Corporate jets, their numbers cut, live on at Anheuser-Busch InBev

For years, Anheuser-Busch Co. ran an impressive fleet of corporate jets.

It owned and operated eight sleek, French-made planes with leather seats and divans and wood interiors. It was as if the St. Louis-based beer company had its own airline -- Bud Air shuttling staff to the brewing behemoth's far-flung operations with regularity. A-B even had its own flight operations department: 20 pilots plus mechanics, line workers and support staff, all housed in a spacious hangar at Spirit of St. Louis Airport in Chesterfield.

Longtime CEO August Busch III, an aviation buff, guided the growth of A-B's flight operations. Busch III and his sons, including his successor as CEO, August Busch IV, still fly their own planes.

Then, in late 2008, Belgian-Brazilian brewer InBev completed its $52.2 billion takeover of A-B. And those jets seemed certain to be parked on the chopping block. Analysts predicted they would be one of the first things to go.

Prior to the merger, InBev says, it never owned corporate jets. It views corporate aviation as a wasteful perk. CEO Carlos Brito, the man who now leads the combined A-B InBev, frequently notes that he and his executives fly coach, opting for business class only on long trips. When Brito came to St. Louis in August 2008, he made a point of telling people it was aboard Southwest.

Nothing seemed to better symbolize the difference between Anheuser-Busch and InBev than those planes.

But a year and two months after A-B InBev was created, the company still has a plane fleet and a flight operations department, although much smaller. Two planes already have been sold. Two more are on the market. But A-B InBev plans to retain two planes and perhaps four pilots, according to several former A-B flight operations employees, who remain plugged into the company's operations and spoke on the condition that their names were not used. An aviation official confirmed the tally.

That is a shock to analysts such as Trevor Stirling of Sanford Bernstein. Two years ago, the London-based beverage analyst unintentionally helped paint A-B as a weak, bloated company when he published a research note in the midst of InBev's takeover bid noting the exact size of the company's air fleet. Investors and the media seized on the image.

Now that A-B InBev appears to be retaining some planes, "it is somewhat surprising," Stirling said.

The surprise comes because InBev has a reputation for ruthless cost-cutting. Already, more than 1,000 A-B InBev jobs have been lost in the St. Louis area alone. The company announced last week 800 new job cuts in Western Europe. Industry analysts describe the dedication to what InBev calls "running lean" as nearly religious.

A-B InBev said in a statement that it planned to eventually sell every plane in its fleet, "however we are not in a rush to sell them" into a sluggish market. Sales listings show the company's 1982 Dassault Falcon 50EX offered at $5.8 million and a 1997 Falcon 50EX for $7.8 million.

An A-B InBev spokesperson declined to address the specific number of planes to be sold or that are in use, but said corporate jets "are used when it is a cost-effective option."

The former flight operations employees and a former high-ranking executive say they know why the fleet remains in play for the company. They described A-B's corporate jets as a misunderstood necessity to conducting business, a view they acknowledge took a public relations hit when automaker executives flew on private jets to ask Congress for a federal bailout.

A-B's planes were used to visit wholesalers and suppliers or drop off engineers to address a brewery emergency, not take vacations or golf outings, they said. "They held meetings on the planes. They had their laptops out," said one former flight operations worker.

Stirling noted that European executives tend to see less value in corporate aviation than their American counterparts, perhaps in part because they have little experience trying to get from St. Louis to Fort Collins, Colo., to Fairfield, Calif., in one day without a high-speed rail system.

But even executives who for years enjoyed the use of A-B jets have changed their tune. Dave Peacock, who now heads A-B InBev's North American operations in St. Louis, told the Wall Street Journal last April that he reached four U.S. cities in less than three days by flying commercial, at 10 percent of the cost of flying a private jet.

Former flight operations workers sound torn by the company's decision to keep some planes and pilots. They don't want to see anyone else lose a job and they believe in the value of corporate aviation, but they are struck by what they see as hypocrisy.

"They had to cut all these people's jobs and claim everyone has to save money," said one ex-worker, "but they're still flying corporate jets."

Several workers also pointed out the continuing aviation-related relationship between A-B InBev and Busch III. The elder Busch, 72, owns a company named Ginnaire Rental Inc. It serves as holding company for his aircraft and has leased space inside the A-B InBev hangar for years.

Since Busch III stepped down as CEO in 2006, he has had an agreement to share aviation resources with the brewer. In 2006, the net cost to A-B was $231,819 paid to Ginnaire. The next year, Ginnaire ended up paying $185,909 to A-B. One former flight operations worker recalled how A-B mechanics scrupulously noted time spent working on Busch III's aircraft for billing purposes.

But now A-B InBev is selling its hangar at Spirit Airport. And the tentative plan is for Ginnaire to buy the hangar and to lease back a portion to A-B InBev, according to former employees and an aviation official.

Busch III declined to comment for this article.

Although the corporate jets were a boon to doing business at A-B, they also provided a huge distraction in a previously undisclosed incident from 2007.

Busch IV, just one year into his reign atop the company, was pushing a plan to slash $400 million in expenses. It was named "Project Blue Ocean." U.S. beer sales were sluggish. Shareholders were getting impatient.

Busch IV discovered the company was about to take delivery of a Dassault Falcon 7X -- a top-of-the-line jet, the first corporate fly-by-wire plane, a $40 million beauty that made aviation enthusiasts swoon. A-B would be among the first in the world to get one. It could fly nonstop from St. Louis to the A-B brewery in China. The plane was in Arkansas getting fitted with final interior details and a paint job.

The Falcon 7X was Busch III's baby. He had been waiting several years to get it. But Busch IV, who did not return a call and e-mail requesting comment for the story, objected. He felt the plane sent the wrong message. The company was trying to control costs. Father and son had long faced a notoriously difficult relationship.

"It was a major moment in the rift between the two of them," the former A-B executive said.

Around the flight operations department, word was that Busch III was angry beyond belief, and the dispute was like "World War III between the two of them," recalled one former flight operations worker. "That 7X was the end of it all."

Months later, InBev would make its bid to buy A-B. But the 7X debacle had so spoiled relations between Busch III and Busch IV that the company was not able to draw up a united plan to fend off InBev, the former executive said.

"That became a real problem," the executive said. "It was seen as a sign of weakness."

And the 7X plane never made it to the A-B hangar in Chesterfield. It went to a buyer in South America.

The brewer used to be the heaviest corporate user of Spirit Airport, said John Bales, the airport's director of aviation. Now that title falls to Emerson, a manufacturing and technology company based in St. Louis that has Busch III as one of its board members. The company bought its own Falcon 7X last year.

Bales recalled the days when A-B flight operations hummed. "They were in and out all the time. They ran it like an airline," he said. "And it was not just the bigwigs on there. They were a great customer."

It is impossible to determine how busy the brewer's planes are today. A-B InBev, like many private companies, blocks the ability to track its planes via tail number. But one day last week, one of A-B InBev's Falcon 50EX sat idling on the tarmac by the hangar, its white frame with blue stripes gleaming in the sun, just waiting to fly.

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