Corporate Jets - the business case

What would be the case for leasing a corporate jet?

• The CEO needs to work while he travels.

Actually most working professionals work when they travel so it must be something else.

• The CEO's time is worth more than that of most working professionals.

A CEO with a salary of $10M (the average for Standard & Poor's 500 company) might save time if there is no waiting in line and no waiting for scheduled flights. If this saves him or her 4 hours per day of traveling, and the CEO travels 3 days a week or 150 days a year, and typically works a 16 hour day, the cost of this CEO's lost time would be about $1M a year. This is not quite enough to pay for the cost of owning and operating a small jet such as the Hawker 800XP which comes to about $2.4 per year. But if one adds the CFO and the COO who might be traveling with the CEO or traveling on the days when he is not, and assume that they are paid half the CEO's salary one could argue that time savings could amount to $2m.

Interestingly Avicor, an aviation consulting company, does not make this claim. What they do suggest is that meetings in-flight are where the money is saved - you can't hold a confidential meeting in coach (or business class for that matter). Here it's the travel time that counts. If one adds in-flight time to the time saved on the ground, and if one assumes flight durations on average of 3 hours, the CEO's useful time might come to $1.75M; the CEO and the top management team together would then likely save the cost of the jet.

Of course this is predicated on two assumptions. One is that the jet is in almost constant use. And second is that there is no alternative. While flying coach may not work as an alternative, teleconferencing, for example Cisco's telepresence, may be a lower cost alternative. In which case the saving would be considerably less. But that's a calculation for another day.