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Two studies highlight bizav's value in real dollars
November 5, 2010
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  • By Mark Huber

    October 20, 2010

    Two new studies underscore the value of businessaviation – and the high cost of not using it. Nexa Advisors studied the value ofbusiness aviation to Standard & Poor’s Smallcap 600 companies from 2005 to2010.

    Nexa found that companies within this group that usedcorporate aviation had three times or more the total return on growth, shareprice growth, EBITDA growth (earnings before interest, taxes, depreciation, andamortization) and earnings growth than other companies within this categorythat did not use business aircraft. Meanwhile, a new FAA-funded study releasedthis week has pegged the annual cost of airline delays to the U.S. economy:$32.9 billion.

    The study, sponsored by the FAA’s National Center ofExcellence for Aviation Operations Research (Nextor) and conducted by leadinguniversity researchers, analyzed data from 2007. It included the cost ofpassengers’ lost time due to schedule buffer, delayed flights, flightcancellations and missed connections.

    The report found that 25 percent of all domestic airlineflights were more than 15 minutes late in 2007. The report warned that nextgeneration air traffic control systems (NextGen) would not eliminate mostairline flight delays: only one-third of airline flights were delayed by theinability of the national air traffic control system to handle flights, whilealmost all of the remainder was caused by “internal problems” at airlinesthemselves that had a cascading effect on subsequent flights.

    Basically, an airplane that arrives late de facto departslate for its next flight. The study also found that while scheduled airlineflights increased by approximately 22 percent between 2002 and 2007, the numberof flights arriving late more than doubled.

    Post-recession, that problem could get worse as the FAApredicts airline traffic will grow by 30 percent between 2012 and 2025. Thestudy warned, “without substantial upgrades to aviation infrastructure, suchgrowth would result in flight delays far in excess of any we have heretofore experienced”and noted that “Growing delays threaten the competitiveness of the U.S. in theworld economy, by limiting the ability of the air transport system to serve theneeds of the U.S. economy.

    The study also cast doubts on the long-term financial prospectsof the airline industry, noting that it lost $60 billion between 2000 and 2008and experienced a $26 billion drop in market capitalization between early 2007and December 2009. The Nextor study, like the one from Nexa, validated thepositive rate of return on business travel.

    Citing Oxford Economics, the Nextor study noted that “adollar spent on business travel earns a return of about $12 in increasedrevenue to the traveler’s employer.

    Date: 2010-10-20