Some in Congress pounced this week on what they view as the hypocrisy of auto executives flying on corporate jets to Washington to ask for public help. Corporations insist riding on private planes is not a lavish perk, but rather a necessary security requirement for top officials that also helps them be more efficient.
Maybe the CEOs of America’s Big Three automakers should have driven to Washington to ask for $25 billion in public money.
Flying there on corporate jets raised the ire of lawmakers. Senate Majority Leader Harry Reid, a Democrat from Nevada, said in Washington that “these guys flying in their big corporate jets doesn’t send a good message to people in Searchlight, Nev., or Las Vegas or Reno or anyplace in this country.”
As it turns out, that’s how executives at many — but not all — big companies often get around.
About 11,000 U.S. companies operate jets or powerful prop planes, and more use smaller planes, said Ed Bolen, president and CEO of the National Business Aviation Association. He said companies like their chief executives to be productive and to have access to phones and e-mail during flights. And if, say, the CEO and chief financial officer are flying together to meet with investors, they can talk about their company’s books without worrying they’ll be overheard, he said.
There are some notable exceptions. Intel Corp., known for an egalitarian work culture where everyone has cubicles, has long told both executives and rank-and-file to fly coach. Intel executives rack up enough frequent-flier miles for regular upgrades to the front of the plane, though, so it’s not often they’re spotted in coach.
Intel also charters private planes for executives traveling abroad, if the company believes there’s a security threat or to save time on busy trips.
Many large companies require their executives to use company planes for all corporate, and even personal, travel.
General Motors Corp. spokesman Tom Wilkinson said its top three executives are required to use a company plane. He said several people were on its flight to Washington this week, though it wasn’t full.
Corporate budget-cutters have taken notice of those shiny jets. Building products maker Louisiana-Pacific Corp. said on Tuesday it eliminated its two planes and support staff. Wilkinson said GM, which leases its planes rather than owning them, once had seven planes and eliminated two planes in December, and will cut two more soon. He said the company has also cut about half of the staff of its corporate aviation program.
He said that while it might have looked bad to fly private jets to Washington to ask for loans to save the business, flying commercial had risks, too.
“It’s not something where you’d want to stand in line on a commercial flight and risk having your flight canceled,” he said. “Pretty high stakes when you’re testifying in front of the House and Senate like that.”
Paul Lapides, a corporate governance expert at Kennesaw State University in Georgia, said some boards require their CEOs to use corporate jets for security reasons.
“For a lot of CEOs, the risk of kidnapping is a real risk,” he said.
He noted that risk has been heightened of late in some parts of the world. “I mean, heck, people are kidnapping entire oil vessels,” he said, referring to piracy in the seas around Africa.
In tough economic times, it would be reasonable for companies to reconsider their use of corporate aircraft to determine if the number of jets they have in their fleet and the amount of money they are spending on the jets continues to make sense, Lapides said.
“Since 2000, people have gotten more thoughtful about the amount of executive transportation they own or lease, especially in light of executive compensation issues,” Lapides said. “That doesn’t mean everybody has it right, but it’s a lot better than it was a few years ago.”
Corporate jet use certainly can be expensive.
According to a regulatory filing, Ford Motor Co. CEO Alan Mulally’s total compensation last year of $22.8 million included $752,203 for his personal use of the company’s jet, as well as personal use of the jet by his wife, children and guests “to ease the burden of Mr. Mulally moving to southeast Michigan and away from his family in Seattle.”
At Coca-Cola Co., the world’s largest beverage maker, former CEO Neville Isdell received total compensation valued at $21.6 million in 2007, including $341,849 for aircraft usage. For security purposes, the Atlanta-based company’s board required Isdell to use company aircraft for all travel. He was reimbursed for the tax liability associated with the personal use of the company plane.
Meanwhile, CEOs of some big airlines, which have access to plenty of aircraft, don’t fly in private jets, opting instead to fly alongside other passengers.
That’s the case at Atlanta-based Delta Air lines Inc. and Orlando, Fla.-based AirTran Airways. In Delta’s case, CEO Richard Anderson flies coach, spokeswoman Betsy Talton said. At AirTran, CEO Robert Fornaro flies at least once a week, and he does so with passengers in coach or business class if that is available, spokesman Tad Hutcheson said.
Elsewhere, Home Depot uses its company aircraft mostly for store visits by executives and members of management, spokesman Ron DeFeo said, adding that for security purposes the company does request its CEO to travel by company aircraft.
Popular among major corporations are Learjets, made by Toronto-based Bombardier, Inc., and aircraft from Gulfstream Aerospace, a luxury jet maker based in Savannah, Ga., which is a subsidiary of General Dynamics.
FAA records show Coca-Cola has two Gulfstream G550s registered to the company. The cost of a G550 ordered for delivery in 2009 would be nearly $49 million, Gulfstream spokesman Robert Baugniet said. The aircraft can hold up to 18 people and can have lie-flat beds, and the planes have a range of 6,750 nautical miles, capable of ferrying executives “anywhere in the world with one stop,” Baugniet said.
He said the jets are used by corporations because they save senior executives a lot of time and they can be in touch with their offices and use their telephones and computers for the entire trip.
“Instead of being out of touch, they can be productive,” Baugniet said.
He gave an example of a business trip he took a year ago from Savannah to Geneva on a commercial airline.
“First thing I had to do was get to the airport an hour and a half before I leave, then flew to Atlanta, wait for three hours for a connecting flight, which took me to Paris, and then I took a flight from Paris to Geneva. Twenty-three hours later, I got to the hotel,” he said.
He caught a ride home on a plane that had been in Geneva for a trade show, “and nine hours after I left Geneva I was at my desk working, and my luggage was with me,” he said.