ANÁLISIS DEL COMPORTAMIENTO DEL CONSUMIDOR

Several methods exist for allocating the costs for company aircraft. The most common are central allocations, direct operating costs allocation, direct and fixed costs allocation, and flat mileage assessment. Each is discussed below. There also are others, but these usually are based on some variation of the above. See also Section 1 for required charges for employee personal use of company aircraft. Central Allocations – Some corporations consolidate all of the headquarters service costs, including the company aircraft, and divide those costs among all the operating divisions for a central allocation method. There are a variety of formulas used in this method (e.g., a percentage of net sales or a combination of sales, profits and payroll). Each formula has its advantages and disadvantages.

If the company has established a policy for distributing other central service costs, the aircraft probably would fit into the pattern without difficulty.When a division uses the aircraft, there are no costs allocated for a specific flight. Divisions that may have little need for travel or that are limited in use of the aircraft by company policy may resist this method of cost allocation. However, the central al- location approach remains a popular alternative with many companies.

Direct Operating Costs Allocation – Each division that has use of company aircraft is assessed the direct operat- ing costs for a given flight. The company absorbs all of the fixed costs as part of headquarters’ operating expense. If several passengers are on board for the same flight from more than one division, those costs may be prorated for each individual, so the cost of the flight is divided propor- tionately among the divisions.

In some cases, the company also may absorb a portion of the direct operating costs as part of headquarters’ expense. This arrangement may stimulate the use of the company aircraft because of the favorable cost factor. Divisions that have a budget to accommodate travel requirements can allocate company aircraft costs against the budget. Direct and Fixed Costs Allocation – Each division may bear the total cost of operating the aircraft, including costs incurred whether or not the aircraft is flown. Because fixed costs are proportionately higher than out-of-pocket expenses, Figure 1.16: Calculating Direct

Operating Costs

Direct operating costs (DOCs) are determined by the following process. For the period during which the DOC will be applied (usually January to De- cember, or the company fiscal year):

• Total all current and expected future receipts for: – Maintenance – Consumables – Inspections – Overhauls – Replacements

Any other item that can be attributed directly to aircraft use (aircraft phone use, catering, pilot trip expenses, etc.) • Divide by the hours, miles, or pas-

senger miles flown or expected to be flown, in the period.

NB

AA Me

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ship _{this method may discourage use of company aircraft or limit}

use to divisions that have a substantial transportation budget. A variation of this method is to charge the user or users of the aircraft the direct operating cost, and charge the fixed cost to the division or operating unit represented by the users. This variation has several advantages. The users bear only the smaller direct cost amount. The division (either a vice president account or division overhead allocation account) bears the fixed cost at a level more tolerant to the larger portion of the total cost, and proportional to the divi- sion aircraft usage.

Flat Mileage Assessment – Some companies use a flat mileage assessment of costs. A variation of this is to as- sess amounts that equate to commercial airline airfares between established airline points of service. The company bears all of the aircraft operating costs in its headquarters account and is compensated in some degree by charges to divisions.

Flat mileage assessment does not depend on commercial service being available between given points. It remains constant no matter where the company aircraft goes. The difficulty with assessing flat mileage rates is that no basis may exist for comparison with airline economy fares. But if the rates are comparable with known scheduled airline mileage rates, the lack of comparison should not present any serious problems.

1.29. Aircraft Insurance

The purchase of insurance protection against financial, dam- age and injury losses resulting from aircraft and/or airport operation accidents is a decision to be made after thorough discussion with insurance consultants and the company’s legal department. The aviation department manager and those responsible for handling the company insurance should remain in close communication during prepara- tions and negotiations for any aviation-related insurance contracts. A brief discussion on the important elements of aviation insurance appears below. For a more thorough treatment of this complex subject, see Appendix A, Aircraft Insurance.

Coverage and/or premiums vary as acquisitions of or modi- fications to aircraft are accomplished. Changes in flight- crews, changes in routes of travel, changes in operational control and international travel also may affect premiums and coverage. The aviation department manager should know of any restrictions in the insurance coverage, whether related to the flightcrews, their qualifications or any other factors.

The basic coverage in the aviation insurance market are physical damage to the aircraft (hull insurance), aircraft liabil- ity insurance and airport liability (premises) insurance.

Physical damage insurance provides for payment to the aircraft owner for physical loss of, or damage to, the air- craft. This usually is written for an amount equal to either the market value, contractually agreed value (loan or lease obligation) or replacement value of the aircraft and covers the interest of both the owner and other persons or orga- nizations who may have a financial interest in the aircraft. This coverage generally is purchased on an all-risk basis. If more limited coverage is desired, such as ground-only or builders risk, it also is available. The following three types of all-risk coverage may be purchased:

• All risk

• All risk not in flight (includes taxiing) • All risk not in motion (ground only)

Most companies will price entertain requests for “fringe” or ancillary provisionscoverage such as extra expense insur- ancecoverage, which provides conditional reimbursement for includes loss of use occasioned by a covered physical damage loss.

AiRcRAFT LiABiLiTy insuRAnce

Liability insurance coverage is designed to cover the legal liability of the insured to others for bodily injury and prop- erty damage resulting from the ownership, maintenance or use of the aircraft. This policy coffers coversage legal for defense of any suit brought against the insured, often even if the suit is groundless. FAlthough financial loss, which can result as a consequence of through liability claims, may be may not be as obvious as loss by reason of damage or destruction of an aircraft, it can be much more costly, even in the end, even to the extent of jeopardizing or destroying the company to satisfy liability judgments. Risk of financial loss increases the importance of carrying liability insurance protection consistent with company’s risk profile. Basic policy coverage includes the following items:

• Bodily injury liability (excluding passengers) • Passenger bodily liability

• Property damage liability • Medical payments

• Guest voluntary settlement (admitted liability)

Risks insured may include liability to third parties arising from (subject to insurance contract or policy conditions, limitations and exclusions):

• An aircraft accident

• A contractually assumed obligation

• Products and/or completed operations liability after resale of the aircraft or upon completion of work

• Use of non-owned, borrowed or rented aircraft

nonowneRsHiP AiRcRAFT LiABiLiTy

Nonownership liability coverage is available as an exten- sion to the owner’s aircraft liability policy or as a separate policy. It protects the named insured for liabilities arising from the use of certain nonowned aircraft. The possibility of exposure to liability suits through the use of nonowned aircraft often is overlooked. However, the company may be subject to suits due to bodily injury or property damage if a company or employee, who may be a pilot and operates an his or her own aircraft, or directly (or indirectly through an agent) rents, charters or borrows an aircraft for use by or on behalf of, the organization.