With Friends Like These. Why General Electric’s Private Jet Downsizing Has Been A Bumpy Ride

Author: Doug Gollan / Source: Forbes

Agitating about private jet usage is a means to an end. Private jets, for the most part, just happen to be the object of convenience for the agitators. It’s why shareholder activists who agitate corporate management and boards to increase stock price through divestitures and cost savings like to point to private jet ownership even though they often own them as well. It’s why both Democrats and Republicans can agree that private jet usage is wasteful, when the other party is doing it. It’s why politicians point to private jets when they want to raise taxes. The rant goes, “If those people can afford private jets, why can’t they afford to pay more taxes?” In other words, invoking private jets is a cheap substitute when the other side lacks issues of substance or real facts to make its case. At the same time, cutting back on private aviation when it adds value can negatively impact a business.

And yes, private jet usage is something that can be abused, however, there is no research that correlates having a corporate flight department with poor performance. In fact, there is a good deal of research and case studies that show the exact opposite. There are also legitimate reasons to reduce private flying as well as to change the mix of private flying. Downsizing a fleet and increasing the usage of charter and fractionally owned jets often makes sense, which is what GE is doing. On the flip side, there are scenarios where building an in-house fleet of aircraft and helicopters is more cost-effective than outsourcing.

That’s what makes the way GE has handled the current situation to date a bit sad. Its decision to cut back on the private jets it owns and operates was first reported in The Wall Street Journal and had led to a flow of follow-up stories in Fortune, Bloomberg, The Dallas Morning News, Bloomberg, CNN and others. Aviation Week reports GE has had a corporate flight department for 75 years, and since it is holding onto at least one light jet and taking delivery of another one next year, it appears that the division will remain in some scaled-down form.

The decision to sell some of its jets is part of a new initiative to shed some $2 billion in expenses, including selling businesses that are not adding to shareholder value. It is at least in part a response to Nelson Peltz’s Triad Fund Management that has taken GE to task for its long-lagging stock price.

Whatever GE’s problems, one thing is for sure. It’s not its corporate jets. Bloomberg estimates based on the jets GE says it is selling, operational savings will be less than $5 million and predicts at the end of the day it could…

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