluidity of the online marketplace and have done their research.
• Engage expert guidance in order to generate business intelligence and ROI based road mapping.
• Know that “reactive” and “planned” are contradictory.  This is a new paradigm and change is constant. 
• Require that their employees understand every touch point their company has with the digital world.
• Avoid agencies that gloss over metrics and measurements, or fail to demonstrate quantified business cases 
• KNOW how each aspect of their business is perceived online and what daily activities are taking place. 

The decision makers who track their credit score and investment performance to the minute using online resources – fail to understand that this same empowerment exists with regard to how their company interfaces with social media.  We show them HOW at executive and functional levels.  

Have you “got it covered”?
Where does your company fall on this spectrum? 
Are investments made based on business cases supported by factual data, or are they guesswork? 
Why take the risk and waste dollars on trial and error? 

What is covered? How do you know?
• How is the business case and roadmap constructed?  How does this map to objectives?
• What research was conducted? 
• What were the information resources – and where did they get the information from?   How is it validated?
• How did you prioritize and select that investment? What are the competitive factors used?
• How are you measuring ROI? What metrics are being used? How do you know these are the right ones?
• What types of contingency plans and policies are in place?  Are there any gaps or variables? 

Social Media Intelligence
Intelligent Social Media is the Web Strategy practice of factual business case construction, starting with comprehensive benchmark. 

Every activity undertaken on the web can be digitally monitored and measured.  A web strategy recognizes that social media consists of thousands of channels and matrixes that need to be custom fitted to a business objective roadmap and implementation plan.  When executives are provided a web strategy based on a quantified business case, they understand how ROI is derived and measured, they understand the exact state of “social media readiness” and they know the steps and investment necessary to be successful.    

Are you Social Media Intelligent? 

What is your state of Readiness? 
• How are you doing business online right now? Is it producing the measureable results you desire?
• Do you have a plan in place with milestones, roadmap sequencing and coordination across all departments?
• Are there any revenue streams that you haven’t tapped?  How do you validate this today?
• How do you identify, monitor, quantify and manage risks? 
• Do you know exactly what and how your competition is doing?  Why not?
• Do you know where you are vulnerable?  (Your competition may…)
• Do you have appropriate policies and procedures in place across all functions of your organization? 
• Are you aware of every possible touch point your company has and what these represent?   
• Have you conducted an objective audit of activities to validate online assumptions, opportunities and risks? Do you audit expenditures frequently and adjust toward cost effective digital solutions? 

What makes us different?
CLS Global is a professional services firm specializing in digital/web strategies and interim technology leadership.

We always kick off our projects with a benchmarking.  ALWAYS. 

We generate relevant online business intelligence first and then provide our client with a prudent planning and implementation structure based on corporate objectives.  You would question a physician who prescribes a pill without conducting diagnostics, wouldn’t you?

We specialize in several areas of Web Strategy:
• Online Competitive Intelligence
• Online Marketing Audits
• Brand and Reputation Management
• Product and Services development for Internet based companies

Our methodology is proven to:
• Increase revenues and revenue growth streams
• Increase margins
• Decrease costs, misalignments, risk
• Increase brand and brand awareness

Compensation is based on a fee based structure and a % of the increased revenue growth or cost recovery.

Daytona 500 Winner – without a plan?

It’s never gonna happen.  Competition is too fierce, stakes are too high.

When it comes to being online, does this sound like your business? It doesn’t have to. 

This note is in response to meetings with Hendrick, Gibbs Racing, Interstate Batteries and a bunch of the Good ‘Ol Boys (and Girls) headed to the big round and round known as Americas Race. 

The Daytona 500.

There are numerous metaphors useful to describe our work – depending on the audience.   We understand all types of sports marketing and Web Strategizing – but this week I want to address the motorheads. 

 Anyone can mash a throttle and go careening off the walls.  Only those with a set of objectives and a finely architected vehicle and campaign stand a chance of winning against highly prepared competitors. 

Online is no different.  Except the environment and rules are constantly changing.  So, if you don’t have a structure and process for something as contained and regulated as oval racing, and no expertise to call on…. you should probably stay in the stands. 

Actually, that’s not fair.  What you should do is find a coach to get you up to speed at lowest risk, best bang for the dollar, and most thorough coverage.  If you want to enter the online race and be credible – do it right. 

