commercial business aviation: a valuable travel

Bachelor-Thesis

Commercial Business Aviation: A Valuable Travel Alternative for Business Companies in Germany?

Presented to and supervised by

Prof. Dr. Karsten Leibold

International University of Applied Sciences Bad Honnef · Bonn

Department of Aviation Management

Jürgen Willems

Jülicher Ring 71

52388 Nörvenich

Germany

E-mail: [email protected]

Student ID: 9031666

Nörvenich, 14 August 2006


Acknowledgements

I would like to thank Prof. Dr. Karsten Leibold, my thesis supervisor, for many

hours of helpful guidance and advice. He introduced me to the topic and helped

me with formulating many of the ideas and concepts. Furthermore, his interesting

lectures provided me with the basic skills to conduct the necessary research.

Many thanks to Prof. Dr.-Ing. Ulrich Desel for being a great advisor and supporting

me during my work on this thesis.

My special thanks goes to Mister Reiner Eismann, Managing Director of

Essen/Mühlheim Airport, for his generous support and for providing me with a

great research opportunity.

I gratefully acknowledge the support of the following persons, who contributed

their time to share their experiences and insights with me and provided me with

further information sources. I truly enjoyed the discussions and I hope that I have

accurately reflected their thinking in this thesis.

Wolfgang Vautz, Manager/Owner, VHM Flight Training and Charter

Uwe Marx, Flight Operations Manager/Pilot, VHM Flight Training and Charter

Guido Harling, Manager, BearingPoint GmbH

I would also like to give a special thanks to Norman, for the excellent and

productive cooperation throughout the last three years and the valuable support

for this thesis.

Finally, I would like to thank my wife, Beate, for providing me the necessary

freedom to conduct my studies, and my kids, Merle and Jan, for providing me with

as much distraction as was necessary to keep my perspective. I more than

appreciate the unconditional love and support they give me throughout my

endeavours.

ii


Table of Contents

List of Abbreviations ................................................................................................v

List of Figures and Tables .................................................................................... viii

List of Appendices .................................................................................................. ix

Abstract ...................................................................................................................x

1 Introduction ..................................................................................................... 1

1.1 Motivation................................................................................................. 1

1.2 Why Commercial Business Aviation?....................................................... 1

1.3 Structure and Purpose of this Thesis ....................................................... 2

2 Business Aviation in Germany ........................................................................ 4

2.1 The Business Travel Market .................................................................... 4

2.2 Business Aviation..................................................................................... 6

2.3 Regulatory Framework............................................................................. 7

2.4 Commercial Business Aviation................................................................. 8

2.4.1 Customer Contracts .......................................................................... 8

2.4.2 Pricing Structure .............................................................................. 9

2.5 Business Aviation Aircraft ........................................................................ 9

2.5.1 Common Aircraft Categories............................................................. 9

2.5.1.1 Multi Piston Aircraft ..................................................................... 10

2.5.1.2 Turboprops .................................................................................. 11

2.5.1.3 Executive Jets ............................................................................. 12

2.5.2 Very Light Jets – A Revolutionary Innovation?................................ 13

2.6 Benefits of Business Aviation................................................................. 14

2.6.1 Personnel Time Savings ................................................................. 15

2.6.2 Increased En Route Productivity..................................................... 15

2.6.3 Choice of airport.............................................................................. 18

2.6.4 Operational Flexibility...................................................................... 19

2.6.5 Improved Employee Morale and Loyalty......................................... 19

3 Finding the Niche Markets............................................................................. 21

3.1 Business Intelligence ............................................................................. 21

3.2 Methodology .......................................................................................... 22

3.2.1 Availability of Data .......................................................................... 24

3.2.2 Analysis Tools................................................................................. 25

iii


3.2.3 Data Validity and Integrity ............................................................... 25

3.2.4 Creation of a Master Data File ........................................................ 26

3.3 Evaluation of Intra-European Airline Connections.................................. 27

3.3.1 Direct Connections.......................................................................... 27

3.3.2 One-Stop Connections.................................................................... 28

3.3.3 Two-Stop Connections.................................................................... 29

3.4 Airline Schedule Evaluation Results....................................................... 30

4 Cost-Benefit Analysis .................................................................................... 33

4.1 Accounting and Economic Principles ..................................................... 33

4.2 Methodology .......................................................................................... 34

4.3 The Value of Time.................................................................................. 34

4.3.1 The Value per Man-Hour (VMH) Concept....................................... 35

4.3.2 Productivity Valuation Models......................................................... 36

4.4 Time and Cost Calculations ................................................................... 38

4.4.1 Time Calculation ............................................................................. 39

4.4.2 Cost Calculation.............................................................................. 43

5 Sample Route Calculations ........................................................................... 47

5.1 Selected Sample Destinations ............................................................... 47

5.2 Basic Assumptions................................................................................. 49

5.3 Route 1: Oulu, Finland ........................................................................... 50

5.4 Route 2: Vilnius, Lithuania ..................................................................... 54

5.5 Route 3: Katowice, Poland..................................................................... 58

5.6 What Type of Business Aircraft to Choose?........................................... 62

6 Conclusion .................................................................................................... 64

References ........................................................................................................... 67

Appendices........................................................................................................... 71

iv


List of Abbreviations

A/C Aircraft

ADV Arbeitsgemeinschaft Deutscher Verkehrsflughäfen

APG (Seabury) Airline Planning Group

ATC Air Traffic Control

BEW Basic Empty Weight

BG Bulgaria

BI Business Intelligence

BRE Bremen Airport

BUD Budapest – Ferihegy Airport

CGN Cologne/Bonn Airport

CZ Czech Republic

DE Germany

DST Daylight Saving Time

DTM Dortmund Airport

DUS Düsseldorf International Airport

FI Finland

FRA Frankfurt Airport

ft feet

GDN Gdansk – Lech Walesa Airport

HAJ Hanover Airport

HAM Hamburg Airport

HEL Helsinki – Vantaa Airport

HRA Human Resource Accounting

HRM Human Resource Management

HU Hungary

IATA International Air Transport Association

IBAC International Business Aviation Council Ltd.

ICAO International Civil Aviation Organisation

IFR Instrument Flight Rules

ITIN VI Itinerary Variation Identifier

JAA Joint Aviation Authorities

JAR Joint Aviation Requirements

v


kg kilogrammes

km kilometers

km/h kilometers per hour

KPI Key Performance Indicator

KRK Krakow – John Paul II International Airport

kts knots (nautical miles per hour)

KTW Katowice International Airport

lbs pounds

lcl Local Time

LV Latvia

m meters

MCT Minimum Connecting Time

MDF Master Data File

MTOW Maximum Take-Off Weight

MUC Munich International Airport

NBAA National Business Aviation Association, Inc.

nm nautical miles

NO Norway

OSL Oslo – Gardermoen Airport

OSR Ostrava International Airport

OTP Bucharest – Henri Coanda International Airport

OUL Oulu Airport

O&D Origin and Destination

Pax Passengers

PCD Personnel Cost Difference

PL Poland

PPR Prior Permission Required

PRG Prague – Ruzyne Airport

RIX Riga International Airport

RO Romania

SAS Statistical Analysis System Software

SOF Sofia International Airport

SQL Structured Query Language

SSIM Standard Schedules Information Manual

vi


STA Scheduled Time of Arrival

STD Scheduled Time of Departure

STR Stuttgart Airport

SXF Berlin – Schönefeld Airport

TEC Total Explicit Cost

THF Berlin – Tempelhof Airport

TP Turboprop

TRF Sandefjord – Torp Airport

TTC Total Trip Cost

TVT Total Valued Time

TXL Berlin – Tegel Airport

UTC Coordinated Universal Time

VAR Varna International Airport

VDR Verband Deutsches Reiesemanagement e.V.

VLJ Very Light Jet

VMH Value per Man-Hour

VMHBE Average Break-Even VMH

VNO Vilnius International Airport

WAW Warsaw – Frederic Chopin Airport

vii


List of Figures and Tables

Figure 2.1: Distribution of Business Trips per Destination Region (2003 -2004) .... 4

Figure 2.2: Split of Total Business Travel Cost (2004) by Cost Sectors ................. 5

Figure 2.3: Usage of time aboard aircraft ............................................................. 17

Figure 2.4: Passenger Productivity Aboard Aircraft Where FIVE Represents a

Typical Office Hour........................................................................................ 17

Figure 3.1: Creation of One-Stop Connections with SAS ..................................... 28

Figure 3.2: Creation of Two-Stop Connections with SAS ..................................... 29

Figure 5.1: Average Break-Even VMH Values (Oulu, Finland)............................. 53

Figure 5.2: Average Break-Even VMH Values (Vilnius, Lithuania) ....................... 57

Figure 5.3: Average Break-Even VMH Values (Katowice, Poland) ...................... 61

Figure 5.4: Average Break-Even VMH for Choice between Business A/C Types 62

Table 2.1: Classification of Executive Jets ........................................................... 12

Table 3.1: SSIM Date - European Airline Schedule 2005..................................... 24

Table 3.2: APGDAT - European Airline Schedule May 2006 ............................... 24

Table 3.3: “There-and-Back-in-a-Day” options from the Rhine-Ruhr Area ........... 31

Table 4.1: Multipliers of Base Salary Resulting From Application of Methods of

Computing Corporate Values of Employees For Typical Corporations ......... 36

Table 4.2: The Value of Executive Time............................................................... 37

Table 4.3: Time Calculation Table ....................................................................... 39

Table 4.4: En Route Productivity and Total Valued Time ..................................... 41

Table 4.5: Cost Calculation Table ........................................................................ 43

Table 5.1: Time Comparison Route 1 (Oulu, Finland) .......................................... 51

Table 5.2: Cost Comparison Airline vs. Business TP: Oulu, Finland (3 pax) ........ 52

Table 5.3: Cost Comparison Airline vs. Business Jet: Oulu, Finland (3 pax)........ 52

Table 5.4: Time Comparison Route 2 (Vilnius, Lithuania) .................................... 55

Table 5.5: Cost Comparison Airline vs. Business TP: Vilnius, Lithuania (3 pax) .. 56

Table 5.6: Cost Comparison Airline vs. Business Jet: Vilnius, Lithuania (3 pax) .. 56

Table 5.7: Time Comparison Route 3 (Katowice, Poland).................................... 59

Table 5.8: Cost Comparison Airline vs. Business TP: Katowice, Poland (3 pax).. 60

Table 5.9: Cost Comparison Airline vs. Business Jet: Katowice, Poland (3 pax) . 60

viii


List of Appendices

Appendix 1: Commercial Air Charter Companies in Germany

Appendix 2: Air Charter Brokers in Germany

Appendix 3: Listing of German Airports

Appendix 4: “There-and-back-in-a-day” Options

Appendix 5: Airline Bookings for Sample Routes

ix


Abstract

The purpose of this thesis is to assess the potential impact of commercial

business aviation on business companies in Germany. In other countries,

especially in the United States, business aviation is accepted as a normal

business tool that can contribute to the profitability of the company. In Germany,

business aircraft are still afflicted with an image of luxury, and many right-sized

and cost-conscious companies do not want to be associated with such

extravagant expenses. It seems to be mainly a question of perception or

nescience, why many German companies avoid contact with business aviation.

Another possibility may be the way in which travel expenses are actually

calculated. The benefits that can result from the use of a business aircraft are

basically the same, no matter where the company is based. A difference obviously

exists in the quantitative effect these benefits may have on the individual company

budget. This again depends more on size and nature of the company than on

nationality.

This thesis will give an overview of the main benefits and advantages that are

unique to business aviation. On the other hand, deficiencies in scheduled airline

services will be highlighted. The potential time and productivity gains that can be

achieved by using commercial air charter are quantified and a model is created to

evaluate the tangible benefits on an individual trip basis and in comparison to

scheduled airline travel. The created model is applied to three business trips,

based on a set scenario. The results clearly demonstrate the existing potential on

the German market. However, honouring these benefits requires a comprehensive

valuation of employee time. Especially in Germany, personnel is a major cost

factor, not only in the service industries. Companies must recognize these costs,

when calculating the full amount of travel expenses incurred. The created cost-

benefit evaluation model provides a simple means to demonstrate that business

aviation can be a valuable complement to scheduled airline travel.

x


1 Introduction

1.1 Motivation

In today’s economy, the growing globalisation of corporate activity has created the

need to establish and maintain long-distance customer and company contacts.

Despite modern communications technology, the need for business travel is still

increasing. While phone, fax, video conferencing or email obviously are ideal

under many circumstances, personal presence is often essential. When physically

being there, the amount and quality of information that can be gathered or

delivered face-to-face exceeds that of any other communication method. As being

there obviously requires getting there (and back), time and cost efficient means of

transportation are required.

Scheduled airline services can provide a valuable tool to perform this task.

However, these services have undergone considerable changes throughout the

last decade. Increased competition and fierce cost pressure caused by the

liberalization of the aviation market forced many of the established airlines to right-

size their operations.1 Hub networks were streamlined and services to and

between smaller cities were reduced. Conversely, business continues to expand

from large metropolitan areas to smaller cities. As this thesis will show in Chapter

3, there are obvious disparities in airline supply and individual business demand.

These disparities are an opportunity for alternative transport solutions, like

commercial business aviation.

1.2 Why Commercial Business Aviation?

Business Aviation, in general, is a flexible and useful business tool that can yield

tangible benefits to the user. A study conducted in the United States found

business aircraft operating organisations earned 146% more in cumulative returns

than non-business aircraft operators. Furthermore, on a return to shareholder

basis, business aircraft operators returned 343% to their shareholders between

1 See: Focus (2003). p. 15 et seq.

1


1996 and 1999 versus 177% for non-operators.2 Some companies in Germany

have realized this potential by operating own corporate fleets or by using the on-

demand service of commercial business charter companies. Yet, the general

acceptance seems to be rather low. Business aviation is still widely perceived as

being an expensive luxury item that goes beyond the scope of commonly tight

travel budgets.

The results of this thesis are directed towards those companies that still rely on

“traditional” means of air transport. As the operation of own corporate aircraft

requires major investments and already existing knowledge of the business,

emphasis will be placed on the commercial side of business aviation, because

there are no commitments associated with on-demand charter.

1.3 Structure and Purpose of this Thesis

In Chapter 2, this thesis will examine the business aviation market and outline the

existing framework for the air charter business. This chapter will also provide a

qualitative description of the most important benefits and advantages of business

aviation compared to scheduled airline travel.

In Chapter 3, it will then go on and look closely at the European airline schedules.

The chapter will outline the disparities between scheduled airline services and

business travellers’ needs for a set scenario.

Chapter 4 will draw on Chapters 2 and 3 to quantify the elaborated benefits and

develop a generic model that can be used to evaluate on an individual trip basis,

whether or not the use of a chartered business aircraft is economically favourable.

In Chapter 5 the generic model will be applied to three selected sample routes to

demonstrate the possible financial benefits.

2 See: Arthur Andersen LLP (2001). p. 3.

2


The reader of this thesis will obtain an understanding of the peculiarities of

business aviation and the potential cost saving opportunities resulting from its use.

