When and why are corporate private jets used - any of you had experiences?
Heard from a friend that her consulting firm regularly puts mid and even sometimes junior level employees on the company jet if the schedules and timing of their flights coincides with where the jet is and where its headed to.
When people at my bank travel for work they mainly fly economy unless its over 4 hours then they're upgraded to business class or so I heard, I've never had the opportunity to travel for work and given the nature of my role likely never will.
Nonetheless, his sparked a thought in my head, what scenarios give rise to the company letting bankers use a private jet. I don't even know if my bank has one but I wouldn't be surprised given the size of business. Even for roadshows, first or business class makes more sense.
Even if we did have one, who would use it and why? Senior bankers and C suite level guys at my company go on and on about public image and frugality and they don't seem like the type to take pleasure in that so I don't see them using it plus the costs of using one are astronomical compared with just flying business or first class, how would you expense a $250,000 (assuming you charter) trip for a learjet from LA to NYC even if you're at a top PE, BB or EB.
I don't think my friend was lying about her company letting employees use the jet I just can't see the business sense in owning or chartering one even if the company has hundreds of millions in revenue. Throwing $40m on a G6 still seems insane unless you are a celebrity who needs ultra privacy like Beyonce or Taylor Swift. How famous are Bob Sternfels or Brian Moynihan or Jamie Dimon if we're really being honest.
I wonder the same for other banks and companies as well. I wouldn't be surprised if JPM/GS/MS/EVR/LAZ/BX and fortune 500 companies had corporate jets but it seems highly odd given that i can't think of many instances where first class wouldn't be a better and more logical option.
Do you guys have any insights or experiences on them?
BB, in a group with a top rainmaker who occasionally travels private - firm has multiple jets. Have seen VP/D fly on jet if they need to go with rainmaker, but juniors fly commercial even if going to the same spot. Can't speak for consultants, but probably makes sense if you're regularly shipping entire teams (and spending a truly massive amount on travel, making the economics better) which doesn't really happen in banking. Banking has similar travel rules to what you're mentioning, ~3 hours and over you can fly business but short flights are economy.
The jets aren't expensed to the client, they are a corporate expense. Vast majority of MDs won't use it - typically top of the C-suite, maybe head of a division sometimes but it's not following them around. The CEOs just logistically need a jet given their travel schedules rival the president. If they flew commercial they'd spend half of every day in an airport.
Really more about time than celebrity - you have massive flexibility with a corp jet, you can arrive 5 min before the flight and if you're running late it waits. The dog and pony show of TSA, boarding, waiting around etc takes hours. First class is fine but you are still there for sooo much extra time on both ends - for most regular MDs the travel eats up a ridiculous amount of time and planning, let alone a truly top guy where every minute not spent in a client meeting is wasted money. The true top brass just have better uses of that time, and billionaires are not going to wait in the lounge or hang out at the airport gate. Even the first class lounges are not some oasis.
This - the beauty is in the name “non scheduled”
also
1) if you fly to stupid places regularly, no need for connection, you just fly to wherever, so long as the range of your aircraft covers it
2) you can have meetings with CEOs/chairmen en route
Former company had a private jet the executives used, but primarily the president who just used it to travel all over. Definitely abused it if we were looking at just for corporate business use, but that company had a lot of sketchy stuff like that going on. CFO would use it to fly an hour to another city, but I, as an analyst, would have to drive down, so I’d have to leave my city at 5am to get there in time for our meeting.
So stupid.
My friend used to be the executive assistant to the #2 person at a large tech company. They used to take the helicopter to the airport and then the private jet to fly places. He was a very busy executive. I met the executive once in a meeting. He was a rockstar.
My wife flies private for her company to a couple satellite offices every quarter or so. But, they have PJ's set up to fly there on weekly bus routes.
The biggest cost for the Jet is the fuel, everything almost pay for itself. So for a flight from NYC to Memphis, say it is 20k (2021) for fuel alone. I would imagine it would not save much if you fly 10 people making 100k, but if a company has 10 people making $1mm a year, the time save is worth it by itself.
