High Flyers and Soaring Inequality
Private and corporate jet sales are taking off, reflecting an increase in the extreme concentration of wealth in the United States and around the world.
Worldwide sales of private jets have more than doubled since 2003, to $19.4 billion in 2007. The number of jets sold increased 28 percent between 2006 and 2007 alone, and sales are up sharply in the first quarter of 2008. Corporate jet ownership has increased by about 70 percent since the early 1990s. Demand for private jets is so high that a used jet bought in 2006 can now be sold at a handsome profit.
But where luxury items like a fancy bottle of wine or a Picasso painting are simply a private extravagance, private jet use imposes real costs on everyone who isn’t a high flyer — and on the planet. The costs are documented in "High Flyers: How Private Jet Travel is Straining the System, Warming the Planet and Costing You Money," a new report issued today by the Institute of Policy Studies and Essential Action (an organization I direct).
Soaring private jet use reflects and is emblematic of skyrocketing wealth inequality, in the United States and globally. Private jet sales grew in parallel with commercial air travel until 1997. Then as wealth inequality began to ascend to stratospheric levels, so did private jet use.
The rise of a global billionaire class has globalized the private jet market. The main manufacturers report that half or more of sales are coming from outside of North America.
Private and corporate jets give the super-rich not just ease and comfort, convenience and luxury — including an escape from the bothers of security lines and flight delays — but a way to distinguish themselves from everyone else. Private jet marketing explicitly emphasizes the elite status and conspicuousness of this consumption.
And, because the ultra-rich are always eager to distinguish themselves from the very rich, private jets are becoming more luxurious and expensive. Boeing’s largest business jet costs $67 million. Other companies sell airplanes that are nearly as costly: Airbus’s priciest plane goes for $55 million, while Gulfstream Aerospace’s G550 sells for $46 million. A relative handful of the high flyers set aside Learjets and the like as child toys, and insist on owning their own personal jumbo jet — Boeing 757s and the like.
Fueling the take-off in jet use is not just concentrating wealth, but numerous subsidies. Amazingly, U.S. taxpayers subsidize private jet use and ownership. Corporate CEOs flying on jets for vacation on personal use pay personal income tax based on the value of the gifted flight — but the value is calculated based on much lower commercial airfares. Most startlingly, the 2008 Economic Stimulus Act enables private jet buyers to take a "bonus depreciation" — allowing them to take larger tax deductions in the first year after purchase than they otherwise would.
Private jet use is subsidized as well by commercial air traffic. According to the Federal Aviation Administration, general aviation — the segment of the industry that includes corporate jets, charters, air taxis, and recreational pilots — uses 16 percent of the FAA’s services, but pays just 3 percent of the cost. Very substantial amounts of federal funds spent on airport improvement between 2005 and 2007 — $2.2 billion of $7 billion total — went to small airports that primarily serve private jets. These are places like California’s Napa Valley Airport.
Private jet use is further subsidized through corporate profligacy, at the expense of workers, consumers and shareholders. Personal use of the company jet is the most common perk for CEOs of large U.S. companies. The Corporate Library has found that more than half of 215 companies surveyed allowed or required — yes, required; it’s supposedly a security precaution — executives to use company aircraft on personal trips, with a median annual cost of $182,929.56.
Perhaps the worst element of private jet use is the environmental damage. Burning airplane fuel spews huge amounts of carbon into the atmosphere, making air travel a significant contributor to global warming. Private jet travel is far less efficient than commercial air flights, because so few people are transported on each private jet flight.
Four passengers flying in a private Cessna Citation X from Los Angeles to New York, for example, would each be responsible for more than five times as much CO2 emitted by a commercial air passenger making the same trip.
And that’s a very generous calculation, given estimates that 40 percent of private jet flights are empty — as pilots return home rather than sit idle waiting for a return trip.
At least some in the industry aren’t very sensitive to these considerations. Robert Baugniet, senior manager of corporate communications for Gulfstream Aerospace told my colleague Jennifer Wedekind that concerns about the private jet contribution to global warming "fallacious."
"So if you go in a bus and pump out a whole bunch of CO2 into the environment, but because you’ve got 40 passengers on board it’s OK?" he queries. (Answer: Not OK, but a whole lot better.) In the aggregate, says Baugniet, air travel is a relatively small contributor to global warming, and private jet travel is a small part of that. So, what’s the big deal?
To the extent that private jets are symbols of an economic system gone awry, remedying the problem will require big picture policy changes — steep wealth and income taxes and other measures to redress inequality, and comprehensive policies to address global warming.
But soaring private jet use also demands its own response. Tax breaks for buying and flying private jets should be ended. Private jets should pay, at least, their fair share of FAA costs. And a hefty luxury tax should be imposed on private jet sales and flying.
We shouldn’t be supporting the High Flyers in their luxury indulgence. If such heavy-polluting opulence is to be permitted at all, the super-rich should pay a stiff price for the privilege.