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Friday, August 6th, 2010

After Hiatus, Private Jet Use Returns

When the chief executives of major U.S. car companies flew their jets to Washington in 2008 to ask for a government bailout, it caused a public outcry. While the CEOs’ travel followed corporate policy, the backlash led to many firms to avoid private jets during the economic downturn.

But after a two-year hiatus, jet use appears to be on the uptick again. The Wall Street Journal recently spoke to Edward Bolen, president and CEO of the U.S.-based National Business Aviation Association, about the current climate.

WSJ: How has the climate for business jets changed over the past few years?

Mr. Bolen: Between 2008 and 2009, things dropped off about 30%. This year versus last, between 2009 and the first half of 2010, things are up about 10%. So we’re well below the 2008 peak, but we are coming off of the 2009 bottom.

WSJ: In light of the controversy sparked by auto executives two years ago, do you think companies now view corporate jets as taboo?

Mr. Bolen: I think a CEO or a senior executive, board of directors and shareholders should all have an attitude of when the business airplane makes good sense, when it’s the right tool for the mission, then it should be used. Flying as a status symbol is probably not an appropriate business philosophy or measurement stick, just as not flying [isn’t one]. If a company could do more for its shareholders and for its employees by seeing four customers in one day instead of four customers in two weeks, then they really ought to do it.

WSJ: What’s the experience of being on one of these jets?

Mr. Bolen: Think of what it feels like in a minivan, except that the seats tend to face each other so you can have a conversation. That’s why a lot of companies use these because they feel can turn their travel time into productive work time. They don’t have to worry about eavesdropping or discussing proprietary equipment. So a company can have four people—some planes hold six maybe eight people—and they can discuss propriety information. …

We’ve done surveys throughout the business aviation community. CEOs are generally aboard the company airplane generally 15% of the time. The majority of the time business airplanes are flying, over 50% of the time, with no senior executive aboard the plane. They are moving technicians, salespeople, engineers or parts and equipment.

WSJ: What are the pros and cons to business jet ownership, fractional ownership and chartering?

Mr. Bolen: It generally matters how often you’d be using the airplane. If there are just a couple of times a year … where you need to visit three cities in a single day or move a large team of employees to an area with not good commercial airline service or move a piece of equipment that won’t fit in an overhead bin or is too fragile for a cargo hold, … then you’d probably charter.

If you have more than that … but it is eight or 12 times a year, it might be cheaper to have a fractional share. If you are flying every day—say you’re a company headquartered in a community with no airline service at all and you’ve a got lot of need to see customers and move teams around, then it may make sense to own your own airplane.

WSJ: Is the growth in emerging markets causing a push for longer-range planes?

Mr. Bolen: I think what we are seeing is that there are new markets that are opening, and they’re not always in the main city of a country. In China, for example, companies have done business in Beijing and Shanghai, but now the Chinese have an effort to bring economic development to some of their Western provinces as well.

There’s more outreach and economic development and trade going on in communities that aren’t as well established, that may not have as much airline service as Beijing and Shanghai. So what you’ll see is that there is a company in the U.S. that’s headquartered in Tulsa, and trying to do regular business in some of these Western provinces of China. The airlines may not be as efficient. It may be more effective to use one of the ultra long-range business airplanes.

Source: The Wall Street Journal