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Pelton Gets to the Point

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Nobody's ever accused Cessna CEO Jack Pelton of being a shrinking violet and his company's latest ad campaign has his imprint all over it. While companies everywhere cancel business jet orders, strip logos from their existing aircraft and hide them from FlightAware and the FAA registry, he's urging them to be honest about their value and utility.

Now, Pelton has a vested interest in reversing this absurd set of circumstances that has made corporate aviation a symbol for the current economic mess, but he also happens to be right.

He's not just telling corporate America to buy his aircraft. He's telling those at the top to start acting like it and show some leadership in times that desperately need it.

While the Big Three CEOs got the reaction they deserved for their notorious trip to Washington and there have been other well publicized examples of questionable use of corporate aircraft, the fact is they are generally well managed, efficient business tools that are often indispensable to well-run businesses.

What's galling is that the public accepts that, even if grudgingly. Executive time is too valuable to waste taking off belts and shoes (although that may be coming to corporate aviation, too) and most people get it.

So why are companies ditching their planes, or worse, skulking around like thieves in the night trying to shield them from public view?

Do they really believe that no one will notice them flying to Orlando and then driving to the Super Bowl in Tampa? Do they think that shell companies on the FAA registry are fooling anyone? When the company jet touches down in the company town, do they think anyone is going to mistake it for someone else's?

Of course not.

By weaseling around in this fashion, they're making matters far worse and feeding a perception that there is something wrong with what they're doing. Sensible use of a business aircraft is nothing to be ashamed of and it's time those who will lead the country out of this mess were honest with themselves, their customers and their employees about it.

Comments (18)

Quote "While the Big Three CEOs got the reaction they deserved for their notorious trip to Washington and there have been other well publicized examples of questionable use of corporate aircraft, the fact is they are generally well managed, efficient business tools that are often indispensable to well-run businesses." Show me the numbers to support this.

quote "Executive time is too valuable to waste taking off belts and shoes ..." Have they really proven that they are?

Posted by: STEPHEN EGOLF | February 12, 2009 5:54 AM    Report this comment

NBAA has a software program for a company operating a private aircraft to compare it's use for a specific trip against using an airline. It factors in the number of employees, and their wages against the cost of airfare along with the time wasted checking in at a ticket counter, clearing TSA, connections, collecting luggage, etc. A company can than choose the more cost efficient mode of travel.

How do you value an executive's use if he lands a big contract over a competitor because they responded more quickly and with with more personal attention, or even saved a contract. These activities are what keeps large numbers of employees employed, and that is good for the individuals, the company, and the economy.

In addition, while you have heard President Obama as late as this past monday in his public address speak as to private aircraft charters as wasteful, he forgot to mention that he charted a Boeing 757 to maximize his efforts to win his bid for President. Apparently a double-standard.

A CEO using the corporate aircraft for personal use would likely be the target you are looking for, however, the IRS also requires that these costs are passed on directly to the user.

Steve asked "have they really proven that they are [too valuable]. I think the question should be more specific, and ask "have they proven themselves worthy of being a company executive?" That is up to shareholders and the Board of Directors.

Posted by: Ben Peltzer | February 12, 2009 7:40 AM    Report this comment

Where are these business aircraft supposed to go? Since they seem to have been branded as politically/socially/economically incorrect, is there even going to be a used market for them, for those scrambling to get rid of their aircraft or downsize their fleets? How many people in the business aircraft industry will be affected by the negative "economic stimulus package" of having this acitivity called out as unacceptable?

The question of corporate flying efficiency/necessity aside, there seems to be a lack of understanding somewhere, that slapping down corporate flight departments isn't just going to affect the CEOs; it's going to affect the entire industry, as the people of Cessna and other companies probably know all too well. Doesn't sound like too good of an idea when we're trying so hard to "put America back to work", etc.

Government bailout = new government management of your business, including the flight department.

Posted by: Mike Holshouser | February 12, 2009 9:26 AM    Report this comment

Mike, I agree... I was just laid off from Hawker Beechcraft due to the recent downturn in the economy, and government officials speaking out against the aviation industry is making the matter far worse.

If the administration is so concerned about expenses, why did President Obama take the 747 from DC to Williamsburg, VA - a 27-minute flight. I'm pretty sure the helicopter (Marine 1) has plenty of range at a lower cost to the tax payer.

Why don't the government officials say that luxury cars are a waste of money and put even more auto workers out of work?

It seems they are rallying support for the socialization of America...

Posted by: Ben Peltzer | February 12, 2009 9:39 AM    Report this comment

Arguments that corporate aircraft are essential business tool may be valid. In normal times, people might buy the argument. These are not normal times.

Posted by: Andrew Tron | February 12, 2009 11:48 AM    Report this comment

Arguments that corporate aircraft are essential business tool may be valid. In normal times, people might buy the argument. These are not normal times.

