Tesco takes delivery of $50m corporate jet

The Financial Times
October 3, 2014 8:20 pm 
By Andrea Felsted, Jane Wild and Peggy Hollinger 


Tesco has taken delivery of a new Gulfstream 550 corporate jet, valued on the open market at more than $50m, just days after revealing it had overstated its profits by £250m.

The latest addition to Tesco’s fleet landed on British soil even as the struggling supermarket group pledged to put all its executive jets up for sale in a bid to rebuild investor confidence.

The new long-range aircraft – ordered in early 2013, just as the group was scaling back its international operations – will raise further questions over the tenure of Philip Clarke, the former chief executive who was ousted in July.

A person close to the company said: “If you want an indication of what has gone wrong at Tesco [it was that] we ordered another Gulfstream.”

Britain’s biggest retailer sparked a storm of shareholder fury last year when it emerged that the group was operating a fleet of four executive jets despite falling sales at home and troubles abroad.

The news comes as the group attempts to recover from a spate of bad news, including three profit warnings in three months and the revelation that the Financial Conduct Authority was investigating its accounting practices.

Tesco’s new chief executive Dave Lewis was brought in early from Unilever to replace Mr Clarke after the second profit warning a month ago. People inside the company said one of his first decisions was to sell the aircraft, though the group has not yet announced this publicly. Tesco would not comment on the new aircraft, beyond saying: “All aircraft operated by Tesco are in the process of being sold.”

The retailer was this week registered as the new owner of a Gulfstream 550 on the website of the Civil Aviation Authority.

Aircraft brokers said that Tesco had put its old Gulfstream on the market in May, and it was expected to attract a price of about $30m-$35m. The other aircraft in its fleet include a Hawker 800, two Cessna Citations and the new Gulfstream, which together could have a resale value of more than $60m, according to Alireza Ittihadieh, head of the broker-dealer, Freestream Aircraft (Bermuda). However prices were “under tremendous downward pressure”, and the company could struggle to find buyers, he said.

Since the financial crisis, companies have been unwilling to be seen flying corporate jets, for fear of being attacked by investors and the public for extravagance. One senior executive in the private aviation industry said: “There has been a fundamental change – corporates don’t want to be seen owning aircraft in Europe.”

News of the new aircraft is also likely to fuel investor criticism of Sir Richard Broadbent, chairman since November 2011. He has come under fire for failures of corporate governance during Mr Clarke’s tenure.

Tesco shares have sunk to an 11-year low since the latest profit warning last week, in part due to rumors of a multibillion-pound rights issue to shore up its balance sheet. Tesco has said it has no current plans for a rights issue.

-Source:  http://www.ft.com



Tesco takes delivery of $50m jet as it struggles with £250m black hole 

Supermarket giant expected to sell new Gulfstream 550 at a loss, as part of a plan to offload entire jet fleet 

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