With the Covid-19 pandemic changing the way people travel over the past two years, many turned to business aviation as an alternative means of getting to where they need to go. As a result, the business aviation market has grown exponentially due to a shift in priorities towards convenience, quicker travel times and the added health benefit of minimized contact with others. According to recent figures, at the start of January 2022 business jets flew 26% more flights than before the start of the pandemic two years ago. In comparison, commercial flights were down by 31% globally in 2021.
While business aviation is welcoming scores of new aircraft owners and charter passengers, the lack of cost transparency within the industry poses a risk to owners still subject to the archaic financial side of private flying. In order for new owners to fully enjoy the benefits of their aircraft and for charter operators to make the most of the current rise in demand, the industry needs to move its financial management beyond Excel spreadsheets and Post-It notes in favour of digital tools and data-informed decision making.
Where do the issues lie?
Distracted by the cost and excitement of buying a business jet, it’s easy for new owners to focus their thoughts on the moment of purchase and not think about what happens next. As a result, owners are often unaware of the actual running costs of private aircraft and can be shocked by the consequences. This can lead to some selling their aircraft or even leaving the industry for good. This lack of understanding stems from two main factors: an absence of transparency within the industry that contributes to long standing barriers to entry, and an absence of efficiency in the management of the aircraft due to lack of technology and automation.
What many don’t know about managing the finances of a business aircraft is how the analogue processes still in common use today slow transactions, stifle cash flow and overwhelm owners with a lack of standardisation across types of operations costs. Each time a private aircraft is flown, there can be 10-15 invoices to process and validate before costs are recovered. The complexities of such a fragmented system, and further inherent inefficiencies in the private aviation sector, mean up to three months can pass between a flight taking place and the payment of invoices. This can make it very difficult for owners to see a clear ‘big picture’ of total costs. Cash flow planning is also impacted by these invoice lags, with so much uncertainty arising from multiple invoices over such a long period of time. Owners end up paying significant lump sums long after their flight and typically without any kind of itemised cost breakdown.
Chasing invoices alone can cost private jet operators and management companies days of working time each month, time that is then lost from delivering or improving core services. When these companies can waste less time and money on inefficient processes, those savings can be passed on to owners. What aircraft owners and the wider industry need are resources to make invoicing faster and costs more visible and standardised to provide the basis for more accurate expectations of aircraft ownership and therefore better budgeting.
Digitalising the details
The good news is algorithms and machine learning are giving business aviation the financial tools it’s been waiting for. Companies like MySky specialise in financial technology solutions for business aviation and can offer aircraft owners a clearer path of financial management for their asset with tools including automated accounting, cost allocation and verification, global price benchmarking and spend tracking and analysis.
When applied to flight operations, automated accounting and invoicing minimises errors and time spent on back-office tasks. Sophisticated optical character recognition (OCR) helps too, speeding up data entry compared to manual inputs and reducing the risk of human clerical errors. Owners aren’t left waiting for old-fashioned paperwork to be completed through antiquated processes, but instead benefit from automated invoices being sent to them immediately. Charges from specific vendors can be saved from prior invoices and used to predict future ones, leading to faster verification and payment and lessened cash flow delays. With this data, accurate predictions then eradicate the uncertainty of actual costs, before they are invoiced.
Beyond improving efficiency, we now also have resources for enhancing transparency. Using a global database of every type of cost in private flying, aircraft owners can compare pricing across cost categories such as fuel, parking fees or landing taxes with automated benchmarks to assess where they can find the best value and service. Having this range of cost data for each flight provides the basis for automated profits and losses tracking every time the aircraft is flown, further pinpointing the areas in which value can be recouped.
At the core of applying digital invoicing and real-time cost data to flight finances is the benefit of accuracy. Owners can have almost instantaneous visibility of the cost of operating their aircraft in a way that is completely customisable to their preference, giving them peace of mind and confidence in the management of their aircraft. By leveraging these tools, owners and operators can make data-informed decisions in a business environment that has long been hindered by barriers to entry, slow billing transactions and unstandardised costs.
Falling back in love with private flying
There are a number of reasons why so many people have joined the market in the last two years. The convenience, comfort and quiet of flying should be what new owners and passengers should be able to focus on, not unmanageable running costs. Without more financial clarity from our industry, owners can easily find spend management a huge challenge. They might be wasting large sums of money and not even know. That’s unacceptable.
Transparency leads to loyalty. Owners must be able to trust their management companies and understand their bills. When nothing is hidden, owners grow in confidence, secure in the knowledge their managers are visibly working hard to source and deliver the best deals on the market. Owning an aircraft should be a luxury and an advantage, not a source of stress. By eliminating processing lags and engaging in data-driven financial management, we can ensure it never has to be.
That is why the key to maintaining the growth of business aviation and removing barriers to entry lies in empowering the market, from new owners to seasoned operators, with innovative tools and investing in their development.
About Christopher Marich
Christopher Marich is an entrepreneur and co-founder and global strategy director of MySky.
After graduating from the Ecole Hoteliere de Lausanne with a degree in hospitality management and working in the aviation industry for several years, he set up his own aviation business, focused on charter capacity commercialization. In 2015, together with his friend Kiril Kim, Marich noticed that management companies, consultants, and jet owners were struggling to manage their finances, provide transparent documentation, and maintain jet profits. So, they launched MySky and set out on a mission to bring standardization and transparency to the private aviation industry. Since then, it has grown into a globally recognized industry player with operations around the world and key strategic alliances with major aviation companies. It continues to offer a suite of innovative solutions and tools to further establish itself as the industry’s most powerful spend management platform.