It may be true that the example of the CEO using the corporate jet to fly his family on vacation is the rare exception, but the general mood is that people feel ripped off, and they focus on that exception.

As well, people are finding themselves having to do more with less. They will not be sympathetic to the purchase of a new airplane.

In such an environment, what can aircraft manufacturers do? I would suggest that a crazy problem in crazy times calls for a crazy solution.

I would announce a new consulting service - maybe call it "Aircraft Productivity Auditing". It might work in a similar fashion to ISO auditing. A company that opts for this service would submit to certain rules for its flight ops (to bar the stereotypical CEO vacation flight). In return, the audit would quantify the value the flight ops to the company, and the company could use this audit as an answer to any criticism about waste and misuse.

Is this overkill - maybe. It would involve some extra overhead, and would constrain a company in its flight operations.

Is this feasible? How expensive would it be to collect the required data - I don't know.

Is this approach merely an exercise in optics - guilty as charged. But in today's environment, the right optics can be vitally important.

Posted by: Andrew Tron | February 12, 2009 12:23 PM    Report this comment

When Steve asked, "have they really proven that they are [too valuable]" Ben responded , "thats up to the shareholders and BOD to determine". This is similar to the argument given for paying out ridiculous bonuses to top execs. I agree with you right up until the time those executives ask for me (as a taxpayer) to bail them out. At that point I think the taxpayers and their elected representatives have a right to some input regardless of what the shareholders and BOD think. Though given the recent performance of the stockmarket I'd guess the average shareholder probably isnt real happy with executive performance these days either.

Posted by: Mike Wills | February 12, 2009 1:30 PM    Report this comment

You are correct, these are not normal times... These times require additional focus on being competitive, and any company should be allowed to deploy any resource they determine helps them gain a competitive edge. Who defines "normal?"

Regardless of the tool/asset, when you purchase and deploy an asset that requires substantial capital, you should justify it economically. If you can't and you're a public company, you have to answer to the owners (shareholders). If you're a private company, you only need justify to the person who owns the company.

Why would OEMs want to limit flying? It's a free world and even if someone wants to waste money, it's their right. Analysis should have been done prior to any purchase, and on an ongoing basis for each operation. The best flight departments already do this internally. Private flights using a company asset are not prohibited, they just fall under a section of the tax code to charge the user. There is no free lunch...

Posted by: Ben Peltzer | February 12, 2009 1:38 PM    Report this comment

Mike, please don't confuse my general statements with any company receiving financial aid from the government. There's always strings attached. However, let's change the context of the asset being purchased to some milling machine, and let's say that a newer model can outperform two older models it was meant to replace. Maybe it's output is higher, or even just it's operating cost is lower. Why can't the company replace outdated equipment with newer more efficient equipment? All I'm saying is it is a slippery slope to meddle in the decisions of any "for profit" business, and until the federal government balances their budget and stops borrowing, are they really sound financial advisors?

The bonus situation is completely different because a select few are taking funds outside the company. It's at least distasteful. But hey, the government threw money at a problem with no plan, and they gave it to an industry that hasn't exactly shown themselves to be concerned with anyone not on Wall Street. Kind of like letting the fox into the chicken coop, and then being shocked when it eats them...

Posted by: Ben Peltzer | February 12, 2009 1:47 PM    Report this comment

Ben, I understand your point and dont disagree when it comes to capital purchases if a business case can be made for them. When I say that I'm assuming a profitable company not asking for public funds to among other things, buy a corporate jet.

I do disagree with you on the right of government to "meddle" in corporate affairs (regardless of how poorly qualified government is to do so) when the CEO's ask the government for money. They invited the government's meddling when they asked for a hand out.

I work for the federal government. Virtually everything I do is tempered by "how would the public perceive this if it popped up on the 10 oclock news". So I also disagree with you on your statement that the bonus situation is completely different. Public perception is that these execs who are asking for a government bailout didnt earn that bonus - its compensation for poor performance. Public perception is that a corporate exec asking for public money to bail his company out isnt deserving of the perk of flying around the country in a leather and oak appointed private jet either.

As a guy who has to travel from the west coast to Washington DC occasionally, traveling coach on the low bidder airline, usually making at least two stops, to do the government's business, I agree with public perception.

Posted by: Mike Wills | February 12, 2009 2:11 PM    Report this comment

Mike, I agree on the bonuses. If these guys lost money, why do they deserve any bonus?

However, 86% of corporate aviation usage is middle managers and below doing the real work of a business. They also primarily use mid-size and smaller aircraft. The CEO's usage is really a very small percentage. The challenge is not hindering the real business to make a point to a CEO.

The government cannot mandate good judgement, moral character, or ethical begavior to someone who doesn't have it. If anything, I'd rather see them meddle in the caliber of the management team, than the details of an operation.

With that said, public officials who have tax problems shouldn't be holding any office if it's apparent they're gaming the system. Guys like Barney Frank are as much to blame for the housing crisis as anyone, and now he's telling bankers what they should and shouldn't do. This part of the system needs repair.

