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eBay buys its own friendly skies

The leading online auctioneer buys a $30 million corporate jet to shuttle executives around. Corporate excess in a time of belt-tightening? Not so, eBay says.

While other companies are tightening their belts, eBay has purchased a $30 million corporate jet.

Chief Executive Meg Whitman and other executives have often been victims of airport delays and other commercial travel frustrations, spurring the company to purchase the Falcon 900EX jet last month, company spokesman Kevin Pursglove said Monday.

eBay hired an independent agent to find the plane, which was used and reasonably priced, Pursglove added.

"As eBay has grown, we find our executives spending more time in airport terminals," he said. "In the long, long haul, the cost of the jet will be what we would have spent having our execs fly around the world (on commercial airlines)."

Unlike many companies in the technology sector, eBay can certainly afford to splurge. The company has consistently reported profits and claims a burgeoning stash of cash. Last week, eBay reported a second-quarter profit of $54 million on $266 million in revenue. The company's current assets have grown from $884 million at the end of last year to $938 million at the end of June.

The plane purchase isn't the first sign eBay's becoming a little more free with its cash. During the quarter, company capital expenditures--money spent on equipment, buildings and other goods and services--ballooned, increasing from $11.5 million in the first quarter of 2002 to $62.7 million in the most recent quarter.

This quarter, eBay spent $5 million on software development and $11 million to purchase a customer support center in Salt Lake City. The company did not itemize its other capital expenditures during the quarter. EBay now expects to spend $130 million this year on capital expenditures, compared to $57 million last year.

Safa Rashtchy, a financial analyst who covers eBay for US Bancorp Piper Jaffray, said he is keeping an eye on the amount of money the company is spending, but said he wasn't particularly troubled by the jet purchase.

"They probably figure they will save some money," he said.

But eBay watchdog Rosalinda Baldwin criticized the purchase, saying it belies the down-home image corporate executives have cultivated for themselves and for the company.

"I think it's absolutely outrageous and ridiculous," said Baldwin, editor of The Auction Guild, an online newsletter. "It's obviously their decision on how they spend their money, but when they do their next price increase, people aren't going to be too happy knowing (eBay) just spent $30 million on a jet for Meg (Whitman)."

Corporate jets typically range from about $1 million to about $44 million, so eBay's jet is definitely toward the upper end, said Jim Lafferty, owner of Lafferty Aircraft Sales in San Jose, Calif.

"That's certainly one of the top-of-the-line airplanes in its class," Lafferty said, adding that eBay should expect to spend about $2.5 million to $3 million a year to pay for fuel, maintenance and a flight crew.

The benefit to eBay executives is that they wouldn't have to run the security gauntlet that regular airline passengers do when they fly commercial jets, Lafferty said. Also, they'd be able to go directly where they wanted to without making airline-imposed connections, he said.

"eBay may have a very good reason why it needed a corporate jet," Lafferty said. "People that ride on those airplanes, their time is often more valuable than the cost of running the airplane."

Prior to buying the plane, eBay executives mostly flew on commercial flights, although they occasionally leased private jets, Pursglove said. The plane will primarily be used by Whitman; Chief Financial Officer Rajiv Dutta; Chief Operating Officer Maynard Webb; and Matt Banick, head of eBay's international business, he said.

eBay is refurbishing the jet and won't begin using it until next month, Pursglove said. Pursglove declined to say how much the company is spending to refurbish the plane or what its expected maintenance costs will be.

News.com's Alorie Gilbert contributed to this report.