Trip Analysis Exercise
Tangible Value of Corporate Aviation
For this discussion, you will look into the tangible value of corporate aviation by comparing it to commercial air transportation for executives traveling to a meeting.
Your company, based in Waco, Texas, has been looking for an expansion opportunity on the West Coast. A property has just come on the market in Oregon, and your company needs to move fast. The company requires that you and three colleagues travel to Medford, Oregon, on short notice. Two days from now, your group must be in Medford by 1:00 pm to inspect the property and then meet at 8:00 am the next day to discuss a deal. You expect to be complete by 2:00 pm that day. Per company policy, employees fly commercially in business class (or better). A friend suggests that you might be able to save money if you charter a jet instead. This sounds like a crazy idea, but you decide to explore it anyway. Here are some assumptions:
- Origination (KACT) to destination (KMFR), one-way is 1,380 miles.
- Flying time is about 3+00 each way (no wind).
- A small jet (like a Lear 35) can make the trip non-stop and can seat 6. Charter cost is $3,500 per hour.
- Employees get $200 per day for travel expenses if they are away from home for any part of the day. This covers all expenses except rooms, rental cars, and airfare.
- Hotel rooms in Medford are $150 per night.
- If traveling by commercial air, company policy requires business class (or better), with fully refundable tickets.
- Travelers are mid-level executives who each make about $800 per day in salary; however, when they are gone from the business, it costs the company about twice that amount in reduced productivity ($1,500 per day per employee).
- The charter jet can fly in and out of KACT and KMFR so a rental car is not required.
- If commercial air in or out of either airport is not available, the group will need to rent a car at $100 per day to get to and from the closest available airport.
To determine if chartering is a better deal, you will need to compare costs for the trip using charter vs. using commercial air. Items that you will need to consider:
- The charter can operate when you need them, but you might need extra travel days/overnights to accommodate commercial air schedules. If so, the additional time that the employees are away from home can be costly.
- Look up actual airfares available for travel. Your meeting day is two days in advance.
Write a short essay describing your analysis, and make a recommendation for travel. Include justification for your recommendation.
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