In Defense of Corporate Aircraft. No, Really.

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In Defense of Corporate Aircraft. No, Really.

GE is getting rid of its jets to look like it's saving money. That's a costly mistake.
by
Joe Nocera
@NoceraBV
More stories by Joe Nocera
6
October 31, 2017 9:38 AM

The efficient way to fly.

Photographer: SeongJoon Cho/Bloomberg

The Wall Street Journal has had a jolly good time recently exposing a small example of corporate excess: It seems that
during the years Jeff Immelt was the chief executive of General Electric Co., the company often sent a back-up plane on
his travel in case something happened to the corporate aircraft he was using.

The practice was first revealed in mid-October, in a Journal story that was mostly about how GEs new CEO, John
Flannery, was cutting costs. Four months on the job, hed already shut down three research centers. He cut out the 700
company cars. He has delayed the construction of a new headquarters building in Boston. And he is planning to soon
unveil a series of major steps aimed at both restructuring the company and reducing costs by $2 billion, a target Immelt
set before stepping down.

One can hardly disagree with the aim. GEs margins are significantly lower than those of other conglomerates, like
Siemens and United Technologies. Its market cap this year has declined by $100 billion, making it the worst performer
in the Dow Jones Industrial Average. And it has been under pressure from Nelson Peltzs Trian Partners, which recently
got a seat on the board.

As a small but telling example of Immelt-era excess, the back-up jet story is just about perfect. Among other things, it
offers a contrast between the presumably free-spending Immelt,
1
and his tight-fisted successor Flannery, who quickly
ended the practice. You can understand why the Flannery team didnt mind seeing it exposed in the Journal.

But its not just the back-up plane Flannery has cut out. He is also eliminating the companys entire corporate fleet,
which includes five jets. The company is holding onto only a few small planes for short flights. This is the cost-cutting
equivalent of cutting off your nose to spite your face.

Yeah, I know: Nothing looks more excessive -- and more plutocratic -- than flying on a private jet. No dealing with riff-

https://www.bloomberg.com/view/articles/2017-10-31/in-defense-of-corporate-aircraft-no-really[10/31/2017 12:46:18 PM]

In Defense of Corporate Aircraft. No, Really. - Bloomberg

raff in crowded airports, no long security lines, no endless waiting for takeoff, no cramped seats, no need to
accommodate an airline schedule. Instead, you drive into a private airport, park your car nearby, hand your luggage to
an attendant who puts it on the plane, plop into your comfortable seat, and away you go. Once youve flown private, you
never want to go back.

For this reason, private jets have always been easy targets. When the three auto CEOs came to Congress in 2008 to
plead for a $25 billion federal loan package, they were excoriated for flying in their private luxury jets to ask for a
taxpayer bailout. When the producers of Billions want to show just how rich and entitled their hedge fund protagonist
is, they show him flying in his jet. When Steve Jobs officially became the CEO of Apple in 2000, he asked the board to
give him a private jet. The boards willingness to pick up the annual tab was one of the few criticisms shareholders had
during Jobss tenure.

Warren Buffett had long been critical of companies spending shareholders money on private jets. When he finally
bought his first plane in the 1990s, he named it The Indefensible. But you know what? A few years later, he changed
the name to The Indispensable. Buffett had discovered that when you run a big company, a corporate jet really isnt
an indulgence. Rather, its a tool. (This may also help explain why he bought NetJets Inc., the fractional aircraft
company, in 1998.)

Companies buy corporate aircraft because there are many situations in which time is more valuable than money. Sure
you might be able to save a few dollars by forcing all your executives to fly commercial, or via charter. But all that
getting to the airport early, waiting in line, dealing with delays, and so on, is going to cut into the amount productive
time they have to, you know, work. When someone is running a big division and has far more to do than there are hours
in the day, flying commercial is counterproductive and costly.

There isnt a company in the U.S. more frugal than Walmart; when its executives are on the road, the company expects
them to double up and share hotel rooms. Yet it maintains the biggest corporate fleet in the country, around 20 corporate
aircraft. Its former director of global travel services, Duane Futch, has said that Walmart uses its jets primarily for
regional vice-presidents who have to frequently visit the stores in their territory. It also saves them from having to stay
overnight. Efficiency of time is one of the main reasons we have the corporate fleet, he has said.

