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Corporate Jets Adding Mileage to Bottom Line

Private planes aren't just for millionaire executives these days. Rank-and-file employees are getting on board as more U.S. firms discover that owning planes actually makes financial sense.

May 16, 1999|MARTHA L. WILLMAN | TIMES STAFF WRITER

The private jet is no longer the exclusive status symbol of the most privileged class.

Just ask Jere Hess, director of public relations for Peavey Electronics in Meridian, Miss. The company's 14-passenger jet whisks employee teams weekly to conventions and joint venture projects across the nation and the world.

"We couldn't do business without it," Hess said. "It's as simple as that."

One study found that 70% of all travelers aboard private business aircraft are members of middle management, technicians or worker bees.

"People who were riding the airlines just three years ago are now buying their own planes," said Clay Lacy, a veteran operator of private aviation services at Van Nuys Airport.

The seemingly sybaritic outbreak had an unlikely origin: the last recession.

As the economy soured at the beginning of the '90s, businesses looked for ways to turn the screws, scrabbling for any way to sharpen the competitive edge, slash costs and increase efficiency.

Their counterintuitive discovery: private jets.

Far from being merely the ultimate indulgence for coddled big shots--although they certainly are that too--many businesses found that private jets actually contributed to the bottom line, paying for themselves many times over.

So when the current economic golden age took off, business took wing.

As one chief executive put it: "If you think you'll make money and then buy an airplane, you just don't get it. You buy an airplane to make money."

Indeed, even multibillionaire investment guru Warren Buffett, who once carped about the sins of the corporate jet, not only now owns his own plane, but last year acquired Executive Jet, the leader in the latest jet fad: time-share ownership.

Buffett drew gasps last fall at the annual convention of the National Business Aviation Assn. by ordering more than $3 billion in new aircraft for the Executive Jet operation.

"The steady expansion of business flying has been dramatic," said David M. North, editor-in-chief of Aviation Week and Space Technology, who also credits Buffett's turnabout as having a major impact on the business flying industry.

The Federal Aviation Administration believes business jet travel is steadily rising, spokesman Hal Price said, though the agency does not track the number of private flights for business purposes.

But numbers compiled by industry groups, including the National Business Aviation Assn. and the General Aviation Manufacturers Assn., show a rise in both the number of business aircraft orders and the number of companies operating jets.

Aircraft makers announced orders for $5.9 billion in business aircraft in 1998--an all-time annual record and a 25.7% increase over the previous year, according to the General Aviation Manufacturers Assn.

Allied Signal Aerospace of Phoenix, which provides annual forecasts on demands for new business jets, predicts orders will remain at near-record levels during the next 10 years, approaching 6,500 aircraft valued at nearly $78 billion.

Perhaps most tellingly, the number of U.S. businesses operating aircraft rose from 6,584 in 1991 to 8,236 last year, according to AvData Inc. of Wichita, Kan., which monitors business aviation.

Who is flying these planes? Two-thirds of Fortune 500 companies own and operate aircraft, but the "vast majority" of companies that own jet or turboprop planes are small or medium in size, according to a 1997 Lou Harris & Associates study funded by the National Business Aviation Assn. Most own a single plane, not a fleet.

The study also said 49% of private business plane passengers were in middle management and 19% were members of technical or support staffs; 19% were among the ranks of top management.

The idea that business jets are ferrying shirt-sleeved workers--and not corporate bigwigs--is met with skepticism by William Yost, a professor of operations and technology management at UCLA's Anderson School.

"The boss--the big man or woman--doesn't go alone. They take an entourage, all the folks who carry the bags. The percentages are going to be skewed," Yost said.

He was also unconvinced that the higher cost of private jet travel--$1,200 an hour and up to charter, at least $10 million to buy--could be justified.

"It's not easy to say it's cost-effective. It's not at all clear," he said.

Advocates of private jets say the actual cost has to be weighed against other factors. The climate aboard commercial airliners is often counterproductive, even hostile, they say. Conversations can be monitored by competitors; delays and transfers are common; disruptions prevent work.

Two to three decades ago, fliers aboard airlines typically wore suits, noted Drew Steketee, a senior vice president of the 340,000-member Aircraft Owners and Pilots Assn., the nation's largest representative of general aviation.

"Now we have people in shorts, screaming kids, knapsacks, bowling balls in the luggage compartment overhead. You're not going to get any work done on the plane.

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