|MSNBC.com/Pittsburgh Business Times|
Money, image move companies away from corporate jet use
Apr 12, 2009
It's a matter of money and image.
Corporate jet travel is down nearly 25 percent since December, according to a National Business Travel Association survey of corporate travel managers conducted last month, as many companies try to distance themselves from corporate travel.
Several companies, including PNC Financial Services Group Inc., Alcoa Inc. and U.S. Steel Corp., are making efforts to cut back.
Last year, U.S. Steel ordered two new aircraft to replace existing planes in its fleet of four, but cancelled the order early this year.
"They were part of a longer-range plan to move to a smaller, more-efficient configuration over time," said spokeswoman Erin DiPietro.
But "due to the market conditions for used aircraft, this plan has been deferred."
At Alcoa, which maintains a hangar for its aircraft at Allegheny County Airport, the company has asked all of its employees to cut down on travel to slash costs.
"We're also trying to take steps to minimize the travel of executives,"
said Alcoa spokesman Kevin Lowery.
This year, instead of going through with a planned annual meeting in Florida, Alcoa replaced it with a series of online meetings, he said.
Alcoa, which has indicated in a proxy that it uses the jets "as a matter of security," owns one jet and co-owns three others.
Often, companies' boards of directors will require that top leadership and their families fly charter for security reasons. For public companies, such conditions are often spelled out in proxy filings that detail executive compensation.
Executives make up a small percentage of the business at Corporate Air LLC, said Mike Vargo, a spokesman for the Allegheny County Airport-based company. Nevertheless, those that fly privately don't deserve the bad rap that hovers above them, he said.
"Can you imagine an executive that makes $5,000 an hour and 30 percent of commercial airline traffic is delayed," he said.
Right or wrong, executives' time is worth a lot of money, and from that standpoint "it's actually cheaper for them to use private planes," Vargo said.
In fact, owning a corporate jet has become even cheaper in recent
months: Prices for used aircraft have fallen by up to 30 percent, said Ron Corrado, owner of Washington, Pa.-based Skyward Aviation, an aircraft sales, management and charter company.
Corrado said he's noticed a number of corporations trying to sell off their jets, which has caused such a spike in supply that aircraft manufacturers are slowing production to a near halt.
Kansas-based Cessna Aircraft Co. announced in January that it will lay off around 4,600 employees in 2009, citing lower demand for planes.
Canadian aircraft maker Bombardier Aerospace said on April 2 that its rate of cancelled orders contributed to a decision to lay off 3,000 workers.
So the market may be tough for PNC, which is attempting to unload National City's corporate fleet of three planes, which PNC acquired in a Dec. 31 takeover.
PNC is keeping its own two aircraft, said spokesman Fred Solomon.
But rules for their use are changing this year. The company's March 16 proxy states that PNC executives James Rohr, William Demchak and Joseph Guyaux will have to reimburse the company for all private aircraft use to the maximum allowable amount under FAA regulations.
The executives will have "general access to our corporate aircraft but will no longer be entitled to any such use as a perquisite," the document states.
No Plane No Gain: Sampling of 2010 Coverage
Since the launch of the No Plane No Gain advocacy campaign, a concerted effort has been made to deliver the message about the importance of business aviation through national and local news outlets. This sampling of national and local television coverage in 2010, highlights the campaign's effectiveness in communicating the industry's importance.
NBAA's Bolen on Fox Business Network
Click here to see Ed Bolen, President and CEO of NBAA, in an interview on Fox Business Network
NBAA's Bolen on DC's Newschannel 8
In an interview with Newschannel 8, Bolen explains that "... business aviation is prudent, cost-effective, and oftentimes, the only way to get where you're going."