Free travel on the company jet has long been a plum executive perk, particularly for top officers and board chairmen. But increasingly, the company plane really belongs to a company executive, who leases the plane to his employer, either directly or through an outside air charter company. Some executives even launch air-charter companies of their own. Companies can shell out hundreds of thousands and even millions of dollars a year to charter the boss’s own jet— often for business travel, but in some cases so the company can cover the tab for personal trips as well.
A review of corporate regulatory filings shows that at least two dozen US-listed companies with market-capitalizations over about $500 million say they rented one or more aircraft from an executive, director or major investor in recent years. Among them: Google, Las Vegas Sands, Danaher, Dell, Cerner, Activision Blizzard, Nordstrom, Dick’s Sporting Goods, ManpowerGroup, Cablevision Systems and Fortress Investment Group.
Here are some striking examples:
Tracy Krohn, chairman and chief executive of oil-and-gas producer W&T Offshore, flew nearly 200 hours in his own jet at W&T’s expense last year. The company hasn’t disclosed what proportion of that was used on personal trips, but it does say it charters Krohn’s own plane for him to use “for any purpose.” The company reports spending about $1 million just on Krohn’s personal flights last year, including in his own jet; that includes $96,300 to cover Krohn’s tax bill for the perk. W&T didn’t respond to a request for comment.
Clifford Illig, vice-chairman of medical-records company Cerner, controls a company that collected $193,759 from Cerner for the use of its aircraft. Cerner bought an additional $184,579 of fuel for the plane from a second company, this one owned by a trust Illig controls. The company’s proxy says Illig is entitled to at least some free personal flights, but doesn’t say how much he actually flew; Chairman and CEO Neal Patterson’s employment agreement promises him up to $110,000 for personal flights on aircraft that Cerner owns or leases (and pays him cash if he doesn’t use the full $110,000 allotment). Patterson took $151,740 in personal flights last year, though it’s unclear if any of that was on Illig’s plane. In regulatory filings, the company calls the arrangement “reasonable and in the best interest” of Cerner. Among the top destinations for Illig’s plane through early 2011, according to The Wall Street Journal’s jet-tracker database: Las Vegas, Eagle, Colo., and Marco Island, Fla. The company didn’t respond to an email seeking comment.
Clear Channel Broadcasting, part of the Clear Channel media and advertising empire, agreed to pay $3 million up-front in 2011 to use an aircraft owned by a little firm called Yet Again Inc. over the next six years, plus taxes, insurance and maintenance—an additional $591,633 last year. Yet Again is controlled by Robert Pittman, a former AOL Time Warner exec who now holds top posts at both Clear Channel Outdoors and the group’s holding company, CC Media Holdings, according to the companies’ filings. Pittman’s employment agreement promises to make a jet available to him “for his business and personal use,” including “flights on which Mr. Pittman is not present,” company filings note. Whenever possible, the plane is to be a Dassault-Breguet Mystere Falcon 900—the kind of jet registered to Yet Again. (Footnoted.com flagged Pittman’s personal flights in a 2011 blog post.) Top destinations through late 2010 for Yet Again’s jet included Montego Bay in Jamaica, Las Vegas and Queretaro, Mexico. The company didn’t respond to a request for comment.
Most companies chartering a top executive’s jet credit security and convenience for business travel, and even bargain pricing, rather than personal junkets. Google spent $410,000 last year to lease a couple of aircraft from executive chairman Eric Schmidt—he owns one outright, and has a one-third share in the other. The company calls the arrangement a deal, since the planes actually cost more to operate than the $7,500-an-hour it pays. “Eric does not profit from the use of these aircraft,” Google’s proxy says. Google didn’t respond to a request for comment.
Similarly, private-equity and hedge-fund manager Fortress Investment Group reports paying $2.6 million to two or three of its principals in 2012 to use their personal aircraft for business flights (and another $3.9 million to one of them over the two previous years). The company declined to identify the individuals. A company spokesman says Fortress doesn’t pay for personal trips, and that using the private planes is “often the most logistically efficient and cost-effective way to address the significant travel demanded by our global enterprise.”
Michael Dell is well known for paying the $2.97-million tab for his security expenses, but the computer company he founded paid $2 million last year to rent his aircraft through a third-party leasing firm. The previous year, it paid companies owned by Michael Dell $2.3 million directly for the same service. Dell didn’t respond to a request for comment.
Zynga, the social-gaming company, says it paid $700,000 last year to lease a plane owned by founder and CEO Mark Pincus in 2011 and 2012, including $300,000 paid to a third-party charter company that rents out Pincus’ aircraft. The company didn’t respond to a request for comment.
Companies typically emphasize that these arrangements are priced at or below market rates, and say they are negotiated at arm’s length. Yet, however above-board the transaction, they rarely survive the jet-owner’s departure.
When CEO John Weber left auto-parts maker Remy International in February this year, it took just two months for the company to cancel an arrangement to pay $15,000 a month to fly up to 14 hours in a plane ultimately owned by Weber. He also got $890 an hour beyond that threshold, or $224,000 in all last year. Canceling the deal put Remy on the hook for another $360,000 in termination payments, according to Remy’s proxy. The company didn’t respond to a request for comment.
Beyond leasing aircraft, executives who decide to sell their jets sometimes find eager buyers in the companies they run.
Sheldon Adelson, the controversial chairman and chief executive of casino giant Las Vegas Sands, sold his Boeing 737 to the company for $34 million. The casino company reports that the figure was derived from two third-party appraisals, but proved to be 2.2 times the jet’s book value. Las Vegas Sands called it a good buy because “it would have been more costly to acquire the airplane in the open market due to the limited supply of similar aircraft with luxury features.” Destinations for the aircraft through late 2010: Ireland, Santa Monica, Calif., and Tel Aviv. Las Vegas Sands didn’t respond to a request for comment.
When the company charters an executive’s plane, it means shareholders are essentially subsidizing the cost of ownership, helping to pay fixed expenses over time. Still, one former jet-leasing executive tells us CEOs probably aren’t getting rich off the arrangements. “You can’t make money owning an airplane,” he says.