The findings may be used to convince companies that still rely on “traditional”

transport modes to approach commercial business aviation without bias.

Eventually, this may further encourage the use of general aviation aircraft for

business travel.

3


2 Business Aviation in Germany

2.1 The Business Travel Market

Business Travel

Business travel in the sense of this thesis is travel for a purpose and to a

destination determined by a business company. Incurred travel costs are covered

by that company.

According to a business travel analysis conducted by the VDR (Verband

Deutsches Reiesemanagement e.V.) in cooperation with BearingPoint, German

business companies with more than ten employees performed more than 146

million business trips in the year 2004.3 With regard to preferred destination

regions, Figure 2.1 shows that the majority of business trips were domestic. While

domestic and European business travel activity increased from 2003 to 2004,

travel to intercontinental destinations declined to only 50% of intra-European travel

activity.

Figure 2.1: Distribution of Business Trips per Destination Region (2003 -2004)4

104.75

24.4918.17

106.63

26.49

13.240

20

40

60

80

100

120

2003 2004 Domestic

2003 2004 Europe

2003 2004 Intercontinental

million

3 See: Verband Deutsches Reisemanagement e.V. (2005). p. 6. 4 Source: Adapted from Verband Deutsches Reisemanagement e.V. (2005). p. 7.

4


Business Travel is a high value market, not only for the air transport sector, but

also for public and private ground transport providers and other service industries

(e.g. hotels and restaurants). The total value of receipted travel expenses, as

depicted in Figure 2.2, accumulates to 44 billion euros per year, with air

transportation and accommodation costs accounting for more than 50%. Another

important cost factor with a share of 17% are Other Cost (covering e.g. service

fees for travel agents, credit card charges, or public transport and taxi costs).

Figure 2.2: Split of Total Business Travel Cost (2004) by Cost Sectors5

Total: 44,0 Billion €

6,2 billion €(14%)

7,4 billion €(17%)

5,3 billion €(12%)

10,1 billion €(23%)

2,2 billion €(5%)

12,8 billion €(29%)

Flight Train Rental Car Accommodation Catering Other Cost

In general, the Total Travel Costs valued in the VDR analysis, are calculated on

the basis of individual travel expense reports. As these expenses are quite

apparent and easy measurable, they are commonly considered being the only

incurred cost of travel. In the course of this thesis, yet another cost factor – the

personnel cost factor - will be introduced. Travel induced personnel cost is an

important factor to consider and it should be valued when making the choice

between different available transport modes.

5 Source: Adapted from Verband Deutsches Reisemanagement e.V. (2005). p. 14.

5


2.2 Business Aviation

The term business aviation, as used in this context, describes business travel with

general aviation aircraft, whereby general aviation encompasses any flight other

than a military or scheduled airline flight.

The International Business Aviation Council Ltd. (IBAC) classifies business

aviation operators in three categories: Commercial, Corporate and Owner

Operated.6

While Owner Operated already implies the operation of a fully owned (or leased)

aircraft by the business owner, Corporate Business Aviation is defined as:

“A multi-engine or turbine powered aircraft transport operation on behalf

of a company, other than commercial air transportation, in connection

with the transport of passengers or cargo for that company, or another

member of the same group of companies, when flown by a pilot or pilots

paid for flying the aircraft.” 7

Some of the major companies in Germany that operate corporate fleets are:

BASF, Bauhaus, Bertelsmann, BMW, Bosch, Liebherr, Viessmann, Volkswagen,

and Würth.8

The cost-benefit analysis in Chapters 4 and 5 of this thesis will only concentrate on

the Commercial (air charter) side of business aviation. On-demand charter is

probably the easiest and cheapest way to partly start the shift from scheduled

airline travel. No costly up-front investments or long-term commitments are

required. Chartering an airplane for a single trip is similar to hiring a taxi.

Therefore, commercial air charter operators are commonly referred to as air taxi

companies. A more detailed description of this category will be given in Chapter

2.4. 6 See: IBAC (2000). 7 See: IBAC (2000). 8 See:HSH Nordbank (2005). p. 19.

6


A comparable cost-benefit analysis for other operating options cannot be

performed on an individual trip basis. A review of annual corporate travel

behaviour would have to be performed to determine the amount of travel required

to amortise the cost of aircraft ownership, depreciation and operation.

A similar model would have to be developed, if only Fractional Ownership is

acquired. Fractional Ownership programmes are normally offered only for turbojet

aircraft, with the most important provider in Europe being NetJets. The minimum

fraction to be acquired is 1/16 or 50 flight hours per year. In addition to paying the

aircraft share for a 5-year contract, monthly charges have to be borne for indirect

operating costs (e.g. crew, insurance, quality assurance) and variable costs (e.g.

fuel, landing fees, maintenance). Doing so, aircraft availability is guaranteed at all

times. Currently, NetJets’ fractional shares start at $ 406,250 (~ € 320,528) for a

1/16 interest in a Hawker 400XP.9

2.3 Regulatory Framework

The legal basis for any kind of commercial air transportation in Germany (and in

Europe) is set by the Joint Aviation Authorities (JAA).

“JAR-OPS Part 1 prescribes the requirements applicable to the

operation of any civil aeroplane for the purpose of commercial air

transportation by any operator whose principal place of business and, [if

any, its registered office] is in a JAA Member State.” 10

As opposed to corporate air services, air charter or air taxi companies are

commercial air transport providers. Thereby, they have to conduct their operation,

just like any commercial airline, in accordance with JAR-OPS 1 and the related

regulations.

9 See: NetJets (2006). 10 See: JAA (2006). JAR-OPS 1.001 (a)

7


2.4 Commercial Business Aviation

In Germany, there are more than 60 commercial air charter companies. Most

commonly, these companies operate turboprop and light to midsize jet aircraft,

with fleet sizes varying from one to more than 20 aircraft.11 A list of available air

charter companies in Germany is contained in the Appendix 1 of this thesis.

2.4.1 Customer Contracts

The relation between air taxi operators and their customers is expressed by either

On-Demand (Ad Hoc) Chartering or Contract Chartering (Block Charter).

Chartering an aircraft on-demand is basically like calling a taxi. Customers usually

make direct contact with the respective charter company. Arrangements can be

made, even on short notice, according to the customer’s needs. However, as

many charter companies operate rather small fleets, aircraft availability may not

always be guaranteed. In such cases, the use of a broker may be useful.

Meanwhile, several specialized air charter brokers (see Appendix 2) are available

to search the market for suitable offers on behalf of the customer.12 Where several

air charter offers are obtainable or market situation is unknown, this option may

save time and money, despite the brokerage fee that has to be paid.

Contract Charters, as opposed to On-Demand Chartering, are based on longer-

term contracts with a defined number of flight hours for the term of the contract. As

the minimum flight volume required for block charters is usually 100 hours, a

considerable amount of travel is required to justify such contracts. However, there

are generally price advantages connected with longer-term contracts.

11 See: Figgen, A. (2006). p. 46 et seqq. 12 See: Figgen, A. (2006). p. 56.

8


2.4.2 Pricing Structure 13

Generally, the prices for aircraft charter14 consist of two components: a fixed rate

per flight hour and additional charges.

The actual amount that is charged per flight hour depends on the type and size of

the aircraft that is chosen for the trip. The hourly rate is used by the operator to

cover the cost of ownership as well as the direct and indirect operating costs (e.g.

crew, fuel, ATC charges, catering). Additional charges depend on the

characteristics of the individual trip and usually contain the landing and potential

handling charges at the destination airport. A supplementary fuel surcharge,

common for many airlines may also be applied. For trips that require an overnight

stay, crew accommodation (around € 500) has to be covered separately.

In contrast to fractional ownership companies like NetJets, the regular air charter

or air taxi companies are fixed base operators. In general, all flights originate from

and return to the operator’s home base at the end of a mission. If a customer

requires his trip to start from (and return to) an airport different than the operator’s

home base, additional flights are required to bring the aircraft to the customer’s

location and back to home base. These positioning flights will also be charged to

the customer.

2.5 Business Aviation Aircraft

2.5.1 Common Aircraft Categories

The portfolio of aircraft available in business aviation is much wider than the

choices offered by scheduled airlines. Aircraft built specifically for business use

vary from four-seat, short-range, piston-powered airplanes to two- and three-

engine long range executive jets that can carry up to 19 passengers more than

12,000 kilometres non-stop. Some companies even use airline-type jets, and also 13 All information based on personal communication with air charter service providers. 14 Just like scheduled airline flights, charter flights with general aviation aircraft to non-domestic

destination are exempted from sales tax.

9


helicopters are sometimes used for business transportation. It is the operator’s

task to select the right aircraft for the required number of passengers, the stage

length, the purpose of the flight, as well as the status and the budget of the

customers. The categorisation of aircraft commonly available for business charter

is listed below.15

• Multi Piston Aircraft

• Turboprops

• Executive Jets

• Airliners

• Helicopters

Especially the first three categories deserve a closer look, when concentrating on

smaller passenger groups using commercial air charter for business travel within

Europe. The following chapters provide a short description of these three

categories of aircraft that are commonly used in business aviation. Nevertheless,

for the sample route calculations performed in Chapter 5 of his thesis only one

turboprop and one jet aircraft will be selected to make a comparison with airline

schedules and costs. A short description of the two aircraft models selected is

included in the following chapters.

2.5.1.1 Multi Piston Aircraft

Aircraft in the multi piston segment are propeller driven and powered by

reciprocating engines. Although engine technology is quite old and average

cruising speed is rather slow, twin piston aircraft are still common with a lot of air

charter companies. Not suitable for much more than carry-on baggage and usually

not equipped with on board lavatories, multi piston aircraft can only be used for

short distance flights.

15 See: Aircraft Charter World (2006).

10


The big advantage of multi piston aircraft however is the low acquisition cost,

which results in comparably low hourly rental rates. Nevertheless, the mentioned

limitations in size, speed and range basically restrict the use of multi-piston aircraft

for commercial business aviation to short distance flights with small passenger

numbers. Above all, the acceptance of the rather old technology in the business

travel sector is rather low.

2.5.1.2 Turboprops

Just like piston-powered aircraft, turboprops are also driven by propellers. The

main difference however is that the propellers are driven by turbines. This

technology in turn enables turboprops to reach considerably higher speeds.

Turboprop aircraft combine the low-cost advantages of the piston aircraft with the

ability to reach higher cruising speeds. Cabin comfort advantages generally

consist of pressurized passenger cabins, satellite telephone and a semi-private

lavatory. Furthermore, turboprops are often able to operate from runways that are

not suitable for turbojet aircraft. The economic advantage of turboprops is most

visible on short to medium range flights, where the speed advantage of the

turbojets is less dominant.16

The Raytheon Beech King Air B20017, able to accommodate up to eight

passengers, is chosen as typical example from this category. The King Air B200

has a maximum cruise speed of 292 kts (541 km/h) and a maximum range of

1,837 nm (3,402 km). Even with eight passengers almost any destination in

Europe can be reached non-stop from Germany. The aircraft can even operate

from airfields with a runway length of less than 2,600 ft (792 m). Average hourly

rates charged for a Beech King Air B200 are generally between € 1,500 and

€ 1,600.18

16 Information researched on business aircraft manufacturers’ websites. 17 See: Raytheon Aircraft Company. (2006). 18 Average rate derived from air charter company quotations and websites of air charter brokers.

11


2.5.1.3 Executive Jets

Aircraft in the Executive Jet segment are the most time efficient way of travel and

are mainly suitable for medium or long distance flights. With average non-stop

ranges of anything from 1,300 nm (~2,400 km) to 6,750 nm (~12,500 km), jets can

travel further and faster than most non-jet aircraft, while operating in and out of

airports that are often not accessible by the major airlines. In the lighter jets,

amenities often include a pressurized passenger cabins, satellite telephone and a

semi-private lavatory while mid size jets often have a private lavatory and external

baggage storage.19

As can be derived from Table 2.1, purchase prices - not surprisingly - increase

with the size of the aircraft. This however is translated to the hourly rates that have

to be paid for chartering the respective aircraft. While hourly rates in the entry

segment are still somewhere near € 2,000, a light medium size jet will usually not

be available below € 4,000 per hour.20

Table 2.1: Classification of Executive Jets21

Segment MTOW [lbs] Seats Range [nm] Price [million $]Entry 10 K – 13 K 4 - 7 1300 - 2500 2.4 - 6Light 13 K – 20 K 6 - 8 1450 - 1970 6 - 8Light Medium 20 K – 33 K 7 - 9 1940 - 2700 9 - 14Medium 33 K – 50 K 8 - 12 2000 - 3400 13 - 24Long Range 50 K – 80 K 5 - 19 3100 - 4500 21 - 34Very Long Range 80 K – 100 K 8 - 19 4800 - 6750 32 - 46

Source: Rolls Royce

For the purpose of this study, the Cessna 525 Citation Jet, a member of the entry

segment will be used for the sample route calculations in Chapter 5. The Citation

Jet can accommodate up to 5 passengers. It has a maximum range of 1,485 nm

(2,750 km), which is sufficient for the routes that will be evaluated. The maximum

cruising speed is 380 kts (704 km/h).22 The average hourly rate for chartering the

aircraft is approximately € 2,000.23

19 Information researched on business aircraft manufacturers’ websites. 20 Average rates derived from air charter company quotations and websites of air charter brokers. 21 Source: Adapted from HSH Nordbank AG (2005). p. 5. 22 See: Flug Revue (2006).

12


2.5.2 Very Light Jets – A Revolutionary Innovation?

A new category just about to enter the market is classified as Very Light Jets

(VLJ). Positioned between the Turboprops and the Entry Segment Executive Jets,

the low-priced VLJs are said to be a revolutionary innovation able to boost the air

charter market. To evaluate this statement, posted mainly by the respective

aircraft manufacturers, VLJs will also be examined as a fourth category. The

Eclipse 500 is supposed to be one of the first models to enter the market, with first

deliveries scheduled for autumn 2006. The purchase price as stated by the

manufacturer is currently set to $1.52 million,24 which is about one third the price

of an average conventional entry segment jet (see Table 2.1).

Evaluating the performance of the new VLJs is rather difficult, because they are

not yet operational. Performance data published by Eclipse Aviation25 state a

maximum IFR range of 1,300 nm (2,408 km). However, looking at the

specifications of the aircraft, the inherent limitations concerning the useful load26

are quite obvious. When operated with two pilots, the full fuel load can only be

carried with no more than one passenger27. With four passengers, holding only

hand baggage, the available fuel28 is already reduced by almost 30%. This will

most probably reduce the maximum range of the Eclipse 500 far below the one of

a Citation Jet.

This is just an estimation, based on the presently available data. A true evaluation

will only be possible after the first operational experiences have been gathered.

