Planning your yearly budget

Strange but true: Only 20 percent of corporate flight departments performed a return on investment (ROI) analysis before adding inflight connectivity to corporate jets.¹ That means the majority (80 percent) of departments did NOT calculate the return on the investment.

Perhaps it’s because an onboard internet connection has become as expected as air conditioning and running water on a plane, and therefore the price “is what it is.” Or maybe the order came down from the C-suite that it is a “must have,” making price not an object. But even if these scenarios are true, an ROI analysis helps with budgeting and driving value by choosing the system that will meet the needs of passengers and crew at the right price point.

While adding inflight connectivity is a decision that requires a six-figure initial investment and, with recurring service costs, will continue to impact the annual budget, the ROI is relatively straightforward to calculate.

Calculating ROI: Start with opportunity cost

How do we calculate it? There are a number of variables involved, but one of the most important is the value of your passengers’ time. Passengers on corporate jets are often executives, and for executives, time is quite literally money. The average compensation for a Fortune 500 CEO is $11 million per year.² That means an hour of his or her time is worth about $5,000. If your company is flying your CEO from New York to San Francisco on the corporate aircraft, consider the value of that executive being connected versus unconnected.

Of course, that’s only the CEO. There are always other passengers on board as well, from other executives to subject matter experts to your sales leaders. Each person adds value to your business, and each adds significant opportunity cost when flying unconnected.

Opportunity cost goes beyond time, too. Consider the risk of missed opportunities. What happens if you miss out on a deal because a sales exec can’t be reached? Or a critical decision doesn’t get made on time because your C-suite is disconnected? From competitive intelligence to market changes to lightning-fast sales deals, connectivity can make the difference between running your business proactively or hitting the ground hours behind.

Digging deeper: Run the numbers

While opportunity cost is certainly real, it can feel like a “fuzzy” calculation. Let’s look at the actual numbers involved in an inflight connectivity investment.

Adding and maintaining inflight connectivity requires both capital and operating expenses.

• Capital expenses: equipment and installation. These upfront costs can seem daunting. Fees typically range from $90,000 to $200,000 or higher for both hardware and installation depending on the type of aircraft and equipment, and you can expect one to two weeks of time on the ground.
• Operating expenses: monthly subscription. Like your internet service at home or work, onboard connectivity comes with a monthly service fee depending on your needs and usage. Plans start as low as $99 per hour and up to around $4,000 for an unlimited subscription.

We get it: these are not small numbers. But let’s return to the value of your passengers’ time. Let’s say you take an average of 4 flights per week, for an average of 2 hours per flight. You usually have five passengers with an average salary of $1 million annually. That means an hour of your passengers’ time is worth an average of about $500. Let’s run the numbers.

Given these calculations, it’s clear that inflight connectivity is not a luxury or a whim: it’s critical to the operations and profitability of your organization.

Additional ROI considerations

Return on investment is a complicated equation with a range of variables. While the calculation above is a clear way to see the value of onboard internet, some intangible factors weigh into its worth as well:

• Inflight internet allows passengers to stay in touch with family and friends as well as work, improving their experience and work-life balance.
• It provides entertainment options for guests.
• Installation of inflight connectivity can be bundled with other upgrades or coordinated with your maintenance schedule to mitigate the cost of downtime.
• Service plans can be tailored to your needs to ensure the most economical fit.

Perhaps most importantly, it gives pilots supplemental information that allows for better decision making, saving time and hassle, as well as reducing the cost of non-connected pilot apps and other add-ons rendered unnecessary by an internet connection. According to Jason Park, the Chief Pilot for one corporate flight department:

“In the cockpit, we can use it [Wi-Fi] for services that we previously paid for separately. Now, instead of paying for a bunch of separate apps, we can go online and get current weather, file flight plans, email FBOs, and more. We were able to cancel the other services, which saves us hundreds or even thousands of dollars per month – that adds up over the course of the year.”

While calculating the ROI on inflight connectivity may seem challenging – or even unnecessary – we promise that it’s worth your while. If you’re considering adding connectivity to your corporate fleet, browse our corporate flight department solutions, or simply get in touch. We’re always happy to help you determine if Gogo inflight connectivity is a smart choice for your business.



Sources
1. 2018 B&CA Survey to 200 members of corporate flight departments.
2. Shen, Lucinda. 2017. “Here’s How Much More American CEOs Make Than You Do.” Fortune, June 21, 2017.