In the wake of the Great Recession, there was a public outcry at the outsized benefits CEOs and other executives seemed to enjoy, even when the companies they represent weren’t churning out profits. More scrutiny was paid to executive compensation and benefits — and to the perk of using corporate aircraft for both business and personal travel. But, as the Great Recession grows smaller in the rearview mirror, a Financial Times investigation has found that company-owned jets are once again being used to ferry executives to and from their vacation destinations.
Law enforcement now has a multitude of helpful tools available to track suspects thanks to advances in technology. Officers can use cell phone data, social media activity and even public surveillance cameras and facial recognition to look for persons of interest. And now, as the Associated Press reports, the FBI is even using a small fleet of undercover aircraft to follow suspects and even to gather cell phone data in some cases. The kicker is this: The FBI holds that it does not need a warrant in most of these surveillance cases.
Curious bystanders have noticed low-flying planes around American cities. And now there’s an explanation behind these unusual aircraft flying at unusually low altitudes. The FBI is using these planes to collect information and track the movements of suspects. While the FBI tried to obscure its connection to the planes by creating a fictitious company, the Associated Press has traced at least 50 planes and more than 100 flights in 11 states in a one month period (April 2015) to the FBI and its operations.
In the wake of riots that occurred in Baltimore this year, many local residents have noticed small planes flying low over the city. Those planes weren’t just taking airborne tours of the city. Rather, they were part of a joint effort between local and federal authorities to monitor activities in the city during the period of unrest. The planes are able to monitor and gather information about areas far larger than a helicopter would. The American Civil Liberties Union has raised questions about the legality of such observation, as well as the secrecy behind it.
In 2014, Malaysia Airlines Flight 370 disappeared over the Indian Ocean without a trace. Now, the United Nations is seeking to create new standards that would help air traffic authorities and airlines keep tabs on commercial aircraft, even in the most remote parts of the world. The proposed standards call for commercial planes to transmit their location every 15 minutes during normal operations and every one minute in cases of distress. It’s expected that a system like this would prevent the disappearance of an aircraft like the Boeing 777 used in Flight 370.
It’s no secret that CEOs and other corporate executives collectively spend a great deal of money on private aircraft. But what executives spend the most on traveling by corporate jet? An analysis of 2013 data shows that CEOs from Bank of America, Boeing, General Electric, Disney and ConocoPhillips spend the most money on their corporate jet perks — with Bank of America CEO Brian Moynihan spending the most, a total of $448,251. In some cases, these expenditures are justifiable. But they still draw concern from many investors and the public at large.
The desire to track flights to glean insights is permeating all sorts of industries — the sports world included. As the world waited and watched to see whether or not LeBron James would resign with the Miami Heat, a few hopeful Cleveland Cavaliers fans clung to reports that team owner Dan Gilbert was on his jet and en route to South Florida. Gilbert poured cold water on that report by tweeting that he was lounging in his backyard — but there was still some interesting news. It turns out Gilbert’s plane was headed to South Florida, even if Gilbert himself was not.
"I thought 'If a company had a jet, it would show up somewhere,'" says Bethany McLean, Contributing Editor at Vanity Fair. "But as it turns out, it’s quite common that it doesn’t, and quite legal. Although, you could ask questions about whether this is following the letter of the law and violating the spirit of the law."
Investors want and expect transparency into the operations of the companies they partially own. But the ownership and use of private planes by company CEOs and executives is often hidden from investors. How is this possible? Corporations can use a range of tactics, including leasing high-end aircraft, to avoid adding private plane info to proxy statements without violating disclosure rules. Jos. A. Bank is just one of the many brands whose executives use this approach to enjoy private air travel without letting investors know about it.
It’s been just a few years since the stock market tanked, giving soon-to-retire owners of 401k accounts great reason for concern and sending everyday Americans into the streets to protest corporate excess. The salaries and bonuses of many executives drew great criticism, but so too did some of the perks they enjoy — like corporate jets for both business and personal travel. But, as the years have passed and the stock market has rebounded, CEOs and other executives are back to taking full advantage of private aircraft.