Nevertheless, a question mark should be placed behind the revolution potential

towards the European air charter business. Unlike the USA, most European

23 Average rate derived from air charter company quotations and websites of air charter brokers. 24 See: Eclipse Aviation Corp. (2006). 25 See: Eclipse Aviation Corp. (2006). 26 Useful load = Maximum Certificated Takeoff Weight (MTOW)- Basic Empty Weight (BEW) 27 For pilot weights, see: JAA (2006). JAR-OPS 1.615 (a) (2). For passenger weights, see: JAA

(2006). JAR-OPS 1.620 (e). 28 Available fuel = Useful load – (pilot weights + passenger weights)

13


countries currently require two pilots for all commercial turbojet flights29. This not

only doubles the crew cost, but given the already limited useful load of the Eclipse

500, this further reduces the payload/range. As flexibility in range and passenger

group size is rather low, the economic arguments for VLJs may not be as

convincing in Europe, particularly for air taxi operations. Furthermore, the comfort

level with four passengers in the relatively small cabin can probably not be

compared to that of other business aircraft.

“A King Air would have a longer range, although it would be slightly

inferior in speed. However, it certainly would be a lot more comfortable

for passengers; you wouldn’t feel like you were cramped into the back

of your dad’s Pontiac.” 30

The higher market potential for such an aircraft can probably be expected in the

area of owner operation (where single pilot operation will be possible), as there is

still a cost advantage arising from the low acquisition cost.

2.6 Benefits of Business Aviation

There may be several reasons for companies to use business aviation instead of

scheduled airlines. Starting with the fact that a trip aboard a business aircraft is

more comfortable and convenient than regular airline travel, regular users point to

many more advantages.31 Several studies have already been made to elaborate

this multi-layered range of benefits and advantages, mainly relating to the

operation of corporate fleets.32 While many of these advantages are rather

intangible, some of them directly translate into tangible benefits that can be

expressed in monetary values. The following chapters will outline the most

important benefits that are relevant for the subsequent cost-benefit analysis.

29 See: JAA (2006). JAR-OPS 1.940 (b) (1) 30 Richard Aboulafia, vice president of the Teal Group. See: di Piazza, K. (2004). 31 See: PRC Aviation. (1995). p. 4.3. 32 See: Arthur Andersen LLP (2001). p. 12 et seqq. See: PRC Aviation. (1995). p. 3-1 et. seqq.

14


2.6.1 Personnel Time Savings

TIME – for many people it is just another four-letter word, but for a fast-paced,

right-sized company in a globalised economy there is never enough of it. Time is a

finite good. It is in short supply and there is no way to manufacture more of it. On

closer examination, at last, there may as well be ways to manufacture more time,

or something that looks a lot like it: the productive use of available time.

Employee time is a tangible cost, as salary and bonuses pay for it. By providing an

opportunity to compress total door-to-door travel time, productivity is improved and

travel related employee cost can be noticeably reduced.33 Business aviation can

provide this opportunity by offering passenger-directed schedules for direct point-

to-point connections. For economic reasons, scheduled airline networks normally

consist of a hub-and-spoke structure, with only a few lucrative direct point-to-point

connections.34 Most frequently, at least one transfer has to be accepted when

travelling from or to non-hub airports.

Schedules that require late night travel, or longer than necessary trips, often result

in post-trip fatigue, damaging productivity in the day(s) after the trip. Because they

can facilitate more efficient scheduling, business aircraft can minimize this loss.

Above all, unwanted and costly overnight stays may be avoided by the ability to

custom-fit business aviation schedules.35

2.6.2 Increased En Route Productivity

En route productivity, meaning the incremental work output completed by

employees when travelling on an aircraft, strongly depends on the prevailing and

perceived working conditions aboard the specific aircraft. Commercial airliners

usually operate in a high load factor environment. Thereby, they can only provide

33 See: Arthur Andersen LLP (2001). p. 10 et seq. 34 See: Pompl, W. (2002). p. 402 et seqq. 35 See: PRC Aviation. (1995). p. 3-20 et seq.

15


a constricted amount of personal space to the passenger, limiting his ability and

willingness to work productively.36

Lack of privacy and the associated risk of revealing secret information are further

hampering factors. Highly visible laptop screens make it easy to read over

another’s shoulder or from halfway down the aisle. In the attempt to protect

industrial security, some companies even urge their employees not to work on

sensitive projects aboard scheduled commercial aircraft. Other companies even

forbid their executives to discuss any business en route.

In contrast, the office-like environment on a business aircraft enables employees

to be more productive en route when compared to a scheduled commercial

airliner. Many business travellers use the flight time aboard a business aircraft to

hold meetings in an interruptions-free, secure meeting space, typically featuring

comfortable, usable work surfaces with ample room for both a laptop and papers

in a secure and private atmosphere. The proposition that work en route is the rule

rather than the exception is one of the key attractions of business aircraft.37

In a survey conducted in 1997 by Louis Harris & Associates, 346 frequent

business travellers in the United States were questioned about their en route

productivity aboard scheduled and business aircraft. According to the survey,

productive collaboration among company employees aboard business aircraft

occurred nearly eight times as often as when those same employees were aboard

commercial aircraft. Productive collaboration with customers occurred nearly

seven times more often than on commercial aircraft. Furthermore, employees

aboard commercial aircraft were more than twice as likely to be resting or reading

non work-related materials.38 The specific results concerning the individual usage

of time aboard aircraft are shown in Figure 2.3 below.

36 See: Arthur Andersen LLP (2001). p. 18. 37 See: Arthur Andersen LLP (2001). p. 18. 38 See: Louis Harris & Associates, Inc. (1997). p. 11.

16


Figure 2.3: Usage of time aboard aircraft39

1%

23%

32%

38%

1%

5%

0%

11%

13%

28%

7%

41%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Other

Rest

Non-Work

IndividualWork

CustomerMeetings

EmployeeMeetings

Commercial Aircraft Business Aircraft

These same passengers also were asked to rate their in-flight productivity while

travelling, benchmarked against an average or typical hour in their office (see

Figure 2.4).

Figure 2.4: Passenger Productivity Aboard Aircraft Where FIVE Represents a

Typical Office Hour40

5

6.2

5.2

3.2

2.1

0

1

2

3

4

5

6

7

Office BusinessJet

BusinessTurboprop

Airline Jet CommuterTurboprop

Mea

n Pr

oduc

tivity

Rat

ing

39 Source: Adapted from Louis Harris & Associates, Inc. (1997). p. 11. 40 Source: Adapted from Louis Harris & Associates, Inc. (1997). p. 13.

17


According to the survey, the passengers felt they were significantly more

productive aboard business aircraft than they would be even in their own offices.

Business aircraft passengers rated their productivity in a business jet at 6.2 on a

0-10 scale, which set 5 as the productivity level in an average or typical office

hour. Average productivity in a business turboprop was reported as 5.2 while

productivity aboard airline jets was rated as 3.2 and commuter turboprops as

2.1.41

2.6.3 Choice of airport

When using business aircraft, the additional access to general aviation airports is

another valuable advantage.

“In 2005, nearly 100,000 different airport pairs were flown by business

aviation [within Europe]. Of these airport pairs, only 5% had a

scheduled alternative: at least one scheduled flight per working day.” 42

In Germany alone, there are more than 170 civil use airports with a paved runway

length of more than 2,000 ft (610 m)43. Apparently, not all of these airports qualify

for scheduled airline operation, because of potential limitations in runway length or

general airport infrastructure. The majority, however, is not being served because

the demand is not sufficient to ensure profitable airline service. In 39% of all

cases, the reason for the use of a business aircraft is to reach destinations with no

or infrequent scheduled airline service.44 Serving these niche markets is not only a

great opportunity for the business aviation sector. It also represents a tangible

benefit for their customers, as origin and destination (O&D) selection is no longer

restricted to airline offerings.

41 See: Louis Harris & Associates, Inc. (1997). p. 13. 42 See: EUROCONTROL (2006). p. 22. 43 See Appendix 3. 44 See: Louis Harris & Associates, Inc. (1997). p. 9.

18


Choosing the departure and arrival airports closest to the place of business can

drastically reduce the ground access times and thereby result in considerable

door-to-door travel time reductions. Moreover, general aviation airports and

general aviation terminals at scheduled airline airports are characterized by short

ground processing times. More convenient parking and quick-access passenger

facilities account for essentially reduced ground times, especially considering the

laborious post 9/11 security measures implemented at scheduled airline airports.

2.6.4 Operational Flexibility

As opposed to the fixed commercial airline schedules, business aviation schedules

are designed to meet the individual customers needs. More than 60% of the

business aircraft passengers use business aircraft to support their tight business

schedules that could not be efficiently met using commercial airlines.45 Idle time at

the destination and mindless time hanging around airports can be avoided. Above

all, if the planned business is running long, scheduled carriers will not wait, but a

business aircraft will. This lets employees pursue their business, without having to

be concerned about missed planes or unplanned overnight stays.46

Furthermore, as air service fares for business aircraft are independent of the

number of passengers, additional specialists or trainees can be taken along on

short notice without creating remarkable increases in direct travel expenses.

2.6.5 Improved Employee Morale and Loyalty

Using business aircraft to provide easy access to markets that are poorly served

by the scheduled airlines can motivate especially those employees who frequently

have to travel to destinations that are inherently isolated and relatively

inaccessible.

45 See: Louis Harris & Associates, Inc. (1997). p. 8. 46 See: PRC Aviation. (1995). p. 3-21.

19


“Employees being required to travel in the public transportation system

to remote or difficult to reach locations might find the first trip an

adventure, the second a chore and the third a factor in quitting (or

finding excuses for not servicing the client). The opportunity to reach

markets such as these quickly and efficiently can recharge work force

morale, and re-motivate the affected.” 47

Furthermore, the cumulative effect of non-business hours spent away from home,

“The Divorce Factor” as it is sometimes called, should not be underestimated.

“Family Time” before and after traditional business hours is critical to most

employees. Constantly pushing travel time into this area can have an acute effect

on employee morale and productivity. It is up to senior management to decide how

important employee time away from home and family really is to the company.

Ultimately, these soft factors will influence employee satisfaction, which in turn

affects productivity and loyalty. Providing a comfortable working environment

including hassle-free travel opportunities is one of the key conditions that are

required to retain key personal that is expensive or impossible to replace.

47 See: Arthur Andersen LLP (2001). p. 22.

20


3 Finding the Niche Markets

3.1 Business Intelligence

Business Intelligence (BI) can be defined as:

“The processes, technologies, and techniques needed to turn data into

information, information into knowledge, and knowledge into plans that

drive profitable business action. Business intelligence encompasses

data warehousing, business analytical tools, and content/knowledge

management.” 48

It is the process of analysing and exploring the information hidden in data to

deliver better strategic solutions for the business user. This process normally

requires extensive data warehousing. A data warehouse is generally a collection

of computerised data that is organised to most optimally support reporting and

analysis activity. The first step in creating a data warehouse is the collection of the

relevant information from either primary or secondary data sources49. All too often,

business data (both primary and secondary) that need to be derived from external

sources are hard to get, and data quality may vary depending on the credibility of

the source. Therefore, integrity and validity of the data need to be investigated,

before trying to turn mountains of data into valuable and reliable business

information. Furthermore, database tables need to be normalized50 to ensure that

redundant data are eliminated and existing data dependencies are meaningful. In

the next step, adequate analytical tools are required to uncover important data

patterns that can contribute to business strategies, knowledge bases or scientific

researches.51

48 See: Loshin, D. (2003). p. 6. 49 Primary Data is information collected directly from first-hand sources, specifically for the

investigation at hand. Secondary Data has been compiled for some purpose other than the current

investigation. 50 The concept of database normalization was first introduced in 1970 by Edgar Frank Codd in his

paper “A Relational Model of Data for Large Shared Data Banks”. 51 See: Han, J., Kamber, M. (2001). p. 3 et.seqq.

21

http://en.wikipedia.org/wiki/Edgar_F._Codd


3.2 Methodology

When trying to find the niche markets for business aviation, one first has to define

the criteria that describe such markets. The aim of this chapter is to geographically

identify target regions or target destinations that best fit the characteristics of

business aviation.

The major advantages of business aviation over scheduled airline travel are

increased flexibility and time saving aspects as described in the previous chapters.

The magnitude of time saved is different for every single O&D, and may also vary

depending on the day of week.

As outlined in Chapter 2.1, the majority of business trips performed by employees

of German companies are domestic. However, the German domestic travel market

is characterized by relatively short distances and a high density of scheduled

airline flights. Furthermore, ground transportation infrastructure is quite

sophisticated. Domestic air travel in general faces fierce competition, especially

from an increasing number of high-speed train connections. Still there are a lot of

opportunities for business aviation in the domestic market. Depending on company

location and airline connectivity, business aviation can yield valuable time savings

as a feeder for international airline connections. The time saving potential is even

more obvious concerning trips from and to non-metropolitan areas. Access to

major airports may require extensive and inconvenient ground transportation.

Quite frequently, travel times can be considerably shortened by using general

aviation airports that are often more conveniently located, but not served by the

commercial airlines. Choice of airports, as explained before, is one of the main

benefits of business aviation.

Even with regard to the airports served by commercial airlines, the offered

schedules cannot always satisfy the business traveller’s need for flexible and most

direct travel opportunities. Besides accessibility of airports, the main decision

criteria for the choice of airline connection in business travel are:52

52 See: Maurer, P. (2003). p. 335.

22


• Total en route time

• Time of the day

• Frequency

• Short and convenient hub transfers

• Attractiveness of the hub

• Ticket price.

These criteria have to be used to identify possible niche markets for business

aviation. To actually find these potential niches in Europe, the European

scheduled airline network must be analysed with regard to the needs of business

travel. The scenario used here is based on time saving opportunities. The basic

idea is to find valuable business destinations, to which the scheduled airlines

cannot provide a “There-and-back-in-a-day” option with sufficient time between

arrival and departure to efficiently conduct business. Business travellers are

mainly looking for timely connections that are offered daily and with high

frequency, especially in the morning and late afternoon. Because not all

destinations are served by direct flights, the analysis also includes multi-leg

connections routed through hub airports. For the purpose of this analysis, a

maximum of three legs is considered to be acceptable. The connectivity of flights

is limited by the Minimum Connecting Time (MCT), the shortest possible transfer

time between two flights. The MCT varies between airports and may range from

25 minutes up to more than two hours, depending on airport size and efficiency of

processes.53 Above that, an acceptable Maximum Connecting Time is defined.

The applied criteria for a “There-and-back-in-a-day” option as used in the course

of this analysis are as follows:

• Arrival at destination airport at or before 11:00 lcl

• Existing return option at or after 17:00 lcl

• Return to departure airport before midnight

• Minimum Connecting Time: 00:45 hrs54

• Maximum Connecting Time: 3:30 hrs. 53 See: Sterzenbach, R. Conrady, R. (2003) p. 290. 54 See: Sterzenbach, R. Conrady, R. (2003) p. 290.

23


3.2.1 Availability of Data

Seriously evaluating all possible airline connections between Germany and any

European destinations, including multi-leg hub connections, requires handling of a

vast amount of data. However, before the data can be examined, the question of

where to get these data needs to be answered. Manually extracting flight data

from airline schedules or airport websites is not a feasible solution. A tremendous

amount of time would be required to create a database that will most probably not

be complete. Fortunately, compiled airline schedule information is available from

different professional sources. Unfortunately, all of these sources do not provide

the information for free. Fortunately again, access could be gained to two of these

sources. The first data set contained direct intra-European airline connections for

the year 2005 in the SSIM55 format. The set contained a total of 323,315 lines.

