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Published: Monday, 3/18/2013

Jetsetting mentality continues to slow

Budgets still tight among companies

BY KRIS TURNER
BLADE BUSINESS WRITER
Todd Smolinski pulls a plane out of the hangar at National Flight Services in Swanton.  Business at National Flight Services has decreased by 25 percent to 30 percent since 2003, but things are looking up. Todd Smolinski pulls a plane out of the hangar at National Flight Services in Swanton. Business at National Flight Services has decreased by 25 percent to 30 percent since 2003, but things are looking up.
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Mementos from Ken Colthorpe's career as a pilot and director of travel services at Champion Spark Plug were strewn about his coffee table.

Mr. Colthorpe, 91, reached for letters, photos, and telegrams as he recounted how aviation changed the world. One of the most telling letters -- penned in 1982 by R.A. Stranahan, Jr., upon Mr. Colthorpe's retirement -- showed just how much history he was witness to.

"Somehow or other time seems to shrink as we get a little older," the then head of Champion wrote. "It seems like only a short time ago when we were flying around in the DC-3. I still have a little nostalgia when I see one of those early birds literally 'floating' over. The progression to the Fairchild, the Falcon, and then the Grumman was a great stimulant to the sales and progress of our Champion organization, and I am certainly mindful that all this happened under your careful guidance."

As corporate-owned or leased planes became the norm in the 1960s and 1970s, Toledo-based companies extended their reach around the world. Luxe jets and planes were commonplace among the corporate landscape.

"We flew our airplanes for any reason that served the company's interest," Mr. Colthorpe said.

PHOTO GALLERY: Aviation Business Fleets

That jetsetting mentality has waned in recent years as companies have tightened their budgets. Whether schlepping it in a company car or flying high in a jet, representatives of local conglomerates said travel plans often are based on distance, time, and the number of passengers.

Dana Holding Corp. had four planes at its disposal in 1992 and has none today. The company began selling its aircraft in 2002 as part of a business decision and completed the sale during its 2006-2008 bankruptcy, spokesman Jeff Cole said. The company rarely rents private planes, he added.

"Today, the vast majority of our corporate travel is on commercial aircraft," Mr. Cole wrote in a statement to The Blade. "We will occasionally utilize private charters solely for business purposes where it is more economical than flying commercially.

"Dana does not pay or reimburse for any personal use of aircraft by its executives."

Gene Swartz, a former Dana pilot who became a top company official, flew all over the world with Rene McPherson and Jack Martin, two of the company's former leaders. Mr. Swartz said he piloted company planes from 1963 until the early 1970s and traveled to exotic locations like Australia and the Philippines.

Mr. McPherson, Dana's former president and chief executive officer, believed face-to-face meetings were the best way to conduct business, Mr. Swartz said.

"His philosophy was to have as few executives as possible and was to make them very mobile," he said.

Ken Colthorpe, 91, with photos of the exterior and interior of a Champion company Gulfstream, circa 1980. Ken Colthorpe, 91, with photos of the exterior and interior of a Champion company Gulfstream, circa 1980.
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Part of that mobile mindset included mixing business with pleasure. Rene McPherson's son, Doug, said he fondly remembers solo trips with his dad to New York, Chicago, and Florida.

"My dad used to go to Chicago all the time on business, I was 10 or 11 years old at the very start," he said. "Whatever the airport on the lake was in Chicago there, my dad would give me 20 bucks and say go hang out at a museum and come back by 4 o'clock. I did that quite a bit with him and I'd either go to the Science and Industry Museum or the Field Museum."

Although Doug McPherson's father could use a company plane for personal purposes, he always reimbursed the company. It was a strict rule he abided by, Doug McPherson said.

Traveling by private plane was a luxury, and Doug McPherson said he's lucky to have experienced it.

"In today's age it's absolutely frowned on ... but it was fun for us," he said.

Incentives for executives might have been more lucrative in the 1970s because personal income tax rates where higher, said Charles Ballard, an economic expert and professor at Michigan State University. The United States has a culture of awarding its executives with generous perks and that tradition only has increased with time, he said.

The income tax rate soared to 70 percent in the 1970s for people and households making more than $100,000. That rate dropped to 50 percent in the 1980s and continued to decline into the 1990s.

Executives have a great deal of discretion in how they live their lives and what perks they request from their employers, Mr. Ballard said.

