"Cessna Fights Back On Private-Jet Trend" WSJ article

SteveC

SteveC

"Laconic"
Staff member
From the Wall Street Journal (yeah, no pro-business bias here! :D ):

By J. LYNN LUNSFORD

Orders for business jets nose-dived after lawmakers pilloried leaders of Detroit's Big Three auto makers for flying corporate planes to Washington to seek a government bailout. Now, one jet maker is striking back.

In a campaign to begin Wednesday, Cessna Aircraft Co. will run an ad that says, "Pity the poor executive who blinks," and gets rid of the company jet. "One thing is certain: true visionaries will continue to fly."

Across the industry, new orders for private jets have almost evaporated, and hundreds of existing customers have sought to defer or cancel orders that were placed in higher-flying days. In addition to layoffs, some jet makers have cut production by as much as 56%. Cessna, a unit of Textron Inc., is laying off more than 4,600 people, or roughly a third of its work force, to cope with the sudden drop in demand for private airplanes of all sizes.

Though much of the industry's reversal of fortune is due to the dismal economy, jet makers attribute part of it to the unexpected public backlash that erupted after the chief executives of Ford Motor Co., Chrysler LLC and General Motors Corp. traveled in private jets last year to ask Congress for billions of dollars in aid.

"We think it's time the other side of the story be told, and that support be given to those businesses with the good judgment and courage to use business aviation to not only help their businesses survive the current financial crisis, but more quickly forge a path toward an economic upturn," said Jack Pelton, Cessna's chairman and CEO.

Companies have long argued that it makes no sense to pay CEOs millions of dollars only to have them waste time in airport lounges while flying commercial. "Do you really want a major executive to show up three hours late to a big meeting because of flight delays?" said Robert Baugniet, director of corporate communications for General Dynamics Corp.'s Gulfstream Aerospace, which makes some of the higher-end jets.

The Big Three executives blinked, and disbanded their jet fleets. By the time the Super Bowl rolled around on Feb. 1, the private-jet stigma had become so intense that some companies chose to fly their jets to Orlando, Fla. and drive to Tampa, rather than face scrutiny for living large, even if they could argue that executives were entertaining clients who might be worth millions of dollars in business.

The jet makers were unprepared for the backlash from Middle America. The irony, they say, is that many of the blue-collar layoffs at Cessna, Gulfstream and Hawker Beechcraft Corp. have been in places like Wichita, Kan., and Dallas.

In its ad, scheduled to run in national publications, including The Wall Street Journal, Cessna says "Timidity didn't get you this far. Why put it in your business plan now?" Instead of retreating, the company argues, companies should adjust and make sure they are flying the right type of aircraft.

So far, Cessna is the sole jet maker to take on the negative publicity with a high-profile ad campaign. A spokesman for Cessna declined to say how much it was spending, but he said "we have redirected more than half of our promotional budget to this campaign." The ads were developed by Dickerson-Grace in Denver, he said.

"We're all trying to battle misperception," said Ed Bolen, president and CEO of the National Business Aviation Association, which represents corporate-jet owners. "The vast majority of the time, these jets are flying offices, where people can conduct business and have confidential discussions that could never occur on a commercial jetliner," Mr. Bolen said.
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Good on ya, Cessna.

Sometimes, I wanna mom-slap (thank you Amber) the general public. While I agree that executives with million-dollar executive washroom renovations should be flogged at dawn, the economics that go into corporate jets actually make a lot of sense vs. commercial transport. But most people (erroneously) don't think about the time-value of productivity.

The public (the shrieking general populace who freaked, I mean) needs to understand that "private jet" does not equal "rock star snorting coke off the arse of the teenager of their choice" or "donald trump" or whatever avatar they have for the filthy rich and excessive. Christ, I think the private jet transport is just as important as the PDA.

And I am not a corporate pilot or even employed flying. I am a shareholder who gets it, though.
 
I doubt much of the drop-off in jet sales is due to Congressional/public approbation. The economy is in a major tailspin; of course companies are deferring nonessential capital expenditures (like new jets).
 
Minnesota_Flyer said:
I doubt much of the drop-off in jet sales is due to Congressional/public approbation. The economy is in a major tailspin; of course companies are deferring nonessential capital expenditures (like new jets).
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Yeah I agree - more correlated than causal. I know we tend to be a jet biased group, but if my company decided to buy a jet after laying off my friends, and announcing that no one is getting a merit raise this year, I'd have to burn this #### to the ground yo.
 
