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Saving money with a private jet charter

You might find the headline of this article implausible. If you are looking to charter a plane, you are probably in the unique position of not worrying too much about money. However, a recent survey focused on the viability of private charter flights for the top CEOs of companies. The survey looked at the ratio between the CEOs hourly salaries, the cost of commercial flights and the flight time and the cost of private jets. It is likely that you will find the results surprising – or not – but let’s explore the issue in more depth.

The argument for private jets

You might need convincing of the arguments before we get to the case studies. You might be overwhelmed by the sense of extravagance of allowing executives to fly by private jet, even if you are comfortable with first-class travel. The main argument for the choice of a charter flight over first-class travel is the adage “time is money”.

The amount of time it takes on a commercial flight can make the saving you feel you are making disappear.  However, it is not just about flight time. Your executive will avoid the crowded terminals, security lines, the fight for early board and then the traffic issues that occur in airports. It is possible that chartering a flight could half the time devoted to travel. If you look at the salaries of executives, you could, therefore, save significant amounts by reducing the journey time by this amount.

In the following case studies, the travel times quoted are the fastest commercial flights available. The calculations also assume that a CEO works 40 hours per week for every week of the year.

Case Study 1: The McKeeson Corporation

 McKeeson Corporation is a giant in the pharmaceutical sector. The CEO, in June of 2020, is John Hammergren, who enjoys a salary of $131.2 million a year or a crazy $63,077 an hour. It is fair to point out that Hammergren is the highest paid Chief Executive in America.

The CEO is based in San Francisco and spends a lot of time travelling to Quebec in Canada, the HQ of the company in this country. If we include time spent at the airport and the likely layover at Toronto, the saved time would be over 10 hours. Therefore, the cost of this journey in time and money is well over $600,000.

If you were to hire a nine-seat Citation Sovereign, the flight would be about five hours. It could cost about $40000 to hire the plane. Therefore, the saving is about $350,000 – a crazy amount of money. This assumes that the savings on time would be huge.

Case Study 2: Charter Communication

In June 2020, the CEO of Charter Communication is Thomas Rutledge. The salary for running a major telecommunications company is $98 million a year. This equates to over $47000 an hour. The HQ of the company is in Connecticut but the main operations take place in St Louis, Missouri. This flight takes three domestic flights, stopping in Atlanta and Detroit before arriving in Connecticut. The travel time is eight hours.

This means that the cost in time for Rutledge to make this journey commercially would be $47000 times by eight plus the addition of a first-class ticket. The cost would come in about $380,000. However, hiring an eight-seat Learjet 75 will take two hours and 5 minutes and would cost $18500. Therefore, the saving of time would be epic – and so would the cost – with a price saving of over £250,000. You would also imagine that Rutledge would let other executives in the company hitch a ride between the head office and the main production base – so the savings would be even more dramatic.

Case Study 3: Ralph Lauren Corporation

The CEO of Ralph Lauren Corporation in June 2020 is the man himself – an icon in the fashion world. It is easier to imagine that such a superstar in such an industry would fly in his personal jet. Oddly, for being such a legend, Lauren commands a mere $66.7 million a year or about $32000 an hour. Lauren frequently flies between American and the HQ in Geneva. From New York to Geneva the total flight time is 10 hours and 5 minutes – with a wait in Milan for your connection.

You would need a bigger jet for an international flight. Therefore, hiring a 16-seat Gulfstream G-IV costs about $80000 and takes only about 7 hours. Therefore, Lauren will save about $47000 by hiring that private jet.

Benefits beyond cost

There are more benefits to chartering a flight for such top executives. Although the top execs are used to working in first class, it is much more efficient to work on a private jet. There is also the chance to enjoy the privacy and confidentiality for conversations, which is a distinct worry for those looking to protect intellectual property. Most jets are outfitted with worktables, WiFi and fully equipped conference rooms. Therefore, you can bring along other professionals and carry on important work.

There is also a reduction in stress for top CEOs. To fly commercial is challenging. It requires a lot of queuing and a sense of loss of control, as you are at the whims of the airport and airline. Although the physical exhaustion of flying commercial will be significantly higher than flying private charter, the emotional exhaustion will be intense. Therefore, hiring a private jet would be seen as a commitment to the continued well being of the talent and human capital in the company.

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