Table 3.1 shows a data sample. The format is already converted for better

readability.

Table 3.1: SSIM Date - European Airline Schedule 2005

The second set of data was an extract of all direct intra-European airline

connections for May 2006, derived from APG56 Data. The data were compiled in

an Excel table containing 43,486 lines. A data sample is shown in Table 3.2.

Table 3.2: APGDAT - European Airline Schedule May 2006 Schedule Full Extract Report for all Airlines for flights between Europe and Europe in May06

Al Flight Alliance Op Al Org Dst Departure Time Arrival Time Block Mins Op Days Tot/Wk KMs Equip SeatsBA 715 ONEW BA ZRH LHR 1520 1605 105 .2....7 2 789 319 126BA 717 ONEW BA ZRH LHR 1715 1805 110 .....6. 1 789 321 176BA 717 ONEW BA ZRH LHR 1715 1805 110 12345.7 6 789 319 126BA 719 ONEW BA ZRH LHR 1915 2005 110 12345.7 6 789 321 176BD 323 STAR BD ABZ AMS 0715 1000 105 123456. 6 705 ER4 49BD 325 STAR BD ABZ AMS 1155 1440 105 12345.7 6 705 ER4 49BD 327 STAR BD ABZ AMS 1630 1915 105 12345.7 6 705 ER4 49BD 363 STAR BD ABZ EBJ 1020 1240 80 1234... 4 687 ER3 37BD 363 STAR BD ABZ EBJ 1425 1645 80 ......7 1 687 ER3 37

55 SSIM files (IATA Standard Schedule Manual, Chapter 7) form the backbone of schedule

exchange in the airline industry. 56 Seabury Airline Planning Group, LLC. See http://www.seaburyapg.com/tools/apgdat.html

24


3.2.2 Analysis Tools

Working with such an amount of data requires a powerful software tool. The

primary software used for the analysis was SAS57 for Windows, which is a very

flexible and stable analysis programme. The raw data sets described above were

imported into SAS for further handling. As the available schedule data only

provided direct connections, all possible multi-leg connections had to be created

from the given airline schedule data sets. A valuable feature in SAS, used

frequently in the course of the analysis, is the possibility to create new tables

based on available raw data or existing SAS files. SAS tables, or only parts of

tables, can then be joined based on specified matching criteria.58 The join is

performed in the SAS programme using PROC SQL59. In theory, when a join is

executed, SAS builds an internal list of all combinations of all rows in the query

data sets. Conceptually, SAS evaluates the newly created table row by row,

selecting only the rows that satisfy the defined matching criteria.60 Further details

on the process of joining the tables and the relevant matching criteria are shown in

Chapters 3.2.2 and 3.2.3.

3.2.3 Data Validity and Integrity

When working with secondary data, it is imperative to investigate the validity and

integrity of the data sets.

SSIM DATA

The SSIM Data set contained the flight schedule for the whole year 2005, whereby

most flights/flight numbers appeared several times with different Itinerary Variation

57 Statistical Analysis System Software by SAS Institute Inc. (for further information on SAS see

http://www.sas.com) 58 See: Delwiche, L., Slaughter, J. (2003). p. 302 et seqq. 59 SQL (Structured Query Language) is a very popular language used to create, update and

retrieve data in relational databases.60 See: Wieczkowski, M. (1999).

25


Identifiers (Itin_VI)61. In the process of normalization, a sample week (16 – 22

May) was defined and entries with validity dates outside this sample week were

deleted.

To investigate the integrity of the data set, a few O&Ds were chosen and checked

against current schedules, published on airport and airline websites. The

investigation showed that the available SSIM data set was corrupted. A lot of

available connections were missing, and the given differences between UTC and

local time did not in total reflect the time changes during Daylight Saving Time

(DST) periods. Although the problem concerning UTC differences could be

rectified, the data set was rendered unusable because the exact number and type

of missing connections could not be specified.

APG Data

The second data set containing all intra-European flights for May 2006, derived

from APG, did pass the integrity checks against current airline schedules as

described above and was used as the basis for further analysis.

3.2.4 Creation of a Master Data File

Although the APG Data were considered to be usable, some important information

was missing and had to be appended. The APG data did not show indicators for

the departure and arrival countries, as well as no specification of the difference

between UTC and local time. As this information was contained and previously

corrected in the SSIM data set, the relevant entries were retained in a separate

table and joined with the APG data with the use of the SAS programme.

61 “An itinerary is a single flight or a series of identical flights defined by a continuous Period and

Day(s) of Operation (and Frequency Rate if applicable), each of which consists of one or more

contiguous legs, which taken together, describe a complete routing of that flight.

The Itinerary Variation Identifier is a number between 01 and 99 used to differentiate between

itineraries having the same Flight Designator […].” See: IATA (1998). p. 45.

26


Further normalization required a split of the multivariate entries for Days of

Operation (Op Days)62 into separate entries for each operation day. Records for

the respective arrival day as well as combined departure- and arrival-datetimes63

(UTC) had to be created to enable the calculation of Minimum and Maximum

Connecting Times. With these modifications incorporated, the data set contained a

total of 125,690 direct intra-European flights64 for the selected sample week (15 –

20 May 2006). It was used as a Master Data File (MDF), and will be referred to as

such in the following chapters.

3.3 Evaluation of Intra-European Airline Connections

After having created the MDF, the actual investigation of the airline schedule was

divided into three parts, relating to:

• direct connections,

• one-stop connections, and

• two-stop connections.

The qualification criteria for a “There-and-Back-in-a-Day” option, as outlined in

Chapter 3.1, were applied in SAS to retain only entries that can fulfil the given

prerequisites. The individual results, all related to the “There-and-Back-in-a Day”

option, were finally exported from SAS to Excel and compounded in a synoptic

table for better visualisation.

3.3.1 Direct Connections

To extract the possible direct connections, the Master Data File was subdivided

into a separately evaluated outbound and inbound section, applying the following

restrictions to the MDF:

62 See Table 3.2. 63 Datetime format defines (UTC) time at a specific day: dd.mmm.yy hh:mm. 64 Not including flights with origin and/or destination in Russia.

27


• Outbound: Departure Country = DE and Arrival Country ≠ DE

STA ≤ 11:00 lcl

• Inbound: Departure Country ≠ DE and Arrival Country = DE.

STD ≥ 17:00 lcl and STA ≤ 24:00 lcl

The result showed a weekly total of 2,873 direct flights departing from Germany

and arriving at the destination before 11:00 lcl. The number of direct return flights

to Germany, leaving at or after 17:00 lcl, was 3,852.

3.3.2 One-Stop Connections

As only direct flight connection data were available, the creation of possible

connecting flights required the direct flight tables to be joined. The tables used for

the join were copies of the Master Data File. In addition to the respective “There-

and-back-in-a-day” criteria, further restrictions were applied to the individual files

during the join to reduce the amount of data to be processed. The resulting

principle for the creation of the one-stop connections and the additional matching

criteria used are illustrated below.

Figure 3.1: Creation of One-Stop Connections with SAS

MDF

Departure Country = DE

Outbound (Leg 1)

Arrival Airport (Leg 1) = Departure Airport (Leg 2)

MDF

Arrival Country ≠ DE

Outbound (Leg 2)

MDF

Departure Country ≠ DE

Inbound (Leg 1)


MDF

Arrival Country = DE

Inbound (Leg 2)

MDF


Outbound (Leg 1)


MDF


Outbound (Leg 2)

MDF


Outbound (Leg 1)

MDF


Outbound (Leg 1)


MDF


Outbound (Leg 2)

MDF


Outbound (Leg 2)

MDF


Inbound (Leg 1)


MDF


Inbound (Leg 2)

MDF


Inbound (Leg 1)

MDF


Inbound (Leg 1)


MDF


Inbound (Leg 2)

MDF


Inbound (Leg 2)

28


The created files showed a total of 27,239 possible one-stop connections from

Germany to European destinations, whereas 52,944 connections met the return

flight criteria.

3.3.3 Two-Stop Connections

Creation of two-stop connections is similar to the process described in Chapter

3.2.2 above. To create the additional leg, yet another copy of the Master Data File

had to be joined in-between the first and the second leg. This was achieved by

joining the MDF onto Leg 1 and then joining the final leg onto the previously

created file (Leg 1+2). The joining principle for the two consecutive joins, the

restrictions applied to the individual MDF derivates, and the matching criteria on

top of those for a “There-and-Back-in-a-Day” option are shown in the following

diagram.

Figure 3.2: Creation of Two-Stop Connections with SAS

MDF


Outbound (Leg 1)


Departure Airport (Leg 1) ≠ Arrival Airport (Leg 2)

MDF

Outbound (Leg 2)

MDF


Outbound (Leg 3)

Arrival Airport (Leg 1+2) = Departure Airport (Leg 3)

Arrival Airport (Leg 1) ≠ Arrival Airport (Leg 3)

Outbound (Leg 1+2)

MDF


Inbound (Leg 1)



MDF

Inbound (Leg 2)

MDF


Inbound (Leg 3)



Inbound (Leg 1+2)

MDF


Outbound (Leg 1)



MDF

Outbound (Leg 2)

MDF


Outbound (Leg 3)



Outbound (Leg 1+2)

MDF


Outbound (Leg 1)

MDF


Outbound (Leg 1)



MDF

Outbound (Leg 2)

MDF

Outbound (Leg 2)

MDF


Outbound (Leg 3)



Outbound (Leg 1+2)

MDF


Inbound (Leg 1)



MDF

Inbound (Leg 2)

MDF


Inbound (Leg 3)



Inbound (Leg 1+2)

MDF


Inbound (Leg 1)

MDF


Inbound (Leg 1)



MDF

Inbound (Leg 2)

MDF

Inbound (Leg 2)

MDF


Inbound (Leg 3)



Inbound (Leg 1+2)

29


After joining the tables a total of 7,821 possible connections were created for the

outbound portion and 22,005 for the return option.

3.4 Airline Schedule Evaluation Results

The intention of the airline schedule evaluation was to find valuable O&Ds with no

“There-and-Back-in-a-Day” option as potential niche markets for commercial

business aviation. Having extracted all the connections that satisfied the stated

criteria, a synoptic table was created to visualise the results. As not all possible

O&Ds could be displayed, further confinements were made regarding the

examined origins and destinations.

Ten major origin airports in Germany were chosen for further analysis:

Cologne/Bonn (CGN), Dortmund (DTM), Düsseldorf (DUS), Frankfurt (FRA),

Hanover (HAJ), Hamburg (HAM), Bremen (BRE), Munich (MUC), Stuttgart (STR),

and Berlin (SXF, THF, TXL)65.

For these origin airports, ten destination countries in Northern and Eastern Europe

were chosen to exemplify the deficiencies in airline connectivity. These ten

selected countries were: Finland, Norway, Estonia, Latvia, Lithuania, Bulgaria,

Czech Republic, Hungary, Poland, and Lithuania.

Because not all the flights were operated on a daily basis, separate entries were

provided for each day of the week. A green coloured flag was assigned to those

O&Ds and days of the week66 where at least one round-trip connection existed

that met the “There-and-Back-in-a-Day” criteria (i.e. both inbound and outbound).

The results were quite surprising, as the total number of possible connections was

far lower than expected.

65 For the purpose of the analysis, the three Berlin airports were considered to be one single

origin/destination. 66 Days of the week are numbered from Monday (1) to Sunday (7).

30


Table 3.3 is an extract of the synoptic table showing only the available “There-and-

Back-in-a-Day” options from the selected airports in the Rhine-Ruhr area (CGN,

DTM, DUS). The complete tables are available in Appendix 4.

Table 3.3: “There-and-Back-in-a-Day” options from the Rhine-Ruhr Area

1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7FI HEL

OSLTRFSOF E E EVAROSRPRG

HU BUDLV RIX

GDNKRKKT

E E

WWAW

RO OTP

There-and-back-in-a-day option Departure from DE before 04:30 lcl

toDUSfrom

NO

CGN DTM

BG

CZ

PL

E

E

From the ten destination countries investigated, Estonia and Lithuania do not show

a single possible connection. Moreover, the posted results for Bulgaria and

Romania are unsatisfactory, as not all the days of the week are covered, and the

few existing connections from Cologne/Bonn are afflicted with rather unpleasant

departure times (between 00:40 lcl and 04:25 lcl). For Finland, 21 destination

airports were investigated, with only Helsinki meeting the criteria from Düsseldorf

(and Frankfurt). Overall, no more than three destinations per country are served

according to the prescribed requirements from any of the selected German

airports.

All the white spots in the table are potential market opportunities for the operation

of business aircraft. By including all the general-aviation-only airports not served

by scheduled airlines into the table, the colour white would become even more

31


dominant. In reverse, this does not imply that the green sectors of the table are

inaccessible for business aviation. Depending on the individual business situation

and booking status of the airlines, there may as well be valuable opportunities in

those areas.

But which of the blank spots are the most valuable for a specific origin airport? As

many companies may not be aware of the potential benefits that can result from

the use of business aircraft, a detailed analysis of the economic situation in the

catchment area of that specific airport has to be conducted. The goal must be to

identify companies in the catchment area with the need for travel to any of the

mentioned blank spots in airline schedules. A detailed cost-benefit analysis, based

on actual company requirements, can then be used to evaluate potential cost

saving opportunities resulting from the use of business aircraft.

In the following chapter such a cost-benefit model will be developed. However, as

the purpose of this thesis is more generic, the destination examples used in

Chapter 5 to demonstrate the potential degree of savings are not related to

specific company relations and must be viewed in a more general context.

32


4 Cost-Benefit Analysis

4.1 Accounting and Economic Principles

According to cost accounting principles, cost is defined as a resource sacrificed or

forgone to achieve a specific objective. Such objectives are called cost objects.

They can be anything for which a separate measurement of costs is required (e.g.

products, machines, services, processes, activities). Depending on their

relationship to a particular cost object, costs are classified as direct or indirect.

Direct costs are directly related to the particular cost object. They can be traced to

it in an economically feasible way. Indirect costs (e.g. overhead costs) are also

related to the particular cost object but cannot be traced to it in an economically

feasible way. Therefore, a cost allocation method must be used to allocate the

indirect costs to the related cost object. The cost-allocation base (e.g. labour hours

or kilometres travelled) is the common denominator that must be specified to

establish the link between indirect costs and a specific cost object.67

Calculation of total cost is done differently by economists. Total accounting cost

generally equals explicit cost, defined as actual cash payments. The key principle

underlying the calculation of economic cost is the principle of opportunity cost. The

opportunity cost of something is basically what is sacrificed to get it. Quite often

opportunity cost is incurred by not using a limited resource in its best alternative.

