Sunday, June 27, 2010
End of the high life -- selling the corporate jets
Roll up, roll up. It is the great company jet fire sale. Everything must go -- and quickly. For the credit-crunched giants of corporate America, living on the generosity of the taxpayer, it ill behooves executives to fly luxury class, and a string of expensive aircraft are finding their way on to the market.
The bosses of the big three Detroit car makers were making a self-flagellating road trip Wednesday from Motor City to Washington, where they are pleading for a $34 billion government hand-out, a fortnight after being ridiculed for turning up at their last meeting on $20,000-per-flight corporate jets. And Citigroup, which just 10 days ago palmed off up to $306 billion in potential losses on to the U.S. government, was also reported to be selling two of its fleet of aircraft, decked out with lush dining chairs and a well-stocked kitchen.
The sales threaten to usher in an era of penury for a cadre of executives who are used to flying on the company jet. For the American public, bitter at forking out more than $1 trillion so far during the credit crisis to bail out Wall Street banks and other companies, it offers one small signal that boom-time corporate excess is being curbed.
A small Maryland broker is hawking two Dassault Falcon jets understood to belong to Citigroup, the banking giant brought to the brink of bankruptcy last month by billions of dollars of losses on sub-prime mortgages. The government has already put in $45 billion from the bailout fund.
The company is only slimming down its fleet, not selling all its planes, and although it is cagey about how many aircraft it will be left with, it justifies their use -- even as it promises to be careful with them in the future. "Executives are encouraged to fly commercial whenever possible to reduce expenses," a spokesman said.
Corporate jets have long been a source of public relations trouble for the executive class. Citigroup's former wealth management division boss Todd Thomson was forced to quit after complaints about his profligate use of company expenses, including one occasion when he kicked fellow executives off the company jet to travel alone with the CNBC television presenter Maria Bartiromo, nicknamed the Money Honey.
Their use can also land an executive in court, as the jailed former Daily Telegraph proprietor Conrad Black found. Accused of using his Hollinger media empire as a personal piggy bank, Black was charged with fraud for using 23 hours of flight time on the company jet, at a cost of $539,000, to go on a two-week private holiday with his wife in 2001. It was not one of the charges on which he was convicted, however.
Nothing in recent times compares to the public relations disaster by the Detroit automakers as their chief executives attended hearings in Washington last month to plead for some of the bailout money to stave off looming bankruptcy. Such was the outrage that earlier this week, GM and Ford both said they would sell their fleet of jets.
"Due to significant cutbacks over the past months, GM travel volume no longer justifies a dedicated corporate aircraft operation," the company said. Chrysler said it did not have a corporate jet facility, and instead leases jets on an as-needed basis from an outside aircraft operator, but said it is "weighing its options for future corporate travel."
At Ford, which will sell all five of its jets, the chief executive Alan Mulally's pay of $22.8 million last year included $752,203 for his personal use of a corporate plane, as well as personal use of the plane by his wife, children and guests "to ease the burden of Mulally moving to Michigan," the company's report to shareholders revealed.
Rick Wagoner, the GM chief executive, was putting a brave face on his 525-mile drive to the capital, talking to the assembled media in a car park opposite his Michigan home as he set off in his Chevrolet Malibu hybrid.
"It's a good chance for me to do some briefing and return some phone calls as well -- on my hands-free, by the way."
Mulally and Bob Nardelli of Chrysler were making the same journey.
GM, Ford, Citigroup et al shouldn't count on getting sky-high prices for their jets, because their travails are not unique and there is a glut of aircraft on the market. In a bankruptcy court in New York Wednesday, a judge rubber-stamped the sale of the collapsed investment bank Lehman Brothers' corporate jet at the knockdown price of $6.2 million. The Dassault Falcon 50 had been up for sale for two months with little interest, the company's administrators said in their court filing. "[Lehman] is aware of at least 38 Falcon 50 aircraft being actively marketed," they said, noting that it is likely that even more of the jets were "being more quietly marketed."
Plane speaking How the other half fly