Murdoughnut said:
Yeah I agree - more correlated than causal. I know we tend to be a jet biased group, but if my company decided to buy a jet after laying off my friends, and announcing that no one is getting a merit raise this year, I'd have to burn this #### to the ground yo.
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Would you "burn this #### to the ground" if they spent money on equipment for the factory that would make the company more efficient and, overall, save the company money (potentially reducing the number of future layoffs)?
 
SteveC said:
Would you "burn this #### to the ground" if they spent money on equipment for the factory that would make the company more efficient and, overall, save the company money (potentially reducing the number of future layoffs)?
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But I just don't buy the jet efficiency argument - not in this period of e-business. I get more done on my laptop at the airport than I do in a comparable time at the office. And if you really need the efficiency of a jet, fractional ownership seems like a much more sensible option.

I see it for what it is - a luxury that keeps execs from having to mingle with the commoners. Airlines should focus on developing their executive lounges to match suit. Waiting 2 hours in the Admiral Club is hardly different than sitting in your office for two hours before catching your flight.
 
Murdoughnut said:
But I just don't buy the jet efficiency argument - not in this period of e-business. I get more done on my laptop at the airport than I do in a comparable time at the office.
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But the work that you are doing on your laptop can be done anywhere. People use aircraft because they need to be in a specific location to do some particular business. If they could do it on a computer there wouldn't be any need to travel at all.

And if you really need the efficiency of a jet, fractional ownership seems like a much more sensible option.
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It is, but only if the total yearly usage is fairly low. I'm not up on the current numbers, but I seem to recall that the cutoff point is something like 200 hours. If your company can justify business aircraft for their personnel (mid-level personnel use company aircraft more than top level management by the way) at a higher usage than the cut-off it is cheaper to own your own airplane. Have you seen the hourly costs of fractional programs?

I see it for what it is - a luxury that keeps execs from having to mingle with the commoners.
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Popular misconception. Kind of like the public perception that all airline pilots make 6 figure incomes and work 10 days per month.


Airlines should focus on developing their executive lounges to match suit. Waiting 2 hours in the Admiral Club is hardly different than sitting in your office for two hours before catching your flight.
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Of course it's different, and for many reasons.

1. Company personnel don't have privacy to discuss sensitive company business in the Admiral Club. This is not very productive company time.
2. Travel on the airlines takes a LOT more time than by private aircraft. Security screening, possible multiple legs with connections (and wait times), waiting for boarding/disembarking process, waiting for luggage, long hikes through terminals, and ending up at only one of the major airports rather than a small airport located much closer to the final destination mean that travel can easily take many times longer on the airlines. UNPRODUCTIVE time is very wasteful when considering multiple personnel (typical corporate aircraft usage), or even when looking at highly paid top level executives.
3. The bottom line is that time is money. Corporate aircraft allow very busy people to make very efficient use of their time, and actually save companies money.

Yeah, sometimes they get used as perks. That's no reason to ignore the fact that corporate aircraft are often important for a company's bottom line, and that it can cost the company money to get rid of their planes.

I'm always amazed at how many pilots don't understand the financial value of corporate aircraft.
 
SteveC said:
But the work that you are doing on your laptop can be done anywhere. People use aircraft because they need to be in a specific location to do some particular business. If they could do it on a computer there wouldn't be any need to travel at all.



It is, but only if the total yearly usage is fairly low. I'm not up on the current numbers, but I seem to recall that the cutoff point is something like 200 hours. If your company can justify business aircraft for their personnel (mid-level personnel use company aircraft more than top level management by the way) at a higher usage than the cut-off it is cheaper to own your own airplane. Have you seen the hourly costs of fractional programs?



Popular misconception. Kind of like the public perception that all airline pilots make 6 figure incomes and work 10 days per month.




Of course it's different, and for many reasons.

