The GM Jet

[Greebo]

So there's a broohaha about GM and other Detroit auto execs spending thousands on private transport to go ask DC for money.

This is not about that.

However, in some discussions elsewhere, some questions about the accuracy of the report have come up, and some other ancillary questions related to the cost of the trip and the cost effectiveness of the trip.

I figured, THIS was the place to ask...

Question 1: Is the estimated $20k for a round trip remotely accurate? Seems high to me.
Question 2: Does GM have a pilot in permanent employ, or hire from a service?
Question 3: Does GM have its own hangar?
Question 4: Does GM have its own fueling station?
Question 5: Do they keep a staff of aviation mechanics on payroll, or hire out for maintenance?
And finally, this one is from me: Does GM have its own friggin airport?

Again - this isn't political, this is just fact seeking, so please keep it non political.

Thanks!

 

[Dean]

Not sure how GM does it, but most company owned aircraft in the St. Louis area are managed by another company(i.e. Aero charter, Jet Corp, etc) these companies supply the pilots and take care of all supporting staff for the aircraft. When the owning company is not using it, it is available for charter. My CFI works for one of these companies and flies several different jets and Turbo-props. It seems to be a win-win for both parties.

 

[mikea]

Our Corp Air Force had 2 jets and 2 choppers and a whole flight support organization, with my guess, 12 people, 4-6 pilots in a hangar building at Midway shared with another company, but with dedicated offices.

Give the CEOs some slack, though. It's not that they dont' want to fly coach. The board of directors ORDERS them that they can only fly on company jets.

 

[wsuffa]

So there's a broohaha about GM and other Detroit auto execs spending thousands on private transport to go ask DC for money.

This is not about that.

However, in some discussions elsewhere, some questions about the accuracy of the report have come up, and some other ancillary questions related to the cost of the trip and the cost effectiveness of the trip.

I figured, THIS was the place to ask...

Question 1: Is the estimated $20k for a round trip remotely accurate? Seems high to me.

That's certainly in the realm of possible, depending on the type of jet. It's 4 hours RT, at $5K/hour. For a G-IV, entirely possible.

Question 2: Does GM have a pilot in permanent employ, or hire from a service?

Most corporations that have a fleet (and I believe GM, like any other large corp has a fleet) will have staff pilots. If for no reason other than sensitive discussions take place on the planes and they want to be sure no one else gets a whiff of what is discussed.

Question 3: Does GM have its own hangar?

In Detroit? Would YOU park a $40 million car on the street there?

Question 4: Does GM have its own fueling station?
Question 5: Do they keep a staff of aviation mechanics on payroll, or hire out for maintenance?

probably not to both questions, but they probably do have a contract. Even AT&T contracted that stuff out.

And finally, this one is from me: Does GM have its own friggin airport?

No.

Again - this isn't political, this is just fact seeking, so please keep it non political.

Thanks!

at one point, the car companies were going to band together to form a charter company into which they'd contribute their aircraft. Not sure that ever happened.

 

[TMetzinger]

As noted earlier, one of the reasons corporate flying exists is because it renders travel time for high-cost employees (execs, senior management, senior techs/scientists) into productive time, because company business can still be transacted while in flight. This translates into significant savings - a team going out to make a pitch to a customer can refine their presentation on the way, something they couldn't do while flying commercially.

Combining the cost savings with the greater efficiency/time savings of all the airports available and flexibility in scheduling, and having a private jet can quickly become a positive item financially.

That said, it's up to the companies to run their flight departments in a way that maximizes this sort of usage, and minimizes usage that doesn't result in net benefit to the company.

 

[Everskyward]

According to this, it appears as if GM has its own flight department which doesn't surprise me a bit. Most big (and some much smaller) companies either operate their own airplanes or have a management company operate the airplanes for them. Others have shares in fractionals like NetJets. If the company uses their fleet in a sensible way it can be a big benefit to them for the reasons that Tim outlined.