"It's always been true that executives could go to the board of directors and say, 'You're only paying me $5 million and this is ridiculous.' Studies have indicated there used to be social constraints that prevented executives from pushing to the limited and those constraints seem to have relaxed," he said.

Like Dana, Libbey Inc. and The Andersons Inc. don't own planes. Other companies have cut back on the use of their private aircraft to trim thousands -- if not hundreds of thousands -- from travel budgets.

Owens-Illinois Inc. adjusted its jet use when the economy soured. The company reduced costs and maximized chosen modes of transportation, spokeswoman Lisa Babington wrote in an email to The Blade.

Owens-Illinois owns two planes, the same number it had in 1992.

"Since 2004, O-I has maintained one global aircraft for international travel and a smaller more fuel-efficient plane for domestic needs," she said. "With the downturn in the economy, O-I took further steps to improve the efficiency of our flight operations by maximizing the number of passengers on each trip and reducing annual budgeted flight hours by 20 percent to 25 percent."

Owens-Illinois Chairman and Chief Executive Officer Al Stroucken is allowed a limited number of hours per year for personal use of a company airplane, per his contract.

R.A. Stranahan, president of the Champion Spark Plug Co. and Captain Lewis A. Yancey are shown at the start of th 1931 National Air Tour. R.A. Stranahan, president of the Champion Spark Plug Co. and Captain Lewis A. Yancey are shown at the start of th 1931 National Air Tour.
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"Mr. Stroucken typically does not use all hours allowed by contract, and any such use is reviewed annually by the Board of Directors," Ms. Babington said in a statement to The Blade.

The company's chief financial office and chief legal counsel also can request the company plane for personal use, and those requests are subject to approval by Mr. Stroucken.

At Owens Corning, executives are not allowed to use the jets for personal purposes and all trips are business related, company spokesman Matt Schroder wrote in an email to The Blade.

Owens Corning uses its three jets to shuttle employees to business and customer meetings and functions, Mr. Schroder said. The use of a jet -- along with all other travel considerations -- is determined on a case-by-case basis.

"We manage the use of our jets the same as other aspects of our business," he said, adding that the economic turbulence of the past five years didn't affect the company's travel plans.

According to The Blade's archives, the company had two planes in 1992. It continued using jets throughout its 2000-2006 bankruptcy, and currently leases its fleet.

Although the economy didn't ground executive travel in the Toledo area, it has caused some cuts at National Flight Service Inc., the area's premier private aviation service since the 1960s.

Cutbacks at local companies caused an up to 30 percent decrease in business at National Flight Services since 2003, said Larry Mates, fixed base operations manager for the company. National Flight Services houses about 20 corporate and private planes at its facility, which is located at Toledo Express Airport in Swanton.

Because of the cuts, the firm trimmed its staff from four to five people at any given time to three, Mr. Mates said.

"A lot of the companies are cutting back on their spending," he said, adding that a round trip flight to Florida on a corporate jet could run about $50,000.

Ten planes were parked in the National Flight hanger recently. The aircraft didn't sport company logos or brand names, and Mr. Mates declined to publicly disclose the firm's clients.

National Flight Services does not rent, lease, or offer partial ownership of planes, nor does it provide pilots or a flight crew for its clients.

The company does provide a cornucopia of other services is customers, who pay thousands each month to store their aircraft.

Employees at the business will pick up food for passengers, arrange travel plans and hotel stays, and maintain aircraft. It acts a miniature airport for people who travel on private aircraft and has a pilot's lounge, a rest area for travelers, a conference room, and a kitchen area.

Mr. Mates said 2012 was better than 2011, and this year is expected to follow that trend. The growth, however, will not match the profitability of the early 2000s.

Choosing to own a company plane is all about providing an efficient means of travel, Owens-Illinois' Ms. Babington said. If a commercial airline can't easily reach a particular destination, a private plane offers executives another avenue to conduct business.

"O-I’s corporate aircraft are an important business tool to grow and manage our global business," she said. "Travel time for company leaders is significantly reduced using the company plane, and private transportation provides important safety and security for senior leaders.

"Corporate aircraft greatly increase schedule flexibility, and by using the corporate aircraft, leaders maximize their time by being able to work effectively and conduct meetings."

Contact Kris Turner at: kturner@theblade.com or 419-724-6103.



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