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End of the corporate high life

Corporate America, humbled by taxpayer bailouts, is ditching the company jet

By Stephen Foley in New York
Thursday, 4 December 2008

Corporate jets have long been a source of public relations trouble for
the executive class, particularly during economic downturns or when the company runs into trouble

Corporate jets have long been a source of public relations trouble for the executive class, particularly during economic downturns or when the company runs into trouble

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 behoves 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 yesterday from Motor City to Washington, where they will plead for a $34bn (£23bn) government hand-out this morning, 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 $306bn in potential losses on to the US 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 not just for business trips but also on holiday. For the American public, bitter at forking out more than $1trn 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 $45bn from the bailout fund and promised more if necessary.

Meanwhile, the brochures open a window on the luxury on offer to travelling executives, showing the plush, carpeted interiors with space for 12 passengers, split into three cabins.

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. "Over the past eight years and to support this objective, Citi has reduced its number of aircraft by two-thirds."

Corporate jets have long been a source of public relations trouble for the executive class, particularly during economic downturns or when the company runs into trouble. 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, to the detriment of fellow shareholders, 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 to the South Pacific island of Bora Bora 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 as part of a cost-cutting plan, as a quid pro quo for getting taxpayer loans.

"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 $22.8m 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 Mr Mulally moving to south-east 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."

Mr Mulally and Bob Nardelli of Chrysler were making the same journey yesterday.

Ed Bolen, president of the National Business Aviation Association in the US, says people don't fully appreciate the security reasons that justify a company jet. Many companies, fearful of the threat of kidnapping, tell the top executives not to always drive the same route home. And there is the problem of industrial espionage. "People carrying corporate paperwork and traveling through public places always have to ask: who is capable of swiping a bag, who is reading over my shoulder?" he said.

Plane speaking How the other half fly

*Roman Abramovich Boeing 767 (33 seats)

A Boeing 767 normally holds 180 passengers, but his cost about £56m and is not for plebs. He has spent millions more customising it; under the sleek external paintjob is an interior of walnut, mahogany and gold, with plasma screens and plush bathrooms.

*Donald Trump

Boeing 727 (23 seats)

This 1968-vintage Boeing 727-100-series has been altered to hold 23 in luxury: leather armchairs, gold-plated seatbelt buckles, oil paintings and crystal lamps. The "Trump" logo on the craft's side is 30ft and made of 23-carat gold leaf. The plane is valued at about $50m.

*The Sultan of Brunei Boeing 747 (430 seats)Costing $100m, his jet has been fitted with washbasins of solid gold and Lalique crystal at an additional cost of $120m. The 747-400 is his largest aircraft. He owns two Airbus A340s and a 767.

*Tom Cruise

Dubbed "emissions impossible", the Top Gun star, a licensed pilot, owns three jets – including a recent £10m purchase for his wife, Katie Holmes. He owns five planes, including a $14m Lear Jet and a Second World War P-51 Mustang worth $1m. There's a story, not denied by Cruise, that he sent a jet to pick up groceries for Katie – at least the veg was organic.

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15 Comments

Extreme examples of the fact that money and good taste do not go hand-in-hand.

Posted by Stephen Mattinson | 04.12.08, 21:42 GMT

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I have been listening for years to the bellicose pontificating hot air from the "Conservative" movement, first on the Reagan agenda, and continuing through the Bush agenda, with full Democrat complicity in between when Bill Clinton traded us down like an overused third rate hockey club for cheaper Asian products. What we have found as a cornerstone of Conservative policy is that markets are allowed to get away with anything they want while the losses are socialized. So much for controlled government spending and their supposed hatred of socialism. All done in the backdrop of a militant society bent on everyone's destruction, especially its own.

And the saga has not stopped. Barely a day goes by as the damage done by the Bush agenda wreaks havoc on "Main Street" as our media so "endearingly" puts it. The utter contempt the Right has had toward the general population is astounding, self-destructive, and misinformed to the point of total BS. Down we go...

Posted by ontarget | 04.12.08, 14:08 GMT

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So they get multimillion bonus payoffs whilst laying people off left right and centre as corporate value plummets and they get injections of cash afterwards. I’ve seen this several times and I don’t know whether to laugh or cry, I reach for the phone to ask my GP for a tranquilizer prescription because I must be going bonkers as I prepare yet another employment submission.

Posted by SolVoxUno | 04.12.08, 14:02 GMT

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So they get multimillion bonus payoffs whilst laying people off left right and centre as corporate value plummets and they get injections of cash afterwards. I’ve seen this several times and I don’t know whether to laugh or cry, I reach for the phone to ask my GP for a tranquilizer prescription because I must be going bonkers as I prepare yet another employment submission.

Posted by SolVoxUno | 04.12.08, 14:01 GMT

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I believe you will be very hard pressed to find an iota of sympathy from any work dependent, newly jobless, homeless etc. Cries of, ‘it’s not really their fault, they could nothing about it,’ are lame excuses. When the average worker makes mistakes they find themselves officially reprimanded and possibly out on their backsides, but these barely inept for want of a more compassionate term continue near undaunted to patch and grab where they can. Surprising as it may seem there are in fact a healthy percentage of non academic internationally experienced work dependent individuals who have stated for years about the business philosophical direction and investment change required for the long hall, But I guess you have to be really educated to balls it up this well.

Posted by SolVoxUno | 04.12.08, 13:44 GMT

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No pity for any of them. In the case of the "F "company , for years they ( Detriot) have ridden on the back of the profits generated by the know how and hard work of thier Engineers and Production staff in the European parts of their operation and were quite happy to slyly sell key parts of PAG ( LR , Jaguar, Aston Martin, )when it suited.
Now there's no one to blame! If they ( the CEO's of the "Big three")
were really serious about thier commitment why did'nt any of them volunteer to go work in one of their production plants .
Its very easy to say "I'll work for a dollar " when your on the money they are , some how I don't think you'd get that offer from any of the line Workers in Saarlious, Dagenham , or in Opels ( GM) case Russelsheim or Ellesmere Port. Should have forced them to do the 525 miles in Toyota prius but that would be too kind and they would'nt get it any way, i would have booked em a minicab from some Dodgy firm in Hackney!

Posted by Dean | 04.12.08, 12:31 GMT

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Something perverse in me wants to know what kind of jet arrangements Al Gore has for his global galavanting.

Posted by Bob | 04.12.08, 11:58 GMT

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wow...Simon Kelner must be pissed off.

Posted by James K | 04.12.08, 11:15 GMT

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Spare a thought for the pilots and cabin crew though. They aren't rich, by any standards, but they're all losing their jobs too.

Posted by Rosie Glendower | 04.12.08, 11:12 GMT

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Poor Babies,,,
It must be hard to be or become a commoner isn't it ?
You spend and spend and spend till the money runs out and my question is WHY did all these various goofs do this ?
Why does someone thing they are worths millions per Year ?

Why are these jerks still working
Why aren't they in jail for stealing
Why do you all allow this to continue

They have no respect for you or to society
It's the ME generation !!!

Take their personal assets and throw them out on the street

Posted by Cruiser | 04.12.08, 10:50 GMT

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15 Comments

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