The Corporate Angel Network recognized four corporate aircraft operators here yesterday as 2008 Quarterly Corporate Angels for their exceptional contributions to making life a little easier for cancer patients. The four aircraft operators are Air Frantz, Meredith Corp., Bank of America and General Motors.

 

[wabower]

This is not about that.

However, in some discussions elsewhere, some questions about the accuracy of the report have come up, and some other ancillary questions related to the cost of the trip and the cost effectiveness of the trip.

I figured, THIS was the place to ask...

Question 1: Is the estimated $20k for a round trip remotely accurate? Seems high to me.
Question 2: Does GM have a pilot in permanent employ, or hire from a service?
Question 3: Does GM have its own hangar?
Question 4: Does GM have its own fueling station?
Question 5: Do they keep a staff of aviation mechanics on payroll, or hire out for maintenance?
And finally, this one is from me: Does GM have its own friggin airport?

Again - this isn't political, this is just fact seeking, so please keep it non political.

Thanks![/quote]

Within the last year or so, five GM jets were parked at Million Air KADS at the same time. Most were Gulfstreams. I have flown contract (fill-in for sick, vacaction, recurrent training, etc.) for a number of large public and private companies that operated G-V's. They normally fill the slots with staff pilots, but occasionally need outside support.

For a large company to have a fleet of airplanes and 30-40 pilots is not unusual. Verizon had over 60 a while back. They all have in-house maintenance personnel too, although many send the airplanes to Savannah or other service centers for heavy maintenance.

A support staff of dispatch/scheduling, travel planning, admin and other support people are also employed. As you might imagine, in any downturn the flight department has the honor of being the initial sacrifice.

So there's a broohaha about GM and other Detroit auto execs spending thousands on private transport to go ask DC for money.

 

[Skip Miller]

As noted earlier, one of the reasons corporate flying exists is because it renders travel time for high-cost employees (execs, senior management, senior techs/scientists) into productive time, because company business can still be transacted while in flight.

They have to justify it with this and other reasons. Back in the 1980s I worked for a large insurance company that had a G II-1/2 (G-2 with G-3 wing), plus an old Sabreliner and a S-76 helicopter. We were told that the fully allocated cost of the G2.5 was higher than if we had bought each seat a first class ticket on commercial air.

That is why the empty seats were available to us peons on a space available basis!

-Skip

 

[wsuffa]

As you might imagine, in any downturn the flight department has the honor of being the initial sacrifice.

Not necessarily, IME. First, exec benefits are one of the later things cut. Second, much of the flight dept expense is fixed. Third, there are other expenses that can be cut a LOT faster (like advertising, marketing, discretionary capex, product development, etc, etc).

 

[wabower]

Exec benefits cut before the flight department takes a hit? When?

Not necessarily, IME. First, exec benefits are one of the later things cut. Second, much of the flight dept expense is fixed. Third, there are other expenses that can be cut a LOT faster (like advertising, marketing, discretionary capex, product development, etc, etc).

 

[TMetzinger]

They have to justify it with this and other reasons. Back in the 1980s I worked for a large insurance company that had a G II-1/2 (G-2 with G-3 wing), plus an old Sabreliner and a S-76 helicopter. We were told that the fully allocated cost of the G2.5 was higher than if we had bought each seat a first class ticket on commercial air.

That is why the empty seats were available to us peons on a space available basis!

-Skip

You (or whoever told you that) are/is missing the point. You can't do company business, even in first class. The private jet lets the folks do meaningful work.

A private jet will never be cheaper than even first class, comparing seat costs. But compare the cost to the company of the CEO and one other exec being minimally productive in first class, or working in a private jet, and the private jet becomes cost effective, particularly on long hops, like visits to Europe or Asia.

 

[Henning]

Exec benefits cut before the flight department takes a hit? When?

I believe he was refering to the flight department as an exec benefit.

 

[Everskyward]

People's image of what goes on in company jets usually consists of top execs going to posh resorts on the stockholder's dime. While a fair amount of this takes place in some companies, there is the other side of the spectrum where the airplane is used as a business tool. It can pay off if a company does business in remote locations which are not served by airlines. Even if the destinations are served by airlines, employees are able to conduct business in one day rather that having a day or two wasted on airline travel.

