Pity working in the Citigroup public relations office—or being a Citi executive. You just can't win. Take today's New York Post story about how Citi is buying a spanking new $50 million top-of-the-line corporate jet, for example. For journos working a cold January weekend, why, the story is irresistible. It's got pain and misery since Citi is hemorrhaging cash, may be forced to split itself into the good-bank/bad-bank structure and consuming billions in taxpayer funds. It's even selling off a stake of its Smith Barney retail brokerage. In short, Citi appears to be burning the furniture to heat the building.
So, it's outrageous, right, that Citi would be buying a jet to fly its executives around the country in posh style? Well, yes—and no. The Post story did allow that Citi is simultaneously trying to unload two older jets—Dassault 900EXs—worth an estimated $27 million each. In fact, a Citi spokesman says the company has reduced its fleet by 66 percent. So if sold for that price, the gain would offset the price of the new plane. A Citi spokesman—sighing with annoyance over the Post story—says it's a matter of convenience: Flying commercially is a time suck, he says. By hopping a private plane, Citi executives can cover more ground, see more clients. In short, the future net benefits of owning the plane may outweigh the cost of buying it.
The other mitigating decision: The decision to buy was made two years ago, before Citi's current financial troubles began. But the firm plans to push the order through, although companies routinely cancel such orders.
Our friend at Citi might be right. Still, it's just too easy for the Post to run the Fat Cat card: Just one week after it announced a $8.29 billion fourth quarter loss, and after being forced to sell a majority stake in Smith Barney to Morgan Stanley, Citi is acquiring a Dassault Falcon 7X, a French-made luxury jet that seats 12 with leather seats, sofas and a customizable entertainment center.
"For security reasons, we cannot comment on information about our aircraft," a Citi spokesman told Registered Rep. "Policies governing the use of our aircraft are strict and rigorously enforced and restrict use to a limited number of executives. Executives are encouraged to fly commercial whenever possible to reduce expenses. Over the past eight years and to support this objective, Citi has reduced its number of aircraft by two-thirds."
Too bad he couldn't just get someone over there to offer the math—about what sort of benefit, monetarily, a private jet affords. I mean, should Citi also give up advertising, perhaps abandon the sponsorship of the New York Mets' baseball field, CitiField, too?
In the meantime, Citi is still spending $21 million a year or so to house CEO and Chairman Sandy Weill's personal investment firm, S.I. Weill, on the 46th floor of the General Motors building. For details on Citi unit Smith Barney's quarterly earnings, check out our recent story here.