Business Aviation can be Tricky and Expensive!
The hype, the image, and the reality of business aviation are vastly different realities!
As the creator of two successful international aviation businesses, and as a high time corporate pilot in the business aviation ecosystem, I fully understand the state of cognitive dissonance that exists in the business aviation community.
When all the necessary elements to create a successful aviation business are brought together at best, it becomes a confusion matrix. A condition that can costs millions if not hundreds of millions of dollars, and at worse can compromise safety which no one wants. But it simply does not need to be that way.
At this point we can get into a lengthy discussion about all the elements that creates the problems or just go to the answer that best solves the entire problem. Let’s just solve the problem.
If you are going into, or are in the business of the aviation, the number one goal should be safety, followed by making money! Lots, and lots of money!
Unfortunately, the Business Aviation industry is viewed as an abstract when what it really is, a product. As a product by default, the product needs to or should be profitable. That is where the problem starts. Business aviation is a product!
As a product, aviation is expensive to produce, therefore it as an extremely limited market. Generally, only the 1%’ers use the product. This sets up the very rudimentary enigma, which is the sales cycle. Sales involves pricing, which is heavily dependent on volume, but with the product being expensive to use, the market and audience is severely limited.
So, with the objective being to sell charter hours, fractional time shares, and a wide variety of other knock offs for a profit to that limited audience and given the way that business aviation operates as of now, making money is not possible.
Like it or not, the market for business aviation is made up primarily of 1%’ers. The 1%’ers “like”, and absolutely love having money. But they do not “like” to spend it, especially if it makes them appear obnoxious.
That is the paradox which creates the market conditions. There is an expensive product, or the service that must be competitively priced to 1% of the population. That is the catch 22. Business aviation sales are dependent on a limited market that is price sensitive and sophisticated enough to exploit the service providers to get what they want. What the limited market wants is efficient yet safe and sophisticated transportation. What operators want is to be a 1%’ers.
All of which is exactly why and how business aviation losses money.
Every version, every scheme, every scam always fails to make a profit for one reason and one reason only; They are being done wrong on a regular basis. And regardless of what you call it, or what gee wiz name you come up with, it is still deemed erroneous.
Consequently, and based on history and all the current systems available, there is no way to be profitable in the current dilemma. Until we think about it that is.
The charter price points/costs for airplanes are based are the same economics as any other product, costs divided by use. So, without a major innovation regarding utilization, anyone operating any aircraft in today’s ecosystem will lose money, every time.
The price driver is a severally limited market in concert with really expensive operating costs, all regulated by the FAA which does not care about any of this.
This is where cognitive dissonance comes in. The people that fund aviation typically are expecting to earn a profit. Something that does not happen because the market for charter and fractional aircraft is extremely limited by volume. At the same time, the 1%’ers that use the services tend to always go with the lowest priced operators. Those operators cannot make any profits with low use, which is what exists today.
There are currently a dozen different variations or business models in the charter or fractional space to solve this specific problem, all of which fall short. Profits cannot and will not happen in any of the current business aviation models that are currently being used in the industry.
So, basically since 1962 (since I have been around), business aviation always losses money. It works great if you are looking for a tax write off though.
The reality is since 1962 when I got into the aviation field no one in the entire business aviation environment has taken the time to find a real solution to the problem. The good news is, I did! And I do have a solution on how to make aviation profitable!
The solution is simple. It primarily revolves around utilization. Increased utilization dilutes specific costs which allows the operating costs to come down and become inclusive and expanding the user market while making a profit. That’s it, And it is that simple.
The solution of how to increase utilization always has been the mystery. A mystery that I have a simple and full proof solution for.
Should simple and full proof be of any of interest you please contact me at rick.eriksen@cox.net
Or at LinkedIn https://www.linkedin.com/in/rickeriksen/
Who am I and what do I know about any of this? I created and co-founded Jet Support Services Inc., aka JSSI in 1988/89, and Mid-West Charter at the request of the Federal Reserve Bank in 1969. Mid-West became Airborne and is known today as DHL. Also, I was the CP and DO for MBNA. As a pilot I have over 21,000 PIC hours. So, I have been slightly more than imminently involve in all forms of business aviation and I really do know what it takes to make business aviation work.
