General Electric’s plan to shed five company-owned planes flies in the face of the boardroom axiom that such aircraft are time- and money-saving tools, not luxury items.
Imagine if Facebook founder Mark Zuckerberg announced he was unplugging from the internet to save time. That’s how private-jet industry executives feel about General Electric’s cost-cutting move to sell the bulk of its corporate fleet.
GE’s plan to shed five company-owned planes — two Bombardier Globals and three Challenger 605s — flies in the face of the boardroom axiom that such aircraft are time- and money-saving tools, not luxury items. GE sells jet engines to plane makers and will have a large presence next month at the National Business Aviation Association’s annual conference, where the motto has been “No Plane, No Gain.”
GE’s savings from selling corporate jets will be minimal, and using higher-cost charter flights risks winding up as more expensive, industry consultants and brokers said. GE won’t raise much cash by selling aircraft into a used-jet market in which prices have been declining for several years, they said.
“I guess they forgot what business they’re in,” said Janine Iannarelli, president of plane broker Par Avion. “It makes no sense.”
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GE says cost-savings go beyond just the jets, as they’ll eliminate spending related to facilities overhead, maintenance and crew. The company is also trimming travel overall, relying more heavily on video conferencing for internal meetings, said Jennifer Friedman, a company spokeswoman. Employees have more options to travel on commercial airlines after the company moved its headquarters to Boston from Fairfield, Connecticut.
“By reducing our corporate air services, we will see significant operational cost savings,” Friedman said in an emailed statement.
The business-aircraft industry is already sensitive about its image, especially after the public outcry that erupted in 2008 when auto executives flew their corporate jets to Washington, D.C., to seek bailout money from Congress.
John Flannery, who took over as chief executive officer of GE last month, is seeking to follow through on predecessor Jeffrey Immelt’s plan to cut $2 billion of costs by the end of 2018.
GE isn’t abandoning private aviation altogether. It will keep two small, short-range planes for quick site visits, and own equity in a few larger jets shared by several owners.
Scuttling the flight department is probably more of a symbolic move than a large contributor to cost cuts, said Pete Agur, founder of the aviation-consultancy VanAllen Group. “In the short term, it’s going to have some benefits,” Agur said. “Long term, there’s no way a global company can operate only with the airlines or only with commercial options, including fractions.”