““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”
Five easy ways to trim flight department costs
Lloyd Geist, chief pilot for Jet Management Inc., was standing nearby in an airport terminal when another business jet pilot dropped off his rental car. A customer service rep told the other pilot he'd have to pay $4.75 per gallon to refill the vehicle's gas tank. "That's OK," he told her. "It's not my money."
When pilots are flying your airplane and spending your dollars, that's the last thing you want them to be thinking. "I could only shake my head in disbelief," Geist recalled.
Unfortunately, while many flight crews feel a duty to manage their employers' funds responsibly, the not-my-money attitude is far from unusual. Probably the best thing you can do to cut costs is to be sure you hire a flight crew that treats the budget seriously.
Once you've done that, though, how else can you trim expenses? Here are five ways:
1. Buy discounted fuel.
Average jet-A prices in the U.S. topped $4 per gallon in July, according to the AirNav airports database, but discounts are available. Some FBOs (fixed-base operators, which provide ground-support services at airports) don't offer the price breaks unless customers ask for them, however, and pilots often don't.
Many programs allow pilots and flight department dispatchers to pre-arrange fuel discounts. Deals range from dedicated fuel credit cards like Avcard and Multi Service to contract fueling programs offered by Avfuel, Best AeroNet, Colt International, Corporate Aviation Association, Jet Fleet International, UV Air, Western Petroleum and World Fuel Services. There are others, too, including networks outside the U.S. and discounts at thousands of international airports that are available through flight-planning companies like Arinc, Air Routing, BaseOps International, Jeppesen and Universal Weather & Aviation.
In addition, many FBO chains have their own fuel-discount programs. Signature Flight Support, for example, offers on-the-spot volume discounts with its Hyper Power program, which doesn't require registration or membership. The more you buy, the lower the cost. For a large jet that uploads more than 1,200 gallons, Signature will lower the price by 75 cents a gallon, a savings in excess of $900.
Mercury Air Centers/Corporate Wings, meanwhile, offers what it calls the Fuel on Demand program at its 23 FBOs. Instead of paying the retail price, operators can prepay facility fees in exchange for fuel discounts. For example, at Mercury's Williamsburg, Va. FBO, a 12-time $3,600 Fuel on Demand purchase offers $2.25 per gallon savings from the retail jet-A price, and all 12 prepaid visits can be used at any of the chain's FBOs. The chain plans to expand Fuel on Demand-which it says makes economic sense for all purchases of more than 125 gallons-to non-owned FBOs that want to participate.
"The biggest difference you can make is in the fuel purchase," said Mike Kreller, chief pilot for D&S Industries of Louisiana. "Get a Colt card or one of the other discount programs." Kreller additionally recommended considering alternate airports, which can save you thousands of dollars on fuel in exchange for an extra few minutes of driving. Fees at major metropolitan airports are usually also much higher than those at outlying but convenient general aviation airports.
Bart Gault, who pilots a Bombardier Challenger 600 out of San Diego, flies the jet's owner to Miami once a year. "We go to Fort Lauderdale because of fuel savings," he said. The drive to Miami takes 20 minutes longer, but the fuel savings amount to an amazing $5,000 to $6,000.
"Fuel is by far the biggest expense for any trip," said Nathan Crane II, CEO of consulting firm Volaeris Aviation. "As a result, contract fuel programs can be the number-one cost saver."
2. Keep an eye on service fees.
While fuel costs are important, other expenses add up, too. "It's amazing that people will scream and yell about four cents [more] a gallon but overpay [other expenses] on a trip by $10,000," said Malcolm Hawkins, president of discount-fuel company Colt International. "There are lots of ways pilots can overpay on the service side."
One way to save on service is to spend some money on fuel, since more FBOs now charge handling and service fees for customers who don't buy fuel. However, fees aren't always posted and pilots should check ahead of time so that costs are clear up front.
While many large modern jets are so efficient that tankering cheap fuel makes sense, your pilot might want to do a quick calculation to decide whether you're better off paying a $300 ramp fee or uploading enough fuel to eliminate that expense. ("Tankering" means carrying extra fuel in the airplane's fuel tanks to avoid having to refuel at each stop. The downside is the weight of the additional fuel, which may limit the passenger and baggage load and can often have a significant detrimental effect on the airplane's performance.)
"Be proactive," suggested Gault. He spends at least an hour preparing for each trip by checking with destination FBOs, finding the best prices and value and making sure there will be no expensive surprises.
3. Save on lodging and food.
Pilots and dispatchers who carefully husband company financial resources know plenty of tricks for finding great hotels for crews at reasonable rates. Gault starts by checking with the destination FBO, which often has special rates for hotels and auto rentals. Then he runs an Internet search to make sure he is getting the best deal. Planning one recent trip to Phoenix, he found that he could have a $200-a-night Marriott room for $150 through the FBO. "Online, I could get it for $99," he said. "It doesn't take a lot [of work]."
While it's often necessary to have food catered for passengers or crews, plenty of opportunities exist to save money here, ranging from using local restaurants to negotiating add-on fees with FBOs. Some operators report FBO add-on fees of 10 to 20 percent, just to store catered food in refrigerators prior to departure.
"I don't need the FBO to do everything," Gault added. "As long as I have time, I'll do [catering] myself." On trips to Atlanta, he drives to a bakery near the airport. "They have outstanding sandwiches. I've catered for eight people for less than $100. Had I gone through the FBO, it would have been $400."
Gault is also careful not to go overboard when dining out on his company's dime. "I don't have to have the fanciest dinners. Maybe occasionally, but I don't make a habit of it."
4. Route flights efficiently.
More opportunities exist to save money by varying airplane routes than you might think.
Ron Current, a flight department manager for Atlanta-based Printpack, discovered this a few years ago, after he came up with a plan to encourage his crews to operate more efficiently. By tracking 628 city pairs that the company uses regularly and the average flight times and fuel burns for those pairs, Current's department is able to measure improvements. Each time a company jet flies one of the city pairs, the department's computer program-Seagil Software's BART Aviation Management System-reports how much time and fuel it saved.
If a pilot shaves six minutes from one leg of a trip, Current said, that means the company saved one tenth of its $840 hourly maintenance costs and about 15 gallons of fuel. Thus, every tenth of an hour saves about $150. "We track that by flight, month by month, and by the full year for each pilot," Current said. While the company is careful not to reward pilots directly for shaving time off a flight with a bonus that might impact safety, cost savings do help pilots earn more in the long term.
5. Get help.
Sometimes you have to spend money to save money. For complicated trips, companies like Air Routing, Arinc, Avcard, BaseOps International, Jeppesen and Universal Weather & Aviation help arrange for fuel, local handling, security, air traffic control, parking, weather data, hotels and ground transport. The bill for these services can be significant, but it could be worth it, particularly on international trips. [See Bizav Basics in our last issue for more on using handlers for international trips.-Ed.]
"For small operations," added Laura Everington, senior trip support specialist for Universal Weather & Aviation, "there is so much involved when you start flying internationally. You're dealing with so many variables-noise restrictions, curfews, private versus commercial [operations]. It's cost effective to use a service provider, because in the end you will spend more money and time trying to do it on