Corporate Flight Department’s Effect on a Company’s Financial Performance

by Can Bayrak# 1479227bayrakc@my.erau.edu

Corporate Flight

• On-demand or non-scheduled flight in order to utilize in corporate business matters.• Private aircrafts versus scheduled airliners• Complete schedule and destination flexibility• Organized by Corporate Flight Department; good management results in optimization of the aircraft.• Airport congestion is eliminated. • Maximum safety

2

Corporate Flight

• Efficiency in Employee Time and Effort • Company Prestige• Enables companies to respond instantly and directly to possible threats and challenges.• Maximum top management and employee utilization• Increase in customer and business relationship interaction• Supplier, cargo, customer, charity transportations when needed.

3

Corporate Flight

• Draws too much attention• Expensive• Extra liabilities, taxes, insurance etc.

o in-direct operation costso direct operation costs

• Un-related and/or new type of management type for most companies.

• Un-trained personnel• Different type of aircraft for different type of operation needed (Passenger count, destination variety etc.)• Constant managerial scrutiny

4

Importance ofthe Study

• Do corporate flight departments help companies to perform better in financial matters ?• Do companies buy an aircraft because it helps to achieve better financial performance or do they have an aircraft because they are already rich? • If the companies with a corporate flight department performs better, a significant increase in private jet sales can be expected.• Companies will look forward into establishing a corporate flight department which will result in various employment diversity. 5

Importance ofthe Study

• New employment opportunities• New market to compete in • Various relevant relationships; aircraft manufacturers

regulators, airports, aircraft lease or fractional ownership providers, etc.• Most of all, increase in financial performance

6

Hypothesis

There is a difference in annual sales volume, number of employees, value of assets, stockholder’s equity, annual income, total current liabilities, and retained earnings among companies with a corporate flight department and companies without a corporate

flight department.

7

Population & Sample• Companies in the Fortune 500 List form the population.• Samples are divided into two: 30 companies that are in the National Business Aviation Association’s (NBAA) Member Directory & 30 companies that are not in the NBAA Member Directory.• Membership in NBAA means that the company has an

established corporate flight department and an aircraft ready to use

8

Variables

• Dependent Variables are the Financial Factors:— annual sales volume, number of employees, value of

assets, stockholder’s equity, annual income, total current liabilities, retained earnings

• Independent Variables are the companies that have an established corporate flight department

and the companies that do not have an established corporate flight department.

9

Research Design• Causal-Comparative• Online data sources such as Mergent Online’s Annual

Financial Reports that can be accessed through Embry-Riddle’s Hunt Library Online Databases.• 30 Companies that have an established corporate flight department (eg. PepsiCo) and 30 companies that do not have an established corporate flight department (eg. Google Inc.) will be compared.

10

Data Collection Device• NBAA’s Member Directory will be searched in order to find out if desired company has an established corporate flight department or not. •Mergent Online’s financial data will be imported to MS Excel and intended data will be exported to SPSS in order to be analyzed.

11

Validity & Reliability• ERAU’s Hunt Library Online Databases will be used in order to access to the official Mergent Online database of company financials.• ERAU’s name will be used in order to gain a temporary membership in NBAA, therefore being able to reach to Member Directory. NBAA is the leading organization for companies that rely on general aviation aircraft to help make their businesses more efficient, productive and successful.

12

Treatment of Data• Descriptive Statistics Comparison demographics among companies’ financial data; the

comparison will be done in percentages due to the possibility of great difference between companies’ size.

• Qualitative Data the Fortune 500 List and NBAA Member Directory; 30 companies with an established corporate flight department and 30 companies without one.• Quantitative Data MS Excel Spreadsheet of companies’ annual financial data can be found in Appendix C.

13

Treatment of Data

•Hypothesis Testing

The data will be testes via hypothesis testing. In order to find out if there is a difference between the companies that are in NBAA member list and the companies that are not, a test will be done to test the null hypothesis: “There is no

difference in financial variables between companies with a corporate flight department and companies without a corporate flight department”.

14