As Economy Takes Off, Companies Return to Flight

by Chris Bahn  on Monday, Jul. 1, 2013 12:00 am  

Beaver Lake Aviation has operated at Rogers Municipal Airport since 1986 and been a wholly owned subsdiary of Wal-Mart since 2002.  (Photo by Ryan Miller)

Jim Keet’s morning commute can be taxing.

Traffic, as it is for most businessmen and businesswomen, is often a factor as Keet heads to work. If he is driving northwest from Little Rock to Benton and Washington counties, the commute potentially tops three hours. When heading east, then south to Birmingham, the drive theoretically takes six hours. Of course, that all depends on what is happening on Interstate 40 and the roads in three other states.

Just the drive time to Birmingham and back or flying commercial adds up to a full day of work.

Those trips to Birmingham, where Keet oversees operations of the Taziki’s restaurant chain, don’t necessarily get shorter if he flies commercial. Flight delays, time spent at baggage claim and then waiting for ground transportation all add up. And Keet’s company has restaurants in nine states — 11 by the end of the year — meaning his travel isn’t restricted to the geography between Arkansas and Alabama.

So the recent purchase of a private airplane for his Keet Management Co. makes good business sense. Keet’s 1974 Beech 58, which seats up to six, cost between $200,000 and $300,000, but it’s a timesaver and because of that it saves money.

“You have to value what your time is worth and how much more efficient flying is than driving or going commercial,” Keet said. “When you use that formula, that calculus, then you can determine if it makes sense or not.

“For me, it makes sense.”

Small-business owners like Keet and Fortune 500 companies like Tyson Foods Inc. of Springdale have long understood that efficiency of operation impacts their bottom line. There are more than 1,400 planes in Arkansas registered with the Federal Aviation Association as belonging to corporations. Those planes can include anything from 1950s model one-seat prop planes to the multiple Dassault Falcons owned by Tyson or the fleet of Learjets used by executives at Wal-Mart Stores Inc. of Bentonville.

Wal-Mart has at least 12 planes registered under its corporate name and many more are registered using will a Wal-Mart mailing address. Wal-Mart even owns its own fixed-based operation at the Rogers Municipal Airport, but the casual observer might not realize that’s what Beaver Lake Aviation is.

Beaver Lake has operated at the Rogers airport, about eight miles from the retailer’s corporate offices in Bentonville, since 1986. It became a wholly owned subsidiary of Wal-Mart in 2002.

Most companies contacted declined to offer comment or did not respond to Arkansas Business inquires about their planes, but a Tyson spokesman did sum up why company planes are viewed as such a vital part of operations. Tyson has more than 97,000 domestic employees, spread out over 25 states. Having multiple planes makes travel and ultimately business operations more efficient.

“We maintain our own corporate planes because it gives us more flexibility in transporting key people to some of the hundreds of facilities and offices we have across the country, some of which are not near commercial service of any kind,” Tyson spokesman Worth Sparkman said.

Up And Away

Despite their value to business operations large and small, the use of company-owned planes declined dramatically as the economy struggled. Recession led to limited use for many, sometimes as a cost-cutting measure, but often because of the perception created by having a company-owned aircraft. As the economy has slowly shown signs of improvement, the practice has begun to see an upswing.

Through the first six months of 2013 there have been 13 corporation plane registrations in Pulaski County and 15 in Benton County. Those two counties are the top two in the state for plane ownership and planes designated for business. Those numbers don’t include a January 2013 registration in Tunica, Miss., of a Learjet belonging to Dillard’s Inc. of Little Rock. FAA records show Dillard’s has a pair of Learjets registered in Tunica County.

Businesses in the state that accommodate private company air travel like Central Flying Service Inc. in Little Rock and Fayetteville Executive Airport in Fayetteville report seeing increases in business travel. Ray Boudreaux, director of aviation at Fayetteville Executive, said business is up “about 15 percent over this point in 2012.”

Dick Holbert, president at Central Flying Service, has also seen an increase, but compared the upswing to the local housing market. While business has improved, it’s not quite to the peak levels seen prior to the recession.

“It’s trending up, but I’m not sure I would call it a rebound at this stage,” Holbert said. “It seemed like everything fell off the cliff in 2008 and reached its nadir in 2009. It’s been coming back slowly since then.”

(Get This Week's Aerospace Lists: Download the list of the state's busiest airports and Arkansas' largest aerospace companies.)

This modest uptick in Arkansas is similar to what is happening nationally.

Businesses saw a sharp decline in their use of company planes, as much as a 50 percent drop from 2008 to 2009, the National Business Aviation Association reports. Data from the NBAA supports the idea that there has been a recent upswing in the use of company-owned planes, just nothing like those peak levels seen in 2007.

Dan Hubbard of the NBAA said three statistical categories used to measure the use of company planes show business is rebounding.

Flight hours are up. So too are the sales of new and used planes. The most recent numbers show about 15,000 businesses using planes for company travel. Only a fraction of those numbers include businesses that don’t own their plane outright but use charter services or fractional arrangements (think of the aircraft like a timeshare on the beach).

“We’re probably still down about 15 percent from those peaks in 2007, but you’re seeing slow and incremental recovery,” said Hubbard, whose organization has 9,000 businesses as members. “And all but a sliver of the businesses using planes are outside of America’s Fortune 500. Most of them are small and mid-sized companies that are not household names.”

Keet, who along with his family owns and operates two Taziki’s franchises in Little Rock and plans to open locations in Bentonville and Fayetteville, is a good example of that.

While Keet has had success with restaurant and real estate ventures, nobody would confuse his annual revenue with those of public titans like Wal-Mart or even large privately held companies like George’s Inc. of Springdale, which has annual revenue nearing $1 billion — and a corporate plane.

Still, ownership and use of a plane are critical to his own operations in the state and getting him to Birmingham so he can oversee corporate operations.

After trying to operate without a plane for two years — the longest he’s ever gone without access to a company plane — Keet decided to invest again this year.

He stressed that businesses have to evaluate how much financial sense it makes to purchase a plane and then pay for upkeep, fuel and storage.

Buying a plane to seat multiple people can be done for less than six figures, but should only be done if it can save or help make money.

“There’s an old adage that says, ‘The two happiest days of my life are the day I bought my airplane and the day I sold it,’” Keet said.

“And any airplane that you buy, if you don’t have a legitimate business purpose for it and if you’re not confident you’re willing to use it frequently, it becomes a real drag on your P&L and doesn’t accomplish anything.

“Regrettably, some people make an important business decision based on ego and not the economics of it.”

Aircraft Registered to Arkansas’ Largest Companies

Private Companies 2012 Revenue Aircraft
Stephens Inc. $1.8 billion 7
Mountaire Corp. $1.8 billion 1
Arkansas Blue Cross & Blue Shield $1.3 billion 0
Simmons Foods Inc. $1.2 billion 0
Riceland Foods Inc. $1.2 billion 0
Public Companies    
Wal-Mart Stores Inc. $469.0 billion 12
Tyson Foods Inc. $33.3 billion 11
Murphy Oil Corp. $28.6 billion 5
Dillard’s Inc. $6.5 billion 2
J.B. Hunt Transport Services Inc. $5.0 billion 0
     
Aircraft Registration by County Total Planes Corporate Planes
Pulaski 434 213
Benton 266 112
Washington 225 88
Lonoke 184 60
Craighead 181 86
Statewide Totals 3,898 1,464

*Estimated
Source: Federal Aviation Administration. Data does not include leased planes or chartered flights.

 

 

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