Total economic cost equals explicit cost plus implicit cost, where implicit cost is

defined as the opportunity cost of improper use of resources (e.g. time, money).68

A Cost-benefit analysis is a quantitative economic comparison. Economic

performance can be evaluated by defining Key Success Factors, commonly called

KPIs (Key Performance Indicators). These operational factors directly affect the

economic viability of the organisation or specific cost objects within the

organisation. They can be related to cost, time, quality or flexibility. By any means,

67 See: Horngren, C. et al. (2005). p. 36 et seqq. 68 See: Case, R. Fair, R. (2004). p. 132 et seq.

33


they have to be quantifiable to yield measurable and meaningful results that can

be used for internal or external benchmarking.69

4.2 Methodology

To examine and evaluate the tangible, monetary implications of a potential switch

from scheduled airline travel to business aviation a cost-benefit analysis is

performed. The analysis is a quantitative economic comparison of selected

business trips. The comparison depicts the differences in travel time, explicit travel

costs and implicit costs (i.e. personnel costs) on an individual trip basis. The

challenge in creating such an analysis model is to find a meaningful method to

translate the tangible benefits described in Chapter 2.6 into monetary values. The

valuation of intangible advantages is different in every company and depends on

the individual employees personal situation and position within the company. It is

therefore hardly quantifiable. The cost savings calculation method used to quantify

the productivity benefits through time savings is outlined in the following chapters.

4.3 The Value of Time

In today’s world of business and commerce, time means money. The relation

paraphrased in this piece of wisdom can be quantitatively expressed in several

ways. Traditional accounting usually treated people as a period cost measured in

terms of salary.70 Thereby, the easiest and most common way to translate

employee time into a direct hourly cost metric is dividing the total annual salary by

the number of hours worked annually. This however does not reflect the added

value that a unit of employee time yields to the company. Common business

sense requires employees to generate more in revenue or profit improvement than

they are paid.71 Thereby, the value of an employee’s time must exceed its

compensation. Especially the value of a senior executive’s time often exceeds its

69 See: Brown, S. et al. (2001). p. 7 et seq. 70 See: Fitz-enz, J. (2000). p. 5. 71 See: Arthur Andersen LLP (2001). p. 13 et seq.

34


cost to the company by substantial margins. The field of Human Resource

Accounting (HRA) recognizes people, their training, skills and experience as

human capital assets, crucial to the company’s success.72 Complementing

traditional accounting theorems, a valuation of these assets must be performed to

determine the true economic value of employees. The main KPI used in this thesis

to measure the benefits resulting from employee time savings is the Value per

Man-Hour. It is a rather simple and efficient method of quantifying the actual value

of employee time. The Value per Man-Hour Concept is perhaps most tangibly

illustrated by the hourly billing rates found for personnel in service industries.

4.3.1 The Value per Man-Hour (VMH) Concept

When calculating travel expenses, the value of time is an important economic

factor that needs to be considered. To quantify the contribution of human

resources to a company’s profitability, HRA has established the principle that the

value of an employee’s time to the employer can be expressed by applying a

productivity factor to the employee’s salary. Again, the emphasis here is on value,

not simply on what a person earns per hour. The actual Value per Man-Hour

(VMH) can be calculated by dividing the average annual salary multiplied by the

employee’s productivity factor by the average annual working hours. 73

VMH = Average Annual Salary * Productivity Factor Average Annual Work Hours

Generally, the productivity factor increases with salary because higher salaries are

justified by increases in the employees contribution to company profitability. 74 The

only challenge remaining is the determination of the productivity factor for

individual employees or employee groups.

72 See: Paauwe, J. (2004). p. 186 et seqq. 73 See: Wells, A., Chadbourne, B. (2003). p. 182. 74 See: Ehrenberg, R., Smith, R. (2006). p. 369 et seqq.

35


4.3.2 Productivity Valuation Models

In a study conducted by PRC Aviation75 in 1995, productivity factors were

elaborated to determine the exact hourly value an employee has to the

organisation. The study concluded that an appropriate valuation of senior

executives’ time results from applying a multiplier of 5.7 to that executive’s total

compensation. For middle managers and professional employees, a multiplier of

3.8 was judged to be appropriate.76 These productivity factors are averages of

multipliers taken from different valuation models as outlined in Table 4.1.

Table 4.1: Multipliers of Base Salary Resulting From Application of Methods of

Computing Corporate Values of Employees For Typical Corporations77

Method Senior ExecutivesMiddle Managementand Professionals All Employees

Cost of average base salary 1.0 1.0 1.0

Value Methods

Service Industries 5.0 - 7.0 2.5 - 5.0 2.5

Five Times Salary 10.9 - 12.2 4.8 - 8.0 -

Ten Percent Rule Whole Life 4.9 - - Term Insurance 20 - -

Benefit Term Insurance 5.0 - 7.0 3 -

Replacement Cost Present Value of Term of Replacement 5.0 - 5.3 3.5 -

Present Value of Term of Replacement Plus Inefficiencies

6.4 - 6.7 4.8 -

Loss of Excess Earnings 13.1 - -

Conference Board - - 2.3

PRC Aviation Evaluationof Several Methods 5.7 3.8 -

75 In 1997, PRC Aviation was acquired by Arthur D. Little, an international consulting firm based in

Cambridge, Mass. 76 See: PRC Aviation. (1995). p. 3-1. 77 Source: Adapted from PRC Aviation. (1995). p. 6-9.

36


Besides the fact that the elaborated productivity factors appear to be rather low,

the results of the PRC study may only be used to get an impression of the

approximate value of productivity for certain employee groups. A distinct link

between annual salary and VMH cannot be established, as actual salary ranges

for the mentioned employee groups are dependent on a lot of factors, such as kind

of industry or company size.

A model that directly provides such linkages was initially developed by the

Business & Commercial Aviation magazine. This model directly shows the VMH in

conjunction with the related annual salary by establishing a linear relation between

hourly pay and productivity factor.78 The model is shown in Table 4.2, with original

dollar values converted to euros.79 Furthermore, a slight modification is applied.

The originally used annual work hour base of 2,000 hours was raised to 2,300

hours. This seems to be a more appropriate number, especially for the service

sector.

Table 4.2: The Value of Executive Time80

Yearly Salary Hourly Pay Productivity Factor Value/Hour

10,000.00 € 4.35 € 2.76 12.00 €20,000.00 € 8.70 € 5.52 48.01 €30,000.00 € 13.04 € 8.28 108.03 €40,000.00 € 17.39 € 11.04 192.05 €50,000.00 € 21.74 € 13.80 300.08 €60,000.00 € 26.09 € 16.56 432.12 €70,000.00 € 30.43 € 19.33 588.16 €80,000.00 € 34.78 € 22.09 768.21 €90,000.00 € 39.13 € 24.85 972.26 €

100,000.00 € 43.48 € 27.61 1,200.33 €110,000.00 € 47.83 € 30.37 1,452.40 €120,000.00 € 52.17 € 33.13 1,728.47 €130,000.00 € 56.52 € 35.89 2,028.55 €140,000.00 € 60.87 € 38.65 2,352.64 €150,000.00 € 65.22 € 41.41 2,700.74 €200,000.00 € 86.96 € 55.22 4,801.31 €250,000.00 € 108.70 € 69.02 7,502.04 €400,000.00 € 173.91 € 110.43 19,205.23 €

78 See: Wells, A., Chadbourne, B. (2003). p.182. 79 Exchange Rate: 1 EUR = 1.27005 USD 80 Source: Adapted from Wells, A., Chadbourne, B. (2003). p.182.

37


No matter which model or valuation scheme is used, the fact remains that when a

manager or other key person is away from the office, the contact time with other

subordinates or peers is shortened and issues that need immediate attention must

wait. To improve this situation, the following chapter will provide a methodology to

calculate required VMH values as the main decision criteria for an economic

choice between airline and business aviation.

Given the fact that there are tremendous differences in the magnitude of the

multipliers in the different models and especially in different industries, it cannot be

in the interest of this thesis to base the analysis on a specific correlation between

annual salary and productivity. It is the responsibility of the companies themselves

to create their own valuation schemes to be aware of the actual value of their

employees’ time. Nevertheless, tables 4.1 and 4.2 will be used in Chapter 5 to

provide an indication for the salary ranges that may correspond to the calculated

VMH values.

4.4 Time and Cost Calculations

When evaluating the cost of travel, it is imperative to consider not only the explicit

(accounting) costs, but also the implicit personnel costs that are induced by the

need to travel. This does not relate to travel expenses, like lodging or per diems,

as these are treated as a part of the explicit cost package.

One might argue that personnel cost will arise no matter if the respective

employee is travelling or not. However, implicit personnel cost are incurred

because of:

• unnecessarily prolonged travel times that could have been avoided by

optimised scheduling, and

• reductions in employee productivity that can be experienced during different

parts of the travel.

38


While employee productivity is considered to be 100% during times spent in-house

or at scheduled out-of-office business, it can be drastically reduced by inherent

restrictions associated with different segments of the travel. These productivity

losses can be viewed as potential revenue forgone and must be treated as an

opportunity cost. For this purpose, it is necessary to split the total travel time into

individual segments and define specific marginal productivity/cost factors per

segment that can be applied to the employee’s VMH. The travel time

segmentation and the applied cost factors are outlined in the following chapter.

4.4.1 Time Calculation

An Excel table (Table 4.3) is used to perform the necessary time calculations81. All

calculations are made for airline travel as well as for the use of a business

turboprop and a business jet.

Table 4.3: Time Calculation Table 82

Airline Business TP Business JetOutboundOffice to Airport 0.75 0.75 0.75Terminal Boarding 0.75 0.25 0.25En RouteDeplaning 0.75 0.25 0.25Airport to Office 0.75 0.75 0.75

Total Outbound 3.00 2.00 2.00

ReturnOffice to Airport 0.75 0.75 0.75Terminal Boarding 0.75 0.25 0.25En RouteDeplaning 0.75 0.25 0.25Airport to Office 0.75 0.75 0.75

Total Return 3.00 2.00 2.00

Total Travel Time 6.00 4.00 4.00

Add. Out-of-Office 0.00 0.00

Total Valued Time 6.00 4.00 4.00

Elapsed Time (hrs)

81 Entries are required for the coloured fields only. Other times may be amended if necessary. 82 Time calculations adapted from Wells, A., Chadbourne, B. (2003). p. 183.

39


Segment times for the outbound and return portion are stated separately. For the

ground segments (all except En Route) standard time spans are already pre-

defined for further use in the following analysis. These time spans are assumed to

be realistic averages. Depending on the characteristics of the respective airports

or personal experience these values may be adjusted.83

Office to Airport and Airport to Office

Office to Airport and Airport to Office times include the drive time from office or

home to the airport and the time from parking to the terminal. These times are

strongly dependent on company location and airport choice. As the following

sample calculations in Chapter 5 are not related to a specific company profile, a

standard of 45 minutes (0.75 hours) will be used for all three aircraft options.

However, general aviation airports are often more conveniently located than the

major airports. Moreover, general aviation terminal facilities at major airports are

usually easier to reach than airline terminals because of nearby and convenient

parking opportunities. This will normally lead to further time savings on the side of

business aviation. Working on a concrete example, the preset time values will

have to be adjusted to reflect the local characteristics.

Terminal Boarding

Terminal Boarding includes time at the ticket counter/baggage check-in, security

screening, walk to the gate position, boarding and possible waiting times. An

average value of 45 minutes is used for the airline flight. Depending on airport and

time of the day, this value may as well be exceeded. For the business aircraft,

average Terminal Boarding is set to 15 minutes (0.25 hours) due to lower time

requirements for the abovementioned procedures.

Deplaning

Deplaning includes the walk to the airline baggage claim area with typical waiting

time (generally not applicable for the business aircraft) and the walk to ground

transportation/parking facilities. Average times used are 45 minutes for the airline

and 15 minutes for the business aircraft.

83 See: PRC Aviation. (1995). p. 3-14. See: Etterich, H.-J. (2006). p. 189.

40


En Route

En Route times comprise the total block time, including hub transfer times for

multi-leg airline flights.

Total Travel Time

Total is the sum of Office to Airport, Terminal Boarding, En Route, Deplaning and

Airport to Office times for both outbound and return portions of the trip.

Summarizing only the set ground times (see Table 4.3) already shows a clear time

advantage of two hours in favour of the business aircraft.

Add. Out-of-Office

A row labelled Add. Out-of-Office indicates the number of business hours out of a

regular ten-hour working day (08:00 – 18:00) and outside the abovementioned

segments of total travel time, that are spent at the destination without being

directly related to the designated purpose of the trip. This is used to value

excessive time that could have been avoided by customized scheduling.

Total Valued Time (TVT)

Total Valued Time, as opposed to Total Travel Time, is the sum of all individual

travel segment times, including Add. Out-of-Office, multiplied by the respective

Cost Factors stated in Table 4.4. Total Valued Time is used as the basis for further

implicit cost calculations.

Table 4.4: En Route Productivity and Total Valued Time

Prod. Credit Cost Factor0% 100%0% 100%15% 85%75% 25%0% 100%0% 100%

50% 50%

Office to AirportTerminal Boarding

Airport to Office

En Route - Business A/CEn Route - Airline

Add.Out-of-Office

Deplaning

41


Prod. Credit / Cost Factor

Different Productivity Credits are assigned to the various segments of the trip to

cater for the corresponding possibility to work efficiently. For the time used to get

to and from the airport, as well as for terminal boarding and deplaning procedures,

the productivity is set to zero. As it is generally impossible to work during these

phases of the trip, the Cost Factor used to value the respective man-hours (in

terms of an implicit cost) is 100%.

But how much work can be accomplished while travelling en route in a commercial

airliner or a business aircraft? As already stated in Chapter 2.6.2, the productivity

of employees aboard a business aircraft is much higher than aboard a commercial

airliner. The possibility and willingness to productively use this considerable part of

the total trip time needs to be credited. An En Route Productivity Factor was

initially introduced by the National Business Aviation Association, Inc. (NBAA) in

its Management Aids article “The Management Accountability Factor”, providing a

quantifiable answer to the question. The En Route Productivity Credit for the time

spent aboard a business aircraft is estimated at 75 percent, whereas the value of

time travelled on a commercial airliner is estimated to be as low as 15 percent.

Thereby, the resulting Cost Factor for airline en route time84 is 85%. For the en

route time aboard a business aircraft a Cost Factor of 25% is applied.85

Differences regarding the aircraft types used (turboprop or jet) as expressed in the

Louis Harris Poll (see Figure 2.4) are not reflected in this model.

Additional out-of-office hours at the destination, resulting from rarely optimal

schedules are credited with 50%, as opposed to 15% for airline en route and 75%

for business aircraft en route. The reason for this valuation is that full privacy and

an office-like environment, as provided on a business aircraft, cannot be

guaranteed when spending idle time at the destination outside the planned

business. However, possible availability of hotel rooms, lounges or even company

facilities in combination with modern communication technology may still allow a

considerable amount of work to be achieved.

84 Actual en route time for commercial airlines also includes possible hub transfer times. 85 See: Wells, A., Chadbourne, B. (2003). p. 182.

42


Concerning the handling of overnight stays, it is rather impossible to find a

monetary equivalent for additional after-office hours spent away from home.

Evaluation and weighting of these criteria is strongly dependent on the employee’s

position within the company and has to be performed on an individual bases.

