ECONOMIC BENEFITS OF GENERAL AVIATION AIRPORTS Definition and Role of General Aviation General aviation encompasses a wide range of air transport and offers a variety of services to the public. The term includes all categories of aircraft, including airplanes (Piper Cubs to corporate jets), seaplanes, helicopters, airships (blimps), balloons, gliders and experimental aircraft. Military airplanes and commercial airlines are not considered general aviation. Many businesses and individuals depend on the general aviation system, including large and small corporations, law enforcement agencies, medical services, aerial fire fighters, air charter transportation companies, organ donor flights and agricultural spraying. The roots of today's corporate reliance on air transportation can be traced back to Charles Lindbergh's historic transatlantic flight. Today, the national general aviation fleet numbers over 187,000.10 This fleet flies approximately 26 million hours per year-nearly twice the total of the airlines' flight hours.11 This is the equivalent of 5.2 million flights per year between New York and Los Angeles, or 7,123 round-trips per day. Nearly 50 million more passengers fly on general aviation aircraft each year than fly on American Airlines, the nation's largest and most traveled airline.12 The General Aviation Manufacturers Association (GAMA) calculates that 70 percent of all general aviation flights are flown on business trips.13 Over 5,500 public use airports across the country make general aviation a quick and convenient means to conduct business travel. By contrast, there are only 550 airports that serve scheduled air carriers.14 Of these airports serving carriers, only about 55 have frequent and convenient airline service. Business travelers using airline service must often rely upon a hub and spoke system of connecting flights to reach their final destination. Business travelers using general aviation have direct flights. This fact helps explain why there are currently 6,335 jet aircraft in the business aircraft fleets15, approximately equal to the number of jet aircraft of the major airlines and regional air airlines.16 Thus, companies using general aviation aircraft are able to reach ten times the number of airports that are served by scheduled airlines and 100 times the locations that have frequent airline service.17 General aviation is a $17 billion industry with an economic impact of more than $51 billion.18 This figure is more than ten percent higher than the $43.9 billion in domestic passenger revenues for commercial airlines in the U.S. during 1991.19 The United States is the world leader in business aviation, having 64 percent of the world's business jets and 56 percent of all turboprops based in this country.20 Yet the owners of these aircraft also purchased $11 billion worth of airline tickets in 1994.21 Speaking at the 50th annual National Business Aircraft Convention in Dallas in September 1997, the Chairman of American Airlines stated that general aviation and the airlines of America are "partners" in providing America with air transportation services. He stated that America needs both forms of air transportation for an adequate and efficient air transportation system. General aviation and the major airlines have therefore become necessary adjuncts to one another. Business Aviation Twenty years ago, business aviation was generally perceived as a corporate status symbol. That is no longer the case today. Aircraft have become an essential tool in business travel. Today, companies both large and small, and individuals that use aircraft as a tool in the operations of business, rely on business aviation. Many of America's largest corporations maintain their own fleet of turbine-powered aircraft and employ their own flight crews, maintenance technicians and other aviation support personnel. Their purpose in doing so is to increase the productivity of their administrators. This was apparent in the rapid (38 percent) growth of corporate flight departments during the corporate "right sizing" movement in the recession in the early 1990s. Corporations were compelled to reduce expenses. To do this, they reduced the numbers of their administrators and added flight departments. With fewer executive staff to do the same amount of work, each one had to do more of it. Their business aircraft enabled the m to do so. Aircraft ownership is not a prerequisite to benefitting from business aviation. Although individuals or companies own the majority of business aircraft, businesses also utilize business aviation through arrangements such as chartering, leasing, time-sharing, interchange agreements, partnerships, fractional ownership and management contracts. Uses of Business Aircraft Many large companies depend upon business aircraft to transport employees, customers and cargo to a variety of locations, both domestic and international. Often business aircraft are utilized to bring customers to company facilities. The chairman of New Jersey-based Inductotherm illustrated to the Commission the benefits that general aviation aircraft bring to his business. Inductotherm uses its Learjet to bring potential customers to its corporate headquarters in Rancocas, New Jersey. He indicated that every time the company has done so, a deal has closed. The Commission also heard testimony about the use of general aviation aircraft to transport component parts to and from New Jersey. Many businesses depend upon receiving and sending shipments via general aviation airports. This follows a long tradition. During the Second World War, New Jersey was known as the "Component State" for its central role as a producer and shipper of component parts for the war effort.22 Today, the timely delivery of these parts has risen to a new level of importance. The operation of assembly lines around the world depend on them. The cost of using general aviation aircraft to make these deliveries is a small fraction of the cost of shutting down the line for want of the part. Benefits of Business Aviation According to the National Business Aircraft Association, the benefits of using business aircraft fall into ten categories:23 (1) Time Savings: Business aircraft reduce not only flight time, but also total travel time, by providing point-to-point service and by their ability to utilize smaller airports closer to final destinations. In addition, the