Are we there yet?

A case study on the current state (late 2009) of the General Aviation industry, and how to market it during this recession.

The short answer is “no”, but if you need more proof, here’s a great infographic from Mint.com. Personally, I tend to lean toward the “we’re not out of the woods yet” mentality, mostly because of what I saw happen to the aviation industry since mid-2007.

Back then (Summer of 2007), our company (my now ex-company), which sells jet fuel and ground services to private aircraft (and in some cases commercial aircraft), had a terrible summer. Then operating at 12 locations, we had our first round of layoffs, and we started to take a closer look at where our money was going.

After that initial flash of panic, there was a small leveling-off for us… until the effects of the recession trickled into our industry. Now, when I say “us”, I’m referring to our industry- not one competitor of ours didn’t feel the effects of this recession. 2008 came and brought bank bailouts, investment scandals, and real estate fallout with it. Its effect on commercial aviation was clear to anyone flying; flights were consolidated through airline code shares, failing airlines merged, on-board amenities were eliminated (or went up in price), and in some cases, flights were cut altogether. Pennies, all of a sudden, mattered.

However, what wasn’t so clear to the public, was the effect on the private (general) aviation industry. Then again, when the presidents of the big-three auto makers flew in separate private aircraft from Detroit to Washington, D.C. to ask our government for bailout money, the reputation (and business of) general aviation (or GA) took a direct hit. This was the worst press our industry could have gotten. All of a sudden, Americans were angry, and big companies saw this as a warning to cut back on expenses (and let their customers know that they’re being “financially responsible” by not utilizing their corporate aircraft).

*On a side-note, many (most) of these companies kept their aircraft. They simply changed their tail numbers (think license plates for planes) and set up separate management companies to keep their fleets in operation. For example, if my company’s name is Ribaudo Enterprises, I might want my company’s initials reflected in the tail number of my aircraft; something like “123RE”. However, I might now want to switch that tail number to something totally unrelated to Ribaudo Enterprises so that my customers won’t notice that I’m still operating a corporate aircraft—public relations nightmare averted.

Now I know what you’re thinking: “Oh, it’s just a bunch of rich people flying around in these planes; who cares about them?” In some respects, I can agree with you, but most of these aircraft are for corporate use- not personal. When Americans saw these stories on the news, they weren’t presented the flip side of the coin. As it turns out, there are a lot of blue-collar jobs supporting G.A. that have been lost due to the recent negative press and recession:

Workers at the aircraft manufacturing plants like Gulfstream, Bombardier, Cessna, etc. In some cases, the economies of entire towns (like Gulfstream’s headquarters in Savannah, GA) are very reliant on these large manufacturers.
Folks who work at the fuel refineries that produce jet fuel like Chevron, Philips 66, Exxon-Mobil, etc.
Mechanics, flight schedulers, and dispatchers who work for corporate flight departments or fractional jet ownership businesses
Businesses that manufacture and distribute aircraft replacement parts
Developers of aircraft hangars, construction workers, and other skilled trade workers
Manufacturers of the ground servicing equipment like fuel trucks, aircraft tow vehicles, ground power units, etc.
Those involved in the Fixed Based Operation (FBO) businesses that sell jet fuel to these aircraft and provide ground services. Large FBO chains like Signature Flight Support, and Atlantic Aviation felt the biggest effects of this; there were even rumors that a certain large FBO chain cut all full-time hourly-paid employees back to 32-hours per week in order to eliminate the need for employee benefits, or risk having to pay them overtime. Regional FBO chains like my previous employer, TAC Air, and Odyssey Aviation unfortunately saw hardship, too. Frequent layoffs, operating hour reductions, and the elimination of customer amenities were common in these mid-sized chains. The Mom-and-Pop/independent FBO’s (that far outnumber the chains) saw the least amount of damage from the recession, as they usually have very low overhead and were used to operating on small budgets.
The list goes on… if you think about it, there probably aren’t many industries that GA hasn’t touched.

General Aviation saw its industry reduced to rubble about six months after the government officially declared a recession. The National Business Aviation Association (NBAA) even worked to improve the reputation of GA through a “No Plane, No Gain” marketing campaign (with little results). Elsewhere in the world, Central/South American and European GA were in fine shape, but as time went on, these international aircraft owners/operators started to see the effects of an American economy in recession… which brings us up to mid-2009.

Now as an experienced marketing professional in this industry (there weren’t many of us left at this point), it was extremely difficult to sell jet fuel to fill aircraft that weren’t flying in the first place. Both corporate flight departments and private owners had grounded their aircraft and in some cases, sold them off in an effort to reduce operating costs. You can hunker down and ride out the storm all you want, but how do you attract new customers (or old customers back) to your business if they’re not interested in its products or services to begin with?

I likened this to trying to sell dog food to someone without a dog—they have no need for the product, so there’s no chance of them buying it (regardless of how good the dog food is, or how low the price). However, you have to keep your product available just in case the customer changes their mind. After all, people like dogs… and people with aircraft like to travel in them.

So, when people aren’t flying and buying, the FBOs that are going to make it through this mess are going open their eyes and focus their efforts toward the customers that are still active.

It’s simple to do, and this will work in most industries: when it comes to marketing, shift the bulk of your resources to improving customer service (or the “customer experience”)—after all, it’s usually inexpensive to do so. Set up recurrent training, spend some time each day getting to know more about your customers (their needs and their businesses), and work with people on pricing. Know which customers spend the most money, and make sure that retaining their business is a top priority. This is where data acquisition and a solid customer database really proves its worth. When the economy turns around, you’ll find that the seeds you’ve planted during the recession will eventually yield you a dense crop of very loyal customers (and the word will spread).

So, are we there yet? Not by a long shot.

We’ve learned that the economic demeanor of General Aviation usually trails that of the national economy by about six months (on the way down). In times of economic recovery (and we have a long way to go to get back to 2005-numbers), this process could take another two-three years. Industry experts aren’t even sure that GA has hit bottom yet, and that a leveling off is still far way.

Final thoughts: If jobs in other industries come back, then consumers have more money to spend on goods and services, the companies that produce these goods/services get more revenue, and they might expand their businesses geographically. This might then warrant a need for a quicker way for key personnel to be transported to these satellite branches, and if it’s financially feasible, an aircraft could be purchased, pilots/maintenance/scheduling personnel are hired, and fuel/ground services are purchased when the aircraft is in operation. The company’s business benefits from the use of the aircraft, the company continues to grow and hire more people, and the process will repeat itself… of course, this is a best-case scenario.