4.4.2 Cost Calculation

Another Excel table (Table 4.5) is created to perform the respective cost

calculations. In this table, the explicit costs of travel and the number of passengers

travelling have to be entered.86 A value per man-hour will be calculated as the Key

Performance Indicator for the economic efficiency. The variables and formulas

used to perform the respective calculations are explained in this chapter.

Table 4.5: Cost Calculation Table

per pax per trip per pax per tripAir ServiceLodgingPer DiemsOther

0.00 € 0.00 € 0.00 € 0.00 €

0.00 € 0.00 € 0.00 € 0.00 €0.00 € 0.00 € 0.00 € 0.00 €

0.00 €

#Pax

Airline Business A/CRouting Routing

Total Trip CostPersonnel Cost Diff.

Average Break-EvenVMH (Airline - TP)

Total Explicit Cost

Total Explicit Cost (TEC)

In the first part of the table, the Total Explicit Cost of travel is calculated by adding

the Air Service fares, Lodging costs, Per Diems, and Other costs (e.g. rental car,

taxi). Furthermore, the number of passengers needs to be indicated. For the

business aircraft the air service fare per trip is entered, as this fare is fixed

independent of the number of passengers. On the airline side, the individual ticket

86 Entries are required for the coloured fields only.

43


price is required. Total air service fare per trip will increase with increasing number

of passengers.

Personnel Cost Difference (PCD)

Personnel Cost Difference (PCD) is the implicit employee cost or opportunity cost

caused by performing the travel. PCD (per passenger) is defined as the product of

an Average Break-Even VMH (VMHBE ) and the Total Valued Time (TVT),

specified before in the time calculation table.

PCDA = VMHBE * TVTA and PCDB = VMHBE * TVTB 87

The variable name contains the word “difference” to indicate that the respective

implicit personnel costs are based on VMHBE, in order to achieve a break-even in

Total Trip Cost for airline and business aircraft.

Average Break-Even VMH (VMHBE)

An Average Break-Even VMH is calculated for which Total Trip Cost Airline (TTCA)

equals Total Trip Cost Business A/C (TTCB).

per pax per trip per pax per tripAirline Business Aircraft

Total Trip Cost

TTCA = TTCB

Total Trip Cost (TTC) is the sum of Total Explicit Cost and Personnel Cost

Difference (see Table 4.5).

TECA + PCDA = TECB + PCDB

87 The subscript “A” relates to Airline, while the subscript “B” stands for Business Aircraft.

44


Substituting PCDA and PCDB with the underlying calculations, the equation will

look the following:

TECA + (VMHBE * TVTA) = TECB + (VMHBE * TVTB)

When solving the equation for the Average Break-Even VMH (VMHBE) the

resulting formula is:

TECB – TECATVTA – TVTB

VMHBE =

To evaluate the result, an Actual Average VMH of all travelling employees needs

to be calculated.

n

∑ VMH ii = 1

; where n = Number of passengers.n

Actual Average VMH =

As soon as the Actual Average VMH of the travellers is greater than the Average

Break-Even VMH (VMHBE), the business aircraft is the more economic option.

If Actual Average VMH of the travellers is above the determined VMHBE for both

business turboprop and jet, the next question to be answered is which of the two

options is the most suitable. A jet will yield bigger time savings, but higher hourly

rates have to be paid. Another VMH value can be calculated, for which Total Trip

Cost Business Turboprop (TTCTP) equals Total Trip Cost Business Jet (TTCJet).

per pax per trip per pax per tripBusiness TP Business Jet

Total Trip Cost

45


Applying the same logic as above, the resulting formula for this Average Break-

Even VMH (VMH (Jet – TP)) reads:

VMH(Jet – TP) = TECJet – TECTPTVTTP – TVTJet

Where cost is a trade-off against time, several other factors must be considered as

well: the emergency need for travel to be accomplished, the perishable nature or

deterioration rate of a situation, and any seasonal demand requirements.88 With

regard to certain maintenance or servicing contracts this could as well mean that a

company may require professional specialist teams to move quickly and thereby

prevent an excessive loss of production. Potential contractual penalties for undue

delays are additional time related costs that may have to be credited. As these

factors are strongly dependent on the specific case, they will not be reflected in the

following analysis. A separate evaluation has to be performed on an individual

basis.

88 See: Wells, A., Chadbourne, B. (2003). p. 188.

46


5 Sample Route Calculations

Sample time and cost calculations are performed for three selected airline round-

trips to European business destinations that showed a lack of supply according to

the previously conducted airline schedule analysis. The airport of Düsseldorf

(DUS) will be used as the origin for all airline flights. To obtain comparable results

for routes representing different flight ranges, the regional airport of

Essen/Mühlheim (ESS) - located about 27 km from DUS89 - is used as the flight

origin for the comparative business aviation calculations.

The model described before will be used to elaborate the required minimum VMH

that will make the use of a business aircraft economically favourable.

5.1 Selected Sample Destinations

The selected sample destinations used and the average ranges from DUS/ESS

are:90

1. Oulu, Finland (OUL) ~ 1,850 km

2. Vilnius, Lithuania (VNO) ~ 1,287 km

3. Katowice, Poland (KTW) ~ 865 km

To outline the general relevance of the selected business destinations, only a

short description of the economic characteristics is provided. To specifically

identify the most valuable O&Ds for specific German regions and airports, further

research will be required.

89 Distance derived from www.viamichelin.de 90 The specified distances are averaged great circle distances from DUS/ESS to the destinations,

calculated with the use of “Great Circle Mapper” (http://gc.kls2.com/) and do no concur with actual

flight distances.

47


1. Oulu, Finland

The two main business centres in Finland are the triangle Helsinki-Turku-Tampere

and the region around Oulu. The high-tech city of Oulu is mainly known for its

Information and Communications Technology industries. Currently, Nokia is the

biggest private employer, employing more than 4,500 people in the Oulu region.

Nokia has established two divisions, Nokia Networks and Nokia Mobile Phones, a

separate Nokia Ventures Organisation, and an internal research unit, Nokia

Research Centre.91

2. Vilnius, Lithuania

Vilnius is the capital of Lithuania. After the country had joined the European Union

in May 2004, the economic relations to Germany were intensified and are still

expected to grow. Meanwhile, Germany is, behind Russia, Lithuania’s most

important trading partner. E.ON-Ruhrgas, Siemens and Nord/LB, the third-largest

German bank, as well as many small and medium-sized enterprises have made

large investments in Lithuania.92

3. Katowice, Poland

Katowice is one of the most important business centres in Poland and the main

city of the Upper Silesian Industry Area. The region is shifting more and more from

traditional coal mining and iron and steel industries towards information technology

and electrical engineering (e.g. Electrolux). Besides, the largest car manufacturers

in Poland (e.g. Opel) can be found in the Katowice Special Economic Zone.93

91 See: City of Oulu (2006). 92 See: Auswärtiges Amt (2006). 93 See: The Śląskie Voivodeship (2006). See: Katowice Special Economic Zone (2006).

48


5.2 Basic Assumptions

The following assumptions have been made to perform the calculations for the

selected sample trips:

1. Purpose of the generic business trips is to attend a three-hour meeting at

the destination, scheduled on Thursday from 12:30 to 15:30 local time.

Arrivals and departures are planned to minimize total travel time and cost.

2. Origin for all sample airline flights is Düsseldorf International (DUS).

3. Origin for all sample business aircraft flights is the Airport of

Essen/Mühlheim (ESS). Possible positioning flights are not included.

4. Business Turboprop used is a Beech King Air B200. Business Jet used is

a Citation Jet.

5. Airline schedules and fares for Vilnius and Katowice were obtained from

the Lufthansa website.94 For the destination Oulu, the website of Finnair95

was used, as no Lufthansa connection to Oulu is available. Bookings were

checked against listings on the opodo website (www.opodo.de) to assure

that the best available connection is chosen.

6. Airline fares are based on business class bookings. Bookings were made

one week in advance to guarantee availability of flights.

7. Schedules and fares for business aircraft are based on actual air charter

company quotations.

8. Lodging cost and per diems are derived from current travel expense

compensation tables published by the German Ministry of Finance.96

While all the trips with business aircraft can be achieved within one day, the

comparable airline trips may require up to two overnight stays. Screenshots of the

airline bookings for the sample routes are available in Appendix 5.

94 www.lufthansa.com 95 www.finnair.com 96 See: Bundesministerium der Finanzen. (2004)

49


5.3 Route 1: Oulu, Finland

Airline Schedule:97

STD STA STD STA DurationWednesday DUS 11:30 15:00 HEL 16:00 17:05 OUL 04:35

STD STA STD STA DurationFriday OUL 06:00 07:00 HEL 07:35 09:00 DUS 04:00

Airline Travel requires a departure on Wednesday at 11:30 lcl (one day early). The

returning flight leaves Oulu at 06:00 lcl on Friday (one day late) and arrives in

Düsseldorf at 09:00 lcl. Both ways one transfer in Helsinki is required.

Business aviation schedules are custom-fit to avoid idle times at the destination

and provide a direct “There-and-Back in-a-Day” option.

Schedule Business Turboprop: 98

STD STA DurationThursday ESS 06:20 11:30 OUL 04:10

STD STA DurationThursday OUL 16:30 19:40 ESS 04:10

Schedule Business Jet: STD STA Duration

Thursday ESS 07:10 11:30 OUL 03:20

STD STA DurationThursday OUL 16:30 18:50 ESS 03:20

Total Trip Duration:

Airline: 48:30 hrs (including two overnight stays)

Business Turboprop: 15:20 hrs

Business Jet: 13:40 hrs 97 See Appendix 5/1. 98 For the Turboprop Crew, a possibility to rest will be required in Oulu to meet the Crew Duty Time

specifications according to 2. DV LuftBO (§ 3 and § 5). See: http://www.luftrecht-online.de/

regelwerke/pdf/2dvluftbo.pdf

50


Total Travel Times and Total Valued Times are summed up as shown in Table 5.1

below. As the airline flight arrives the day before and leaves the day after the

actual business day, the idle time on Thursday from 08:00 lcl to 12:30 lcl and from

15:30 lcl to 18:00 lcl is counted as Add. Out-of-Office time.

Table 5.1: Time Comparison Route 1 (Oulu, Finland)

Airline Business TP Business JetOutboundOffice to Airport 0.75 0.75 0.75Terminal Boarding 0.75 0.25 0.25En Route 4.58 4.17 3.33Deplaning 0.75 0.25 0.25Airport to Office 0.75 0.75 0.75


ReturnOffice to Airport 0.75 0.75 0.75Terminal Boarding 0.75 0.25 0.25En Route 4.00 4.17 3.33Deplaning 0.75 0.25 0.25Airport to Office 0.75 0.75 0.75



Add. Out-of-Office 7.00 0.00 0.00


Elapsed Time (hrs)

The individual business class ticket price for the Finnair flight to Oulu and back is

€ 1,349,56. The total air charter fares for the roundtrip are € 12,850 for the

turboprop and € 13,500 for the jet. Table 5.2 and Table 5.3 below show the

resulting Average Break-Even VMH values for three passengers. For the business

turboprop the required Average Break-Even VMH is € 241.11. With € 251.48 the

VMHBE for the business jet is only slightly higher.

51


Table 5.2: Cost Comparison Airline vs. Business TP: Oulu, Finland (3 pax)

per pax per trip per pax per tripAir Service 1,349.56 € 4,048.68 € 4,283.33 € 12,850.00 €Lodging 240.00 € 720.00 € 0.00 € 0.00 €Per Diems 126.00 € 378.00 € 14.00 € 42.00 €Other 0.00 € 0.00 € 0.00 € 0.00 €

1,715.56 € 5,146.68 € 4,297.33 € 12,892.00 €

4,048.91 € 12,146.73 € 1,467.14 € 4,401.41 €5,764.47 € 17,293.41 € 5,764.47 € 17,293.41 €Total Trip Cost

3

Personnel Cost Diff.


Total Explicit Cost

#Pax

Airline Business TPDUS-OUL-DUS ESS-OUL-ESS

241.11 €

Table 5.3: Cost Comparison Airline vs. Business Jet: Oulu, Finland (3 pax)


1,715.56 € 5,146.68 € 4,514.00 € 13,542.00 €

4,223.06 € 12,669.18 € 1,424.62 € 4,273.86 €5,938.62 € 17,815.86 € 5,938.62 € 17,815.86 €

#Pax

Airline

Average Break-EvenVMH (Airline - Jet)

3

Personnel Cost Diff.Total Trip Cost

Total Explicit Cost

DUS-OUL-DUS ESS-OUL-ESS

251.48 €

Business Jet

Based on the productivity factors shown in Table 4.2, an average traveller salary

of € 46,000, equal to a VMH of € 253.99, would already meet the criteria for the

use of both business turboprop and jet.

Figure 5.1 shows the remaining Average Break-Even VMH values for other

passenger numbers. The values obviously decrease with increasing passenger

number. If the Actual Average VMH of the passengers is above the line, the use of

52


the specified business aircraft is economically justified. For eight passengers, the

indicated value for the turboprop is zero. This indicates that already the Total

Explicit Costs of the airline trip exceed those of the business turboprop option.

Figure 5.1: Average Break-Even VMH Values (Oulu, Finland)

0100200300400500600700800900

1,0001,100

No. of Passengers

VM

H in

EU

R

Av. VMH (TP-Airl.) 1041 441 241 141 81 41 13 0Av. VMH (Jet-Airl.) 1060 454 251 150 90

1 2 3 4 5 6 7 8

53


5.4 Route 2: Vilnius, Lithuania

Airline Schedule:99

STD STA STD STA DurationWednesday DUS 17:25 19:05 WAW 19:55 22:20 VNO 03:55

STD STA STD STA DurationThursday VNO 18:20 19:30 FRA 21:05 21:50 DUS 04:30

Airline Travel to Vilnius requires a departure on Wednesday at 17:25 lcl (one day

early) and includes one transfer in Warsaw. The return flight via Frankfurt leaves

Vilnius at 18:20 lcl on Thursday and arrives in Düsseldorf at 21:50 lcl.


and provide a direct “There-and-Back in-a-Day” option.

Schedule Business Turboprop: STD STA Duration

Thursday ESS 07:30 11:30 VNO 03:00

STD STA DurationThursday VNO 16:30 18:30 ESS 03:00


Thursday ESS 08:05 11:30 VNO 02:25

STD STA DurationThursday VNO 16:30 17:55 ESS 02:25


Airline: 31:25 hrs (including one overnight stay)


Business Jet: 11:50 hrs

99 See Appendix 5/2.

54



below. For the airline flight an Add. Out-of-Office time is counted on Thursday from

08:00 lcl to 12:30 lcl and from 15:30 lcl to 16:50 lcl (90 minutes prior STD).

Table 5.4: Time Comparison Route 2 (Vilnius, Lithuania)








Elapsed Time (hrs)

The individual business class ticket price for the Lufthansa flight to Vilnius and

back is € 1,709.62. The total air charter fares for the roundtrip are € 9,450 for the


resulting Average Break-Even VMH values for three passengers. For the business

turboprop the required Average Break-Even VMH is € 117.85. For the business jet

it is € 138.45.

