'It's a New Market,' Exults Jack Olcott,
Going Far Beyond the Business Boom

It's been the greatest business expansion in history and it's pulled with it an upsurge in business aviation activity -- and corresponding aircraft production and model availability -- that would have been dismissed as wild fantasy during the lean years of the early 1990s.

But the boom in business aircraft -- 8,778 U.S. flight departments last year as compared with 6,584 in 1991 -- is due to more than just tagging on to the nation's economic surge. The boom in business aircraft has gone far beyond the overall business boom, and that bodes well for long-term business aviation prospects.

"As of June 30 there were 12,969 flight departments worldwide and 9,047 flight departments in the United States," according to John Zimmerman of Wichita-based AvData. Fractional operators are each counted only once in the total, Zimmerman emphasizes.

"Business for the last five, six, seven years has been unprecedented," says Cessna CEO Gary Hay. With upwards of 3,100 Citation jets in worldwide service and a pre-NBAA 2000 order backlog of $5.7 billion for his company alone, he should know.

"It has been very robust," Hay says of the recent run of prosperity.

"It's a new market," says National Business Aviation Association chief Jack Olcott. "It's a market that is generated by American industry's need for productive transportation.

"The communications marvels we have today have quickened the pace of business," Olcott says. "They haven't reduced the need to travel." Leaner and meaner business organizations haven't reduced demand for business aircraft, they've done the opposite.

"They downsized staff but they didn't downsize the number of jobs staff had to perform." Modern executives, Olcott told Show News prior to NBAA 2000 here in New Orleans, "essentially have to have an office that moves, and that is what a business aircraft is."

"People's time is a greater percentage of the economic equation," agrees Richard Aboulafia, who directs aviation research at the Virginia-based Teal Group. Teal even talks about a "new paradigm," while the prognostication firm still cautions about the non-sustainability of the fractional surge, it acknowledges that the quest for productivity, particularly among North American companies, is a big contributor the ongoing prosperity, and an upward indicator for business aviation over the long term.

Also pointing to continued prosperity are new patterns of use, as aircraft are being made to be more productive too, indicating an even more robust market in future. "The real measure of our community health is the number of hours that are flown, the number of people who are moved," says Olcott.

NBAA is quantifying the trend to increased aircraft utilization via a new benchmark survey. It'll likely affirm that busy people are keeping their airplanes busier than ever.

"We seeing a lot heavier usage in the last couple of years," says Cessna's Hay. Five or six years ago, he says, the average business jet saw 400 to 500 hours of annual service. Now the average is closer to 800 hours for non-aviation companies, Hay says. It's not unusual for fractionally owned aircraft to see 1,200 hours of annual use.

Fractionals not only boost the immediate market (Warren Buffett's Executive Jet claims its myriad buys have accounted for one-third of the overall business jet market for the past four years), they bring new buyers into non-shared ownership, says Olcott.

"Once companies start to use business aviation they find out how valuable it is and they tend to use more and more of it," Olcott says. "Fractional ownership is a tool but it's a tool that's not as efficient in terms of cost-per-mile as whole ownership with reasonable levels of utilization." That's because fractionals have from 30% to 40% deadhead time, and someone has to pay for it. The message? Big users are likely to become new owners.

Perhaps even more significant, and making the future look even brighter, is an NBAA finding that more than 70 percent of companies with revenues in excess of $50 million have never formally evaluated business aircraft. "As companies fly they're going to want more," Olcott predicts. "There's a great opportunity for growth."

By Rich Piellisch