Magazine article Insight on the News

Now Fortune 500 Companies Conduct Business on the Fly

Magazine article Insight on the News

Now Fortune 500 Companies Conduct Business on the Fly

Article excerpt

State-of-the-art corporate jets can fly from New York to Tokyo in 15 hours but can cost up to $35 million. Still, the industry is ready for takeoff -- unless new federal and state taxes keep it grounded.

Fed up with volatile airfares? Tired of long waits in airports? Displeased by airline cuisine? An alternative to commercial flights is becoming ever-more popular among the globe-trotting executives of America's largest companies: the corporate jet.

The $2 billion-a-year corporate-jet market grew by nearly a quarter in 1995 and is expected to register a 10 percent increase this year. Some 8,000 business jets are operating worldwide, more than half of them based in the United States. (A similar number of corporate propeller planes also are in use, although sales have leveled off.) Companies operating their own aircraft cite numerous advantages:

* Efficiency Corporate jets reduce flight time by providing direct service and using smaller airports located near final destinations. In addition, executives bypass the lengthy check-in procedures required for commercial flights. The interiors of business aircraft often are designed to function as office space, allowing travelers to work en route.

* Flexibility Companies control the scheduling of their own planes rather than conforming to airline timetables, allowing for last-minute, even mid-flight, changes in course.

* Security Corporate aircraft enable companies to reduce the risk of their executives being kidnapped and guard against lesser dangers such as stolen luggage.

Such benefits do not come cheap, however; business jets range in price from several million dollars to as much as $35 million. Moreover, companies must contend with a perception among the public -- including stockholders -- that such aircraft are an unjustified luxury. "The corporate jet is the most prominent thing in a company," says Robert Miers, an analyst at Avmark, an aviation consulting firm in Arlington, Va., "so it's the first thing to go when the company starts tightening its belt."

Indeed, such visibility makes corporate jets a frequent target for federal and state tax hikes. In late August, President Clinton proposed that business aircraft be taxed $225 per flight to raise revenues for education and literacy programs. …

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