55


Table 5.5: Cost Comparison Airline vs. Business TP: Vilnius, Lithuania (3 pax)


1,863.62 € 5,590.86 € 3,159.00 € 9,477.00 €

1,943.54 € 5,830.62 € 648.16 € 1,944.48 €3,807.16 € 11,421.48 € 3,807.16 € 11,421.48 €

Total Explicit Cost



DUS-VNO-DUS ESS-VNO-ESS#

PaxAirline Business TP

3

117.85 €

Table 5.6: Cost Comparison Airline vs. Business Jet: Vilnius, Lithuania (3 pax)


1,863.62 € 5,590.86 € 3,425.67 € 10,277.00 €

2,283.40 € 6,850.19 € 721.35 € 2,164.05 €4,147.02 € 12,441.05 € 4,147.02 € 12,441.05 €


DUS-VNO-DUS ESS-VNO-ESS#

PaxAirline Business Jet

3

Total Explicit Cost

Average Break-EvenVMH (Airline - Jet) 138.45 €


of slightly more than € 34,000, equal to a VMH of € 138.76, would already meet

the criteria for the use of both business turboprop and jet. Applying only a

productivity factor of 5.7, as described in the PRC Aviation study (Chapter 4.1.2),

an annual average salary of € 56,000 would be sufficient.

56



passenger numbers. Where the Actual Average VMH of the passengers is above

the line, the use of the specified business aircraft is economically justified. For a

group of six or more passengers, the required VMHBE for the turboprop is zero.

This indicates that already the Total Explicit Costs of the airline trip exceed those

of the business turboprop option.

Figure 5.2: Average Break-Even VMH Values (Vilnius, Lithuania)

0

100

200

300

400

500

600

700

800

900

No. of Passengers

VM

H in

EU

R


1 2 3 4 5 6 7 8

57


5.5 Route 3: Katowice, Poland

Airline Schedule:100

STD STA STD STA DurationWednesday DUS 20:10 21:05 FRA 21:50 23:15 KTW 03:05

STD STA STD STA DurationFriday KTW 06:00 07:30 FRA 08:50 09:35 DUS 03:35

In order to be at the scheduled business in Katowice on Thursday, the existing

airline schedule requires a departure on Wednesday at 20:10 lcl (one day early)

for an arrival at 23:15 lcl. Earliest return possibility is a departure on Friday (one

day late) at 06:00 lcl, arriving in Düsseldorf at 09:35 lcl. Both flights are transfer

connections via Frankfurt.


and enable a direct “There-and-Back in-a-Day” option.

Schedule Business Turboprop: STD STA Duration

Thursday ESS 09:20 11:30 KTW 02:10

STD STA DurationThursday KTW 16:30 18:40 ESS 02:10


Thursday ESS 09:45 11:30 KTW 01:45

STD STA DurationThursday KTW 16:30 18:15 ESS 01:45


Airline: 40:25 hrs (including two overnight stay)


Business Jet: 10:30 hrs 100 See Appendix 5/3.

58



below. Add. Out-of-Office time for the airline option is counted on Thursday from

08:00 lcl to 12:30 lcl and from 15:30 lcl to 18:00 lcl.

Table 5.7: Time Comparison Route 3 (Katowice, Poland)








Elapsed Time (hrs)

The individual business class ticket price for the Lufthansa flight to Katowice and

back is € 1,454.79. The total air charter fares for the roundtrip are € 6,950 for the


resulting Average Break-Even VMH values for a group of three passengers.

Average Break-Even VMH values required to justify the use of the business

turboprop are € 65.29 and € 93.12 for the business jet.

59


Table 5.8: Cost Comparison Airline vs. Business TP: Katowice, Poland (3 pax)


1,666.79 € 5,000.37 € 2,324.67 € 6,974.00 €

989.88 € 2,969.65 € 332.01 € 996.02 €2,656.67 € 7,970.02 € 2,656.67 € 7,970.02 €

Business TP

3

DUS-KTW-DUS ESS-KTW-ESS#

PaxAirline

Total Explicit Cost


Average Break-EvenVMH (Airline - TP) 65.29 €

Table 5.9: Cost Comparison Airline vs. Business Jet: Katowice, Poland (3 pax)


1,666.79 € 5,000.37 € 2,624.67 € 7,874.00 €

1,411.86 € 4,235.57 € 453.98 € 1,361.94 €3,078.65 € 9,235.94 € 3,078.65 € 9,235.94 €


#Pax

Airline Business Jet

Average Break-EvenVMH (Airline - Jet) 93.12 €

ESS-KTW-ESS

3

Total Explicit Cost

DUS-KTW-DUS


of € 28,000 (equal to a VMH of € 94.11) would already meet the criteria for the use

of both business turboprop and jet. Even by applying the average productivity

factor of 5.7 for senior executives, as described in the PRC Aviation study

(Chapter 4.1.2), the annual salary corresponding to the Average Break-Even VMH

for the business jet will be only slightly more the € 32,000.

60



passenger numbers. Where the Actual Average VMH of the passengers is above

the line, the use of the specified business aircraft is economically justified. For a

group of five or more passengers, the indicated values for both turboprop and jet

are zero, indicating that already the Total Explicit Costs of the airline trip exceed

those of both business aircraft options.

Figure 5.3: Average Break-Even VMH Values (Katowice, Poland)

0

100

200

300

400

500

600

700

No. of Passengers

VM

H in

EU

R


1 2 3 4 5 6 7 8

61


5.6 What Type of Business Aircraft to Choose?

To perform the sample route calculations, one turboprop and one turbojet aircraft

were examined as a possible alternative to commercial airline travel. As expected,

the VMHBE values for the jet are higher than those of the turboprop. However, the

gap between the respective values decreases with increasing flight ranges. The

greater the distance that has to be covered, the more time can be saved by higher

cruising speeds. These shortened flight times will eventually compensate the

higher rates that have to be paid for the jet, and the total air charter fare will drop

below the one that is charged for the turboprop aircraft. For the aircraft types

(Beech King Air B200, Cessna 525 Citation Jet) and the flight ranges (less than

2,000 km) evaluated in the examples before, this point has not been reached yet.

On all three routes, the turboprop is still cheaper than the jet, producing lower

VMHBE values.

The VMHBE values required to close the mentioned gap and turn the still higher

priced business jet into the cheaper option are shown in Figure 5.4 below.

Figure 5.4: Average Break-Even VMH for Choice between Business A/C Types

0400800

1,2001,6002,0002,4002,8003,2003,6004,0004,400

No. of Passengers

Brea

k-Ev

en V

MH

in E

UR

Av. VMH (Jet-TP) OUL 1548 774 516 387 310Av. VMH (Jet-TP) VNO 2759 1379 920 690 552Av. VMH (Jet-TP) KTW 4286 2143 1429 1071 857

1 2 3 4 5

62


Only if Actual Average VMH of the travellers is above the line, the business jet will

be more cost-effective. The lowest values are shown for the longest route, where

the time savings are most dominant.

This does not consider the subjective quality perception of the customer,

concerning travel comfort or safety with regard to turboprops or jets. Where both

options are more economical than airline travel, personal preferences may as well

be a decision criteria for the choice of the respective business aircraft type.

63


6 Conclusion

The potential use of business aircraft is based on their ability to make travel more

efficient by reducing total travel time and increasing productivity for the given

amount of time. Business aircraft are more flexible than airlines because they fly

according to a self-determined schedule, quite often closer to the ultimate

destination of the business traveller. Business aviation is the real point-to-point

form of air travel, able to fill the large existing gaps in scheduled airline services:

most business flights are between cities that are not adequately or not at all

served by scheduled flights.

Business aircraft are productivity multipliers that allow passengers to conduct

business en route in complete privacy while reducing the stresses associated with

travelling on scheduled carriers. While flying with an airline, business basically

stops. But the “office in the sky” in a business aircraft means business as usual,

with confidential in-flight meetings and briefings with clients or associates.

Business aviation is not about taking top managers from the head offices of large

corporations and flying them in “their own aircraft”. The Louis Harris Poll stated

that only 14% of company employees travelling on board business aircraft were

top management. Another 14% were senior managers, 49% middle managers and

19% professional staff.101 The sample route calculations performed in Chapter 5

as well proved that there is a great saving potential for small groups of lower

salaried employees, especially on the shorter routes. This basically relates to the

fact that airline ticket prices, other than air charter prices, are not necessarily

dependant on flight ranges.

Overall, commercial business aviation is for sure a valuable alternative for

companies in Germany. Simply stated, business aviation can help a company to

obtain maximum productivity from its two most important assets - people and time.

This makes it a commercial proposition, not a luxury. The proposition however is

101 Louis Harris & Associates, Inc. (1997). p. 5.

64


based on a comprehensive valuation of employee time as an implicit part of travel

expenses.

Many of the large corporations in Germany already have inherited these thoughts

and acknowledge the benefits of business aviation by operating own corporate

fleets. Independent of company size or travel volume, commercial business

aviation can provide the same benefits on demand, without the need for long-term

financial or contractual commitments.

The model developed in this thesis is an easy to use tool to evaluate the financial

benefits, arising from the use of commercial air charter flights on an individual trip

basis. However, it requires that companies appreciate their employees’ time as a

valuable good that must not be wasted. For the three sample routes evaluated in

this thesis, the Total Valued Time savings per passenger resulting from the use of

a business aircraft were at least 10 hours (i.e. one complete working day) per trip.

In other words, using the airline to perform the trip (for employees meeting the

VMH criteria) would be a waste of valuable resources that cannot be tolerated by a

profit organisation. On top of the pure micro-economic evaluation, the non-

financial factors, e.g. non-business hours away from home (family time) that can

influence employee motivation and loyalty should be given a thought.

The sample calculations were based on an artificial scenario. The results will be

even more meaningful, when the model is applied to a specific company case.

Again, honouring these benefits requires a comprehensive valuation of employee

time. Especially in Germany, personnel costs are a major cost factor. Companies

must, at least, recognize the opportunity cost of reduced productivity when

calculating the full amount of travel expenses incurred.

65


Areas for further research

Based on the European airline schedule analysis performed in Chapter 3 of this

thesis, an economic research can be conducted for specific German origin

airports. The aim should be to identify companies within the catchment area that

maintain business ties to the “blank spots” as shown in the synoptic tables

(Appendix 4). By analysing the travel behaviour of these companies and then

applying the cost-benefit model to the specific cases, the respective companies

may be convinced of the saving potential inherent to business aviation.

In a next step, for companies with higher travel demands, a cost-benefit model

may be developed to determine the minimum amount of business travel required

to justify the operation of own corporate aircraft.

66


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70


Appendix 1/1Appendices

Commercial Air Charter Companies in Germany 102

Name Internet

Bizair Fluggesellschaft mbH 10589 Berlin www.bizair.de

Windrose Air Jetcharter GmbH 12101 Berlin www.windroseair.de

Private Wings Flugcharter GmbH 12521 Berlin www.private-wings.de

Canair Luftfahrtunternehmen 20345 Hamburg www.canair.de

ACH Hamburg 22297 Hamburg www.ach-hamburg.de

earlybirds Jet Charter Company GmbH & Co. KG 22335 Hamburg www.early-birds.de

atec Flugcharter KG 24159 Kiel - Flughafen Süd www.atec-flight.com

FLM Aviation LuftverkehrsgesellschaftMohrdieck mbH & Co. KG 24159 Kiel - Flughafen www.flm-aviation.de

ohlair 24159 Kiel www.ohlair.de

Hanseatic Aviation 25474 Ellerbeck www.hanseaticaviation.de

Jet Kontor 25488 Hamburg-Holm www.jetkontor.de

Luftverkehr Friesland Harle 26409 Wittmund-Carolinensiel www.inselflieger.de

FLN Frisia-Luftverkehr GmbH Norddeich 26506 Norden www.reederei-frisia.de

OLT Ostfriesische Lufttransport GmbH 26721 Emden www.olt.de

Atlas Air Service GmbH 27777 Ganderkesee www.atlas-air-service.de

Silver Bird Charterflug GmbH 28199 Bremen www.silverbirdcharter.com

Aerowest GmbH 30669 Hannover www.aerowest.aero

Advance Air GmbH 35789 Weilmünster www.advanceair.de

JET EXECUTIVE International Air CharterGmbH & Co. KG 40472 Düsseldorf www.jetexecutive.com

Air Traffic GmbH Executive Jet Service 40474 Düsseldorf www.airtraffic.de

Triple Alpha GmbH 40474 Düsseldorf www.3A-online.de

Vibro Air Flugservice GmbH & Co. KG 41066 Mönchengladbach www.vibroair.de

Westavia Fluggesellschaft mbH 41066 Mönchengladbach www.westavia.de

LGW-Luftfahrtgesellschaft Walter mbH 44319 Dortmund www.lgw.de

VHM Schul- und Charterflug GmbH 45470 Mühlheim/Ruhr www.vhm.aero

MSR Flug-Charter GmbH 48268 Greven www.msr-flug.de

Excellent Air AG 48703 Stadtlohn www.excellent-air.com

CCF manager airline GmbH 51147 Köln www.jetcharter.de

Senator Aviation Charter GmbH 51147 Köln www.senator-aviation.de

WDL Aviation GmbH & Co. KG 51147 Köln www.wdl-aviation.de

Location

102 Source: Adapted from Figgen, A. (2006). p. 46 et seqq.

71


Appendix 1/2

Commercial Air Charter Companies in Germany 103

Name Internet

AirGO Flugservice GmbH & Co. KG 55126 Mainz-Finthen www.airgo.de

Air Alliance Express AG & Co. KG 57299 Burbach www.air-alliance.de

Avanti Air GmbH & Co. KG 57299 Burbach www.avantiair.com

JetConnection Businessflight AG 60549 Frankfurt www.jetconnection.com

Hahn Air Lines GmbH 63303 Dreieich www.hahnair.com

AERO Business Charter GmbH 64625 Bensheim www.aerobusiness.de

Cirrus Aviation Luftfahrtgesellschaft mbH 66131 Saarbrücken www.cirrus-aviation.de

Silver Cloud Air GmbH 67346 Speyer www.silver-cloud-air.de

transavia Fluggesellschaft 67346 Speyer www.transaviaflug.de

DaimlerChrysler Aviation 70567 Stuttgart www.dc-aviation.com

EFD Eisele Flugdienst GmbH 70629 Stuttgart-Flughafen www.eisele-flugdienst.de

Rieker Air service GmbH 70629 Stuttgart-Flughafen www.riekerairservice.de

Stuttgarter Flugdienst GmbH 70629 Stuttgart-Flughafen www.stuttgarterflugdienst.de

Jetline Fluggesellschaft mbH & Co. KG 70794 Filderstadt www.jetline.aero

ProAir-Charter-Transport GmbH 70794 Filderstadt www.proair.de

ACM Air Charter Luftverkehrsgesellschaft mbH 77836 Rheinmünster www.acm-air-charter.de

flugbereitschaft GmbH 77836 Rheinmünster www.flugbereitschaft.com

Business Air GmbH 78166 Donaueschingen www.business-air-gmbh.de

Dr. Schenk Flugbetrieb GmbH 82152 Planegg www.vip-flights.de

CPI Air Service GmbH Carlos de Pilar 82166 Gräfelfing www.cpi-airservice.com

Phoenix Air GmbH 85326 München www.phoenixair.de

Air Independance GmbH 85356 München www.airindependence.com

Comfort Air Luftfahrtunternehmen GmbH & Co.KG 85356 München www.privatejets.de

Premium Aviation GmbH 85356 München www.premium-aviation.de

Augusta Air 86169 Augsburg www.augusta-air.de

FoxAir GmbH 86167 Augsburg www.foxair.de

Donau-Air-Service GmbH 88512 Mengen www.donauair.de

Aero-Dienst GmbH & Co. KG 90411 Nürnberg www.aero-dienst.de

Jetair Flug GmbH 90411 Nürnberg www.jetair.de

ALPHA EXEC Flugbetriebs GmbH 91126 Schwabach www.alpha-exec.de

Comair Reise und Charter GmbH 94474 Vilshofen www.BergerBau.de

mediair ambulanzflugdienst 94501 Aidenbach www.mediair.de

Air Charter Picard Flugzeugvercharterung 97901 Altenbuch www.air-charter-picard.de

Fly Point Flugservice Haufe KG 99819 Hörselberg www.fly-point.de

Location

List may not be exhaustive.

