Travel$ense User's Guide (PDF, 139 MB) - NBAA

TRAVEL$ENSE• The Group-Human Value Approach,173• The Opportunity Cost Method,• The Goodwill Approach,• The Absolute Cost Approach,• The Earnings Objective Approach,• The Excess Return Differential Approach.These nine methods, for the most part, would involve an extensive analysis aswell as arbitrary judgments ascertaining and assigning intangible values.FAA VALUE OF TIME STUDIESThe concept of time savings realized when traveling by air has been aroundsince the beginning of aviation. In the earlier days of the industry, it wasexpressed largely in terms of speed, and later it was expressed in terms of flighttime saved on trips between cities.One of the first times that an organization attempted to express time savings ineconomic terms happened in the mid-1960s, when the FAA conducted severalstudies that were involved with the development of a Supersonic Transport(SST) in the United States. These studies were submitted at the Congressionalhearings for government funding of a U.S. SST development program. 29Cost Allocation IssuesAviation department managers or chief pilots who have managementresponsibility are generally operationally oriented by virtue of their primaryexperience as pilots. Therefore, they should rely on the expertise of thecompany’s financial and accounting departments for company aircraft operatingcost accounting. Costs are usually divided into direct and fixed operating costs.NBAA recommends that aviation department managers be familiar withaccounting practices and other business subjects to ensure that aircraftoperations are properly represented by the company. Accurate and wellmaintainedaircraft operating cost records are critical to credibility.Several studies have indicated that the use of aircraft is acutely cost-sensitive.Consequently, the allocation of business aircraft costs – whether to includedepreciation, resale recovery, etc. – can be critical to the company’s decision totravel or not to travel.29 1) U.S. Institute of Defense Analysis (I.D.A.), Economic and Political Studies Division, Demand AnalysisFor Air Travel by Supersonic Transport, prepared for the FAA (1966). 2) System Analysis ResearchCorporation (SARC), Feasibility Of Developing Dollar Values For Increments Of Time Saved By AirTravelers, prepared for the FAA (1966).Copyright © 1999, National Business Aviation Association, Inc.