1. Company personnel don't have privacy to discuss sensitive company business in the Admiral Club. This is not very productive company time.
2. Travel on the airlines takes a LOT more time than by private aircraft. Security screening, possible multiple legs with connections (and wait times), waiting for boarding/disembarking process, waiting for luggage, long hikes through terminals, and ending up at only one of the major airports rather than a small airport located much closer to the final destination mean that travel can easily take many times longer on the airlines. UNPRODUCTIVE time is very wasteful when considering multiple personnel (typical corporate aircraft usage), or even when looking at highly paid top level executives.
3. The bottom line is that time is money. Corporate aircraft allow very busy people to make very efficient use of their time, and actually save companies money.

Yeah, sometimes they get used as perks. That's no reason to ignore the fact that corporate aircraft are often important for a company's bottom line, and that it can cost the company money to get rid of their planes.

I'm always amazed at how many pilots don't understand the financial value of corporate aircraft.
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I understand the "specific place at a specific time" argument, but that can be achieved by leaving early. I dunno, I understand there being a benefit, but the cost differential is just so massive.
 
Murdoughnut said:
I understand the "specific place at a specific time" argument, but that can be achieved by leaving early.
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Leaving early doesn't save time though, does it?

I dunno, I understand there being a benefit, but the cost differential is just so massive.
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Ah, but "cost" is much more than just the dollar price of the plane ride. I don't have time right now to get into it further than that. Maybe others will fill in details.
 
SteveC covered most of the major points, but there is one that he didn't address, and which is probably the most compelling:

Large deals - multi-million dollar deals involving thousands of employees and potential ripple effects across a wide range of venues - do not get done on a teleconference.

Or over the phone. Or an email.

They get done by executives meeting face-to-face, on very tight schedules. Or, to put it more accurately, two executives and their teams of lawyers. Or a couple of boards of directors.

The point is that business still gets done on face time and with handshakes. There's no way in hell I'd buy millions of something (or sell it to someone) without meeting the principals involved. Further, a lot of legal issues require presence as well. The more people involved, the more you have to schedule out in advance, making sure everyone gets in to the airport at the same time, or within hours. And additional hours waiting to get everyone synched up.

You can't always plan that far ahead. That's where the bizjet tool is justified.

Look at it like this. I've done some metrics and analysis to my own little company and I've discovered that it can be cheaper on certain trips for me to rent a 172 and fly it on business rather than buying a last-minute fare on SWA here in and out of Austin. Or on AA or Continental, for that matter, mainly because airline schedules dictate whether or not I'm renting cars/hotels buying meals because my day didn't finish in time for the last flight out. See?
 
I mainly see this as the public complaining about those companies using jets. So the companies sell their jets. Then the jet manufacturers say "O, orders are down, lets reduce production and lay people off to offset the cost."

So in turn, that same complaining public now lost their jobs from either the direct manufacturer (which probably isn't true because those people want companies to buy their airplanes), or more likely they lost their job through the supply chain.
 
Murdoughnut said:
I see it for what it is - a luxury that keeps execs from having to mingle with the commoners. Airlines should focus on developing their executive lounges to match suit. Waiting 2 hours in the Admiral Club is hardly different than sitting in your office for two hours before catching your flight.
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Wow, just wow. :drool:
 
All of these well-crafted "productivity" arguments are predicated on, uh, "production". What, pray tell, have these self-important clowns been producing but debt, bankruptcy, and failure? You can have your jet back when you make some money. Till then, you're grounded. And eat your peas.
 
Murdoughnut said:
But I just don't buy the jet efficiency argument - not in this period of e-business. I get more done on my laptop at the airport than I do in a comparable time at the office. And if you really need the efficiency of a jet, fractional ownership seems like a much more sensible option.

I see it for what it is - a luxury that keeps execs from having to mingle with the commoners. Airlines should focus on developing their executive lounges to match suit. Waiting 2 hours in the Admiral Club is hardly different than sitting in your office for two hours before catching your flight.
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That's because you're a knowledge worker, not a salesman. Closing deals, big and small, is largely about pressing the flesh. Face time. Convincing people to do something they might not do otherwise.

Look how misconstrued peoples' posts here can be, for lack of tone/inflection/body language. When millions are riding on a deal, you don't leave such things to chance and "hope" they get your meaning correctly. And video conferencing only sends the message that a potential customer's business isn't worth the trouble of sending someone in person.

It's why people who work in sales are so grossly overpaid. Their social skills are often what make or break the deal.
 
Im sick of this private jet bashing. untill members of congress stop flying privately, nobody has any valid argument against corporate aviation.

