““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 ”
Exactly how do you suppose the imminent arrival of very light jets will change the aviation landscape? We've heard opinions from an army of analysts, but history makes clear the hazards of paying too much heed to "expert" prognostication.
In the immediate post-World War II years, aviation's best and brightest saw America as a sure bet to become a hotbed of personal aviation. On paper, their arguments looked convincing. During the war, the country's massive assembly lines had switched from building sedans to cranking out bombers and fighters by the tens of thousands. The military and civilian pilot training program had taught close to a half million Americans to fly, and countless more had learned to crew and maintain aircraft with Uncle Sam footing the tuition bill.
After the war, even those who hadn't been part of the great air armada were eligible to use their GI Bill benefits to learn to fly. What had been the province of the rich now appeared accessible to any veteran. In fact, it looked to some as if the personal airplane was set to rival the automobile as the vehicle of choice-at least for long-distance transportation. But they were looking with their hearts rather than their eyes.
As anyone who had stock in the general aviation industry back then can tell you, the changeover to civilian air power never happened. A few years of big production numbers followed the war, and then sales figures crashed and burned. Moreover, scores of dreamers who'd hoped to cash in on the private flying "boom" saw their investments evaporate in the smog-filled skies above our great national highway system.
But how likely is it that all the VLJ excitement could wind up fizzling in the same way? There are some parallels, but in some ways, the current situation is significantly different.
First, many people in 1945 assumed that to replace the automobile-if only for interstate travel- airplanes would have to be flown by the owner. Dad would don his fedora and crank up the family four-seater for a business trip, or squire his wife and kids to a picnic three states away, returning before sunset to sleep at home. New aircraft of the day were designed to be easier to fly than their predecessors, and many included weather-flying capability.
Today's business plan for VLJs certainly includes the owner-flown segment-in fact, it depends heavily on it. But the bet is hedged by other elements, such as the hoped-for air-limo concept, fractional-ownership programs and even fast-freight and training industries. If the VLJ business plan were an investment portfolio, you could say it was well balanced.
Just after the war, high-performance single-engine propeller airplanes effectively matched airliners for cruise speed. But the personal airplane's speed advantage dissolved in the 1950s with the introduction of jet airliners. The Boeing 707 blistered across continents and oceans at greater than 600 mph, luring many who might have bought airplanes to purchase first-class tickets and join the "jet set" instead.
Today's VLJs also match airline speeds through the air. At the same time, a light jet can halve the airlines' effective door-to-door speeds with direct flights (as opposed to the hub-and-spoke connector system); use of smaller, more convenient airports; and
the bypassing of security lines.
Ironically, as preparing for airline travel has become more complex, time-consuming and personally offensive, even the vintage prop airplanes from the post-war era have begun to give the once-chic jet airlines a run for their money. Given favorable conditions, a pilot flying a small prop airplane powered by a piston engine can win the door-to-door race with the first-class airline passenger on trips of 1,000 miles or less.
In the years leading up to World War II, personal aviation was readily available-mostly to the wealthy. Airplanes were large, hand-built masterpieces of custom manufacturing with massive, powerful radial engines. Many were professionally flown. In a way, they were comparable to today's business jets.
Somewhat like today's VLJs, the post-war, high-performance personal airplanes did almost all that the pre-war machines did, but at a third of the price, with a fraction of the horsepower and with correspondingly lower fuel burn. As an example, the all-metal Beech Bonanza was introduced with a 165-horsepower conventional piston engine and yielded performance numbers closely comparable to those of the company's pre-war, fabric-covered Model 17 "Staggerwing" cabin biplane, which flew behind a 600-hp radial piston engine.
Anyone examining the two airplanes side-by-side would agree that the Staggerwing was an epic design. The Bonanza, conversely, was an ultra-efficient product of up-to-date (for 1947) assembly-line manufacturing. That mass-production technology helped us win the war, and it introduced a much more efficient, elegantly modern flying machine to the post-war buying public.
The Beech Bonanza was designed in 1945 to be introduced to the market two years later at a price of $7,995 (about $85,000 today), while that year's model Staggerwing cost $29,000 (or about $305,000 today). In 1945, the Daily Record in New Jersey advertised a three-bedroom house in posh Morris Plains for $8,500. Likewise, the cost of VLJs (starting at $1 million-plus to almost $3 million) compares favorably with what you'd pay for a luxury home in one of today's hot real estate markets. Therefore, the relative airplane-to-home cost is comparable to what it was more than half a century ago.
But expectations were probably a lot higher back then-and much more naïve. The hope among aviation lovers was to rival the automobile in sales and popularity. That was never going to happen without significant government support in airport infrastructure. Though the country was sprinkled with thousands of newly constructed training fields left over from the war effort, it was the national highway system that won the political battle for funding.
So how deep will be the inroads VLJs carve into the airline and traditional business jet markets? With their operating costs projected to be significantly lower than those of existing private jets and their capability to trump the airlines for speed and convenience, the future looks good. But then again, I would have bet money on aviation's future in 1945, and I would have lost my shirt.