Private Jets

For most of us, the airport is not an enjoyable place. We have to get there hours before our flight takes off; we stand in long lines to check our bags; we’re herded through body scanners, shoeless and confused. And on the plane, we’re serenaded by crying babies and crushed by the guy in front of us who insists on reclining his chair. But, for a privileged few, there’s a parallel universe, where none of these problems exist — where traveling by air is a breeze.

TIVNAN: You pull the car right up to the plane. There’s somebody waiting outside for you. They know exactly where you’re going. They’re greeting you, grabbing your bags. There’s a red carpet waiting as you enter the doorway to the plane and you’re on your way.

That’s Anthony Tivnan. He runs a private jet company in Boston.

TIVNAN: You’re sitting in a $30-40 million airplane with just your family watching whatever you want to watch, listening to whatever you want to listen to. It’s Ritz-Carlton. It’s Four Seasons. There’s a beautiful set up if you want to grab a drink — Champagne, scotch. You can have an outstanding dinner three, four or five course meals. And then you can head to the rear of the cabin and have a full-sized bed made up and sleep for the rest of the flight.

Executives and celebrities shell out millions of dollars for regular access to this convenience. But critics say we are paying for it, too.

COLLINS: They don’t pay the real costs of their air space use. They don’t pay the real cost of their ecological emissions. You’re really talking about the 0.001 percent — the ultra-wealthy — that are the beneficiaries of the system that the rest of us subsidize.

For the Freakonomics Radio Network, this is The Economics of Everyday Things. I’m Zachary Crockett. Today: Private Jets.

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Globally, there are now more than 23,000 private planes — more than twice as many as two decades ago. Last year, those jets embarked on 5.3 million flights. Now, “private aviation” is a fairly broad category. It includes mail planes in Alaska and crop dusters in Kansas. But the majority of these jets are used for business and pleasure by the ultra-wealthy. And when they need to book a flight, they call someone like Anthony Tivnan.

TIVNAN: We want to make them feel as though they weren’t even on a flight, and they’re as comfortable as humanly possible.

Tivnan is the president and co-founder of Magellan Jets, one of the nation’s leading providers of private flights. He’s been in the business for more than 20 years.

TIVNAN: We service, I would say, roughly 1200 clients. And annually we probably visit about 80 plus countries for our international flights. So, you know, we’re certainly all over the place.

If you want to fly private, you have a few options. If you’re a really big baller, you can buy your own jet. But that requires some serious dough.

TIVNAN: You know, let’s just say, like, a Phenom 300. You’re usually in the ballpark around 7 to $10 million. If you’re looking at a Gulfstream 650 or some of the new products, like a Global 8500 or, you know, the Falcon nine X, you’re upwards in the 60 to 75 million dollar range there.

Donald Trump flies on a $100 million dollar Boeing 757; Kim Kardashian — her Gulfstream G650ER clocks in at $150 million. And these figures don’t include the ongoing expenses of owning a jet. It runs around $8,000 bucks to fill the tank on a mid-size plane. Parking your jet in a major airport hanger? You’re looking at $12,000 dollars a month. Most private jets also require two pilots, whose salaries come out of your pocket. If you include things like maintenance, insurance, and depreciation, the cost of upkeep can easily exceed $1 million dollars a year.

If this is all a bit too rich for you, you can buy fractional ownership in a jet from a company like NetJets or FlexJet. It’s kind of like a timeshare for fancy airplanes.

TIVNAN: You can have as many as 32 folks that are all assigned to a certain jet. And you’re paying for your portion upfront. And then you’re paying for your occupied flight time and your fuel. So it’s kind of like a shared asset type of model.

Or if you just want to fly private sometimes, without the ongoing costs, you can book charter flights and pay by the hour.

TIVNAN: A light jet is typically going to cost 6- to $8,000 an hour. A mid-sized jet 8 to $10,000 an hour range. A super midsize aircraft is going to put you, I would say, in the 12 to $15,000 range per hour. And then you have your jets, Gulfstream 450, 550, Global Expresses, I would factor in about 14 to $20,000 depending upon the airplane.

Charter flights are among Magellan’s offerings. But the company doesn’t actually own any jets. Instead, it works with people and corporations that do. A lot of private flights are one-way only — which means the jet ends up flying back empty. Magellan sells those empty legs to willing customers. It also monetizes any “down time” — time when a jet is just sitting around in a hanger.

