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Analysis: Executives turn to private skies as economy improves
November 24, 2010
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  • By John Crawley

    U.S. executives, including those at government-owned General Motors Co GM.UL prepping investors for a public stock offering, are getting back on corporate planes as the economy slowly recovers.

    While airlines still account for the majority of corporate travel, many businesses are gradually returning to private planes. They are eager to avoid airport hassles, flight delays and other potential logistical snags associated with commercial flying. For some companies, corporate jets are also a better value.

    “We appear to be off the bottom,” said Dan Hubbard of the National Business Aviation Association trade group that represents companies that own and charter planes. “We seem to be seeing things stabilize at this point.”

    Total business jet flights — privately owned and charter — rose 7 percent to 2.84 million in the 12-month period through September, with much of the growth seen in overseas travel, according to data tracked by the Federal Aviation Administration (FAA).

    “People are feeling more confident,” said Shirley Mason, a vice president with Argus International Inc, which conducts market research and provides safety management and other services to the business aircraft industry. “Things are starting to improve in the economy.”

    The best year for business jet traffic was 2007 when the FAA recorded 4.82 million flights.


    One example is GM, which chartered planes to haul teams of executives to meetings with prospective investors ahead of Thursday’s public share offering.

    The automaker’s return to private travel follows an incident in 2008 when lawmakers berated GM, Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler Group (FIA.MI: Quote, Profile, Research, Stock Buzz) executives for taking corporate jets to Washington, D.C., to ask the government to help their struggling companies.

    GM unloaded its leased fleet during its Treasury-led restructuring but is permitted under terms of taxpayer ownership to charter aircraft in certain cases. The U.S. Treasury does not sign off on each trip, but requires senior executives to do so.


    Companies, however, are still reluctant to maintain their own fleets.

    Corporate jet sales are off 20.3 percent globally in the first nine months of 2010, compared with the same period last year, the General Aviation Manufacturers Association said in its third-quarter report.

    Honeywell International Inc’s (HON.N: Quote, Profile, Research, Stock Buzz) aerospace unit is forecasting a softer outlook for the sector next year, but expects expansion in 2012.

    A sweet spot seems to be chartered jets, which allow executives to fly efficiently to multiple meetings, without the major investment and expense of a corporate fleet. This was the option selected by GM.

    Argus found in its latest report using TRAQPak data that overall business aircraft flying rose 10 percent in October, compared with September. Charters were up 11 percent.

    Charter rates vary, but generally cost between $1,500 and $6,000 per hour.

    “It’s cost effective for business to travel efficiently,” said Gretchen Collins, vice president of special contracts and business development for CIS Aviation Services Inc, an Albuquerque-based charter broker.

    “They’re trying to be smarter with the way they spend their money,” Collins said.

    Source: REUTERS
    Date: 2010-11-15