GE jet-sale plan surprises industry
DALLAS: Imagine if Facebook founder Mark Zuckerberg announced he was unplugging from the Internet to save time. That’s how private-jet industry executives feel about General Electric’s cost-cutting move to sell the bulk of its corporate fleet.
GE’s plan to shed five company-owned planes flies in the face of the boardroom axiom that such aircraft are time- and money-saving tools, not luxury items. GE sells jet engines to planemakers and will have a large presence next month at the National Business Aviation Association’s annual conference, where the motto has been “No Plane, No Gain”.
Savings from selling corporate jets will be minimal, and using higher-cost charter flights risks winding up as more expensive, said industry consultants. GE won’t raise much cash by selling aircraft into a used-jet market in which prices have been declining for several years.
GE says cost-savings go beyond just the jets, as they’ll eliminate spending related to facilities overhead, maintenance and crew. The company is also cutting down on travel overall, relying more heavily on video conferencing for internal meetings, said company spokesman Jennifer Friedman.
“By reducing our corporate air services, we will see significant cost savings,” said Friedman.
The business-aircraft industry is already sensitive about its image, especially after the public outcry that erupted in 2008 when auto executives flew their corporate jets to Washington to seek bailout money from Congress. Former president Barack Obama often railed against tax breaks for private planes.
John Flannery, who took over as chief executive officer of GE last month, is seeking to follow through on predecessor Jeffrey Immelt’s plan to cut US$2 billion (RM8.4 billion) of costs by the end of next year. Flannery is also trying to reverse this year’s biggest stock slide on the Dow Jones Industrial Average.
Scuttling the flight department was probably more of a symbolic move than a large contributor to cost cuts, said Pete Agur, founder of the aviation consultancy VanAllen Group.
GE’s jet-engine unit will keep a HondaJet, a small five-passenger plane. GE will take delivery of a second HondaJet in January. GE makes the engine for the HondaJet.