TIVNAN: So, you know, Corporation X has 15 airplanes in their corporate flight department. And we make that cost of their ownership lower by producing charter revenue on the aircraft when it’s not moving.

If you’re chartering private jets on a regular basis, you can buy a jet membership card. You purchase a certain amount of hours at a set rate on a specific airplane and you can use them whenever you want.

TIVNAN: It’s comparable to like an Airbnb or Uber, right? When you’re done with it you walk away and you have no other responsibilities to that asset. Generally speaking, $100,000 is kind of that entry level program in order to have access to like, a guaranteed aircraft. And that’s certainly on the smaller end.

Obviously, all of these options are a lot more expensive than flying commercial. But the passenger isn’t always the one paying — executives’ flights are often covered by the companies they work for. Those companies would tell you they’re trying to maximize the value of their highest paid employees’ time. If you fly private, you don’t need to get to the airport two hours early.

TIVNAN: If you have a 3:00 flight, arriving at 2:55 is no problem.

Private planes also have access to a lot more airports.

TIVNAN: So we’re getting folks as close as humanly possible to wherever it is they’re going. We have access to 5000 airports in the U.S. alone. When you’re flying commercially, that number goes down to 500 airports. 

When it comes to executive travel, every minute counts. Take, for instance, Doug McMillon, the C.E.O. of Walmart. He earns $24 million dollars a year, which means his time costs the company around $7,000 an hour. When he flies, it’s on one of the company’s 20 jets. These planes allow McMillon and other Walmart executives to visit stores and hubs all over the country — and get back to the company’s headquarters in Bentonville, Arkansas, the same day.

Corporations are often willing to pay significantly more money for a flight, just to save a single hour of time.

TIVNAN: I remember one situation. There was one aircraft that could be there in 2 hours and there was another aircraft that could be there in one hour. And the one that was one hour was like $15,000 more. And they said, “Oh, okay, let’s take that one because it’s cheaper, based on the salaries of how many people are on board.”

In the business world, the benefits of private jets go beyond time savings. They’re often used as a flex to wine and dine potential clients.

TIVNAN: Whether it’s entertaining customers, picking them up golf events sports games, really important account — you know, “Let’s go ahead and book the Gulfstream.”

Private jets might make sense for companies, and they’re certainly popular with the individuals who fly in them. But some people say they shouldn’t exist at all. That’s coming up.

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Growing up, Chuck Collins was surrounded by people who flew private jets.

COLLINS: I’m the great-grandson of the meatpacker, Oscar Mayer. So I like to say I was born on third base, although I didn’t inherit the cool car.

He did, however, inherit a trust fund. But at 26, he gave it all away to charity. Today, he’s a program director at the Institute for Policy Studies, or IPS, where he focuses on the harm caused by income disparities. He’s also a member of the Patriotic Millionaires — a group of rich folks who support higher taxes on people like themselves.

COLLINS: You know, the last 40 years we’ve been pulling apart as a society. This imbalance of concentration of wealth and power is at the root cause of a lot of things broken right now.

Lately, he’s been particularly fixated on private jets.

COLLINS: To me, it’s sort of the most indefensible form of luxury consumption because it has so many harms that it causes everyone else.

Collins’s concerns begin with the way that private jet travel is taxed. Say you buy a one-way ticket from Boston to New York on a commercial flight. Your ticket might cost around $60 bucks — but you’ll also pay around $20 in taxes and fees: a 7.5 percent federal tax, a passenger facility charge, a flight segment tax, and a security fee. If there are 150 people on your flight, that’s $3,000, collectively. Some of this money is used to fund the Federal Aviation Administration, which pays for things like air traffic control and the upkeep of airports. But Collins says private fliers don’t pay their fair share into this system.

COLLINS: Private aviation is about 16 percent of all the use of the airspace. But that sector only chips in about 2 percent of the costs of operating the sector. There’s all these small airports that don’t have commercial travel — you and I can’t fly to them unless we have our own plane. And that’s supported by this system of revenue that mostly commercial travelers and taxpayers pay for. So, effectively, we subsidize private jet aviation. 

