Tesco board faces new questions after purchase of $50m corporate jet

Tesco

There was fresh embarrassment for the board of Tesco after it emerged the embattled supermarket the proud owner of a new $50m (£31m) Gulfstream G550 corporate jet.

The decision by Philip Clarke, who was ousted as chief executive in July, to buy the aircraft in early 2013 is likely to raise questions about his judgment, as the retailer had already issued its first profit warning in 20 years. Another four would follow on his watch.

It also raises questions about the oversight in place at Tesco, where sales and profits are in decline, turning up the pressure on the chairman, Sir Richard Broadbent, whose leadership is already being questioned by shareholders.

Tesco’s new chief executive, Dave Lewis, moved quickly to defuse a situation likely to anger investors who have seen the value of their shareholdings halve this year. No Tesco executives will ever board the jet, as he has put it up for sale – along with the rest of the Tesco fleet, which includes a Hawker 800 and two Cessna Citations.

Lewis is already battling to restore Tesco’s credibility in the City after it emerged last week that accounting errors meant expected profits for the first six months of its financial year would be £250m less than previously anticipated. The error is blamed on how it accounts for payments received from suppliers for running promotions and hitting sales targets.

The largesse represented by the corporate jet jars with the no-frills culture of a company that operates out of utilitarian offices on an industrial estate in Cheshunt.

The 29-metre-long G550, which can seat up to 18 passengers, has a range of up to 12,500km and a high-speed cruise capability of Mach 0.87. It can fly non-stop for up to 12 hours.

To charter a G550 for a 12-hour flight would cost nearly £67,000 – more than twice the average UK salary of £26,000.

Tesco was this week registered as the new owner of a G550 on the website of the Civil Aviation Authority, according to the Financial Times. The retailer had already put its existing Gulfstream on the market in May in anticipation of the replacement’s arrival, it said.

In a further irony Tesco has only retrenched from overseas markets in recent years. It has shut down its US chain Fresh & Easy, pulled out of Japan and scaled back its ambitions in China.

Tesco would not comment on the new aircraft beyond saying: “All aircraft operated by Tesco are in the process of being sold.”

Powered by Guardian.co.ukThis article was written by Zoe Wood, for The Guardian on Friday 3rd October 2014 23.16 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

JefferiesAnd the Best Place to Work in the global financial markets 2017 is...

Register for Financial Markets News Alerts