Lot of reasons. I'm sure the obvious one (that it's cheaper than bulk airfare for multiple team members) is easy enough, so the rest:
Access to more airports - if your client or the business you are scoping out is in the middle of nowhere (not unreasonable) then private jets can actually provide value in the sense that you can get to small airports on your own schedule, instead of waiting for the one puddle jumper that goes there every other day. I've never worked at a firm that's needed it, but I've heard from others who have done site visits in 3 states (separated by a lot of distance, not CT/NY/NJ or something) in a day. Can't do that on a commercial airline
Ego/Appearance - The former part is obvious: some people derive self worth from being on a private jet, which is why so many influencers go to photo galleries meant to resemble the inside of one and pretend to their followers like they're on a private jet. You could also make an argument that for a business like consulting, where the entire industry exists only to provide CYA safety for executives and not to actually provide value, the appearance of success is hugely important in winning new business
Tax Purposes - Pretty simple. The plane is a depreciable asset. If you are in a cash flow positive business without a lot of deductions you can buy the plan, deduct the cost, and write some of the operating expenses off your taxes and off you go. This is especially true when dealing with businesses that have sole owners (or sole majority owner); they'll buy the plane and lease it back to the company. I can think of one example of this I read about several years ago.
Comfort - Private planes are just straight up more comfortable and convenient. Maybe the average director doesn't get that access, but if you are Jamie Dimon and you're jetting all over the world all the time, the convenience of not spending 2+ hours going through security, boarding, the possibility of delays, and frankly the superior experience of having the cabin to yourself is worth a lot of money. If you've got half a dozen MDs who make $500/hour on average flying out somewhere every day or so, then the value of avoiding inevitable airline delays and the nonsense of going through the TSA song and dance is worth hundreds of thousands if not millions of dollars of savings every year in comparison to hours wasted at a major airport/on a commercial flight
You have to understand the broader economics of private aviation.
A plane is a heavy asset. This means a couple things if you're an owner. One, you finance it. Two, you gain the benefit of depreciation.
Financing it means that you don't pay $78m outright for the G700. You pay the non-refundable deposit (about a million) at contract signing, and then for all the milestone payments between signing and actual delivery (which can be three years for the ultra heavy class, often half that for the ultra-mid or other smaller cabin classes; zero if you're buying pre-owned), you draw on your aviation finance facility from your bank. This means you pay only the interest costs on your LOC, which is secured by the asset itself.
Depreciation is very tax advantageous. The 2017 Tax Cuts and Jobs Act provides for 100 percent bonus depreciation, allowing taxpayers immediate deduction of the cost of aircraft acquired and placed in service between September 2017 and January 2027. You can Google for more details on this, but even used airplane purchases allow the owner to write the whole thing off that year's tax bill depending on their usage qualifications. By that I mean how much of the total usage is for business versus personal. For what it's worth, this is changing, 2022 is apparently the last year 100% is eligible. I haven't bothered to stay on top of the details but my advisers did raise the issue.
The long and short of it is that you're basically paying only the interest costs and the hourly operational costs. Hourly operational costs can be $10k for a craft like the Challenger 350 to maybe $18-20k for a Global 6000. This is the total cost of fuel, pilots, attendant, and ancillary expenses. So if you fly 100 hours a year on a Global, you're under $2m in direct operational costs. Then add whatever your interest expense is.
The other ways to access private aviation are fractional ownership, lease, or card programs.
Corporate buyers tend to be owners, either whole craft or fractional.
As you can see, if you've got a single person whose time is very valuable (CEO of a major bank), it makes sense to unlock more of their time regardless of the cost. You skip the inefficiency of time spent waiting for security, connecting flights, or baggage. You gain the privacy that allows them to conduct calls or meetings in-transit so travel time still is productive work time. You enable maximal efficiency. I heard it said once that a private plane is really a time machine.
A transcontinental flight can be done on a Longitude for about $95k in operating expense. That's nothing to spend on someone like Jamie Dimon, D-Sol, Jane Fraser, you get the gist, because you could do that 500 times in a year for less than $50m total which might be the fee revenue for a single large deal.
