How to Measure BizAv’s Key Performance Indicators

from AvBuyer Magazine February 2022

Five Tips for Hiring Great Contract Pilots

What are the Key Performance Indicators that highlight the benefit of Business Aviation to your company, and how can you conduct a meaningful analysis using them? René Armas Maes provides an outline…

There is no doubt that business aircraft are a productivity enhancement tool – but how do you measure the Key Performance Indicators?

To begin with, the use of a business aircraft provides flexible scheduling, and helps entities optimize revenue growth opportunities, as well as facilitating more valued face-to-face customer interactions.

Other benefits include enabling the increased agility and mobility of executives and managers, who may even be able to visit multiple destinations in one day.

It is well documented that companies using business aircraft consistently outperform those who don’t. But how can companies measure the performance of their business aircraft as they aim to optimize revenue, employee productivity, improve efficiency and enhance profitability?

Which performance indicators should be considered? How is performance measured? We’ll explore the answers over the following paragraphs.

The Five Key Drivers of Enterprise Value

There are a number of metrics available to measure your enterprise’s value, but here are the five key metrics…

Total Return: Includes an evaluation of the enterprise’s stock value, dividends, interest, and capital gains over a given period of time. Focus on the growth of the enterprise over a five- and ten-year timeline.

EBITDA, Earnings Growth & Measures of Profitability: Focus on corporate profitability metrics while using this indicator to compare the entity’s performance. For further comparison and analysis, find out what the industry averages are.

As an example, NASDAQ provides visual representation of analyst expectations in terms of earnings growth, which are algorithms based on a company's historical reporting dates.

Return on Assets and Average Asset Turnover: Measure how efficiently (or not) the company uses its assets to generate a profit. Focus on a single industry, since companies within the same industry will share the same asset base.

Return on Equity: Find out how well the company is managing the capital that shareholders have invested. A higher number means improvement in efficiency, in terms of management’s ability to generate income and growth from its equity.

As per the ‘Return of Assets’ metric, it is important to focus on, and compare, companies within the same industry.

Revenue Growth: Yearly and quarterly revenue growth measures the increase in a company's sales from one period to another. Focus on successive quarters of sales performance, and seek to understand your sales growth.

How consistent is revenue growth over a period of several quarters and years?

It’s crucial to understand any business seasonality relating to revenue growth when comparing this against other entities.

Other indicators, such as Stock Price performance and Market Capitalization, may be used for further analysis and comparison.

After gathering the data, the next step, as shown in Chart A (below), is to plot each individual metric discussed above and compare Business Aviation user entities with non-users, while assessing performance over a five-to-ten-year timeline.

The benchmark peer group should consist of 15-25 companies. Validate where and how Business Aviation has been associated with key performance drivers, and whether it has driven enterprise.

Employee Productivity – Another Key Metric

Using a business aircraft improves employee productivity in several ways. To measure the contribution of a business aircraft when moving employees around, start by assessing how a business aircraft saves employee time, and how productivity is improved by the time savings resulting from door-todoor travel.

For example, in a recently-undertaken corporate travel assessment, one entity needed to evaluate whether it could productively fly four executives from Point A to B, and hold two full-day meetings at Point B without diminishing their employees’ productivity at Point A.

The key question that needed answering was, “How will travel time impact our employees’ productivity if they fly on scheduled airlines, versus a business jet?”

A number of assumptions were made, including the number of trips per month, executive compensation, onboard productivity, passenger loads, and more. 

Chart A: Business Aviation Users vs Non-Users Performance Trend Line (Years 1-10)

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Chart B: Employee Productivity Analysis: Scheduled Airline Service vs. Business Aviation

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The wasted round-trip productivity time when using scheduled airline services was 23 hours per trip, or 552 hours annually. By comparison, the wasted round-trip productivity when using a business jet was only two hours per trip, or 48 hours annually – an improvement of 91% (see Chart B, above).

Ultimately, the entity found it could save almost US$3m per year using Business Aviation, while freeing up nearly 3,000 man-hours per year (the equivalent of 62 weeks). Such key findings within these types of study have proved to be enlightening for many a board member around the world.

Other Benefits Associated With Business Aircraft

There are, of course, other benefits that should be factored in when using a business aircraft, including the flexibility to access many more airports than the scheduled airlines. Many of those airports are conveniently located closer to customer facilities, allowing for efficient and quick access to final destinations.

In addition, a business aircraft can reduce travelrelated stress for employees, since an operation can control its own scheduling, routing, departure and arrival times.

And, by eliminating travel-related fatigue (i.e. by avoiding long queues and waiting times at airports) that is associated with scheduled airline travel, employees can even conduct business onboard the aircraft, without any distractions, threats to privacy, or loss of productivity. In Summary

Ultimately, with enhanced mobility, companies that operate a business aircraft can increase decision making, accelerate market penetration, and respond rapidly to market opportunities and key customer issues. The geographic reach of an entity’s sales force can be extended through easy access to efficient, more flexible transportation.

Business Aviation can improve customer and employee relationships, since a business aircraft can secure more face-time with customers, and an entity can benefit from a closer and more intimate relationship. This can naturally translate into a long stream of revenue opportunities.

Customer satisfaction can be enhanced as employees spend more time building and expanding those relationships, and more time can be spent in quizzing customers about future product development.

Moreover, time-savings gained from using Business Aviation will help keep valued employee satisfaction high, nurturing a culture of loyalty and higher productivity, which further enhances enterprise value creation.

The benefits of using a business aircraft cannot be denied. However, the actual extent of those benefits will differ from one enterprise to another. Hence the recommendation to conduct your own Key Performance Indicator survey as it applies to your own business airplane use. We suspect, like many of those who have already done so, the results will be eye-opening. ❚

RENÉ ARMAS MAES