People who charter jets generally have to pay the same taxes as we do on their flights. But those who own their own jets — the billionaire types — many of them only have to pay a fuel tax of 22 cents per gallon. And the tax benefits of jet ownership don’t stop there. The Tax Cuts and Jobs Act of 2017 allows private jet owners to deduct the entire cost of a new jet on their tax return in the first year of purchase. It just has to be used for business purposes. Oftentimes, the line between business and pleasure is blurry.

COLLINS: You and I could fly to Aruba, play a round of golf, and have a business conversation, and that would be a “business” flight. In our recent report, we found guys going to Argentina to go on a pheasant-hunting preserve or something. 

Allowances like this have been heavily promoted by private jet lobbyists. Since 2010, the three largest private jet associations have spent $68 million dollars to influence the decisions of lawmakers. Their latest focus has been privacy.

COLLINS: They are behind this effort to bring a greater shroud of secrecy over private jet travelers. You know, if you own a private jet, you can ask the F.A.A. to have your name removed from a public tracking registry.

Savvy internet users have found ways to work around tactics like this. But in recent years, an increasing number of corporations and executives have moved toward fractional jet ownership, which gives passengers even more invisibility. Some people in the industry see this lack of transparency as a threat to national security.

COLLINS: You take out your golf clubs or your hunting rifle or whatever. You just get on the jet. Nobody’s frisking you. Nobody’s taking your water bottle. People in aviation in Europe don’t think that the next 9/11 terror attack is going to come with a commercial jetliner. It’s going to be somebody with a private jet.

But Collins says the biggest issue with private jets — the thing that really keeps him awake at night — is their disproportionate impact on the environment.

COLLINS: Private jets burn 10 to 20 times more carbon emissions than a commercial jet per passenger.

Take, for instance, Elon Musk, one of the nation’s heaviest private jet users. Last year, he took 171 flights that burned 222,000 gallons of jet fuel. The carbon emission from his flights alone was 200 times more than the average American’s annual footprint.

What makes this especially exasperating is that many private flights aren’t necessary to begin with. Kylie Jenner made headlines last year for taking a 17-minute flight across Los Angeles on her $72m Bombardier jet. That same trip would’ve taken around 40 minutes in a car. Collins analyzed flight traffic from an airport outside of Boston and found that that kind of short hop is not uncommon.

COLLINS: We found 41 percent of the flights were less than an hour and 14 percent were less than 30 minutes. These are wealthy folks who are choosing to fly private jets, but they actually have other options.

Anthony Tivnan, of Magellan Jets, thinks the focus on private clients has been blown out of proportion.

TIVNAN: Pointing fingers and going back and forth isn’t going to solve the issue. When you look at it: as a whole, aviation represents about 3 percent of the carbon footprint. Now, private aviation represents less than 3 percent of that 3 percent.

Many private jet outfits, including Magellan, offer carbon credits to clients, to offset the impact of their flights. And the National Business Aviation Association, which is one of the big jet lobbyists, says that it’s aiming to cut CO₂ emissions in half by 2050.

Legislators have proposed more immediate solutions. Congress is considering a bill that would increase fuel taxes for private jets from 22 cents to $1.95, per gallon. This extra revenue would go toward long-term investments in clean and affordable transportation. Other places around the world have taken an even stronger stance. Politicians in France have proposed banning private jet flights altogether.

Unsurprisingly, Tivnan is not on board with these ideas.

TIVNAN: What you’re doing is just creating a higher cost for the companies that really run the country, which is just going to eventually drive up consumer cost. 

COLLINS: I mean, for most of the 20th century, we didn’t have the kind of private jet-set that we have today. Somehow we had healthy commerce and businesses.

A few months ago, Chuck Collins convinced one of his wealthy friends — a man who loves the trappings of luxury — to sell his beloved jet. That, he says, is the kind of action he’d like to see more of.

COLLINS: And if it means you’re going to be inconvenienced — you’re gonna have to take the train to New York and it’s going to take three and a half hours, instead of your jet, which is going to take 40 minutes — so sorry!

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For The Economics of Everyday Things, I’m Zachary Crockett. This episode was produced by Sarah Lilley and mixed by Jeremy Johnston. We had help from Julie Kanfer, and Daniel Moritz-Rabson.

TIVNAN: You should see what the tuna sandwich costs.

CROCKETT: How much does it cost?

TIVNAN: You know a $30 tuna sandwich, sometimes.