I have seen Princess Pelosi in her G550 twice at SFO. The US government is in more debt than any private company and yet they ride around in biz jets an no one says a word.
 
Murdoughnut said:
But I just don't buy the jet efficiency argument - not in this period of e-business. I get more done on my laptop at the airport than I do in a comparable time at the office. And if you really need the efficiency of a jet, fractional ownership seems like a much more sensible option.

I see it for what it is - a luxury that keeps execs from having to mingle with the commoners. Airlines should focus on developing their executive lounges to match suit. Waiting 2 hours in the Admiral Club is hardly different than sitting in your office for two hours before catching your flight.
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Boris Badenov said:
All of these well-crafted "productivity" arguments are predicated on, uh, "production". What, pray tell, have these self-important clowns been producing but debt, bankruptcy, and failure? You can have your jet back when you make some money. Till then, you're grounded. And eat your peas.
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For you two, I'm going to skip all the "arguments", and give you some real life examples, things that we deal with on a daily basis. I am not exaggerating on these either, this is just plain old truth.

First, some info on the company I currently intern at. We are a member-owned power cooperative that sells electricity from our power plants to member cooperative systems, who then sells the electricity to their own rural customers. There are over 100 member systems divided into 10 physical districts. These districts spread from the Canadian border to the Mexican border, and from western Montana to eastern Iowa. It's a pretty large area. Spread throughout that area, we own 12 generation facilities, and are in the process of building another one, creating power with coal, gas, oil, and wind energy. To manage all of this, we constantly and consistently have to transport electricians, engineers, lawyers, contractors, media, management, cargo, etc to do jobs that can't be done on a laptop or over the phone.

First example: Generally, we fly all over our area transporting people and cargo. Mostly, though, we go to two principle airports, and on average we have a plane going to these airports at least once a day. Since we have a flight department, we can take these people, 9 at a time, to the job site in the morning, drop them off two miles from their final destination, let them do their jobs, and then bring them back to their main base before dinner (We own three aircraft and can take as many as 22 people to and from said airports in a day, or 44 people to OR from. I've seen it done before. Theoretically, we could probably double that number if we did multiple trips). Now imagine if we did not have a flight department. In order to transport just one person, we would have to have said person fly from our local airport to Minneapolis, from there to Denver, from Denver to the closest airline-served airport, and then pay for a rental car to get them the next hundred miles or so to where their going. That would take almost all day, then they would need a day to do their work, then another day to travel back. So, in order to do a single days work, that person would need to take three days in order to do it. Then you have to consider actual costs of the trip, including airline tickets, meals, hotels, and the rental car. For one person, it's doable, but then multiply this by, say, 5 people a day, every day, all year, and you can see where it starts to add up, both in terms of time and money. At some point (I don't know the actual flight hour number, but we're well past it), the advantage to having a corporate jet far outweighs the costs of having it.

For another example, you will remember that we are a member-owned cooperative. Our management is elected from and by our owners. Each member system has their own board, which elects a board member to represent them in their district, which in turn elects a board member to represent them at the company wide level. Every month, there is a two or three day board meeting. Since each company board member must live and work in their district, and the districts are spread over such a large area, we would run into similar issues as explained above. Instead of having each board member take off a full week (one day to travel, two or three for the meetings, and another day travel back), we can pick them up on Monday, have them together and working by lunch, and then have them home to their districts by dinner Wednesday.

I know I am not speaking for all corporate outfits out there, but I believe that this is how most companies view their corporate flight departments. Not as luxuries, not as toys for the so-called "fat cats", but as business tools that enable the company to run as efficiently and cheaply as possible.
 
XcalibeR said:
For you two, I'm going to skip all the "arguments", and give you some real life examples, things that we deal with on a daily basis. I am not exaggerating on these either, this is just plain old truth.

etc.
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Yes, and presumably you're making money, or at least not demanding that I give you mine because you're "too big to fail", so you can then refuse to lend it (my money) back to me at usurous interest rates. If GM or BOA absolutely, positively has to get their executive-bunglers from one place to another right now, let em throw up a bid on Grand Aire or Active. The proviso is they have to take the lowest priced charter that will get them there on time. Strap em all Jball, Metro, or Convair. No leather, no wet bar, no fun.

I don't have a problem with corporate aviation in the least. I have a problem with corporate aviation funded by theft.
 
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