UPDATE 1-Nortel grounds corporate jet in cost-cutting drive

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By Wojtek Dabrowski

TORONTO Jan 21 (Reuters) - Nortel Networks Corp NT.TONT.N has grounded its corporate jet as the telecom equipment maker cuts costs and restructures its ailing business, which is in bankruptcy protection.

The company is also in leaseholder talks to get rid of the plane, which was used primarily to ferry Chief Executive Mike Zafirovski on business trips.

"As part of an extensive cost-cutting program taking place across the company, Nortel has grounded its corporate jet," company spokesman Mohammed Nakhooda said on Wednesday. "It was one of the first things to go."

Critics have tried to fashion private corporate jets into symbols of excess, particularly given the spiraling economic downtown. Late last year, the chief executives of General Motors (GM.N), Ford (F.N) and Chrysler were blasted by U.S. lawmakers for flying private jets to Washington to ask the government for bailout money.

Nakhooda wasn't able to say when Nortel's corporate jet was last used.

Nortel -- North America's biggest maker of telephone gear -- filed for court shelter from its creditors a week ago, blaming the global financial crisis for derailing a turnaround effort that the Toronto-based company started in 2005.

The company has laid off thousands of employees as part of that turnaround. In November, it also said it would freeze salary increases, extend its hiring freeze and review its consultant relationships and all its real-estate holdings.

Nortel's shares rose 2 Canadian cents to close at 11 Canadian cents on the Toronto Stock Exchange on Wednesday. In mid-2000, they were worth more than C$1,100 each, adjusted for a stock consolidation that took place in late 2006.

($1=$1.27 Canadian) (Reporting by Wojtek Dabrowski; editing by Peter Galloway)