JCPenney will sell its three corporate aircraft and associated engines and parts. The fleet consists of two Gulfstream G450s and one Gulfstream GIV-SP. JCPenney estimates the sale will reduce annual operating expenses by between $5 and $10 million.
The company expects to receive approximately $20 million in cash during Fiscal Year 2018 as a result of the sale of the aircraft. An impairment charge of approximately $50 million will be incurred, a number that represents the “expected loss on sale upon completion of the disposition of the assets,” according to a recent company 8-K SEC filing. The impairment, proceeds, and expense savings amounts are dependent upon “timing of completion of the disposition of the assets, changes in management’s assumptions and other plans, and other factors,” according to the filing.
The former CEO of JCPenney, Marvin Ellison, stepped down in May to become the CEO at Lowe’s. Before his departure, Ellison was required to participate in a Key Associate Protection Program (KAPP) wherein the former CEO was to use company aircraft for all business as well as personal travel. Ellison was party to an aircraft time-sharing agreement that required him to reimburse the company for any personal use of the jets in excess of $150,000 during each fiscal year. A JCPenney SEC filing from April valued Ellison’s personal use of the aircraft during Fiscal year 2017 at $139,612.
In addition to the resignation of the CEO, the decision to sell the aircraft comes as JCPenney has been struggling financially and has been in the midst of shuttering stores.