Wabower is right that in some companies the first thing to go in a bad economy is the flight department, or at least part of it. This is probably more the case when the airplane had been used as an executive perk rather than an integral way of doing business.

 

[wabower]

Most company aviation budgets are based on the operating units paying corporate for the use of the airplanes. The ongoing issue is how to price the service. Corporate gets the tax benefits (and pays back the recapture) and the operating units are charged some rate that can be a full allocation including tax depreciation to a much smaller number that is based on estimates of true net cost over estimated ownership life. When executives travel, they either bill their costs directly to corporate, or to the unit on behalf of whom they are traveling.

The balancing act is to figure out how to optimize utilization. If the rate is too high, the operating units won't fly the airplane because the cost eats into their budget (and their bonuses). If the rate is too cheap, everybody in the company is trying to schedule the airplane, and in some cases for trips that should be accomplished by other mode. Look at 20 sets of books, expect to see 20 sets of calculations and billing rates.


cosuote=Everskyward;377809]People's image of what goes on in company jets usually consists of top execs going to posh resorts on the stockholder's dime. While a fair amount of this takes place in some companies, there is the other side of the spectrum where the airplane is used as a business tool. It can pay off if a company does business in remote locations which are not served by airlines. Even if the destinations are served by airlines, employees are able to conduct business in one day rather that having a day or two wasted on airline travel.

Wabower is right that in some companies the first thing to go in a bad economy is the flight department, or at least part of it. This is probably more the case when the airplane had been used as an executive perk rather than an integral way of doing business.[/quote]

 

[Everskyward]

I've gotta add that even though traveling by business jet may be a normal way of doing business in normal times, it's not a good idea to show up in your Gulfstream when you're begging for money.

 

[Henning]

I've gotta add that even though traveling by business jet may be a normal way of doing business in normal times, it's not a good idea to show up in your Gulfstream when you're begging for money.

and you shouldn't take multi million dollar bonuses either, it wrankles people, and at the end of the day, regardless the bailout or not, people are who make your business, and for American car manufacturers, they can hardly afford to lose any market share at all.

 

[Joe B]

Found this from August 6, 1999. Don't know current status:

PONTIAC, Mich. (Reuters) - General Motors Corp. and DaimlerChrysler AG said Friday they plan to start a charter airline service to try to defray the cost of the fleets of jets the companies use for corporate travel.

GM will own 51 percent of the venture and DaimlerChrysler will own 49 percent, GM said. Financial terms were not disclosed.

GM, the world's largest automaker will provide seven aircraft to the venture and DaimlerChrysler will supply 12, including several that it manages for other companies.

The aircraft will be chartered to outsiders when they are not needed for corporate travel. ``This revenue will be used to help offset our operating costs,'' said Ken Emerick, GM's director of worldwide travel.

Both automakers aircraft that are used to fly executives around the world. Neither company would disclose how often the aircraft are used.

The companies hope to begin the charter service by the end of September, pending approval by the U.S. Federal Aviation Administration.

The new charter company will be headquartered in Pontiac, Mich.

 

[Greebo]

Thanks - that's the info I was looking for.

 

[steingar]

The real point is that a company begging for my money shouldn't be wasting it on corporate jets. They can drive fine GM vans to Washington and have oodles of time to get work done. The hour's worth of work they get done on the trip to DC isn't likely to offset the huge cost of maintaining and flying a Gulfstream. And it really sends the wrong message to the voters, whose money these guys are seeking because of their pathetic business dealings (I don't see Honda asking anyone for a handout). And by the way, I work all the damn time in the coach seats of airliners; it isn't that hard.

 

[Skip Miller]

You (or whoever told you that) are/is missing the point. You can't do company business, even in first class. The private jet lets the folks do meaningful work.