office environment of a business aircraft allows travel time to become more productive. (2) Flexibility: People who travel by business aircraft do not have to alter their schedules to conform to those of commercial carriers. Consequently, they have the freedom to change course en route and leave and arrive according to their own schedules. (3) Reliability: Business aircraft are engineered and built to the highest standards, and companies that maintain their own aircraft have complete control of the readiness of their fleets. (4) Safety: In recent years, business aircraft have compiled an outstanding safety record that is comparable to, or better than, that of the scheduled commercial airlines. (5) Improved Marketing Efficiency: Business aircraft extend the reach of the sales force and can quickly and easily bring customers to the point of sale. (6) Facilities Control: Business aircraft help management extend its control by facilitating personal visits to remote company sites. (7) Personnel and Industrial Development: The mobility that business aircraft provide company employees can accelerate training, orientation and teamwork. (8) Privacy and Comfort: Conversations on business aircraft are confidential, and cabins can be configured to accommodate virtually any special needs of passengers. (9) Efficiency: Business aviation enables a company to maximize its two most important assets: people and time. (10) Security: A company that uses business aviation controls all aspects of its air travel, including the visibility of its employees on sensitive missions. Some of the intangible benefits of business aviation, including enhanced management productivity and better customer relations, may be difficult to quantify but are no less significant to a company than direct financial returns on investments.24 The National Business Aircraft Fleet In the United States, 7,611 companies operate 11,798 turbine-powered aircraft, of which 6,335 are corporate jets.25 The Commission heard testimony from Mr. John W. Olcott, a New Jersey native and president of the National Business Aircraft Association (NBAA). NBAA is the primary organization representing operators of business aircraft. The NBAA represents 4,700 member companies, which own or operate more than 6,000 general aviation aircraft. NBAA member companies employ more than 16 million people worldwide and generate annual revenues of $3 trillion, or about half of the U.S. gross national product. Mr. Olcott presented the Commission with two studies that confirmed the economic importance of general aviation to the business community. The studies, and their results, are as follows: Arthur Anderson & Co. The Arthur Anderson study analyzed the financial characteristics of 766 companies over a five-year period immediately following the purchase of a turbine powered aircraft. On average, the study found that medium sized companies (with gross revenues of at least one billion dollars) experienced a seven- percent greater sales growth in the years following their purchase when compared to companies that did not purchase an aircraft. Additionally, Arthur Anderson looked at earnings per share of companies that purchased airplanes compared to the average of Value Line companies over the same period. Again, they found that on average, companies that purchased aircraft had significantly higher growth earnings per share growth than the non-purchasing companies. Study of Fortune 500 Companies The top 50 companies with the highest returns in capital gains or dividends to shareholders over the preceding ten year period, were studied as well. Of those companies, 46, or 92 percent are operators of business aircraft. Over the last four years, nine out of every ten companies on this honor roll have been operators of business aircraft. Additionally, 80 percent of companies that have maximum sales per employee have business aircraft. The finding of this study was confirmed when the Commission also reviewed one of the indices developed by Business Week, which classifies companies with maximum sales per employee as "productivity pacesetters." Eighty percent of these companies are operators of business aircraft.26 In its 1998 Business Aviation Factbook, the NBAA cites a study, performed by Aviation Data Service (AvData) of Wichita, Kansas, which showed, among other things, that there were more than twice as many aircraft-operating companies as non-operators among the Fortune 500; that operators of business aircraft, as a group, employ more than 16.8 million people; non-operators (of aircraft) employ 3.6 million. The net income of all operators was $261 billion in 1996; non-operators' total income in 1996 was just $40 billion.27 Furthermore, a 1997 survey of chief pilots and business aircraft passengers conducted by Louis Harris & Associates, Inc. shows that of 60 percent of those surveyed use business aircraft to support efficient schedules and over 25 percent use them to reach remote locations not served by any scheduled airline.28 Footnotes: 10 Exhibit 11C, 1998 NBAA Business Aviation Fact Book 1998, page 22. 11 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, President's Letter. 12 Exhibit 11B, 1997 NBAA Business Aviation Fact Book, page 24. 13 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, page 23. 14 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, page 24. 15 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, pages 18-20 16 There are approximately 4,481 jet aircraft in the fleets of the major airlines and 1,806 in the fleets of the regional air carriers. 17 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, President's Letter. 18 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, President's Letter. 19 Exhibit 9, The Economic Impact of Business Aviation on the National Economy, pages 2-1, 2-2. 20 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, page 21 NJGASC 11/28/95, page 5. 22 Cunningham, John T., New Jersey: America's Main Road, Doubleday & Company (1966). 23 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, pages 3-4. 24 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, pages 3-4. 25 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, page 18, 20. 26 NJGASC, 11/28/95, pages 8-10. 27 Exhibit 11C, 1998 NBAA Business Aviation Fact Book, page 17. 28 Exhibit 11C, Business Aviation Fact Book, 1998 (National Business Aircraft Association), page 4.