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Defending Your Business Jet
Sitting behind a long table in front of Congress in November, the CEOs of Detroit's Big Three automakers had barely begun pleading for a taxpayer bailout when they hit an unexpected snag.
Without warning, the media suddenly became obsessed with the business jets that Ford's Alan Mulally, General Motors' Rick Wagoner and Chrysler's Robert Nardelli had used to reach Washington. Soon after the airplane story began making the rounds, the House Financial Services Committee hearings descended into a textbook example of public relations gone awry, proving yet again that corporate images have almost everything to do with perception and often little to do with reality.
"There is a delicious irony in seeing private luxury jets flying into Washington, D.C., and people coming off of them with tin cups in their hand, saying that they're going to be trimming down and streamlining their businesses," Rep. Gary Ackerman (D-N.Y.) told the CEOs. "It's almost like seeing a guy show up at the soup kitchen in high hat and tuxedo. It kind of makes you a little bit suspicious."
Another business aviation critic, Tom Schatz, president of Citizens Against Government Waste, said, "It appears that the CEOs of the Big Three auto companies simply don't get it. It's a slap in the face to taxpayers."
For the auto executives, things slid downhill from there as GM's Wagoner-apologizing under his breath for using the company Gulfstream to attend other meetings before appearing in Washington-walked away from an ABC News reporter. Compounding what had quickly become a PR nightmare, Ford's Mulally used the same tactic with the same ABC reporter after refusing to comment about his company's Gulfstream.
Later that day, the National Business Aviation Association (NBAA) started hearing from indignant aviation department managers who wondered why these Motor City CEOs had failed to defend a form of transportation they had come to admire as a company workhorse.
In government, moreover, few top officials shy away from employing business airplanes, the most significant user being the President of the U.S. himself. Both copies of Air Force One cost taxpayers hundreds of millions of dollars each year, but no one expects the President to fly Delta or United. Air Force One makes sense because of the need for efficiency and security.
Though similar needs justify corporate aviation, Ford and GM knuckled under to the firestorm of bad publicity and quickly closed their long-running flight departments the following week. Ironically, Ford once built an airliner (the Ford Trimotor) and GM had been in the vanguard of American companies that defined business aviation after World War II with its use of airliner-sized airplanes. Ford began operating business aircraft in 1925 and established its flight department in 1941.
During the Capitol Hill hearings, none of the three CEOs would have batted an eye had they been asked to defend recently updated robotics at a manufacturing plant or the addition of thousands of laptop computers to wirelessly connect salespeople to inventory data. Yet when asked to explain why they climbed aboard business airplanes to fly to Washington rather than take the airlines, they all offered only a deer-in-the-headlights response instead of pointing out that they could have easily wasted half a day-at shareholder expense-sitting around an airline terminal waiting for a one-hour flight.
Said Jim Haynes of The Aviation Group, a consulting firm, "The Detroit automobile CEOs should have taken a page from Lee Iacocca when he came begging for loan guarantees in the early 1980s. When the grandstanding congressmen suggested he sell his company's Gulfstream jet, he replied, 'OK, I'll sell it, but I will be damned if I know how I will run Chrysler's plants in small towns all over the USA. I guess I will just have to lease it back.' That's what he did, and he saved Chrysler."
What if you or one of your senior staff were confronted by a reporter or at a stockholder meeting about the cost of the business aircraft you use? Would you do better than the auto CEOs? Do you understand enough about company aircraft to calmly explain their value? Or like the auto executives, would you mumble, "No comment," and walk away from your inquisitors as fast as you could?
For years (if not forever) corporate users of business aviation have seemingly taken a vow of silence about the value their airplanes bring to them. That's a mistake. Instead, you should prepare yourself and others who use your corporate aircraft so that you can all speak truthfully and confidently about the benefits these important assets provide to your company.
"The only people who really understand the value of business aviation are the ones who use it," said Jeff Agur, managing director of the VanAllen Group, another aviation consulting firm. "To hide after something like this [the events in Washington] and hope it will all go away is simply not going to work."
Pat Dunn, a corporate pilot who spent 25 years flying for a major American communications equipment manufacturer, agrees. "Those auto executives realized pretty quickly that they'd stubbed their toes trying to avoid talking about their airplanes. But they were simply unprepared. We can't sit back and keep our fingers crossed any longer."
The only defense offered by one of the automobile industry spokesmen for the use of their corporate airplanes-before they dumped them-was that company regulations demand executives travel aboard corporate jets for security reasons. But they never explained why. In fact, corporate terrorism is a real problem that's a vital concern to business executives nevertheless.
