Subscribe to Print Edition | Wed., November 12, 2008 Cheshvan 14, 5769 | | Israel Time: 01:27 (EST+7) web haaretz.com   Back to Homepage Haaretz Toolbar Diplomacy Defense Jewish World Opinion National Print Edition Car Rental Books Haaretz Magazine Business Real Estate U.S. election Travel Week's End Anglo File

Companies buy jets, we crash By Sarit Menahem Controlling shareholders in publicly traded companies can have creative ways of squeezing money out of the companies they own: sky-high salaries for themselves and their executives, bonus options packages, and even insider transactions at indulgent prices. These methods have now been topped by a new trend: executive jets on the company's tab. The purchase of these toys, which cost tens of millions of dollars, are usually accompanied by explanations such as "The company is expanding operations around the world"; "We don't want to miss any global opportunities"; "It will save us money"; and "Private jets shorten travel time." No, the planes have nothing to do with pampering the controlling shareholders, but rather are intended to make more efficient use of the executives' time, and even to cut costs. Advertisement After all, Warren Buffett has a private jet - exactly the same model as Gazit Globe controlling shareholder Chaim Katzman. How much do the jets cost us? Plenty. Every hour of flight in a private jet costs at least $3,500, or about 10 times as much as flying via a commercial airline, even in first class - plus the cost of the plane. One of the first Israeli tycoons to buy a private jet was Eliezer Fishman, the controlling shareholder of the Jerusalem Economic Corporation. Back in 1999 Fishman bought a Challenger executive jet for $31 million. Even though he paid for the plane out of his own pocket, in 2005 the company's shareholders decided that Jerusalem Economic would pay for the plane's operation, via the Merhav operating company. Merhav charges $3,500 per hour of flying time, plus $1,200 for the first night abroad and $2,000 for subsequent nights. In addition, if Fishman's plane is used to serve any other company in the Fishman group, such as Industrial Building, the expense will be charged to that company. Yitzhak Tshuva, Delek Group's controlling shareholder, bought an executive jet for $23 million in March 2001, using Delek Group's checkbook. In June 2007 Alfred Akirov's Alrov Group announced the purchase of a private jet for $27 million. Nochi Dankner, the controlling shareholder of IDB Holding Corp, bought a secondhand Bombardier Challenger 640 for $26 million in February 2008. The release announcing that purchase noted that the plane would be used by Dankner and IDB's staff on their global travels, saving valuable time and money. Dankner demonstrated his need for the expensive toy when he flew to Zurich late one night to meet with the manager of Credit Suisse and close a deal worth 1.2 billion Swiss francs, before the stock market opened for trade in the morning. Thirty-six hours after signing that deal, its value ballooned by $430 million - 16 times the cost of the plane - and Dankner made the headlines for engineering a successful transaction. A few days later, Credit Suisse's share price nosedived, and although it recovered slightly, it is currently trading at around 38 Swiss francs - not much more than Dankner's purchase price of 35 Swiss francs. The real success of Dankner's night flight will meet the test only in the future, if Credit Suisse gains more ground. Katzman joined the private jet club last year, when Gazit Globe leased a Gulfstream worth $35 million, for $2 million a year. At the end of the lease, Gazit Globe will have the option of buying the plane. Operating a new Gulfstream costs about $5,000 an hour, and Katzman and his managers work a lot, investing all over the world. That plane will spend about 1,000 hours a year in the air, at a cost of about $5 million. Although the cost of commercial airfares would have to be deducted from that sum to calculate the actual cost of the jet's use, those airfares would not amount to much. Gazit Globe could pay up to $6 million annually to use its new toy. Will the private jet contribute significantly to Gazit Globe's net profits? Will the new opportunities that will be accessible thanks to the jet justify its cost? Lev Leviev knows how to recognize a good deal. Why own a private jet when you can roll that cost onto your shareholders? When Leviev moved to London in January 2008, he sold his private jet for $15 million and bought a $50 million Bombardier Global 5000 via Africa Israel subsidiary AFI Developments. Membership in the jet club does not always help businessmen or their companies. The companies whose share prices shed the most value this year include many controlled by tycoons with private jets. It turns out that the easy accessibility afforded by a private jet has not prevented the tremendous losses in Florida, India, Eastern Europe or Switzerland. Judging from the mood among investors, expensive purchases are not an encouraging factor. The corporate bonds of private jet owners are trading at double-digit yields, and it's hard to tell whether those private jets generated or erased value. In the past year Gazit Globe's share price has sunk by 60% and its corporate bonds are trading at yields of 7% to 14%, depending on the type of linkage (dollar or euro). Tshuva's jet is not helping him find new opportunities, either. In the past year Delek Group's shares have shrunk by 72%, and Delek Real Estate has lost 72%, too. The company's bonds are trading at junk bond yields. Since buying executive jets, all of the companies mentioned here have shed more than 60% of their market capitalization, and some of their bonds are trading at yields of 35%-50%. With that in mind, perhaps Akirov, Leviev and Fishman should sell their planes and invest the proceeds in half-price bonds. Bookmark to del.icio.us   No light at the end Amira Hass / Powerless in Gaza, residents rely on the tunnels. Offensive strikes Report: U.S. secretly attacked dozens of Mideast targets since 2004.

