"Scorn" Against Big Three Automakers Hasn't Spread To Wall Street

The Associated Press has "revealed" a dirty little secret about corporate America. Despite a massive outcry from lawmakers on Capitol Hill, several large businesses are still using business jets for corporate travel... even though it's increasingly considered improper to do so.

In an "AP Impact" article/commentary that ran this weekend, Stevenson Jacobs notes a number of Wall Street companies which are beneficiaries of the US government's massive $700 billion Troubled Assets Relief Program (TARP) bailout scheme have scaled back their corporate aircraft fleets somewhat, but most are still flying those planes when they need to.

For example, when a number of executives need fast transportation to their destination... and they don't wish to lose valuable work time traversing the miasma of commercial airlines.

As ANN reported, CEOs of General Motors, Ford and Chrysler made a PR blunder last month when they each flew to Washington, to beg for government bailout money, onboard their companies' business aircraft. "Couldn't you all have downgraded to first class or jet-pooled, or something, to get here?" New York Congresman Gary Ackerman asked rhetorically.

And rhetoric is the operative word here... since most corporate execs use business jets for the same reasons such high-profile lawmakers as House Speaker Nancy Pelosi (D-CA) use them: it makes more sense for those people to efficiently use their time in the air -- meeting with staffers, for example, rather than wasting two hours reading SkyMall -- and often, they need to arrive at their destination sooner, and more securely, than a commercial airline can muster.

Given their precarious financial positions, those Big Three CEOs felt it wasn't advantageous to point those facts out. In the end, each kowtowed to Congress... announcing they would slash their corporate jet fleets. Each CEO then wasted two days driving from Detroit to DC for a second round of hearings earlier this month.

While he does make note of the time savings corporate aviation provides, Stevenson also notes "Wall Street's reliance of the rarified mode of travel has largely escaped the scorn poured on the Big Three automakers."

That doesn't mean the industry hasn't felt the sting, however, as several distressed companies have taken heed of the antipathy against corporate aviation.

Insurance giant AIG maintains one of the largest corporate aviation fleets around, but it sold two of its jets earlier this year to raise badly-needed cash. Since the automaker fracas, AIG has sold or cancelled outright other orders for new jets.

"Our aircraft are being used very sparingly right now," AIG spokesman Nicholas J. Ashooh told the AP. "I'm not saying there's no use, but there's very minimal use."

Beleaguered investment firm Citigroup -- which is among five financial companies that have received a combined $120 billion in TARP funds -- has also scaled back operations for its Citiflight aviation wing. Company spokeswoman Shannon Bell said just a "limited number of executives" are allowed to utilize Citi's fleet of four jets and a helicopter. "Executives are encouraged to fly commercial whenever possible to reduce expenses," she added.

Though most declined to offer specifics, there's evidence other companies like Wells Fargo, Bank of America and Morgan Stanley have also trimmed back their use of business jets. Stevenson correctly notes "many US companies are giving up the perk," and adds the market for used private aircraft had increased 52 percent as of September 2008.

Patrick McGurn, special counsel at investment advisory firm RiskMetrics, says the outcry comes from the perception among lawmakers and the general public that corporate jets are flashy, opulent toys, that executives use not for business... but to jet off to faraway tropical destinations, TARP monies burning holes in their pockets.

"The personal use of these planes is virtually indefensible at this point," McGurn said. "Once you're on the federal dole, the pressure is going to become immense on these firms to cut these costs."

Gulfstream communications director Robert Baugniet begged to differ. "What people don't understand is that business jets are mobile offices," said Baugniet. "If time has any value to you, then you'll understand why people use business jets."

FMI: Read The Full "AP Impact" Article, www.nbaa.org