Qwest’s Mueller still flying high…
While some companies seem to be curtailing their use of the corporate jet over concerns over how that might look, footnoted frequent flyer Qwest (Q) just signed another agreement with CEO Ed Mueller to let him continue using the company’s two planes for the next two years.
The agreement, which was included in the 10K that Qwest filed late Friday, isn’t all that different from the one signed two years ago — the one that allowed Mueller’s family, including his step-daughter to use the plane to commute back and forth to high school. Back then, footnoted readers voted that disclosure as the worst footnote of 2007. Qwest’s stock has fallen about 50% since.
But here’s the real problem with time-sharing agreements, at least according to my go-to expert on all matters regarding corporate aviation: they’re essentially a legalistic-loophole that allows executives and their guests to fly for a lot less money. While companies typically note that the executive has to pay for a long list of items ranging from fuel and lubricants to lodging for the crew, it’s still a bargain. For example, under a time-sharing agreement, this expert figures a company may bill an executive $3K an hour for use of a GV, when the actual cost is closer to $8K an hour.
“”Time sharing arrangements are a sham and a shield that companies and executives use to fly for less,” this expert says. “The executive gets a tremendous savings and the company loses a lot of tax deductions.”
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Posted in Tags: 10Ks, frequent flyers, Qwest |
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February 18th, 2009 at 11:54 am
This is amazing. How can people still choose to fly as they wish? Think about the company then think about yourself as should a CEO think.
February 19th, 2009 at 11:56 pm
While not defending time-sharing agreements, one factor that may be driving them, vs. a market rate charter, is the FAA crackdown on charter operators since the Teterboro crash in 2005; Prior to that, a corporation could use a charter broker, who would charter out to executives and third parties under their Part 135 certificate.
After this crash, the FAA changed/enforced their rules, requiring charter brokers to exert full operational control over any aircraft they brokered charter hours for. Corporations who sold off excess capacity to brokers, or sold it to their executives, now had to give up control to the charter broker. Basically in this new environment a company would need to give 24 hours notice to their charter broker just to move their plane from one side of the hangar to another. Selling off 100 hours a year was no longer worth, it, as the hassles of not being able to control your own aircraft were not worth it.
Without an FCC Part 135 certificate, which are costly and not easy to get, a company cannot charter its aircraft to anyone – executives or third parties. However, companies are permitted to time share hours with affiliated parties at variable cost, but they can no longer charter their planes to their exec’s or others at market rates.
I don’t write this to defend this practice, but just to note that time sharing at basically variable costs is the choice faced today. You can’t charge exec’s a market rate, as that would in effect be chartering without a certificate.
All of this news about jets should be great for Net jets. Exec’s will still fly, it will just be harder to track.
BTW on Feb 17 five execs from the Charter operator responsible for the Teterboro crash were arrested on criminal charges.
March 2nd, 2009 at 5:43 pm
If a company like quest owns an aircraft and operates it under part 91 and not 135, they can charge their executives whatever they want up to the total cost, correct? In fact, if they provide the airplane to the executive or anyone else without a pilot, fuel and oil (which the executive would hire/purchase on his own), they can even charge enough to turn a profit, correct? Time sharing is another way to bury the costs of executive perks.