No that's the point exactly. Perhaps I didn't express it well. There are benefits to the senior executives' use of the company plane that cannot be measured in terms of airline ticket costs. And this was back in the non-TSA environment. Adding in the extra time to get through the long security queues just makes it worse!

-Skip

 

[flyersfan31]

The real point is that a company begging for my money shouldn't be wasting it on corporate jets. They can drive fine GM vans to Washington and have oodles of time to get work done.

I think that is an excellent suggestion. Frankly, it would have gotten them a LOT better press, plus think of all the meeting time they could have gotten in. They could stick big "Save GM" logos on the sides, stop at plants and visit the workers, stop by dealerships, all the while followed by news crews each step of the way. They missed an opportunity there. Instead they jetted in, jetted out, and looked really bad in the process.

 

[RMCN172RG]

A little of what I Know.

GM has a hanger at DTW they operate out of.

When it was Daimler Chrysler they operated a 737 from PTK to Stuttgart shuttle fly here Sunday, back on Monday etc.

The CEO of GM, who is poorly paid versus the CEO of Ford, less than half, makes a little over $1900 per hour. How much time do want him spending in line at the airport, walking to a gate or trying to hold a conversation on his cell phone? edit: or sitting in a van?

 

[wsuffa]

Exec benefits cut before the flight department takes a hit? When?

The flight department at MOST companies IS an executive benefit.

Most company aviation budgets are based on the operating units paying corporate for the use of the airplanes.

Most? Maybe at one time. With the exception of a handful of companies, the use of the corporate jet is reserved for the top executives.

The ongoing issue is how to price the service. Corporate gets the tax benefits (and pays back the recapture) and the operating units are charged some rate that can be a full allocation including tax depreciation to a much smaller number that is based on estimates of true net cost over estimated ownership life. When executives travel, they either bill their costs directly to corporate, or to the unit on behalf of whom they are traveling.

The balancing act is to figure out how to optimize utilization. If the rate is too high, the operating units won't fly the airplane because the cost eats into their budget (and their bonuses). If the rate is too cheap, everybody in the company is trying to schedule the airplane, and in some cases for trips that should be accomplished by other mode. Look at 20 sets of books, expect to see 20 sets of calculations and billing rates.

While the analysis is correct, many companies include use of the corporate jet as a "perk". Likewise, after the tax rule change a few years ago, many companies had "security audits" done to justify personal use of the corporate jet to the IRS.

While I don't disagree that some companies cut the flight department as a discretionary expense as the economy sours, the fact is that most companies have already set policies in place to require employees to fly commercially. I know of at least two Fortune 500 companies that had policies that authorize first class airfare for the top executives (in one case, it's the top 30 execs, in another it's the division heads and corporate EVP and above) - and one of those companies restricts use of the two corporate jets to the C-level and Chairman.

 

[flyersfan31]

and you shouldn't take multi million dollar bonuses either, it wrankles people, and at the end of the day, regardless the bailout or not, people are who make your business, and for American car manufacturers, they can hardly afford to lose any market share at all.

I still don't get it. It happens again and again. I really love it when the bonuses are announced as being necessary to "retain top talent in challenging times." I've always wondered, if they're so top notch, why is the company in such a crappy state. Delta did that, IIRC, back in the airline bankruptcy boom.

 

[RMCN172RG]

I still don't get it. It happens again and again. I really love it when the bonuses are announced as being necessary to "retain top talent in challenging times." I've always wondered, if they're so top notch, why is the company in such a crappy state. Delta did that, IIRC, back in the airline bankruptcy boom.

My company is going bankrupt and I know it. Probably much better than the outside world.

I will start looking for a Job so I can continue to eat when the company dies. The bonus to stay is my cushion to live on from the time of death until I can find a new job. Without it I will leave as soon as my new employer wants since I have given up on the old company.

 

[Henning]

The real point is that a company begging for my money shouldn't be wasting it on corporate jets. They can drive fine GM vans to Washington and have oodles of time to get work done. The hour's worth of work they get done on the trip to DC isn't likely to offset the huge cost of maintaining and flying a Gulfstream. And it really sends the wrong message to the voters, whose money these guys are seeking because of their pathetic business dealings (I don't see Honda asking anyone for a handout). And by the way, I work all the damn time in the coach seats of airliners; it isn't that hard.

