Economy forces closure of some flight departments

 - January 29, 2009, 7:53 AM

Since the Big Three automakers flew to Washington in business jets to ask for bailout money, rumors about flight department closures have multiplied.
Complicating the hunt for the facts is some companies’ practice of offering employees severance packages that include a gag policy on the closing of their flight departments. Others offer generous packages and employees simply don’t want to talk publicly about the situation because they feel the company has been trying to do the right thing for them.

In any case, “The economy is not universally terrible despite what the publicity would have you believe,” according to Pete Agur, managing director and founder of The VanAllen Group. He continued, “Two of our more than 100 clients have ordered their aircraft be sold. Both were leaning heavily into strong economic winds and unfortunately the winds shifted. On the other hand, we have two clients who are starting flight departments and another who is preparing to upgrade his equipment.” He declined to identify the companies, citing confidentiality concerns.

Some flight department closures have been substantiated. Bristol-Myers Squibb is putting its two Gulfstream Vs and two Sikorsky S-76Cs up for sale and terminating 32 flight department employees.

The two Falcon 900EXs owned by Citigroup are up for sale and several sources have said Lucent Technologies is attempting to sell its two new G450s, one of which isn’t scheduled for delivery until early this year. Substantiation of that claim has proved elusive.

Brunswick, parent company of Mercury Marine, consolidated its flight department, eliminating one of two Hawker 800XPs located at its Waukegan, Ill. facility. Pfizer laid off 27 employees and closed down its shuttle service based in Kalamazoo, Mich., divesting itself of its two ERJ 135s.

In Defense of Corporate Aircraft
Shortly after flying to Washington in corporate jets to ask Congress for bailout money Ford, General Motors and Chrysler experienced enormous public and political fallout in what may prove to be one of the biggest public-relations blunders of 2008. Rather than explaining the logic and cost effectiveness of corporate aircraft to the congressional committee, the company leaders returned home acting guilty and announced they would shut down their flight departments.

Ford announced that it would terminate 49 employees who operated two GVs, a pair of Fokker 70s and a Falcon 2000. GM said it would lay off 32 pilots and 40 others as it sells off a pair of GVs and five G350s.

Glen Knight, aviation director for Wachovia Bank’s Charlotte, N.C.-based Hawkaire, operated a G500 and five Challenger 300s. The department had 50 people, including flight crew, mechanics and administrative personnel. Knight’s department is in the process of being shut down.

“Wells Fargo bought Wachovia at the end of last September,” he told AIN. “We were announcing huge losses with the mortgage meltdown and they offered 20 cents on the dollar per share. Our flight department was no longer needed because of a philosophical decision.”

Knight said Wachovia viewed the aircraft as a business tool, with personal use accounting for less than 1 percent of flights. “They were available to any employee with a trip that was justifiable,” he said. “We’d fly about 4,000 hours a year all over the world. Management felt the airplanes saved time, making an employee’s life easier and more productive; you can never recover lost time. Wells looked at the issue from a purely financial perspective and encouraged people to travel commercially. However, I know that the congressional hearings with the car companies influenced the decision. Large publicly held corporations are sensitive to what people see and hear about them.”

Knight said Wells Fargo is being proactive about helping flight department employees make the transition. “They’re leaving the drawdown to my discretion. No one is being locked out and we all still have access to our offices. We continue to be treated as a trusted partner with respect and graciousness. Everyone is getting a severance package and the company has retained Sheryl Barden of Aviation Personnel International for all of us.”

One of the reasons so many people in the industry are upset with the automakers debacle is because the companies did nothing to explain the value of owning corporate aircraft. “What would you have the CEOs do? Spend a day trying to get to Washington on the airlines? Talk about a waste of productivity and time,” one flight department manager said.

Ed Bolen, president and CEO of NBAA, explained how corporations typically make the decision to acquire and subsequently keep an aircraft. “Our members have made a case for aircraft ownership by studying their operation and determining it makes sense based upon the criteria they establish,” he said.

“We advocate every flight being a business decision; you make it on a mission-by-mission basis. Many of our member companies use a mix of airlines, cars, trains and corporate aircraft depending on the specific mission. A mission might be a couple of hundred miles or halfway around the globe. We’ve found that the body of companies that own corporate aircraft also account for the purchase of about $12 billion worth of airline tickets a year. [There is] no one-size-fits-all and there’s no one reason why a company does or doesn’t use business aviation.”

Bolen pointed out that 97 communities have lost airline service in the past few years. “If you’re located in one of them, business aviation is more important than ever before. Some companies have to move people and equipment quickly in response to events. We had a company that moves extremely sensitive equipment described as being as fragile as a bag of potato chips. The equipment was too large to fit in an airline overhead and far too delicate to check in as baggage. A corporate aircraft was the only reasonable solution.”

Bolen said overall flight hours for business aviation are similar to the airlines’, varying proportionally with the economy. In good times it goes up; in bad times it goes down. “It isn’t just the aircraft that gets less use. It will likely be an overall reduction in all forms of travel,” he said.

Another critical issue is the length of time necessary to complete a trip on the airlines versus a company aircraft. “How long will someone be out of the office and out of communication? And it’s not uncommon for an executive to prepare proprietary information en route. On an airline, half a dozen strangers are sitting there watching your computer screen along with you,” Bolen said.

The public also often thinks of a corporate jet as a CEO perk. Bolen said the majority of trips on NBAA member aircraft are not with the CEO but more likely teams of sales people, engineers or other front-line workers. NBAA offers its members Travel$ense software to help them decide what’s most appropriate for a given trip.

Despite the economy, some companies see business aviation as an integral business tool regardless. Starbucks has taken delivery of a $45 million Gulfstream G550.
While it might make perfect economic sense, it too was a bit of a public-relations disaster as the announcement came at about the same time the company informed its employees it is reconsidering how much it will match in their 401(k) plans this year.

Starbucks ordered the aircraft three years ago and spokeswoman Deb Trevino said the company determined that nixing the aircraft would cost about $5 million plus the loss of payments to date.   

One Gracious Closure To all AIN readers:

The task has fallen to me to inform this group that Wachovia/Hawkaire will cease flight operations in the near future. We have been in the business since the 1970s and, just like all of you, have evolved with the industry. The current economic environment coupled with our acquisition by another company has brought us to the point where no amount of change will enable us to survive.

The Hawkaire team that is now available for employment is professional to the core. They are well trained, highly skilled and dedicated to excellence. I have had the privilege of being a part of this team for the past nine years and deeply respect each one of them.

By my reckoning, my 50 colleagues–pilots, mechanics, line service, dispatch and admin–are among the best in the business.

If you come across a résumé or an application that mentions Hawkaire, I suggest you treat it like a discovered treasure. These are all exceptional individuals and I’m asking that you help them as they continue to pursue this career that we all love.

Glen Knight, Aviation Director, Hawkaire