I too am a road warrior, and I mostly book one-way tickets at the last minute and get the last choice of seating, so I feel you're pain...

Posted by: Ben Peltzer | February 12, 2009 5:19 PM    Report this comment

I have been absolutely livid about the treatment the big three received by congress concerning the use of the corporate jets. I wish one of the big three or the bank ceo's could have had the guts to rebut congress and tell them the aircraft are business tools just like the machinery and computers in their business. Things would grind to a halt if the machinery didn't work. Business still involves people and eye contact. The ceo needs speed, efficiency and a place to work while sitting in the time machine.

The very best example of the value of general aviation occurred right after the blizzard of Jan. 1978. Every airport east of the Mississippi river was shut down from Wed. until Sat. No general aviation aircraft were able to move and carry the cancel checks to the clearing houses. By the following Mon. the money fund was out of balance and the money managers in NY went nuts thinking the Fed was doing something. Note: check the AOPA archives for this story, they are the organization that reported it.

Aviation as an industry is the largest employer in KY and a $10 billion dollar business. If congress continues to be stupid aviation in KY will go the way of tobacco. Robert Riggs

Posted by: Robert Riggs | February 12, 2009 7:07 PM    Report this comment

I agree that the use of the corporate aircraft is a necessary tool in conducting business for business, negotiating contracts, meeting with prospects and winning NEW BUSINESS, but going to the welfare line in a chauffered limo??? wrong....image!!!!uh-uh, no way!!

Posted by: tom drumm | February 12, 2009 8:48 PM    Report this comment

Certainly business aircraft can be valuable business tools. Time is valuable and the time of key executives is particularly valuable.

The problem is that there is ample evidence that business aircraft are used not just as business tools but as ego/prestige builders for narcissists and lavish perks. Once upon a time that was the problem only for shareholders. But in the new America that we are creating, corporations either are or may become wards of the taxpayer.

Like many other things, the good unfortunately gets tossed out with the bad after something is abused.

Posted by: Kenneth Katz | February 13, 2009 1:43 AM    Report this comment

In reviewing the fundamental propriety of corporate aircraft, we should consider the effect on the airline-flying public if there were no corporate aircraft.

Having flown as a passenger on the airlines, I know what its like to stand in long lines to check in one's baggage. I know what its like to wait on a runway while the captain waits for the word to fire up the engines and take off. Yes, I am jealous of Corporate VIP's and entertainment world celebrities who have their own planes.

Yet I wouldn't consider for even a minute, that celebrities and VIP's fly on Part 121 scheduled airlines like the rest of us. Why? Consider this: If the likes of the CEO of General Electric (a company well-known for firing the bottom 10% of its executives) were to fly commercial, he and his staff and bodyguards would probably need a whole section of the plane to themselves, to protect the CEO's privacy and physical safety. Think of the inconvenience that would create for the public.

As for entertainment celebrities who are constantly being stalked by obsessed individuals and at risk of being mobbed by an adoring public: NO WAY should they travel on airlines, what with the security arrangements that would be necessary, and the resulting inconvenience to the public.

Corporate jets may seem wasteful, but I believe the logical, rational needs of society should come before the purely emotional and ego needs of politicians and intellectuals.

Posted by: Alex Kovnat | February 13, 2009 8:42 AM    Report this comment

To the general public, the use of a Gulfstream 5 at 9500 dollars an hour to fly an executive around looks more of a perk to feed their ego than a business necessity. There are planes that will fly within the US for much less cost. And I still haven't seen a single one of these companies that have caused the furor to come out with any facts and statistics that support a business use for the aircraft.

Posted by: STEPHEN EGOLF | February 13, 2009 9:05 AM    Report this comment

The "New Reality" is this: only the Elite Political Class should have the option of non-public air transportation. Those that receive or will receive ANY Gov. assistance at any time now or the future should not own airplanes. Don't think this could happen? You will be priced out of the air and the airports. Class envy is capable of unlimited destruction. The Political Class knows how to capitalize on this to grow Government power and has been doing this for decades.

Posted by: Steve Hooley | February 16, 2009 3:06 PM    Report this comment

Most reading this thread, myself included, can accept the concept that there is a place for corporate aviation. I got the nickel tour of a corporate G5 just this morning by a buddy who works for the company. Beautiful airplane. I'm not convinced that all the leather, teak, etc... are a real necessity for this aircraft to accomplish its mission and it seems a little ridiculous to use a G5 to transport three low level managers hafway accross the country. But I can even accept that as long as the corporation isnt on the public dole. What I object to is the argument that a high level executives time is "too valuable" to be wasted travelling with the commoners. If these guys are so sharp and business savvy how come not a one of them, nor anyone in their management chain was smart enough to point out how it was going to look flying to Congress to beg for money?

Posted by: Mike Wills | February 17, 2009 11:54 AM    Report this comment

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