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The Value Of Corporate Time
October 5, 2011
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  • By Bill Cox, Plane and Pilot
    October 1, 2011

    It has to do with misinformation, not politics

    Back in November 2008, when the CEOs of Chryslcr, Ford and General Motors flew to Washington to ask for a government bailout, congressmen made much of the fact that the executives had all used corporate jets for the trip.

    As a direct result ofthat criticism, General Moiors and Ford announced two weeks later that they were selling their entire corporate jet fleet, a total of 12 aircraft, and laying off all flight crews, attendants, flight coordinators, mechanics and other maintenance personnel – probably not the best way to resolve the unemployment crisis.

    (The three automotive CEOs were summoned to Washington, D. C., a month later, and this time, the executives DROVE the 630 miles to D. C. and back.)

    In early July of this year, President Obama also took a swipe at corporate jet operators, suggesting that tax benefits of jet operation should be abolished and that travel by corporate jet was somehow irresponsible, a concession to greed and privilege.

    “…Il we choose to keep a tax break for corporate jet owners. ..then that means we’ve got to cut some kids off from getting a college scholarship,” said the president. (Talk about the ultimate red herring! What does corporate jet ownership have lo do with college scholarships?)

    Abolish those tax breaks, said Obama, and “you’ll still be able to ride in your corporate jet. You’re just going to have to pay a little more.” In other words, the president wasn’t asking anyone to give up their corporate jet, only to pay more to fly it.

    Both congress and the president completely missed the point that the vast majority of business aviation doesn’t travel by ”corporate jet” at all, an incorrect stereotype that totally mischaracterizes business flying.

    Its just as illogical to lump Bonanzas, Cessna 180s, SŽnecas and King Airs together as “Piper Cubs” as it is to regard all jet operations outside the airlines and the military as business jets.

    First, the huge majority of business airplanes aren’t jets, and most of the folks who fly in them aren’t rich. I’ve been fortunate to fly on corporate turboprops and business jets perhaps two dozen times over the last 40 years, and not one of those trips has been for fun. Every trip has been to transport company personnel to or from business appointments ai lradc shows or conventions on the opposite side of the country or overseas, and the airplanes just happened to have an extra seat for me.

    Those companies that do operate turbine equipment must perform careful analysis to justify the expense, and even ihcn, passengers are more often midlevel management Lhan high-priced CEOs.

    Just as with boats and company limousines, there are unquestionably some abuses of jets, but the vast majority of operations ate simply too expensive noi to be legitimate.

    Putting aside for the moment the faet that such uninformed stereotyping on the part of government officials is unbelievably hypocritical, it seemed logical to analyze exactly what it costs to transpon the CEO of a major company.

    Take, for instance, Alan Mulally of Ford Motor Company who drew a salary of S2L.7 million in 2008. Compensation for the oiher two auto executives at the hearings above was estimated in the same general range.

    Mulally doesn’t punch a clock, but if he works 60 hours a week, 50 weeks a year, not unreasonable for an executive at that level, his direct hourly pay comes out to $7.000.

    That means if a comparably compensated executive who’s determined to “save money” by flying airlines arrives at the airport the required two hours before flight time, travels for three hours on the airline, then spends another 1.5 hours disembarking, retrieving luggage and getting out of the airport, his company will have spent a total of probably ai least seven hours’ compensation, worth about $49.000. Make thai a total cost of $98,000 for a round-trip.

    Oh yes, the first-class airline fare will add 51,128 to the price. Figure a nice round $100,000 total cost for Mulally to fly round-trip to Washington by airline.

    Keep in mind, virtually all of that executive’s time will be unproductive on the airline, even in first class. He won’t be able to use his cell phone during the trip, and he probably won’t have an Internet connection. (In fairness, some airlines do now provide WiFi.)

    Conversely, if the same executive travels by corporate jet, he’ll fly on his own schedule from and to the most convenient airport, he won’t need to change planes in Atlanta or Dallas, and he’ll usually have all the accommodations of his office available in the airplane.

    His check-in time will be nonexistent, as the airplane won’t leave without him even if he’s late or if he needs to reschedule; he can keep his shoes on (or off) for the entire trip; he can take along several advisors for the same price; and he’s guaranteed to have his baggage arrive on the same airplane. A company airplane can sometimes fly home after the meeting, as well, thereby avoiding an overnight.

    By corporate jet, the trip would charter for about $8,000 one way. Figure the combined ground and flight time at four hours. Bottom line – the busy executives company would spend roughly $56,000 for corporate time and another $16,000 for travel expense on the corporate jet. a total of $72,000.

    The company is already way ahead if traveling by private aircraft, but remember, executives rarely fly alone, just as the president nearly always travels with a large retinue of assistants and advisors.

    Remember that the president, any president. America’s ultimate CEO, travels on perhaps the ultimate business airplane (operating cost – roughly $180,000 an hour), as he should. There’s no question whatsoever the president needs the security and facilities of Air Force One. No one argues that the president isn’t entitled to optimize his time and maximize his security on a corporate aircraft, in this case, a Boeing 747-200.

    Would it be illogical to assert that the security of a $20 million/year CEO is pressing to a major company? No one is suggesting the president should fly first class on Delta, but is it any more reasonable to assert that corporate executives do exactly that? Perhaps now you understand exactly how the business aviation community felt about the presidents comments on business jets. P&Rp

    Date: 2011-10-01