There's a company in Beverly Hills that owns more than 50 commercial jets but has only three pilots on its payroll--and one is the president. It operates not a single hangar, leases not a solitary landing gate at any airport and, in 15 years, has sold not one ticket or served one in-flight meal.
Is this any way to run an airline?
Well, not really. But International Lease Finance Corp., the firm in question, has figured out how to run by far the most productive public company in California--in fact, one of the most efficient corporate revenue- and profit-generating machines anywhere in America.
Each member of International Lease Finance's staff of 16, on the average, produced revenue of $10.8 million last year, making them more than three times as productive as their closest competition in The Times 100 ranking of firms by revenue per employee.
An airline, heavily dependent on squadrons of often-cantankerous employees, could not hope to ring up such numbers. The only airline ranked by The Times 100 based in California last year--PS Group, until recently the parent corporation of PSA--mustered but $456,600 in revenue per employee.
By design, though, the business invented by International's three immigrant founders when they started the company with $150,000 requires just a handful of people to produce wide-body-loads of money.
The firm is an "operating lessor." That means it buys jets from Boeing, McDonnell Douglas and other manufacturers and then leases them to U.S. and overseas airlines. International collects lease payments, uses the fleet's depreciation to cancel its federal tax liabilities and, finally, sells the used jets when the leases expire.
None of which takes a lot of manpower, even though the company owns more planes than Swissair or KLM Royal Dutch Airlines.
"We really work hard to figure out ways to keep the organization in size the way it is, rather than figure out ways to make the organization grow," said Executive Vice President Louis L. Gonda, the Venezuelan who founded the company in 1973 with his Hungarian-born father, Chairman and Chief Executive Leslie L. Gonda, and a friend, President Steven F. Udvar-Hazy, also a Hungarian.
For example, the firm has steered away from opportunities to move into leasing commuter aircraft, executive jets or other kinds of equipment, instead sticking strictly to its core business of leasing and selling commercial jets.
And despite the drawing on a wall in the firm's conference room of a Fokker F-100 carrying International's colors and logo, the company's principals don't give much thought to going into competition with American Airlines, Delta, TWA or their other customers and trying to run an airline.
"Those are very people-intensive businesses," Gonda said.
As a measure of whether a company is well run, such productivity ratios as revenue per employee have been gaining in popularity among financial analysts and investors.
Standouts within their industries among California companies include the Price Co., whose unadorned, warehouse-style marketing of bulk groceries, clothing and household goods makes its employees twice as productive as those of the next highest-ranking food retailer, Lucky Stores.
Other companies that score much higher than the competition on The Times 100's productivity scale simply have organized their businesses, like International Lease Finance's, to make the management of personnel somebody else's problem.
For instance, Milpitas-based Chips & Technologies is eight or nine times more productive in revenue per employee, than its silicon chip-making competitors National Semiconductor and Advanced Micro Devices. But Chips & Technologies contracts out most of its manufacturing, while the other companies employ 36,000 and 18,000 people, respectively--the bulk of whom make chips.
Similarly, the makers of two familiar consumer product lines, Armor All Products and WD-40, overwhelm the state's other manufacturers on the productivity scale. But they, too, farm out most of their production processes.
Irvine-based Armor All Products has just 65 employees. "What they do is mix their secret formula, which doesn't require a lot of personnel," explained Gibbs R. Moody, an analyst at Hambrecht & Quist in San Francisco. "Then they ship the concentrate to a contract packager, and the packager takes responsibility for adding water to the formula, creating the bottle, packaging it and distributing it."
At International Lease Finance, though, the formula for high productivity includes big-ticket transactions, low overhead, competitive interest rates and key personnel--especially the three founders--who stop at nothing to close a deal.
"It's work, work, work," said Robert R. Dockson, chairman of California Federal Savings and a director of the airplane leasing company since 1983.