 

 Racing is a process. Race preparation, just like planning a Web Strategy – is a constant working and reworking of variables and factors that influence change. Design is both an art and a science. So is online business. 
We just happen to be good at both.       

The value differentiator at CLS Global is that we implement a prudent and scalable business methodology (based loosely on Boston Consulting Group, McKinsey, and Accenture/Microsoft models). 

Most advertising or marketing agencies don’t have any idea what I’m talking about here.  Enterprise software designers and NASCAR crew chiefs sure do though. So does any business that has been burned by chasing hype.   

With no dicipline, you cannot possibly compete on a dollar for dollar basis. Without the dicipline, you cannot have successful market responsiveness or change management agility.   You are going to get yur ass whupped. 

Racing teams follow a process for successful campaigning.  After all – when was the last time someone won a major event without a large R&D sand planning effort prior to entering a race series? 

You don’t build a winning car with mismatches pieces, and you don’t build a profitable online business on guesstimates. 

Why would you waste your resources or risk your company online this way?  Disjointed pieces, no plan, reacting to market pressures….these are attributes of passengers, who are not incontrol of their fate.

We create winning drivers and teams who OWN their competitive space.    We build successful web strategies, online businesses and campaigns for sports and motorsports related businesses, from teams to sponsors. 

Often this entails creation of online communities around a common interest or associated interests.  Why?  Because we believe that engagement online has serious mutual value – for the Fans, and for the companies involved. 

We believe that the internet offers the richest media options, and the best experiences. Plus – it’s digital. Ones and Zeros. Completely measureable by the very computers that run it.   If you know how and what to measure.

We KNOW we are on the right track.  

When Chad Hurley joined USF1, he made no secret about the value and critical nature and profitability from using online media to build an online community of fans around USF1 and their sponsors. 

Do your research, know your objectives – then scale up accordingly. One size does not fit all.  If an agency is telling you to get on Twitter or Facebook and doesn’t have the data to support a viable business case – run away and call us.  We can walk you through this. Enter the race with knowledge and a plan.

Start by knowing exactly what you are getting into and why.  Begin with manageable components (rent a go-Kart first), then progress to the next level.  The by-product of smoothness is speed and agility/responsiveness. 

We also KNOW that companies who do not have a planned and carefully architected online presence will fail. 

If you don’t use R&D to get a planning and constructing edge, your competitors will.  The key is to hire someone who not only can demponstrate a solid methodology, but can also think outside the box.

Would you rather have us working for you, or for them?  

Design for success or get your ass kicked by someone who did.

Have fun Y’all…we’ll be in the Wind Tunnel.

The Big Squeeze

Social Media Sites are squeezing out traditional media in terms of time, advertising and audience.

In terms of advertising impressions in the US, sites like Facebook and Myspace account for more than 20 percent. These sites are the aggregation of the longtail of marketing, so LongTail is alive and well, however consolidated.

The Long Tail of the Internet is largely being aggregated by social media sites that offer a platform for the huge number of small content generators. This is putting pressure on portals and the traditional media in terms of advertising because their shares of both time and page views are declining.

So what is the way forward? Instead of trying to challenge these sites, traditional media should find a way to benefit from the attractive platforms.

By combining the mediums, a variety of multipliers can be brought to bear.

We at CLS Gobal have been blowing this horn for some time. Yet we also recognize the cycle of centralization/decentralization and the societal resistance to conformity or domination by a few entities, regardless of type.

How do you know what’s attractive for your business? 
Make sure that you do a VERY comprehensive online intelligence sweep that includes your interests and those of your competitors. 

Armed with data about where your targets are and how they want to be communicated with, you can construct a roadmap of engagement. 

Without the research – you are simply guessing. 
And the last time I checked – guesswork didn’t come with a predictable ROI.

The last time Madison Avenue was in control was in the 60’s, and there were controllable media networks, only three in television.  These are the braintrusts attempting to convince you they have Social Media figured out. 

My 13 year old knows more about online media placement than most agency execs.  Her question is – Why don’t they just do their homework?  

If you feel caught in a quandry, give us a call.  We provide the real world online analysis so that you can build and implement viable strategies that have highest ROI and lowest risk.