Let's look at your consulting firm example. They probably have to send a full team somewhere. Say that somewhere isn't serviced by a major airport, meaning there's connecting flights. Maybe that regional airport is still a brutal 90-minute drive away from the facility or headquarters. Say that five people are going on-site. You can go all the way down to something like an XLS for $3-4k an hour. A three hour flight is $11k. For five people, you can see how that makes sense.
And you can't overstate the convenience, you'd be shocked how many small airfields there are across the country. Sometimes you have to manage fuel because they don't have an FBO so your range is limited to being able to get there and back on a tank, but that's infrequent.
All of this ignores the intangible elements. Sure, the math can check out. But some people have legitimate security needs. Sometimes it's just about the psychological aspect. You don't want someone showing up to the kickoff pitch meeting with the anchor LP / a backdoor meeting with some central banker / or whomever tired and cranky because they got delayed, had to listen to babies scream, and had a bad meal in the air. Or you might just want an easy time getting to your vacation ...
Good overview.
I worked for a company where an Exec had a personal PJ. They were able to charge back flights for business purposes if there were a certain number of employees on the plane. As a result, I flew to numerous meetings where I did not say or contribute a single thing, just to reach that threshold. One time we had to fly to pick him up, so I flew the first leg of the trip by myself, on the PJ, with only the pilots. My iphone almost combusted from all the flash photography.
Sensible me found it a little preposterous but in practice, and for someone like that, it was incredibly efficient. Leave NYC in the morning, have a breakfast meeting in Boston, dart up to Vermont for a lunch meeting, drop someone off in New Hampshire on the way home, land on LI, and be in the hamptons by early afternoon.
As an aside, the best way to show you don't belong is being the only guy in the teterboro private terminal crushing the free popcorn and stealing all the cliff bars. Hand up.
Companies like Walmart do it because team members can visit way, way more locations in a day than you could with normal flights. You can fly right into a small local airport too instead of into a hub then driving.
PE side, think about board meetings in-person or touring a companies facility. You can show up in person and be home before dinner. This is what one firm I’m on the board with does. I think it’s a little overkill but idk lol
Warlmat, Costco, large infrastructure companies with facilities worldwide, yes, all have fleets of jets. But quite small and not the larger sized jets (except for the principal pax--he/she flies the big one.)
Makes sense
JPM has private jets.
When I was an intern we were fucking around looking through the phone book and found ~15 pilots on company payroll, all in different locations.
In a similar vein, one of the bankers that I knew had a twin Cessna. The operating costs are substantially lower than even a very light jet. A light twin like a Piper Seneca cruises at 190kts/215 mph and a Cessna 421 at 240 kts/280mph. They really shine on making half day drives into hour flights. They had an immense degree of value especially for those with regional coverage. I can’t overstate the time savings on both ends and the flexibility.
Flew with both helicopter and PJ, but at the client's expense. My former employer had some family offices as their clients, and they would use the planes to travel with the deal team (no analysts usually). We also chartered planes during Covid to circumvent the travel restrictions/highly limited flight schedules. This was mainly between the Nordic capitals (roadshow in Copenhagen, Oslo, Stockholm, and London). Fun times, but probably something that I won't get to do for a while.
When I was doing PE, probably 75% of management meetings and facility tours used the PJ. We looked at a lot of industrials in the middle of no where in the Mid West. Places that are hard to get to via commercial air. Anything that required a connection, the Partner involved usually didn't want to bother, and would get the PJ.
Sucked as an Associate. There's nothing glamorous about it. Instead of getting to do whatever you want, you have to sit across from the Partner while they grill you about the company. Only real advantage is not having to do TSA and getting the car to take you right to the runway.
ahhahahhahahahha
Flew private a bunch at Citi. They had a fleet of jets. It was mostly when M Klein was involved. We also took them to recruiting events at UIUC because it was legitimately cheaper than flying into Champaign.
My grandfather and his brother were both bomber pilots in WW2 and each had private jets that they flew. That was great for family vacations. When the USSR broke up my grandfather tried to buy a MIG but it was just too complicated. They were selling for like $25k, and he was certified.