Read & React Aluf Benn: No leader before Olmert explicitly urged return to '67 borders Responses: 173 Nehemia Shtrasler: We shouldn't copy Obama, he should copy us Responses: 32 Report: Hamas says its officials met Obama aides before U.S. election Responses: 162 Moshe Arens: History may judge Bush, Iraq war, very differently Responses: 57 Israel renews fuel deliveries to Gaza, after week-long halt Responses: 94 U.S. Jews to Mormons: Stop baptizing Holocaust victims Responses: 114 More Headlines 00:54 Poll: Secular hopeful Nir Barkat leading in Jerusalem mayoral race 22:05 Nasrallah: Israeli hands that attack Lebanon will be severed 00:57 Abbas says Israel has proposed Jerusalem concessions in the past 19:22 Netanyahu will seek alternative to current peace talks if elected 00:05 Arafat's nephew insists Israel poisoned the late Palestinian leader 15:51 Blair's bodyguard accidentally fires gun at Ben Gurion airport 20:26 Sweden court: Civil servant unlawfully demoted for pro-Israel views 15:58 Report: Hamas says its officials met Obama aides before U.S. election 20:44 IDF files harsh indictments against officers involved in Golan training accident 10:09 Livni distances herself from Olmert comments on '67 borders 01:46 ANALYSIS / No leader before Olmert has explicitly called for return to '67 borders 15:59 UN: Gaza food aid to halt if Israel keeps crossings closed 08:28 Obama, and the first Arab prime minister of Israel 18:21 U.S. Jewish group to Mormons: Stop baptizing Holocaust victims Previous Editions Select Day 11 nov 10 nov 09 nov 07 nov 06 nov 05 nov 04 nov 03 nov 02 nov 31 oct 30 oct 29 oct

Special Offers Advertisement Living in Israel Studying in English Click & Meet our students from all around the world Dan Boutique Jerusalem New Dan Hotel in Jerusalem Young, Fun & Distinctively Dan Book Now Online! Fattal Hotel Chain Perfectly located hotels on best resorts of Israel. Car rental in Israel Shlomo Sixt Receive $15.00 from our low rates. Dial 013 for your long-distance calls and get all your money back US CITIZENS Vote for real change. Request your ballot today! Eldan Rent a Car Israel's leading car rental company offers you a 20% discount on all online reservations Jewish Singles Personal Ads Find the love of your life on JDate.com Israel's Premier Real Estate Website www. israel-property.com Hebrew Summer courses From $39.95 Junkyard Junk a car - get free towing nationwide and a tax-deductible receipt

Home | TV | Print Edition | Diplomacy | Opinion | Arts & Leisure | Sports | Jewish World | Underground | Site rules |

Real Estate in Israel | Travel to Israel with Haaretz | Hotels Israel | Restaurants Israel | Tourist attractions Israel | Shops Israel

birthright Israel | Search engine marketing

Haaretz.com, the online edition of Haaretz Newspaper in Israel, offers real-time breaking news, opinions and analysis from Israel and the Middle East. Haaretz.com provides extensive and in-depth coverage of Israel, the Jewish World and the Middle East, including defense, diplomacy, the Arab-Israeli conflict, the peace process, Israeli politics, Jerusalem affairs, international relations, Iran, Iraq, Syria, Lebanon, the Palestinian Authority, the West Bank and the Gaza Strip, the Israeli business world and Jewish life in Israel and the Diaspora.

© Copyright  Haaretz. All rights reserved