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Many industry experts doubt that GE will save all that much by eliminating its corporate jets. As a recent Bloomberg
story noted, its used planes wont generate much cash, given the glut of used jets on the market. As GE executives,
needing to put time over money, start using expensive charter jets, they may well wind up spending more of the
companys money, not less. Pete Agur, the founder of the aviation consultancy VanAllen Group, told Bloomberg that
long term, theres no way a global company can operate only within the airlines or only with commercial options,
including fractionals.

GE does 70 percent of its business overseas. Its executives dont just need to travel, they need to travel efficiently. Yes,
its pleasant to fly private -- and bound to breed a certain resentment -- but it is also the most efficient, most productive
way for a busy executive to get from Point A to Point B. Shareholders should want that.

You usually expect politicians to embrace symbolic acts even when theyre counterproductive. You dont expect it from
the chief executive of General Electric. Yet thats exactly what hes done. I dont know if Flannery is right to be cutting
research centers, but I am sure hes wrong to be cutting out the companys corporate jet. To me, its a red flag about the
new man in charge.

https://www.bloomberg.com/view/articles/2017-10-31/in-defense-of-corporate-aircraft-no-really[10/31/2017 12:46:18 PM]

In Defense of Corporate Aircraft. No, Really. - Bloomberg

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

1. Immelt has said that he did not know about the back-up plane, and would not have approved it he had known. The
Journal also reported that the GE board didnt know about the plane until the directors read its story.

To contact the author of this story:

Joe Nocera at jnocera3@bloomberg.net
To contact the editor responsible for this story:
Philip Gray at philipgray@bloomberg.net

Before it's here, it's on the Bloomberg Terminal.

LEARN MORE
6
Comments

Joe Nocera is a Bloomberg View columnist. He has written business columns for Esquire, GQ and the New York
Times, and is the former editorial director of Fortune. He is the co-author of "Indentured: The Inside Story of the
Rebellion Against the NCAA."
Read more
Follow @NoceraBV on Twitter
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Both Campaigns Sought Russian Dirt. Clinton's Way Was Legal.

In playing dirty politics, the Democrats were simply smoother than Team Trump.
by

https://www.bloomberg.com/view/articles/2017-10-31/in-defense-of-corporate-aircraft-no-really[10/31/2017 12:46:18 PM]

In Defense of Corporate Aircraft. No, Really. - Bloomberg

Eli Lake
@elilake
More stories by Eli Lake
275
October 30, 2017 12:59 PM

Manafort in the middle.

Photographer: Victor Blue/Bloomberg

There is a temptation for President Donald Trump's supporters to approach Monday's disclosures from Robert Mueller,
the special counsel looking into Russian involvement in the 2016 election, with the shrug of whataboutery.

Sure, Trump's former campaign chairman Paul Manafort has been charged with money-laundering and other dirty
dealings. But most of the details have been known for a while. And his indictment mentions no actual crimes committed
on behalf of the Trump campaign.

What about the Hillary Clinton campaign?

On Monday, Tony Podesta, the brother of Clinton campaign chairman John Podesta, stepped down from his powerful
Washington lobbying shop because he, like Manafort, worked for a shady nonprofit group to lobby the U.S. on behalf of
former Ukrainian President Viktor Yanukovych.

What's more, the Washington Post reported last week that a Clinton campaign lawyer, Marc Elias, paid the opposition
research firm Fusion GPS to dig up dirt on Trump. Some of that information came from Russian officials speaking to a
former British spy, Christopher Steele.

So, Trump supporters would seem justified in asking, why is it permissible for Russians to help Democrats and not
permissible for Russians to help Republicans?

There are two answers here. The first is obvious. The Russians tried to sow chaos in the election by trolling both the left
and the right on social media with fake news. But when Russian hackers distributed stolen emails on the internet, they
came from only one party: the Democrats. If Mueller finds evidence that this was coordinated with Trump or his
associates, it would be like finding out G. Gordon Liddy subcontracted the Watergate burglary to the KGB.

The other answer is more subtle. Adav Noti, who served as a Federal Election Commission lawyer between 2007 and
2017, told me that all of this goes back to the ban on contributions and donations from foreign governments or foreign
nationals in federal elections. The law has been on the books since the 1970s, and he said it applies to promises of
deleted emails and other kinds of opposition research.