Or they could do like Dick Madden and have the Corporate Bus. Nice, roomy, comfortable and a fraction of the cost of operation. GM does build bus chassis.... With modern communications and data systems, there's nothing they can't do on the bus that they can do in their office. Have 2 Drivers, and there's no need to stop for overnights and waste money on hotels, just sleep underway.

 

[Henning]

A little of what I Know.

GM has a hanger at DTW they operate out of.

When it was Daimler Chrysler they operated a 737 from PTK to Stuttgart shuttle fly here Sunday, back on Monday etc.

The CEO of GM, who is poorly paid versus the CEO of Ford, less than half, makes a little over $1900 per hour. How much time do want him spending in line at the airport, walking to a gate or trying to hold a conversation on his cell phone? edit: or sitting in a van?

Explain why he cannot be productive in the van or bus....

 

[RMCN172RG]

Explain why he cannot be productive in the van or bus....

Detroit to LAX for the LA Auto show.

Mission photo op introducing Chvy Volt for the umteenth time.

Bus leave Detroit Sunday 9:00 am arrive LA Tuesday 3:00 pm look like s**t in expensive suit after 3 day bus ride.

Spend 2 hours doing intro hop in Bus and head home, arrive Thrusday night ~9:00 pm.

Jet leaves DTW 9:00 Tuesday arrives 11:00 am Tueday in LA after lunch meeting clean up in hotel do presentation until 5:00 wheels up at 7:00 pm.

Arrive DTW ~3:00 Wednesday.

Savings is three extra days doing something more productive than seeing the country from a bus window.

 

[Henning]

Detroit to LAX for the LA Auto show.

Mission photo op introducing Chvy Volt for the umteenth time.

Bus leave Detroit Sunday 9:00 am arrive LA Tuesday 3:00 pm look like s**t in expensive suit after 3 day bus ride.

Spend 2 hours doing intro hop in Bus and head home, arrive Thrusday night ~9:00 pm.

Jet leaves DTW 9:00 Tuesday arrives 11:00 am Tueday in LA after lunch meeting clean up in hotel do presentation until 5:00 wheels up at 7:00 pm.

Arrive DTW ~3:00 Wednesday.

Savings is three extra days doing something more productive than seeing the country from a bus window.

What is he going to do in those 3 days he can't do from the bus? And I'm not talking Greyhound here, the dude can be showering and get a sauna, manicure and pedicure as they're rolling up to the convention center. Besides, I think a lot of CEOs, especially auto manufacturers should have to spend a few days staring out the bus window to see the rest of the country and the what their crap products look like after a couple of years.

 

[TMetzinger]

....and then the media will be on him about his exorbitant, luxurious bus, and it's horrible gas mileage.

What he can't do on the bus is go meet in England the day after he meets in LA.

 

[mikea]

As noted earlier, one of the reasons corporate flying exists is because it renders travel time for high-cost employees (execs, senior management, senior techs/scientists) into productive time, because company business can still be transacted while in flight. This translates into significant savings - a team going out to make a pitch to a customer can refine their presentation on the way, something they couldn't do while flying commercially.

Combining the cost savings with the greater efficiency/time savings of all the airports available and flexibility in scheduling, and having a private jet can quickly become a positive item financially.

That said, it's up to the companies to run their flight departments in a way that maximizes this sort of usage, and minimizes usage that doesn't result in net benefit to the company.

They way I heard it the mandate to use company aircraft was painted as being a security measure.

We all knew it was "but don't throw me in that thar briar patch!"

The flight crew are equivalent to very senior managers in compensation and benefits.

 

[TMetzinger]

Really, how much do the flight crew make? I'd be pleasantly suprised if it were much more than $100K/yr.

Senior management at my company have base salaries closer to $200K, and their additional performance-based compensation can triple that or more.

