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Purser: Corporate jets take a PR hit

It was a wince-making time for people in the general aviation industry – aircraft manufacturers, charter operators, lessors, shared-ownership providers.


March 26, 2009
By Richard Purser

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It was a wince-making time for people in the general aviation industry – aircraft manufacturers, charter operators, lessors, shared-ownership providers. It was Nov. 18-19 and the CEOs of the three U.S. carmakers were testifying before congressional committees, seeking $25 billion US in bailout money from taxpayers. But they attracted considerable derision from Senate and House politicos for having each flown from Detroit to Washington in his own company’s corporate jet (owned or leased).

They went away empty-handed, and when they returned for a second bout with Congress on Dec. 2 – with an increased request, to $34 billion US – they took care to drive to Washington in fuel-efficient company hybrid cars.
The November public relations gaffe was just a blip in the worldwide economic meltdown in which the auto industry is only one sufferer, albeit a giant one. But it was a signal to aviation executives not to get any idea that they might be immune from the storm.

And the storm is huge, and so is the mess that probably helped push President Barack Obama into office and which he, in particular, inherited. The weakening in U.S. financial regulation, even though the financial industry was increasing in complexity and decreasing in transparency, preceded the Bush years. But it was during the tail end of those years that the housing bubble burst and the present recession had its beginnings. That it was more than a recession and indeed a catastrophe became undeniable on Sep. 15 when the hapless outgoing U.S. treasury secretary, Henry Paulson, let Lehman Brothers investment bank fail.

Since then the story has been one of increasing job losses, a disastrous housing market, decreasing access to credit, falling consumption, fears of trade wars, and fear of a spiralling descent into a depression the like of which has not been seen in over seven decades.

Economists are unable to agree on how the world in general and the U.S. in particular can arrest the decline, and on how long it might take to do so. The only consensus is that things will get worse before they get better. Controversy in Congress over Obama’s “stimulus” approach shows that political opinion on economic strategy is bitterly divided.

So while we all bite our nails as we wait for the next moves, whither corporate aviation?

It is a sector that has never been an easy sell to the general public, which tends to regard corporate aircraft as playthings of the rich rather than as economically effective business tools. And indeed companies appear uneasy about their aircraft; they tend not to boast about them. Rarely if ever does a corporate aircraft bear the company logo. The days when a Hugh Hefner would emblazon the tail of his otherwise all-black DC-9 with a white Playboy Bunny are long gone. But there are valid security reasons for this reticence, just as there are valid security reasons for some corporations prohibiting their prominent CEOs from flying commercial.

In the wake of the November fiasco, General Motors was in the process of cutting its own seven-plane fleet to three; more recently, bad publicity forced bailed-out bank Citigroup to cancel a previous order for a new Dassault Falcon 7X. On the larger scene, Business Week reported in mid-December a glut of corporate jets coming onto the market. While private jet makers still have order backlogs, it said, “a plethora of pre-owned aircraft sits unsold,” with more than 1,300 on the block, up 63 per cent from a year earlier.
In the Jan. 10 Economist, Michael Boyd of the Boyd Group consultancy criticized the Detroit CEOs for not pointing out the value of corporate jets as time-saving tools. Because “they didn’t have the guts to defend their actions,” he said, business jets are now regarded as evil, “right up there with Saddam Hussein.” Boyd feared sales of new aircraft could fall as much as 80 per cent as companies rushed to unload their existing aircraft.

And the credit crunch makes financing for new aircraft difficult. But time is money to key executives, and as the hassle of commercial air travel increases, the demand to circumvent it will remain.

William Garvey, editor in chief of Business and Commercial Aviation, made a valiant public plea on behalf of the business jet in the Feb. 1 New York Times. Call up www.nytimes.com and search for The Mile-High Office. Read it. It will at least make you feel better.

Medical reasons have forced me to end my 16-year relationship with this magazine, so this column is my last regular contribution to Wings: rpurser@shaw.ca