Bloomberg reports that “non-business travel expenses” have increased for a third-consecutive year. In the aftermath of the Great Recession, executive salaries, bonuses and benefits (like the use of corporate jets for personal travel) drew great scrutiny and criticism both from investors and everyday American concerned with the growing divide between haves and have-nots. But this new report shows that the 10 largest S&P 500 companies spent 61% more on corporate jets for personal travel in 2013 than they did in 2012.
When average Americans look at aircraft owned by businesses, they may see corporate excess. But, in reality, buying a corporate jet is among the most sound financial decisions a business can make. The United States tax system assumes that many corporate assets (include aircraft) last only 5–7 years — when, in reality, these assets are useful far beyond that time. This gap in expected and actual lifespan provides businesses with incredible tax benefits that help jets pay for themselves in relatively short order.
Many analysts and investors are waking up to the idea that tracking corporate jets can yield some helpful insights. But some skeptics are asking the question: Is spying on corporate jets insider trading? A closer look at the history of following private aircraft shows that tracking the movement of important people on their personal aircraft is not insider trading and that it is not illegal. There’s even a unique case that focuses on flights in and out of New Jersey’s Teterboro Airport that serves as a precedent in answering this question.
Corporations and their executives would suggest that they need private jets to quickly access destinations for doing business. Activist investors and others would suggest that executives are more often using corporate aircraft to visit exotic locales where there’s a lot more leisure than business going on. And a new Wall Street Journal review of FAA flight records shows that the activist investors are often correct. In fact, between 30% and 50% of trips by publicly traded companies were to or from resort destinations over a four-year period.
Many CEOs are permitted to use corporate aircraft for limited or occasional personal use. At least, that’s what the fine print on contracts and agreements states. But, in the case of EMC Corp. and its five corporate jets, it turns out that CEO Joseph Tucci was using the planes in far more than limited fashion and far more than just occasionally. Over a four-year period, EMC jets landed nearly 400 times in Cape Cod, the Florida Keys and the Jersey Shore — all locations where Tucci owns vacation homes.
The FAA is beginning to open up more of its records, making them available in alignment with the Freedom of Information Act. Businesses and aviation groups are fighting back against this move. Why? Because this type of free aviation information could provide new insights into how corporations and their executives use private jets. Information obtained by the Wall Street Journal shows that Google founders Larry Page and Sergey Brin used a private plane to reach Tahiti for a viewing of the 2010 solar eclipse. Corporations and executives would rather leave trips of this nature hidden from public view.
A federal judge has ruled that a list of private planes whose flights were hidden from public view can and should be released under the Freedom of Information Act. The ruling came in response to a suit by ProPublica, the non-profit news organization that had been seeking information on flights by automotive executives to Washington DC in 2008 to ask for financial assistance from the government. Flying by private plane to ask for a bailout makes for bad optics, which is why corporations would prefer to obscure their movements via corporate aircraft.
In recent years, the owners of private planes have been able to keep flight records secret if they could cite a valid security concern. Now, the Federal Aviation Administration is proposing new rules that would prevent owners from enjoying such secrecy. The ability to keep flight records secret creates a “transparency issue,” according to the FAA, while a representative of the National Business Aviation Association says that the proposed rules represent an “unwarranted invasion of privacy” and would allow anyone to “electronically stalk” people.
Many public figures have drawn attention for their inappropriate use of private jets. Televangelist Kenneth Copeland put his ministry’s tax-exempt status at risk by using a private plane to fly to Maui and the Fiji islands. South Dakota Governor Mike Rounds drew criticism for his use of state planes for personal and political trips. And AIG executives elicited outcries for their use of corporate jets after getting a government bailout. But owners and operators of private jets can avoid this scrutiny by requesting secrecy from the National Business Aviation Association.