Family member was a C-suite executive at a large corp in Europe. Know GS and JPM took out the private jets a lot for road shows - hitting multiple cities at the times that fit your schedule is tough flying commercial. Fun anecdote: a graduate analyst once asked him (CEO of the company they were assisting) to take a picture of him on the stairs of the jet
I worked at a fam office as an analyst for a couple of years... one of the portcos leased two private jets owned by the family... i flew to & from delkab peachtree, tweed, teterboro, lincoln, opa locka, etc... i get motion sickness and turbulence is a lot worse on the small jets vs a 737. i never got to enjoy the goodies on board. i prefer delta tbh... also agree with the comment about more oppty to be grilled by your seniors, esp if sitting face to face... the head of the family used to make us rotate into the seat directly in front of him so we each got 1-on-1 time
we bought a 135 via M&A deal and hired pilots & ran an aircraft & charter mgmt biz via a separate entity that owned the aircraft to help offset some costs... challenger 300 was more like 5K an hour than 10K (depends on mileage/condition/etc)... also from purely a P&L perspective: you can expense your delta tickets as well, not unique to jets. The best position is adam neumann style: own 100% of the entity that owns the jets and leases it (at highest mkt rate possible) to the portco you own less than 100% of.
DJ DSol needs his privacy. Don't know who those other guys you mentioned are.
Did it a few times at a F500. Was staffed on a small task force for a project where they were working alongside leadership of another similar size companies.
but was nothing sexy at all. Cool to just drive up and go compared to regular travel, and had food waiting for us at the hangar. Was staffed with alcohol but that wasn’t for us
all in all cool to have done and definitely beats regular travel but I was plebe status at the time so didn’t feel like a baller or anything
There's a wide range of private jets each with widely varying operating costs. A fleet of smaller to mid sized jets are often the option for companies ferrying their staff regularly (G280s-G550s and smaller Falcons etc.) Most whales fly alone, or with small number of family/friend. Rarely (but it does occur) have seen 650s, Globals, Falcon 8xs used regularly for mass corporate travel (although a big attractor for the tax write off is the jet must be used mostly* for business, per FAA regs). This is private aviation. Do as one likes is the rule, and use of jets will vary by principal pax and company policy. It's funny when a whale walks off from their new G650 (Globals are brash) and then quietly goes to drive their 2004 Lexus (no joke). And then the deca millionaire walks off from a packed 30yr old G450, makes a massive scene, and dramatically goes to their waiting Bentley. The thing to keep in mind is that at the whale's level, private jet travel is not a luxury/experience. It's just a tool for customised travel, and the bird is nothing more than a train or a taxi cab ride to wherever. When you're pushing 1,000 hrs per year on your 650--most of the time by yourself--there's literally nothing special about it from their perspective. You treat it like a daily commuter.
Qui quo quasi quisquam natus sed laborum sequi. Dolorum quae repellat consequatur officia deleniti ut. Corporis sunt perspiciatis repellendus quia repellendus. Ut eveniet voluptas quia repellendus porro impedit.
Voluptates doloribus aut quo at. Vel est sit quos rerum nemo velit. Suscipit quam omnis exercitationem dolores fugit laudantium voluptas. Molestiae aut qui dolorum. Voluptas voluptates eligendi ad dolores voluptatem. At quod dolore veritatis tenetur quia cumque id facere. Tenetur asperiores ut excepturi qui sapiente vel.
Eum error ipsum et ut architecto in. Illum totam vitae laboriosam. Sequi rerum quia quo enim. Qui est illo ut sit dicta quibusdam. Praesentium qui sequi quia. Quas incidunt perferendis a et maiores iure molestiae. Modi dolor ea labore similique reiciendis.
Quasi optio veritatis sunt enim. Illum vero excepturi nihil provident. Earum veniam asperiores sit esse consequatur et et. Voluptatem veritatis ipsam et consequatur. Tenetur beatae amet qui autem. Vel amet adipisci in sed omnis quae quasi.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Quos temporibus sed optio commodi. Consequatur libero omnis rerum consequuntur hic veniam dolor. Aut vel illum magni id praesentium. Magni voluptatem illo reiciendis voluptate labore eos. Sed culpa et doloremque. Autem voluptas ut fugit nostrum nostrum optio facere.