December 23, 2008
On Company Jets
AIG is not giving up any of its seven private jets even though it has acepted $150 billion from us folks. It sold two of its jets and has cancelled orders on four more in an effort to tighten its belts. So says the Associated Press in its article "Wall Street Still Not Downgrading to First Class." J. Robert Brown has some great comments on this issue and the "toothlessness" of the executive compensation restrictions in the bailout. See Brown's comments on his December 22 and 23rd posts. For example, the CEO of Circuit City used the company jets for personal use to the tune of $100,000 in 2007 as disclosed in its 2008 Proxy Statement.
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As an instrument-rated, commercial pilot and Fellow, Am. College of Bankruptcy, I feel qualified to comment. Imagine that you are an executive in Detroit. You have facilities in Opelika, Alabama; Salina, Kansas; Galesburg, Illinois; and Redlands, California. You need to meet with personnel at each location. Your compensation is $1M which, at 2,000 hours/year, is $500/hr. Explain, please, how you can effectively travel to these diverse venues on the airlines. You can't. Perhaps the Big 3 should have jet-pooled Detroit to Washington; they might have flown commercial to Reagan and taken the train from the airport; but try that in Galesburg. Can't be done.
Reminds me of the story of the guy who while strolling down the street, picked up the pennies and missed the quarters.
General aviation allows management to efficiently move from location to location. While A $41M Gulfstream G-5 may be overkill, a Cessna Citation is certainly reasonable.
Posted by: Barry M Barash | Dec 23, 2008 1:18:36 PM
I really don't disagree. In fact, I feel bad for these people sometimes that they are expected to work in the car to the airport, work the whole flight, work on the way to the meeting - you get the idea. And I'm sure some do and some don't. My sarcasim was directed more at Congress; what's next - how big their office can be? How big the steak can be in the executive lunch room? As an old populist at heart, I loved the hype though on taking private jets to ask Congress for a handout. Arnold won't do that when he seeks a handout for California. Prof. Hayes
Posted by: Bankruptcy Prof | Dec 24, 2008 7:59:11 AM