White Paper Backs Business Aircraft Use
By William Garvey
Aviation Week
9/4/2009

A new study sponsored largely by business aviation interests argues that
corporations using business aircraft deliver better financial performance
than those eschewing that form of travel.

“Business Aviation In A Changing Economy—An Enterprise Value Perspective,”
was produced by NEXA Advisors, LLC, an Arlington, Va.-based corporate
finance consultancy, for the National Business Aviation Assn. (NBAA), the
General Aviation Manufacturers Assn. (GAMA), and others, including Aviation
Week.

The study, which is expected to be available this week, follows a similar
review conducted for NBAA and GAMA eight years ago by Arthur Andersen, the
former accounting and consulting firm. Michael Dyment, the Andersen partner
who led the earlier study, heads NEXA.

The timing of the new white paper is propitious since the business aviation
industry is struggling as a result of the global economic downturn, along
with criticism from Washington politicos and some general media pundits
about what they maintain is the corporate extravagance and mismanagement
embodied by business jets. In consequence, so many corporations put their
jets up for sale that the used aircraft market became flooded, severely
depressing their value. Others canceled new aircraft orders, which has
resulted in massive layoffs.

The NEXA study, whose preliminary results were shared with Aviation Week,
suggests those moves are ill-considered. NEXA’s consultants reviewed the
Standard & Poor’s 500 between 2003-07, while also examining the turbulent
2008 period in a separate analysis. Dyment said the corporate performance
during the latter interval “produced surprisingly consistent results.”
(Like Aviation Week, Standard & Poor’s is a unit of the McGraw-Hill
Companies.)

The final report will also include a special section on executive
helicopter use and, notably, the use of passenger-carrying business-type
aircraft by Federal and state governments. This last section is expected to
be released by the NBAA next month during its annual convention in Orlando,
Fla., where Dyment will present the entire study in detail.

While the study was restricted to companies in the S&P 500, the actual
group was smaller as a result of consolidations during the five-year
period. In the end, the group totaled 423 companies. Of those, 322, or
three out of four, used business aircraft.

“Users” were primarily composed of whole aircraft owners or lessees,
fractional owners and those who chartered aircraft regularly. “Non-users”
either used charters sparingly or avoided business aircraft altogether.

Aircraft are assets, and the report notes that the relative asset
efficiency of S&P 500 companies that use them is 20% higher than their
counterparts that do not.

But by almost every significant financial gauge examined by NEXA
researchers—revenue, earnings, stock appreciation, market capitalization,
and return on equity, among others—the study found that business aircraft
users’ enterprises grew more than those who shunned business aircraft.

“The point is that top-performing companies are avid users of business
aviation,” said Dyment. “Their market value growth is almost double that of
the non-users. What that means is the stock market is rewarding them for
their overall performance.”

In anticipation of those whom might associate business aircraft use with
irresponsible corporate behavior overall, NEXA researchers turned to other
non-financial data sources—the so-called “best” lists. Specifically, they
reviewed Business Week’s compilations of 50 Most Innovative Companies, 25
Best Customer Service Companies, and 100 Best Brands; Fortune magazine’s
100 Best Places to Work, and 50 of the World’s Most Admired Companies; and,
finally, the 100 Best Corporate Citizens as determined by the Corporate
Responsibility Officers Assn. (Business Week, like Aviation Week, is a unit
of the McGraw-Hill Companies.)

Of the bizav user and non-user companies in the NEXA study, the former far
outnumbered the latter on every one of the “best” lists. Consequently, the
study concluded that the companies producing good financial results, while
at the same time exhibiting the most concern for customers, employees,
governance, transparency and the environment, among other things, often
rely on business aviation to help them succeed.

“There are too many instances when the use of a business aircraft has made
the difference between success and failure,” Dyment says, and the NEXA
report captures some of those.

According to Dyment, the data clearly suggest that business aircraft
provide benefits through time-savings; quicker response to opportunities;
delivery of critical equipment or personnel; better project cooperation,
strategic and tactical management; and improved customer and employee
retention, all of which add value and, ultimately, help raise stock value.

“Business aviation adds great value, but in complex ways,” he says. “It’s
incumbent upon boards [of directors] to understand that these are valuable
business tools, but boards have fallen down on this issue recently. To sit
quietly as flight departments are reduced or eliminated is nonsensical
since that destroys part of the value of the company.”