 

[EdFred]

Really, how much do the flight crew make? I'd be pleasantly suprised if it were much more than $100K/yr.

Senior management at my company have base salaries closer to $200K, and their additional performance-based compensation can triple that or more.

Knowing what my friend makes flying for a fortune 500 company, I would not be surprised if the crew pulls in 6 figures.

 

[SCCutler]

It is symbolically bad, but the total expense of all the jets in GM's hangars cannot possibly amount to the vapor off of the ocean represented by the legacy costs from their idiotic (but agreed-to) compensation and retirement schemes...

...and (just out of curiosity) how much is the senior management at UAW paid (I really am asking, not setting anything up)?

 

[mikea]

Really, how much do the flight crew make? I'd be pleasantly suprised if it were much more than $100K/yr.

Senior management at my company have base salaries closer to $200K, and their additional performance-based compensation can triple that or more.

The chief pilot mapped into a exec level of director only one below an AVP. Trust me. $200K is easy, plus stock options and bonus.

This is corporate world. The CEO wants the guy/gal up front to be happy.

 

[EdFred]

It is symbolically bad, but the total expense of all the jets in GM's hangars cannot possibly amount to the vapor off of the ocean represented by the legacy costs from their idiotic (but agreed-to) compensation and retirement schemes...

...and (just out of curiosity) how much is the senior management at UAW paid (I really am asking, not setting anything up)?

#DIV/0 % more than they should be.

 

[wabower]

The security audit gambit is not working in many cases, as the companies do not provide the same level of security for the exec's other activities. Some of the executives who used the security scam have lost it due to the bogus nature (and most are) of the security argument.

It's interesting to watch the show in private vs. public company operations. Both fall all over themselves kissing up to the big boss-man, but the differences in dress code, other stuff can be dramatic. Most G-V's for example, have fully stocked galleys with fancy dishes and white tablecloths.

One that I flew for a while had no glass tableware, and no cloth apkins.
Instead, the owner wanted only (nice) plastic disposables and paper napkins. When the flight is over, one plastic bag on the ramp holds all the trash and the crew can make one pass up the aisle and have the airplane ready for the next leg.

The flight department at MOST companies IS an executive benefit.

The only difference between now and past years is the level of disclosure required.


Most? Maybe at one time. With the exception of a handful of companies, the use of the corporate jet is reserved for the top executives.

Depends on the company and the airplane. The chairman doesn't normally get bumped when he wants to fly, but many business airplanes work for a living.

While the analysis is correct, many companies include use of the corporate jet as a "perk". Likewise, after the tax rule change a few years ago, many companies had "security audits" done to justify personal use of the corporate jet to the IRS.

While I don't disagree that some companies cut the flight department as a discretionary expense as the economy sours, the fact is that most companies have already set policies in place to require employees to fly commercially. I know of at least two Fortune 500 companies that had policies that authorize first class airfare for the top executives (in one case, it's the top 30 execs, in another it's the division heads and corporate EVP and above) - and one of those companies restricts use of the two corporate jets to the C-level and Chairman.

 

[steingar]

If they're so gosh darned special they can get their own money to run their damn companies!

 

[Everskyward]

Most? Maybe at one time. With the exception of a handful of companies, the use of the corporate jet is reserved for the top executives.

I think that more than a handful of companies use their corporate jets for things other than top executive travel. The one I fly is used as a company shuttle. Even when some of the top execs are on board the airplane is open to other employees going the same way. In the six months I have been flying it I have not loaded one set of golf clubs and I haven't been to any resort destinations.

 

[wsuffa]

One that I flew for a while had no glass tableware, and no cloth apkins.
Instead, the owner wanted only (nice) plastic disposables and paper napkins. When the flight is over, one plastic bag on the ramp holds all the trash and the crew can make one pass up the aisle and have the airplane ready for the next leg.

I've ridden in back with a couple of guys like that.

One decided he didn't like the usual catering stuff, so he has tasked his pilots with finding great local food to have on board. On one flight, we had fresh Chicago pizza....