"There is a real meaningful distinction," said Noti, who is now senior director of the Campaign Legal Center, a
nonpartisan group that monitors election law. "The Clinton campaign, based on what has been reported, paid for
opposition research, which included paying people to dig up dirt in foreign countries." Unsavory? Perhaps. But not
illegal.

Compare that to what we know about George Papadopoulos, a low-level Trump campaign foreign-policy adviser, who
has pled guilty to lying to the FBI. The plea agreement, released Monday by Mueller, says Papadopoulos emailed a
Russian professor and another Russian contact who promised to turn over Clinton's emails free of charge.

Or consider the meeting in the summer of 2016 between Donald Trump Jr. and Russian nationals who reportedly
offered to hand over dirt on Clinton. Noti said that if the Trump officials solicited the information, "the act itself was
unlawful."

Noti cannot be dismissed as a partisan. Last week, his law center filed a formal complaint with the FEC against the
Clinton campaign and the Democratic National Committee for filing misleading federal reports that hid the contract
with Fusion GPS. "They routed the money through their legal counsel so that no payment showed up on their federal

https://www.bloomberg.com/view/articles/2017-10-31/in-defense-of-corporate-aircraft-no-really[10/31/2017 12:46:18 PM]

In Defense of Corporate Aircraft. No, Really. - Bloomberg

disclosures," Noti said. "The activity was legal, but they misreported it."

It's important to note that so far, in both the case of Trump Jr. and Papadopoulos, it appears the information promised
was never delivered. Eventually, after initial denials, the younger Trump acknowledged he had a meeting with a
Kremlin-connected Russian attorney, Natalia Veselnitskaya, but said all she wanted to discuss were human-rights
sanctions against Russian senior officials implicated in the death of an anticorruption attorney. The Justice Department
document signed by Papadopoulos says on page 9 that a separate, off-the-record meeting with the Russians regarding
information on Clinton never took place.

At the same time, we know that Steele, the former British spy, did get lots of juicy allegations about Trump from several
high-level Russian government officials when he was working on a contract paid for by the Clinton campaign. That
dossier did not sway the election, but it did poison the political environment for Trump during the presidential transition
and during his first months in office. It dominated news coverage and prompted, in part, the launch of congressional
inquiries into his election.

It's quite possible that Mueller has more information that shows Russians illegally provided the Trump campaign with
dirt or coordinated with it the release of the stolen Democratic emails. But so far, nothing like that has surfaced.

What has surfaced is that the Democrats in this instance played it smarter than Trump's associates. The Clinton
campaign had the good sense to pay a contractor for Russian info besmirching the opponent (even if they do eventually
get in trouble for failing to disclose it). Trump Jr. and Papadopoulos, on the other hand, may have violated the law by
agreeing to receive Russian dirt that was never delivered.

The sad irony is that various Russians were willing to share opposition research directly and indirectly with both
campaigns. In this case, Team Clinton was just smoother than Team Trump. Nonetheless Trump still won. As the late
Tom Petty sang: Even the losers get lucky sometimes.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:

Eli Lake at elake1@bloomberg.net

To contact the editor responsible for this story:

Tobin Harshaw at tharshaw@bloomberg.net

Before it's here, it's on the Bloomberg Terminal.

LEARN MORE
275
Comments

Eli Lake is a Bloomberg View columnist. He was the senior national security correspondent for the Daily Beast and
covered national security and intelligence for the Washington Times, the New York Sun and UPI.
Read more
Follow @elilake on Twitter
Most Read

1. Manafort Indictment Should and Shouldn't Terrify Trump

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2. Don't Rush to Judge Trump
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3.
Manafort Indictment Is the Start of a Complicated Story
by Noah Feldman
4.
Trump Drags the Fed Down Into the Political Mud
by Tyler Cowen
5.
Both Campaigns Sought Russian Dirt. Clinton's Way Was Legal.

https://www.bloomberg.com/view/articles/2017-10-31/in-defense-of-corporate-aircraft-no-really[10/31/2017 12:46:18 PM]

In Defense of Corporate Aircraft. No, Really. - Bloomberg

by Eli Lake
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