Corporate Jets

This is something that has been bothering me for a while. Recently the attention given to this matter has risen to a level worthy of discussion, so here it is: why are people so disgusted by corporate air travel? When GM, Ford and Chrysler CEOs went to Washington for hearings few weeks ago, no one could stop talking about the fact that they each took corporate jet to D.C. for the hearing. There was nothing but outrage and indignation at the fact that these execs were begging for money but were "wasting" tens of thousands on corporate air travel. How arrogant that they can't travel commercial along with the rest of us sacrificing peons without stock options. At the very least, don't they have a PR person whispering in their ear that it would look bad?



This bothers me because people are very willing to quickly attack that which offends their personal sensibility without even so much as asking for a reason, nevermind actually hearing the justification. I'll bet you didn't hear any of those reporters or commentators actually check into the costs of flying private. Corporate jets are a modern day business necessity and a bargain to boot. Say what? Yes, you read correctly- a bargain. Say your average CEO gets paid about $23 million per year*. If he/she works 300 days per year, 10 hours per day (not an unusual CEO work load by any means), it works out to $7,600 per hour of their time.  Now consider that a roundtrip corporate flight from Detroit to D.C. would save at least 4 hours of the CEO's time, the corporate jet saved over $30,000. What about the cost? Depending on the service and the plane in use, private air travel costs $1,000 to $3,000 per hour of flight time. On this Detroit to D.C. roundtrip of 3.5 hrs, this trip would cost about $11,000 (on the most expensive plan).  Hmmm...an $11k expenditure to save $30k- looks like a good deal to me.

But wait, there's more. There are certain perks to private flights that I didn't quantify above. There is the ability to arrange, on very short notice, the trip times. Compare that to a commercial flight- when are the available flights? Are there any first class seats left? Once at the mercy of a commercial flight schedule, you now have to extend the trip at least an additional night, perhaps two- so as to be absolutely sure you don't miss the meeting while accomodating the commercial flight schedule. Taking a senior executive, lawyer or others along with you? They travel at no extra cost when flying private, but each one is at least another $1,000 round trip commercial flight. Plus their hotels. Perhaps $4,000-$8,000 in additional savings?

Then there are a few of the less quantifiable benefits such not being harassed should you be recognized in the airport. The privacy to work, talk, strategize, and make calls enroute. The chance to rest, think, and prepare. The ability to arrive unwrinkled and fed. No lost luggage or trying to stow your awkward carryon. Knowing you won't be delayed because the crew didn't arrive from another flight or that if there is a mechanical problem, a replacement plane will be ready within 2 hours max.

I am aware this all sounds elitist, but the math alone pays for the expense. The elitist perks make the expense all the more productive. Yet people get all worked up over this "obvious" corporate excess.  We aren't talking about private chefs in the executive dining room or even golf club memberships. These private flights make executives far more productive and are cost effective- meeting every accountant's definition of money wisely used. Despite fears of appearing to lavish CEO's, corporate jets have become widespread across all of corporate America because of their utility and cost effectiveness. As discussed previously, if people are outraged over CEO treatment, they ought to take legitimate gripes about ridiculous pay to the Board of Directors. Just because popular culture depicts private flights as the purview of the elite, rich and famous does not mean they are a case of burning $1,000 bills. Attacking the corporate jet is an appeal to emotion rather than evidence based criticism.

Ironically, all three Detroit auto CEO's say they won't return to D.C. this week by private plane. Ford CEO Mulally will drive the 521 miles each way. At nearly 9 hours each way, how much will that extra 15 hours cost Ford? When the others (presumably) fly commercial and book first class flights for three execs ($4,000) and hotels for each exec for extra two nights ($1,500), the difference is a mere $4,000 without even considering the value of anyone's time or condition. Better PR and $4,000 saved. Caving into Congressional/media pressure: priceless. 

*I chose $23 million as a pay example because this is what Alan Mulally, Ford's CEO, was paid in 2007 including stock options. His cash pay was around $5 million. Lest you think the mathematical justification is based on outrages compensation, using a more palatable CEO pay figure of $5 million yields an hourly cost of about $1,667- still easily a mathematically justifiable expense given all the many reasons to fly private.