IT'S NOT WRETCHED EXCESS--IT'S A NECESSITY
During the 1980s, the business jet was vilified as a vehicle of corporate conspicuous consumption. Who can forget the tales of Ross Johnson ferrying his dog around on the RJR Nabisco jet or Mary Cunningham's insistence that the bulkhead of Morrison Knudsen's plane be redone in gold-leaf flowers?
As shareholder backlash against such excesses gathered force, many executives decided that flying commercial wasn't so bad after all. The number of U.S. companies operating their own aircraft peaked in 1986 at 7,310 and fell through decade's end to a low of 6,584 in 1991, according to Aviation Data Service Inc., an industry consultant. One might have thought that the 1990s vogue of downsizing would have finished off the corporate jet for good. Instead, the number of companies using business jets has been accelerating steadily since 1992, hitting a record 7,480 this year.
In part, that's because generally robust economic conditions and the increasing globalization of business have provided an enormous boost to plane manufacturers. But Gulfstream, Bombardier, and others have also have aided their own cause by shifting their marketing focus. Recognizing that an overt appeal to CEO vanity would no longer fly in an era of cost consciousness, manufacturers have recast the corporate jet as a money-saver. No less important, they've also capitalized on the mania for penny pinching by selling jets to time-share concerns that let companies own just a piece of a new plane for far less than the whole thing.
Of course, none would deny that an executive jet remains a high-status luxury much coveted by the corporate elite. But to help convince skeptical boards that it is also a necessity, the industry now is getting down to particulars. Last fall the National Association of Business Aircraft, a leading trade group, began selling a newly developed software package--Travel Sense--that enables corporate flight departments to cost out of every single trip and figure out in advance whether it would be cheaper to take the company plane, charter an aircraft, or fly commercial. ''It's been a real eye-opener,'' says a senior officer of one of the 260 companies now using Travel Sense. ''I do think that the use of private planes is increasingly economic.''
The financial argument for corporate jets has been bolstered by wrenching changes in the airline industry, which have driven the price of a business class ticket up precipitously and cut service, especially to second-tier cities. Chief executive salary inflation helps too. The time saved thanks to the undeniable convenience of the private jet is far more valuable when the CEO it carries is pulling down $20 million a year.
Of course, you won't hear CEOs advocating the purchase of a G V or Global Express on the basis of their fat salaries--or on any other basis, for that matter. A jet is a hard thing to hide, yet most companies respond to questions about them with the same tight lipped ''no comment'' usually reserved for a scandal in the executive suite.
Although corporate jets haven't figured prominently in the proxy battles of the 1990s, a belief in their frivolity remains an article of faith among activist shareholders. ''I don't know of a single person who thinks of the corporate jet as a good thing,'' says Nell Minow, a principle of Lens Inc., a shareholder rights group.
Faced with that kind of skepticism, both Gulfstream and Canadair are moving beyond the fat-cat class by embracing the concept of time-sharing, or shared ownership. For a few million dollars a year in fees, customers of time-sharing companies get an equity interest in a plane and the right to use it for a set number of hours.
Bombardier owns a piece of JetSolutions, a time-sharing firm founded in 1995. Gulfstream has gone a different route, fashioning a marketing alliance with NetJets. Founded in 1987, NetJets is the largest and oldest time-sharing company. It also has become far and away Gulfstream's single biggest customer, having ordered 33 planes (31 G IVs and 2 G Vs) since 1995.
By Anthony Bianco in New York
Updated June 15, 1997 by bwwebmaster
Copyright 1997, Bloomberg L.P.