Why Your Company Needs an Aircraft-Use Policy

Elaborate procedures and policies often weigh down big companies, especially public ones, turning the simplest actions into bureaucratic nightmares. The hapless corporate official tasked with accomplishing something can lose himself in a labyrinth of departmental approvals and box checks: procurement, insurance, law, finance, human resources. So does your company really need a formal policy for use of its jet? The short answer is yes, it probably does.

Such policies—I’m talking about written and published ones—used to be rare, something a company might have only because several key executives were fighting over who gets to use the aircraft. If there was a chairman/founder/CEO who ruled the roost, the “policy” might just be: “I decide who flies when and where, and if you don’t like it, buy your own airplane.”

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Fessing up to jet perquisites

Understating the value of personal usage of the company aircraft can lead to significant penalties.

Clarifying any confusion about who gets to use the jet is certainly an important reason to have a formal policy. If nothing else, it helps avoid putting someone in the flight department or elsewhere in the difficult position of having to tell a blustering executive why he can’t use the aircraft tomorrow. A written policy can eliminate the need for such explanations by specifying rules that everyone can read for themselves. Some companies make the aircraft available to all employees, while others limit its availability to specific people, departments, or levels of management. In the latter case, the rules may allow permitted users to bring along other corporate employees because, for example, they’re working on the same project together.

Drafting a corporate-use policy provides an excellent opportunity for a company to reflect on, and make decisions about, what it considers most important. The most controversial use-policy issue is a function of the company’s views about the safety of air travel.

Companies that regard business aircraft as among the safest forms of transportation may be committed to filling the seats and taking maximum advantage of each flight, not only as a way to move people from place to place but from a financial and tax point of view. In that case, the corporation may even require that a certain percentage of the seats on the airplane be occupied before it can be used for a trip at all.

On the other hand, a company that is more focused on the potential for an aircraft accident may in effect try to keep employees off the jet. Concerned about putting all of its eggs in one basket, it may discourage key executives or all employees in a given department from taking the same flight. Similarly, where a company regards more than one executive as too important to lose, the aircraft-use policy may require them to fly on different airplanes even when they’re traveling to the same destination at the same time.

Of course, safety is an important consideration in a corporate-use policy even for companies that don’t focus on the possibility of accidents. A policy can let everyone know that aircraft operational decisions are the province of, say, the aviation department director (on the ground) and the pilot-in-command (on the trip). The rules should protect the flight crew from being bullied by a key executive into implementing an inadvisable or unsafe operation that runs counter to their professional judgment. Similarly, the policy can clarify who oversees administering and enforcing compliance with the policy itself.

The policy should also contain specific instructions about how eligible travelers can request use of an aircraft. Who makes the decision about granting access to the jet? How much lead time is required under normal circumstances—and can requirements be waived if a critical trip pops up unexpectedly? If you reserved the aircraft first, can you be bumped in favor of a more important flight or passenger? The policy should include rules for prioritizing requests and adjudicating conflicts.

For times when a company aircraft isn’t available for a given trip, the policy can specify and rank permissible alternates, such as use of the executive’s own aircraft (including rules regarding expense reimbursement), fractional shares, charter, and the airlines. The policy may also require specific charter operators, operator qualifications (such as Argus Platinum and Wyvern Wingman), and aircraft types (e.g., no single-engine aircraft).

Don’t forget to include detailed information about recordkeeping for trips—whose responsibility it is, what information should be recorded (dates, places, passengers, purposes), and where the information is kept. Such data may be invaluable if, for example, the IRS audits the company’s tax return.

If the corporation has more than one aircraft, the policy should clarify which are available for what kinds of trips. The company’s Global 6000 is probably not the model of choice to fly from Chicago to Cleveland—unless its other aircraft aren’t big enough to carry everyone who needs to make the trip.

Some companies have rules requiring key executives to use the corporate jet instead of the airlines for all flights, including personal ones. Not only are company aircraft potentially more secure, especially for travel to dicey destinations around the globe; they also offer all the other benefits of business aviation, such as significant savings of valuable time for key employees, a private and productive work environment (including telephone and Wi-Fi connectivity), and the ability to change travel plans quickly. The policy should dovetail with a security program if the company has one. [See “How a Security Program Can Cut Flying Costs” —Ed.]

Personal use of company aircraft raises a host of issues worth addressing. Will executives be charged, and if so how much? The FAA now permits companies with policies that reflect a desire for key executives to be immediately available when on non-business trips to charge the executives for use of the aircraft. [See “Paying to Fly the Company Jet”—Ed.] Among other questions: Are pets welcome? Will the company need to collect the transportation excise tax? To the extent that the executive is not charged, will income be imputed for tax purposes? Suppose a given flight has both business and non-business passengers—what rules apply for bringing friends and family along?

A newly drafted aircraft-use policy should be reviewed by all relevant company departments, including flight, legal, financial, tax, and risk management. Aviation counsel should also scrutinize the policy to ensure, for example, that it complies with FAA, DOT, and IRS rules regarding charges and taxes for flights. And don’t neglect to show it to the CEO.