103 Source: Adapted from Figgen, A. (2006). p. 46 et seqq.

72


Appendix 2

Air Charter Brokers in Germany104

Name Internet

Chapman Freeborn Airmarketing GmbH 12521 Berlin www.chapman-freeborn.de

Nordavia Fluggesellschaft mbH 20144 Hamburg www.nordavia.de

Air Partner GmbH 22453 Hamburg www.airpartner.com

FlightTime GmbH 27721 Ritterhude www.flighttime.de

Hellmann Air Charter 30669 Hannover www.hellmann.net

Air Traffic Euro Charter GmbH 40474 Düsseldorf www.airtraffic.de

Hunt & Palmer International 50353 Hürth www.huntpalmer.co.uk

Pro Sky Airbroker GmbH 50667 Köln www.clickajet.de

open sky air charter services GmbH 51147 Köln www.open-sky.com

Air Charter Agency 53859 Niederkassel www.charteragency.de

airport-broker aircharter 53859 Niederkassel www.airport-broker.de

Aviation Broker GmbH 60313 Frankfurt www.aviation-broker.de

Executive Jet 63110 Rodgau www.executive-jet.de

Panda Flight Management GmbH 63329 Egelsbach www.panda-flight.de

ProAir-Charter-Transport GmbH 64546 Mörfelden-Walldorf www.proair.de

Global Flight Flugdienst GmbH 70629 Stuttgart [email protected] (email)

EBAS International GmbH 85356 München www.ebas-international.de

Location


104 Source: Adapted from Figgen, A. (2006). p. 56.

73


Appendix 3/1

Listing of German Airports in Germany 105

International Airports 106

Town Airport name ICAO IATA Rwy length (feet)Berlin Schönefeld EDDB SXF 9,800Berlin Tegel EDDT TXL 9,900Berlin Tempelhof EDDI THF 6,800Bremen Bremen EDDW BRE 6,600Cologne-Bonn Cologne-Bonn EDDK CGN 12,500Dortmund Wickede EDLW DTM 4,700Dresden Dresden EDDC DRS 8,200Düsseldorf Düsseldorf EDDL DUS 9,800Erfurt Erfurt EDDE ERF 8,500Frankfurt/Main Frankfurt/Main EDDF FRA 13,100Hahn Hahn EDFH HHN 8,000Hamburg Hamburg EDDH HAM 12,000Hannover Hannover EDDV HAJ 12,400Leipzig-Halle Leipzig-Halle EDDP LEJ 8,200Munich Munich EDDM MUC 13,100Münster-Osnabrück Münster-Osnabrück EDDG FMO 7,100Nürnberg Nürnberg EDDN NUE 8,800Saarbrücken Saarbrücken EDDR SCN 6,500Stuttgart Stuttgart EDDS STR 10,900

105 Source: Adapted from Aircraft Charter World (2006). 106 Classification according to ADV. See: Arbeitsgemeinschaft Deutscher Verkehrslughäfen (2005).

74


Appendix 3/2


Regional Airports 108

Town Airport name ICAO IATA Rwy length (feet)Altenburg Nobitz EDAC AOC 6,800Augsburg Augsburg EDMA AGB 4,100Barth Barth EDBH BBH 3,900Bayreuth Bayreuth EDQD BYU 2,900Bielefeld Windelsbleiche EDLI BFE 2,400Braunschweig Braunschweig EDVE BWE 5,100Chemnitz-Jahnsdorf Chemnitz-Jahnsdorf EDCJ 1,900 *Cottbus-Drewitz Cottbus-Drewitz EDCD 8,200Cottbus-Neuhausen Cottbus-Neuhausen EDAP 2,600 *Egelsbach Egelsbach EDFE 2,900Eisenach-Kindel Eisenach-Kindel EDGE 3,900Essen/Mülheim Essen/Mülheim EDLE ESS 5,000Friedrichshafen Friedrichshafen EDNY FDH 7,700Gera Leumnitz EDAJ 2,400Heringsdorf Heringsdorf EDAH HDF 7,500Hof-Plauen Hof-Plauen EDQM HOQ 4,800Jena Schongleina EDBJ 2,500Karlsruhe/Baden-Baden Karlsruhe/Baden-Baden EDSB FKB 9,700Kassel Calden EDVK KSF 4,900Kiel Holtenau EDHK KEL 4,100Lahr Lahr EDTL LHA 9,800Lübeck Blankensee EDHL LBC 5,900Laage Rostock-Laage ETNL RLG 8,200Magdeburg Magdeburg EDBM 3,200Marl Loemuhle EDLM 2,700Meschede Schuren EDKM 2,900Mönchengladbach Mönchengladbach EDLN MGL 3,900Neubrandenburg Neubrandenburg ETNU FNB 7,500Paderborn-Lippstadt Paderborn-Lippstadt EDLP PAD 7,100Passau-Vilshofen Passau-Vilshofen EDMV 3,200 **Rothenburg/Görlitz Rothenburg/Görlitz EDBR 8,200Schwerin-Parchim Schwerin-Parchim EDOP SZW 9,800Siegerland Siegerland EDGS SGE 5,300Speyer Speyer/Ludwigshafen EDRY 4,000Stendal-Borstel Stendal-Borstel EDOV 6,400Strausberg Strausberg EDAY QPK 3,900Welzow Welzow EDCY 4,900Zweibrücken Zweibrücken EDRZ 9,600

* Unpaved** PPR 4,100 ft

107 Source: Adapted from Aircraft Charter World (2006). 108 Classification according to ADV. See: Arbeitsgemeinschaft Deutscher Verkehrslughäfen (2005).

75


76

Appendix 3/3


General Aviation Airports (Paved Runway Length > 2,000 ft)

Town Airport name ICAO IATA Rwy length (feet)Aalen-Heidenheim Elchingen EDPA 3,100Allendorf/Eder Allendorf/Eder EDFQ 3,500Allstedt Allstedt EDBT 3,900Anklam Anklam EDCA 2,900Arnbruck Arnbruck EDNB 2,000Arnsberg Arnsberg EDLA 3,000Aschaffenburg Aschaffenburg EDFC 2,700Baden-Baden Oos EDTB 4,100Ballenstedt Ballenstedt EDCB 2,200Bautzen Bautzen EDAB 7,200Bonn Hangelar EDKB 2,600Borkum Borkum EDWR BMK 3,200Breitscheid Breitscheid EDGB 2,900Bremerhaven Am Luneort EDWB BRV 3,000Bremgarten Bremgarten EDTG 5,400Brilon/Hochsauerland Brilon/Hochsauerland EDKO 2,400Burg Feuerstein Burg Feuerstein EDQE 3,100Coburg Brandensteinsebene EDQC 2,800Cochstedt/Schneidlingen Cochstedt/Schneidlingen EDBC 7,200Dahlemer Binz Dahlemer Binz EDKV 3,500Damme Damme EDWC 2,200Diepholz Diepholz ETND 4,200Dinslaken Schwarze Heide EDLD 2,900Donaueschingen-Villingen Donaueschingen-Villingen EDTD 4,200Drewitz Cottbus-Drewitz EDCD 8,200Eggenfelden Eggenfelden EDME 3,800Eisenhüttenstadt Eisenhüttenstadt EDAE 2,900Emden Emden EDWE EME 3,200Finow Finow EDAV 8,200Flensburg Schäferhaus EDXF FLF 4,000Freiburg/Breisgau Freiburg/Breisgau EDTF 4,000Ganderkesee Atlas Airfield EDWQ 2,700Giessen Lutzellinden EDFL 2,300Grossenhain Grossenhain EDAK 7,800Gunzenhausen Reutberg EDMH 2,300Guttin Guttin EDCG GTI 2,900Halle Oppin EDAQ 3,600Hamburg Finkenwerder EDHI XFW 7,600Hamm Lippewiesen EDLH 2,900

109 Source: Adapted from Aircraft Charter World (2006).


Appendix 3/4


General Aviation Airports (Paved Runway Length > 2,000 ft) Town Airport name ICAO IATA Rwy length (feet)Hartenholm Hartenholm EDHM 2,400Hassfurt Schweinfurt EDQT 3,600Heide Busum EDXB HEI 2,300Herzogenaurach Herzogenaurach EDQH 2,200Heubach Heubach EDTH 2,400Hoppstädten-Weiersbach Hoppstädten-Weiersbach EDRH 2,100Höxter-Holzminden Höxter-Holzminden EDVI 2,600Juist Juist EDWJ JUI 2,200Kamenz Kamenz EDCM 3,600Karlshofen Karlshofen EDWK 2,200Karlsruhe Forchheim EDTK 3,100Koblenz Winningen EDRK 3,800Köthen Köthen EDCK 2,600Kulmbach Kulmbach EDQK 2,300Kyritz Kyritz EDBK 3,200Landshut Landshut EDML 2,900Leer Papenburg EDWF 2,600Lemwerder Lemwerder EDWD XLW 6,200Leutkirch Unterzeil EDNL 3,300Lüchow Rehbeck EDHC 2,100Mainbullau Mainbullau EDFU 2,300Mainz Finthen EDFZ 3,200Mannheim Mannheim City EDFM MHG 3,400Meinerzhagen Meinerzhagen EDKZ 3,800Melle-Gronegau Melle-Gronegau EDXG 2,500Memmingen Allgäu Airport EDJA FMM 7,800Mengen-Hohentengen Mengen-Hohentengen EDTM 3,900Merseburg Merseburg EDAM 3,700Mindelheim Mattsies EDMN 2,300Mosbach-Lohrbach Mosbach-Lohrbach EDGM 2,000Mühldorf Mühldorf EDMY 2,200Münster-Telgte Münster-Telgte EDLT 2,200Neumarkt/Opf. Neumarkt/Opf. EDPO 2,100Niederstetten Niederstetten Army ETHN 3,300Norderney Norderney EDWY NRD 3,200Nordholz Sea Airport ETMN 8,000Nordhorn Lingen EDWN 2,900Obermehler/Schlotheim Obermehler/Schlotheim EDCO 4,700Oberpfaffenhofen Oberpfaffenhofen EDMO OBF 7,500


77


Appendix 3/5


General Aviation Airports (Paved Runway Length > 2,000 ft) Town Airport name ICAO IATA Rwy length (feet)Oberschleissheim Oberschleissheim EDNX 2,600Oehna Oehna EDBO 2,700Offenburg Offenburg EDTO 2,900Osnabrück Atterheide EDWO 2,600Peenemunde Peenemunde EDCP 7,800Peine Eddesse EDVP 2,900Pirmasens Pirmasens EDRP 2,600Porta Westfalica Porta Westfalica EDVY 2,800Rechlin-Larz Rechlin-Larz EDAX 7,800Regensburg Oberhub EDNR 2,100Reichelsheim Reichelsheim EDFB 2,300Rendsburg Schachtholm EDXR 3,100Riesa Gohlis EDAU 3,200Rosenthal-Field Plossen EDQP 2,400Rotenburg/Wümme Rotenburg/Wümme EDXQ 2,600Rothenburg o.d. Tauber Rothenburg o.d. Tauber EDFR 2,600Rottweil Zepfenhan EDSZ 2,600Saarlouis-Düren Saarlouis-Düren EDRJ 2,600Salzgitter Drutte EDVS 2,000Schleswig Schleswig EDXC 8,000Schonhagen Schonhagen EDAZ 3,900Schwäbisch Hall Hessental EDTY 3,000Schwenningen Am Neckar Schwenningen am Neckar EDTS 2,600St. Michaelisdonn St. Michaelisdonn EDXM 2,200St. Peter-Ording St. Peter-Ording EDXO PSH 2,100Stade Stade EDHS 2,100Stadtlohn Wenningfeld EDLS 3,200Straubing Wallmühle EDMS RBM 3,000Trier Föhren EDRT 3,900Walldurn Walldurn EDEW 2,600Wangerooge Wangerooge EDWG AGE 2,700Werneuchen Werneuchen EDBW 4,900Westerland/Sylt Westerland/Sylt EDXW GWT 6,900Wilhelmshaven Mariensiel EDWI WVN 4,700Winzeln-Schramberg Winzeln-Schramberg EDTW 2,300Worms Worms EDFV 2,600Wriezen Wriezen EDON 7,800Würzburg Schenkenturm EDFW 2,100



78


Appendix 4/1

“There-and-back-in a-day” Options

1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7HEL

SXF/THF/TXLto

DUS FRA HAJ HAMfrom

IVLJOEJYVKAJKAOKEMKOKKTTKUOLPPMHQOULPORRVNSJYSVLTKUTMPVAAVRKAESALFBDUBGOBOOEVEFDEFROHAUHMRHOVKKNKRSKSULKNLYRMJFMOLMQNNVN KO

MUCCGN DTM BRE

OLAOSLOSYRRSSDNSKESOGSRPSSJSVGTOSTRDTRFVDBXKIXUCXUIXZO

STR

FI

There-and-back-in-a-day option

79


Appendix 4/2

“There-and-back-in a-day” Options

1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7BOJSOF E E E E E E E EVAR E EBRQKLVOSRPRGZDNTLLURE

HU BUDPLQVNO

LV RIXBZGGDN EKRKKTWLCJPOZRZESZZWAWWROBAYBBUBCMCLJCNDIASOMROTP E ESBZSUJTGMTSR

E

CZ

BG

RO

PL

LT

EE

SXF/THF/TXLto

DUS FRA HAJ HAMfrom MUC STRCGN DTM

Departure from DE before 05:00 lcl

BRE

There-and-back-in-a-day option

80


Appendix 5/1

Airline Bookings for Sample Routes

Route 1: DUS - OUL

81


Appendix 5/2


Route 2: DUS - VNO

82


Appendix 5/3


oute 3: DUS - KTW

R

83


of Authenticity

erewith I confirm

that this thesis is my own work, which was written without unauthorized assistance

and that all references are marked appropriately.

Nörvenich, 14 August 2006

Jürgen Willems

Declaration

H

84

commercial business aviation: a valuable travel

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