Companies Cut Back on Corporate Flights
July 27, 2009
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  • By Ken Leiser

    Long a symbol of corporate America strength, the company plane is flying into turbulence stirred by a slumping economy and a public peeved by perks.
    Some St. Louis-area companies say they’re not using their planes as often because of the global recession. Manufacturers of corporate airplanes say demand appears to be softening, while airports that cater to corporate planes have seen fuel sales and traffic tumble.

    The effects have been far-reaching. Corporate aircraft manufacturers and airport-based businesses that cater to business flyers have been forced to lay off employees in recent months. The number of used corporate jets, meanwhile, has saturated the market.

    “There’s a lot of fallout from these airplanes’ not flying,” said Peter Sudekum, president of St. Louis Aircraft Sales, a company that specializes in pre-owned aircraft.

    Sudekum said the market had been hit by a worsening economy and credit crunch, but he also acknowledged the “image thing.” Last fall, chief executives for America’s Big Three automakers were criticized after flying to Washington on private jets to seek a federal bailout. Since then, Americans’ outrage has grown over executive perks such as chauffeured cars, bodyguards, club memberships, and yes, free travel in company jets.

    Many companies are looking at not only their bottom lines but public perception to determine whether the company plane is a necessity or an extravagance. Some major St. Louis-area companies that have corporate aircraft say they’re using them less often, or getting rid of them altogether.

    Emerson, based in Ferguson, has operations and customers around the world, so company aircraft is an “important productivity tool,” Emerson spokesman Mark Polzin said in an e-mail. “For economic reasons, we have curtailed their use,” Polzin said. “Beyond that, for security purposes, we don’t comment.”
    Anheuser-Busch said nearly all employee air travel was commercial, although corporate planes were used when it was a more cost-effective option. A-B, which was acquired last year by InBev, is in the process of selling its aircraft.

    “However, we are not in a rush to sell them,” a company spokesman said in an e-mail, declining to say how many or what type of aircraft A-B owns.

    Energizer Holdings Inc. shares ownership of three corporate aircraft with Ralcorp Holdings and Nestle Purina PetCare Co. Overall domestic travel at Energizer is down 40 percent this year, said Jackie Burwitz, Energizer’s vice president of investor relations. She didn’t know how much of that was in corporate air travel.
    Meanwhile, fewer corporate flights means less fuel is being sold at Spirit of St. Louis Airport in Chesterfield. Fuel sales have fallen about 20 percent so far this year – a number that is slightly better than the national average, said John Bales, St. Louis County director of aviation.

    “The traffic is definitely down,” Bales said. “We’re down, but everybody is down across the country.”

    Air travel started to drop off noticeably in December, said John J. Morgenthaler Jr., president of Aero Charter Inc. at Spirit of St. Louis Airport. By January, “you could have shot a cannon off at the airport out here,” he said. “Nobody traveled.”

    But there’s some good news at the St. Louis Downtown Airport in Cahokia, where half of the traffic is business-related. So far, takeoffs and landings have picked up slightly compared with last year. However, operations are down by one-third compared with five years ago, said Bob McDaniel, the airport’s director.

    As companies shed their private air travel, manufacturers are shedding jobs.
    Last week, General Dynamics Corp. announced a drop in aircraft deliveries and revenue in its Gulfstream unit in the first quarter of 2009. The company announced last month that it would lay off 1,200 workers and reduce production this year.

    Textron Inc., parent of Cessna Aircraft Co., also reported weaker demand for corporate jets and said it would suspend production of its new Citation Columbus corporate jet. On Wednesday, company officials announced 2,300 additional layoffs at Cessna.

    Industry groups are moving to dispel what they believe is more of an image problem. The National Business Aviation Association and the General Aviation Manufacturers Association launched a public relations campaign this year dubbed, “No Plane, No Gain.”

    “We believe that the downturn in business aviation has been exacerbated this time around because of a negative stereotype that we believe is unfounded,” said Ed Bolen, president and CEO of the NBAA.

    Earlier this year, Cessna Chief Executive Jack J. Pelton said that 85 percent of business aircraft were used by small or medium-sized companies and that most passengers were middle managers and technicians. Most business aircraft are single- or twin-engine propeller and turboprop aircraft, as well as small- and medium-sized jets.

    That’s hardly the tale of millionaire executives’ abusing privileges, Pelton said. “The reality of business aviation is a far cry from the misconception of CEOs flying in large, luxurious airplanes.”

    Date: 2009-05-03