Dec 5, 2008

Business - Why the Big Three Should Fly Corporate Jets

Bill Saporito

When the heads of the Detroit Three auto companies return to Washington this week to testify before Congress about their restructuring plans, they won't be traveling on their corporate jets. Not after the story broke on Nov. 19 that they had flown their "luxurious" aircraft to Washington to beg for $25 billion in loans to keep their companies afloat. Official Washington was outraged at the extravagance. Columnists and comics were ever so grateful for the gift. "I mean, couldn't you all have downgraded to first class or jet-pooled or something to get here?'' whined Representative Gary Ackerman of New York.

This from a legislative body that has raised money-wasting to an art form. It wasn't too long ago that members of Congress often mistook corporate aircraft for the Congressional Airline. "Hitching" a ride on corporate jets was such a regular event, and so abused a privilege, that eventually the solons had to stop themselves. There was nothing to stop Senator John McCain from using his wife's jet to make dozens of campaign stops this year, contravening but not breaking election laws because he, or at least Mrs. McC, "owned" the aircraft through a family company.

It was pointed out that the three could have flown commercial that morning for something like $212 each. But let's do the math. Three CEOs being paid millions a year each are going to Washington on a business trip to try to save $300 billion worth of sales and 3 million jobs — and they are supposed to risk all of that on Northwest or US Air, a.k.a. Northworst and Useless Air, formerly Allegheny a.k.a. Agony Air? I see the connection: you fly to D.C. on a previously bankrupt airline as you contemplate the bankruptcy of your own company. The experience should be enough to scare you into devising a scheme to save your own company from such a fate. But wouldn't this be a case of America's worst-run manufacturing companies relying on America's worst-run service companies? There'd be a 50% to 75% chance of the CEOs showing up on time. What are you supposed to do, call Congress and tell them you're on a gate hold?

ABC milked the story for all it was worth, as any news organization would do. But ABC's VIPs are not strangers to corporate jets. This week there's ABC's Charlie Gibson interviewing George Bush on Marine One, the helicopter the President uses to get out of town to Camp David. You think Charlie took Amtrak to Washington to meet the President? Even if he did, it's fairly routine for the networks to ferry their precious anchors around by private jet these days. (And while we're at it, why can't Bush take a carpool to Camp David? This nation isn't exactly flush, and he's not exactly essential any more. Doesn't the Secret Service own an armored Suburban?)

And don't expect the honchos at Walt Disney Co., which owns ABC, to be arriving for the Obama Inaugural festivities via United or American. Disney, like any self-respecting media company, owns or leases aircraft to get its own VIPs around. They're not going to let Miley Cyrus slum it on Southwest. The privileged would include Bob Iger, Disney's CEO. The company spent more than $65,000 in 2007 on Iger's personal travel aboard corporate aircraft, and it requires him to fly corporate when he's on business. Disney extends the private-jet perk to other top officers as well as directors attending meetings and other company events. Nice. Yes, Iger is having a way better year than the Detroit Three — would you rather own High School Musical or Buick?

But the issue here is that most of the Fortune 500 boards require the boss to fly in the corporate jet. And why not? What's the point of achieving the big corner office, knifing all those people on your way to the top, if you don't have the ultimate travel ticket? You might as well stop at divisional vice president. That should be no less true for the Detroit Three. Ford boss Alan Mulally left an aircraft company, Boeing, to take the top job at the auto company — the man is used to big jets.

What really ticks us off is not that the Detroit Three flew private on a begging mission. It's that we have to fly commercial, and they don't. Anyone who has spent time seething at an airport hub, squished into a middle seat of a 737, or paid $2 for a bottle of water and some attitude has nothing but venom for those who can avoid it. The corporate fleet has mushroomed over the years as commercial service has deteriorated. Going from Grand Rapids, Mich. to Jackson, Miss.? That will only involve an entire day shoehorned into "regional" jets apparently made in a region where all the people are 4 ft. 6. It was the reduced service to secondary markets that prompted some corporations to take action. Toilet-paper and Kleenex maker Kimberly-Clark, for instance, created an airline, Midwest Express, in 1984 partly to compensate for the lack of service in Neenah, Wis. (its headquarters at the time) and to optimize the use of its owned or chartered planes. Midwest Express quickly became known for top-rated service, unsurprising coming from a company that knew a little bit about taking care of customers' tushes.

Invariably, the jets that CEOs ride — Gulfstreams, Citations, Lears — are described as luxurious by reporters who probably have never been on board. Good guess, though. Being a business journalist, I've been on a number of corporate chariots, ranging from Nike's (think new, cushy Air Jordans with wings) to Wal-Mart's (think used Chrysler minivan with wings.) Typically, you are offered a ride-along with the CEO to watch the big boss in Action Mode. I'm not really sure if this is designed to impress or if it's simply an effective use of the CEO's time. After all, he's got to get from A to B, so he can use this otherwise dead period to fill some idiot reporter's head with stuff. The joke's on them, though, because on a corporate jet, the subject is trapped. He can hardly say, "Well, I'd like to talk to you a little longer but I've got a meeting across town." Not without a ripcord.

The best thing about flying corporate isn't the comfy seats or the jumbo shrimp, or even the ego massage. The best thing about a corporate jet is that it's not a commercial-airline jet. The best thing is avoiding long airport-security lines and having to simultaneously untie your shoes, take off your coat, get a laptop out of a carefully packed bag and walk at the same time; it's avoiding the crummy, overpriced airport food, the packed planes, the overstuffed overhead bins and the frazzled, overworked crews. And being No. 175 for takeoff. When you fly corporate, you are driven up to the plane, you get in, and when everyone is ready, they tell the pilot to go. And then you do. That is real, unadulterated luxury.

Those complaining about the extravagant cost of winging CEOs around the world are also forgetting about the extravagant cost of CEOs. My own company, Time-Warner, at one time owned five G-5s, a couple of which were used to haul movie stars wherever it was they needed to be hauled to. They certainly were not for journalists; I've been on a company jet exactly once in the last 10 years. The shareholders paid Time-Warner CEO Jeff Bewkes $19.6 million last year. Based on a 40-hour week (and he'd better be working more than that), his hourly cost is about $9,400 — I'm guessing that's beyond the hourly run rate of a G-5. Bewkes has actually been known to fly commercial to Los Angeles. If he takes United Flight 29, he's on time 70% of the time. If he's not on time, he's cooling his heels at JFK, burning the shareholders' money. My money. So take the corporate jet, Jeff. We're not paying you to sit around airports reading People.

As for the Detroit Three, they don't have a choice this week. The weenies at Ford announced they were selling two jets (meaning, of course, that lower-ranking execs will be flying Northwest to the plant in Valencia) and driving a Ford Escape hybrid to Washington. GM has caved completely and shut down its air force, throwing 50 people out of work. (Thanks, Congressman Ackerman!) Maybe the President should send his helicopter for the GM honchos. He doesn't really have use for it now. And when some truly desperate Americans need a dramatic rescue, sending in Marine One isn't a bad idea at all.

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