Gold Sponsors
Array Telepresence Logo   Human Productivity Lab Logo   Ashton Bentley Logo
Silver Sponsors
Bronze Sponsors
Telepresence Options Magazine

Latest Telepresence and Visual Collaboration News:
Full Article:

General Aviation Sounds Mayday as Fat Cats Ditch Their Jets

May 15, 2009 | Chris Payatagool
Cessna_Citation.jpgBy Dave Demerjian

The Cessna Citation is the best selling corporate jet in the world, but the company, like others, is feeling the pinch as corporate giants ranging from Bank of America to General Motors ditch their fleets. The trend could undermine the economy and threaten one of the last manufacturing sectors the US still dominates.
Photo: Cessna

Nothing symbolizes corporate excess in this economy like a private jet, and scores of companies are ditching them to bolster their images and hold the bottom line. It's a trend that could hurt the aviation industry, undermining one of the last manufacturing sectors the U.S. still dominates.

Corporate giants ranging from Bank of America to Time Warner are grounding planes amid a faltering economy and pressure from critics who say jets are a luxury they cannot afford and taxpayers should not subsidize. Shareholders and pundits aren't the only ones telling CEOs to fly commercial with the rest of us. A judge recently told Ritz Camera, which is closing more than 400 stores, to get rid of the jet it started leasing a few months before filing for Chapter 11.

The trend has the general aviation industry in a nosedive. Shipments are down 7.1 percent and 12 percent of the manufacturing workforce has been laid off. Unemployment in Wichita, Kansas, the Detroit of general aviation, has climbed from 3.9 percent to 6.7 percent in the past year. The aviation industry and those who watch it call the backlash against corporate jets misguided and fear it will have grave repercussions.

"Corporate aviation has become a whipping boy," says Charles Mayer, vice president of marketing at Hawker Beechcraft, the nation's largest privately held aviation company. "But it's crucial to the U.S. economy on several different levels."

It's hard to look at a company that's asking Washington for help and argue it needs a plane. And no one denies the bone-headed decision by the CEOs of the Big Three automakers to fly to last fall's bailout hearings aboard private jets did nothing to help the aviation industry's case.

"It's what sparked the shift in public opinion," said Ed Bolen, president and CEO of the National Business Aviation Association.

But there are legitimate arguments for big companies owning planes. Only 10 percent of the nation's 5,000 general-use airports have scheduled airline service, and most of those flights serve just 70 domestic markets. It doesn't help that airlines cut service to nearly 100 cities in the past year.

"Lots of people think executives use corporate jets to avoid flying commercial, but it's much more about a lack of commercial availability," Bolen said. "You try flying commercial out of Salinas, Kansas see how far you get."

Others argue that flying commercial isn't the best use of time for a CEO. A flight that can take all day when you consider the time it takes to get to the airport, deal with security, sit on the tarmac and make your connection can requires just a few hours in a private plane. That's one reason Starbucks is keeping one of its three jets even after laying off 1,800 people.

"We're keeping one plane to provide safe, secure and efficient transportation of key Starbucks employees as well as accomplish travel that would not otherwise be possible using scheduled services," the company told Wired.com in a statement. "We believe this is an appropriate approach with regard to the current economic situation."

None of that flies with Chuck Collins, a researcher with the Institute for Policy Studies. The group has led the charge against corporate jets, arguing they are a bane to society.

"The case against private jets is undeniable: They pollute more, fail to pay their fair share of the air traffic system and leave us vulnerable to security risks," Collins said. "They undermine the social cohesion of our country at our expense."

Collins wrote a 30-page study called "High Flyers: How Private Jet Travel Is Straining the System, Warming the Planet, and Costing You Money" that argues corporations shouldn't have planes. He says they harm the environment, clog our strained air traffic control system and cost shareholders and taxpayers billions.

But general aviation, a class that includes the planes many CEOs have at their disposal, is a big part of the economy. It provides 1.2 million jobs and generates $150 billion annually. It's one of the few areas where the United States maintains a positive trade balance, and American manufacturers hold more than 70 percent of the market. That's compared to 53 percent for personal computers and 25 percent for the auto industry. Almost half of the planes built here last year were exported, and last year's backlog of planes that have been ordered but not yet manufactured or delivered stood at $80 billion.

Business jets are typically powered by two engines and seat as many as 10 people. The Cessna Citation, built in Wichita, is the world's best-selling model. Other popular planes include the LearJet 45XR, General Dynamics Gulfstream V and the Hawker 4000.

Perhaps we should say they were popular. AIG, CitiGroup, Time-Warner, Bank of America and Alcatel-Lucent are among the scores of firms getting rid of their planes. It's done more than force their executives to experience the joy of flying commercial. It's shaken the manufacturing industry.

Thanks to layoffs at Cessna, General Dynamics and Hawker Beechcraft, over 12,000 general aviation manufacturing jobs have been lost in recent months, but it's not just the plane makers that are hurting. Pilots, mechanics, dealers and others who make their living serving those planes are also feeling the heat. Jay Mesinger, who runs a corporate jet brokerage business in Colorado, says his sales plunged 50 percent in 2008 and he expects further drops this year. With orders for new planes being deferred and the market flooded with used aircraft, firms that supply the manufacturers with everything from seats to avionics are downsizing, too.

Nordam, a Wichita-based firm that manufactures aircraft interiors and composites, has laid off 411 people in the past eight months. That's 22 percent of its workforce. Other suppliers, including Rockwell Collins and Teledyne Continental Motors, have cut production and staffing.

Others fear the drop in sales could stifle innovation. Mayer, the Hawker Beechcraft VP, says a decline in aviation would force an industry he says is responsible for such innovations as anti-lock brakes and modern navigation systems to invest less in research and development. He said corporate jets showcase some of the best technology the U.S. has to offer, such as composite materials. He compares the industry's current position to that of the Detroit automakers 30 years ago, and fears it will slip if the backlash continues.

"We dominate, but we are starting to see some serious competition on the horizon," he says. "A healthy (general aviation) industry creates jobs and drives innovation. It represents the future, not the past."

Collins concedes aviation manufacturing centers like Wichita would be hurt by a shift away from corporate jets, but says it's a necessary transition toward more sustainable transportation.

"I'd rather take the money we're using to subsidize corporate jets and use them to build a real high-speed rail system in this country," Collins says. Nor does he believe corporate planes are an essential part of doing business. "We had a thriving business sector 10 years ago, and not everyone had private jets."

Kimberly DuBord, an analyst with Briefing.com, says the people arguing about whether or not CEOs should be flying in corporate jets overlook more fundamental problems facing corporate aviation.

"This is much bigger than a handful of Fortune 500 companies grounding their fleets," she says. "Ultimately, it's the issues facing the global economy that will decide the fate of this industry.

"It's a significant part of our manufacturing base," she said. "My gut is that if it took a big hit, the impact would be profound."

[via wired.com]

 






Add New Comment

Telepresence Options welcomes your comments! You may comment using your name and email (which will not be displayed), or you may connect with your Twitter, Facebook, Google+, or DISQUS account.