How big businesses justify their private jet spending
Private flights are a sign of wealth. If the average Europeans were to spend all they earn in a year on chartering an average private jet from Lisbon to Warsaw, they would have to stop in Frankfurt. And yet, there are people who resort to private flights to fly very long journeys, like from Paris to Beijing. They can spend tens of thousands of euros on a private jet flight. This kind of spending seems excessive, mostly, it seems like a waste of money. For example, if one were to hire a Falcon 8X from Paris to Mumbai, it would cost around € 50,000 just one way; whereas with the same amount, we could fly 15 times on the same route in business class.
Listed companies must justify their expenses to their shareholders. So, they can’t afford to waste money. This implies that expenses between 3,000 and 10,000 € for one hour of flight must be economically profitable.
Consider that a CEO or senior executive works around 2,500 hours per year. If he earns € 1 million gross per year, as is often the case, that makes € 400 gross per hour. However, CEOs of the largest European companies earn an average of five million euros per year, which is roughly € 2,000 per hour.
A private jet is not profitable on very long journeys
Renting a Falcon 8X from Paris to Mumbai would cost € 50,000 to go there. The same trip, in business class, would cost around 3,500 €. However, as the speed of a private jet is equal to that of an airliner, the first saves time especially thanks to the fact that we can embark and disembark very quickly at airports, about fifteen minutes, while with a jet line it takes 1h30 at the airport for each departure and arrival. So, the longer the trip, the less the savings made with private jets on executive working hours. In this case, it would save three hours, against an additional cost of € 46,500. For CEOs or executives earning around $ 2,000 per hour, there would be $ 6,000 in savings on that trip. Therefore, renting a private jet would only pay off if you consider a trip for at least eight executives.
A private jet is very profitable on multiple short trips
Now suppose that Carrefour, the world’s number two in mass distribution, which has headquarters in many European cities, has to send its CEO to visit Italy’s regional directors in Milan, Turin and Bologna, taking off from Paris. With an airliner, losing at least 1.5 hours for each take-off and landing, and given the time constraints of the airlines, it would take at least two days and nights at the hotel. Carrefour should spend not only to pay for 16 hours of work at least 2,000 € per hour, so 32,000 €, but also at least 8,000 € for travel allowances, hotel and catering costs, in addition to around 4,000 € for four one-way business class tickets. If the CEO needed to fly with three collaborators, the total bill would greatly exceed € 114,000.
However, with a small private jet with a capacity of four passengers, the four leaders could accomplish their mission to Italy in a day, returning to Paris around nine PM.. Their remuneration, including allowances, would amount to less than € 40,000, saving Carrefour € 74,000. In total, for about a day and four hours of flight time, renting a light private jet would cost, all inclusive, around € 20,000, even less if Carrefour owned the private jet.
Savings of tens of thousands of euros with a private jet
In total, a private jet would save Carrefour, in the above-mentioned case, around € 54,000. Not to mention the comfort, safety and the ability to work better offered by a private jet, which, moreover, presents almost no risk of being contaminated by the Covid 19.