The full story behind GE's fleet of private jets
General Electric, the US conglomerate with a market cap of $130 billion, is getting rid of its corporate fleet of business jets to cut costs. This follows John Flannery replacing Jeff Immelt as CEO of GE last year as well as a nation wide move across corporations to reduce their use of corporate jets.
In operation since 1892, GE has been a pillar of the US economy in some form for decades. Last year, however, its public image took a severe hit when the press got wind of their executives' reported overuse of private jets under ex-CEO Jeff Immelt. This has culminated in instances where Immelt had a second private jet follow him in case one broke down and he needed to quickly get from one place to the other.
According to a report by the WSJ, the backup jet was, in fact, used on most of Immelt's trips until mid-2014 when the company started to scale down this practice. Immelt, however, said he did not know about this chase plane.
"Given my responsibilities as C.E.O. of a 300,000-employee global company, I just did not have time to personally direct the day-to-day operations of the corporate air team, I had every right to expect that it was professionally run. Other than to say ‘Hello,’ I never spoke to the leader of corporate air in 16 years." he said in a public statement.
Immet's departure from what was already then considered a conglomerate in trouble, however, only complicated things for General Electric, which saw its stock drop from $25 per share to now $15 per share, obliterating near $70 billion in market cap for the company along the way. Complications for GE, however, only continued once the jet story broke.
At the source of the issue, according to Immet, was the company's corporate air department, which operated GE's private jet fleet for its executives. During the last 10 years, the company has had 4 heads of this department, which, according to AIN, employed near 70 people in 2016 and a fleet of possibly as many as 13 private jets.
Amongst the private aircrafts that GE operated were, at least, 2 AW139 helicopters, 3 Challenger 605, 1 HondaJet and once a reported three Boeing Business Jets, the world's largest private aircrafts. GE also fractionally owned another 6 aircrafts operated by NetJets.
"We have a site in Strother, Kansas. It took two or three days to get in and out. Now you can fly in and back home in a day." one of their executives said on the use of their private jets.
General Electric's corporate jet fleet indeed saw heavy use throughout their history. According to analysts, it was not uncommon for a smaller GE corporate aircraft to fly 11 sectors in one day. For reference, high net worth individuals typically judge it more cash efficient to buy a private jet when chartering for more than 270 hours per year, a figure that was nearly reached every two months by GE's fleet.
"A lot of our sites are not easily accessible by commercial aviation" said Brad Mottier GE's Aviation VP, "To get to some you need to take multiple flights and sometimes then drive for a couple of hours to get there, so the HondaJet flying direct is a huge productivity gain."
In 2010, notorious billionaire Mark Cuban said in an interview to CEOs who stepped away from private jet travel: "I just hope I compete with them. I get to work while they get to stand in line at the airport."
Shortly following the private jet debacle, GE said it would shut down its corporate air department under its new CEO, John Flannery. Private jets owned by the company would be sold off to the highest bidder and executives could either chose to fly on chartered private jets when there were no adequate commercial aviation lines.
A spokesman for GE told BEAM, the company owns and operates two HondaJet aircrafts. "GE Aviation recently became the first HondaJet customer to reach 600 hours and is the current HondaJet fleet leader. GE Aviation has 22 facilities within range of its HondaJets. It has been a great productivity machine for the business." the spokesman added.
Whilst appearing to save money on the surface, many argued that the cost of renting private jets for travel will be higher than operating a corporate air department, due to the time spent in the air. Others argued that an increased efficiency and sharing economy of private jets would eventually make the switch more cost efficient.
GE's decision to review the use of corporate jets was, however, indicative of an even larger trend in the industry, which has seen larger corporations step away from extensive private jet ownership in favour of chartering and sharing, a trend that is set to change the industry. Technology has also allowed teleconferencing and for less time to be spent on the road in favour of efficiency.
The fact that GE is the company considering to move away from the use of private jets is, however, particularly significant. Throughout the industry, it is widely believed that GE and its then CEO, Jack Welch were at the source of Boeing's decision to start manufacturing business jets. In fact, engines on BBJ aircrafts are made by GE. The company, at one point, reportedly owned 3 Boeing Business Jets.
An iconic brand amongst ultra high net worth individuals, Boeing Business Jets are a status symbol in the mega rich world, equating to what purchasing a Rolex would be for mere mortals. Its history, however, started just 20 years ago when Boeing opened its business jet division reportedly thanks to GE. Inside, the cabin spans 850 square feet.
Whether or not GE will be able to make the public and press forget about its corporate air department enough to rebuild one, remains to be seen. Shareholders have, however, not been pleased with the company in general in recent months, leading to a loss of nearly 40% in share value in just over a year.