As stores close, Starbucks buys a jet

Starbucks bought a $45 million corporate jet last month at about the same time it told employees that it is reconsidering how much it will match in their 401(k) plans this year.

The new jet, a Gulfstream 550, spent its first two weeks under Starbucks ownership in Hawaii, according to flight records at FlightAware.com.

Starbucks ordered the jet three years ago, according to spokeswoman Deb Trevino. She said the Seattle coffee company determined canceling delivery would be too expensive. She declined to say who took the jet to Hawaii over the holidays, but said it was a combined personal and business trip. She pointed out that Starbucks policy requires employees to reimburse the company for personal use of the jet. That policy was instituted in fiscal 2007, when Chairman Howard Schultz reimbursed the company $400,919 for flights.

"That's not an acceptable answer in 2009," said Nell Minow, editor at The Corporate Library, a watchdog-research firm. "It's not acceptable to use it for anything but the most efficient possible business use."

Companies should be transparent about which employees use the jet and where they fly, she said. They also should not be allowed to make personal trips even if they reimburse their companies, because the reimbursements often are not sufficient.

While many companies have corporate jets, Starbucks' new arrival comes at a delicate time. Plunging profits are forcing the company to make unprecedented cost cuts, including closing 616 U.S. stores last year and slashing thousands of jobs.

Last month, it warned Wall Street to expect disappointing profits for the holiday quarter and told employees it might shrink how much it contributes to their 401(k) plans this year.

Corporate jets became a symbol of executive excess last fall after auto executives flew in private planes to Washington, D.C., to ask Congress for bailout money.

Starbucks has three jets now — the new airplane, a 5-year-old Bombardier and a 7-year-old Gulfstream V that it is trying to sell.

Trevino said they are important to Starbucks' business, which includes nearly 17,000 stores in 49 countries, a multinational business and relationships with coffee growers around the world. Employees also take commercial flights, she said, but "in some instances it makes more sense, from a time and economic standpoint, to use the corporate plane."

She would not say how much Starbucks paid for the new Gulfstream, but similar aircraft are listed for sale at $40 million to $60 million. If the company locked in a price three years ago, the jet probably cost about $45 million, according to Bob Zuskin, a consultant at Jet Perspectives in the Washington, D.C., area who works with Gulfstream and other manufacturers and aircraft-finance companies.

To cancel the contract, Starbucks likely would have paid about $5 million and lost payments it already made, Zuskin said.

The Gulfstream V that Starbucks is trying to sell could have brought up to $45 million six months ago, but now is worth $32 million to $34 million, Zuskin said.

Jet prices have dropped partly because of the economy, but also because "there's a witch hunt against corporate aviation in American right now," he said.

Like the National Business Aviation Association, Zuskin argues that corporate jets are extensions of executive offices, "so leadership can be in back of the airplane productively working as opposed to sitting in row 23F."

Trevino said Starbucks ordered the new plane to save money, because the older plane is no longer under warranty and would need more repairs than a new jet.

Zuskin said the Gulfstream 550 is not more fuel-efficient than the Gulfstream V, but it does have longer flight range and enhanced safety systems.

The new plane can carry up to 19 passengers and, according to a Gulfstream brochure, comes with two DVD players, multi-disc CD player, two floor-to-ceiling closets and a galley for hot meal service that includes "dual coffee makers."

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Seattle Times researcher David Turim contributed to this report.