In addition to personal security, there is corporate information security. Industrial espionage is not merely the stuff of novels. No one wants to discuss sensitive corporate information that might screw up a $20 million deal aboard an airliner full of strangers.
Then there is the value of time, a topic few C-level executives like to talk about openly, probably because explaining that an executive's time is worth $10,000 to $15,000 an hour raises eyebrows. Leaving the discussion of corporate pay rates for another day, we can assume that even a group of middle managers could well be worth thousands of dollars per hour. Put a CEO on an airliner with two or three cohorts and, with delays, those people could be away from the office for six to seven hours to complete an hour-and-a-half flight. Do the math. Delays and overcrowding will only get worse this year, say experts, because many airlines continue to reduce domestic capacity.
Consider, too, that once an airliner begins to taxi, passengers are completely out of touch until they return to the gate. Meanwhile, the executive's time clock keeps ticking.
It's also worth noting that it's not just CEOs who use business aircraft-far from it. A recent NBAA survey showed that 86 percent of passengers aboard business airplanes in the U.S. are "not a company's senior officials, but instead are mostly mid-level employees, including salespeople, engineers or other technical specialists."
Stanley S. Hubbard, chairman and CEO of St. Paul, Minn.-based Hubbard Broadcasting, summed up the benefits of business aviation this way: "Business jets, when used properly, are very important to many companies' ability to compete and prosper. Usable time is spent en route meeting with other company executives or clients, this as compared to having to wait in a check-in line an hour or two ahead of a commercial flight. When there is an emergency at a far-off plant or a customer needs immediate help, nothing can compete with the ability of a corporate jet to accomplish a mission in a timely manner. Some well-meaning people think of a business jet as a luxury, but for those who use a jet for business it's a vital tool in this highly competitive world environment in which we all live."
Executives also need to make the public aware that business airplanes contribute to the communities around their airports, noted Pat Dunn. "Consider the thousands of people in need of expensive medical care that business airplanes have transported free of charge," he said, "not to mention that business airplanes were some of the first machines on site after Hurricane Katrina in Louisiana or Ike in Texas. What about the Special Olympics that Cessna sponsors every year? They transport hundreds of special-needs kids for free."
One of the most stinging demands of the recent federal legislation to try to save the embattled auto industry was a requirement that the companies use no business airplanes, a stipulation that will add significantly to the cost of bringing the automakers back to profitability. The hypocrisy of failing to make similar demands before billions were handed over to Wall Street was not lost on some people. In a letter to House Speaker Nancy Pelosi, NBAA CEO Ed Bolen was quick to defend not simply his industry, but also the way of life business airplanes deliver, to a woman who is more than a little familiar with business aircraft. (Pelosi travels aboard military-operated versions of business airplanes in her role as speaker.)
Bolen said the bill's language "appears to prohibit the use of business aviation in all situations, including when it is the sole mode of transportation available to a business, or it is the most prudent and cost-effective solution to a given transportation challenge." This is a bit like the government telling Detroit to build more fuel-efficient cars, but not to use any new computers because that might offend people who don't have their own.
In a world gone crazy with excess, where trusted bankers are indicted for stealing billions from customers, people are angry. So we shouldn't be surprised that some people see airplanes as an example of corporate greed. "Couldn't you all have downgraded to first class or jet-pooled or something to get here?" one Congressman asked the auto CEOs.
Sure they could have. But companies are often managed by the hour-even by the minute at times-and these CEOs knew that as well as anyone, even if they failed to explain it. Airlines were never designed for that kind of turn-on-a-dime flexibility and never will be, which is why business airplanes exist in the first place.
By trying to maintain low profiles, those three auto executives made themselves the poster children for business aviation secrecy. Without a change to that strategy, five years from now, the results of the next media "exposé" of corporate aviation may well be the same. The VanAllen Group's Agur said we stand at the edge of an opportunity to transform the way people view the use of business airplanes. While we cannot educate the entire world about corporate aviation, business executives can draw a line in the sand today by going public with the solid data that supports their use of business aircraft.
Be prepared with your own data before the doubters come knocking at your next stockholders' meeting.
Editor's Note. The strings attached to the bailout money approved for the automakers in December included the divestiture of their business aircraft. Meanwhile, language requiring any companies receiving Troubled Assets Relief Program (TARP) funds to divest themselves of business aircraft was removed from another House bill, which specified amendments to the original TARP and was introduced in early January. As we went to press, there did not appear to be enough time for this bill to pass both the House and Senate before a procedural deadline expired and by default the President would receive authorization to allocate the remaining $350 billion in TARP funds without congressional restrictions. However, the Obama Administration itself may decide on its own to add restrictions on TARP money, which conceivably could include divestiture of business aircraft.