Detroit Jet-Gate Screws Business Aviation Industry
Clearly, The Big 2.8’s head honchos did themselves no favors by swanning into DC for a federal teat suckle on big ass private jets. And Ford CEO Alan Mulally’s family outings on the company Gulfstream G500 were a bit OTT for a company on the ropes. But used judiciously, there’s nothing wrong with private jets per se; they can greatly increase an executive’s ability to get information from front line troops. By not sticking-up for private aviation, by slinking back into town via hybrid, the Big 2.8’s CEOs threw a valuable industry into disrepute. No, I mean the private aviation industry. AIN Online reports that “H.R. 7321, the auto bailout bill, which would have prohibited the financially strapped automobile manufacturers from owning outright, leasing or owning any interest in private passenger aircraft, as long as the government debt was outstanding; and required the manufacturers to sell or divest any aircraft or interest that was owned before the bailout. Even though the bailout bill failed, the damage was done. “Jeff Beck, a Gulfstream contract pilot, had one word to describe the state of the economy and the fallout following the GM and Ford announcements: bad. ‘As soon as [people] started talking about the auto executives and their private jets, it just killed the contract pilot business and the aviation business,’ Beck said. A number of other flight departments followed suit, Beck said, and now there simply aren’t enough jobs to go around.” Needless to say, there’s yet more perfidy here in GM and Ford’s craven capitulation to the congressional class worriers.
“Both companies [GM and Ford] blamed the economy, rather than the increased media attention they received for flying to Washington, D.C. in private jets to request government financial assistance. In its statement, GM said it had suffered ‘significant cutbacks’ and would be ceasing operations at Detroit Metro Airport as of January 1 and ‘pursuing sale of four of the [company’s seven] aircraft.’ A Metro Airport spokesman told AIN that as of mid-December, GM had yet to notify the airport of its plan to vacate the space. ‘As far as we’re concerned, they have that space through 2009,’ the spokesman said. ‘We’ve certainly seen everything that has been in the press, but we haven’t received any official notice, so nothing has changed.’
“Both companies told AIN they laid off 49 employees each, although earlier reports had stated that the GM closure would leave as many as 72 people unemployed. Neither company would provide a breakdown of the specific number of pilots, flight attendants, maintenance or dispatch personnel employed by the respective flight departments.”
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Landcrusher: Thank you for your long post, and for trying to help me understand. But, I still do not understand. If the former CEO of CitiGroup is retired and wants to fly to the Cannes film festival in style, then why can't he just buy himself one of these expensive planes and hire his own crew? Or hire his own charter? Either that or they can sit and relax in the first class lounge at the airport while they await their flight. They certainly received enough compensation to make this a trivial expense out of their own pocket. (Think $1 billion over, say, a ten year period.) Why is it vital for Ford's competitiveness for Mrs Mulally and the kids to have these expensive and exclusive planes at their beckon call? I can understand Mr. Mulally not having to lounge in the first class suite at the airport, but certainly Mrs. Mulally can do this - don't you think? The public's perception of the use of the corporate fleet is nothing less than a perversion of corporate power ran amuk. Centuries ago, when a certain French King was beheaded at the guillotine, the cottage industry that supported the extravagancies of the French Crown took a dive, I'm sure. But those extravagancies never should have existed to begin with. I think the people are now sick and tired of this corporate system that has bred this new monarchy in America. It is not just the abuse of the corporate fleet of aircraft; it is the mantra that somehow these narcissists are worth $100 million/yr in compensation, that they do not pay any income tax, that once retired they fly around the world in private business jets ad infinitum at the shareholder's expense, etc... Lastly, I want to add that my choice for what products and services I purchase IS affected by this mumbo-jumbo of monarchy and privilege. I am leaning towards Japanese branded vehicles for my perception of higher value, and a perception of zero abuse by the Japanese manager's of the resources that their shareholders have entrusted onto them. If society is better served with more appropriate corporate governance and fewer general aviation jobs, then so be it. After all, in the end, France is better off without their monarchy. Thus, I will go out of my way to avoid financing anything through GE credit or CitiGroup, and driving any vehicle stamped FORD/LM.
allegro, You won't like my answer, but the reason they give the perk is that it allows the company to provide something with a high cash value at a lower cost and with a tax advantage. IOW, it is just one more thing making the CEO overpaid. I agree they are overpaid, but this actually saves both parties money. Also, much of these contracts were written before the fractional jet market became such a good deal. The jet perk will likely go away due to both PR issues, as well as the fact that the ex-CEO can now get his own jet ride at a cost similar to what it cost his ex employer. Several years ago, the Cannes trip would cost the ex-CEO three times to charter what it would cost the ex-employer to take him on a company plane. Same answer applies to the wife. It's a contract item that was negotiated. I disagree with the French aristocracy analogy. Corporate jets actually can, and do, save a company money and make their management more efficient. This isn't just an extravagance. Deny the king a gold plated coach, but don't deny him the finest team of horses. Most of the corporate jets really are functional, not extravagant. The whole "perks" thing is really a bad argument. Really, there is compensation and compensation. The whole "perks" thing is all about perception, and while perceptions must be managed, it's not something that I want to worry about. To me, they are overpaid in cash already. If you cut their pay to what it ought to be, and then give them the jet, I would be much happier. Only a foolish person is really concerned about a 100k a year perk because it's jet usage. I concern myself with whether the guy is worth the 100k a year compensation, and then don't worry if they pay him in jet usage or $2 bills. On the new monarchy, I think most of these guys pay a LOT of taxes. Of course, few pay more than 25% of the total, while many people making less pay a higher effective rate. It's simply because Congress is full of hubris. The IRS and Congress will never be as effective as teams of private accountants. They should go for simple codes over trying to micromanage us through taxes. The wealthiest can always afford to beat the complex system. I agree they are overpaid, but once again, I don't care how they get paid, or how they travel. I only care that as a stockholder, they are overpaid. You are of course entitled to avoid business with the 2.8 because of your principles. I do the same, but because I am sick of indirectly supporting the union subsidization of liberal politicians.