Corporate Jets Back on the Radar
The aviation industry is up in arms over a proposal to end a $3 billion tax break for corporate jets. To be specific, Congress is proposing an extended depreciation schedule where companies who use private jets for business travel would have to write off the cost over seven years instead of the current five-year schedule.
Business jet
Airplanes used for commercial flights or charters are already on a seven-year schedule, so it wouldn’t have been a big story all by itself.
But then President Obama chose to single out this tax break in a press conference on June 29, 2011. See the video — the relevant comment begins just before the two-minute mark.
The reaction was immediate and visceral, and it’s now more about the President’s comments impacting sales of private airplanes, and perceptions about their use, than the tax itself.
National Business Aviation Association (NBAA) president and CEO Ed Bolen: “NBAA has forcefully spoken out against the president’s vilification of business aviation, and we will oppose his policy reversal, which would harm the industry.”
Aerospace Industries Association (AIA) president and CEO Marion C. Blakey: “General aviation plays an important role in our economy and took a substantial hit in the recent recession. We feel that disparaging comments from the President regarding business jet users are not conducive to promoting jobs, investment and economic growth.”
General Aviation Manufacturers Association (GAMA) president and CEO Pete Bunce: “General aviation manufacturers can help the President meet his export goals, but not if this damaging rhetoric continues.”
International Association of Machinists and Aerospace Workers (IAMAW) president R. Thomas Buffenbarger: “Words have consequences and, in this industry, a few misguided words can put at risk even the ever-so-modest recovery we have experienced.”
With the $150 billion general aviation industry’s 1.2 million jobs on the line, Congress can’t afford to ignore these people. The NBAA alone has more than 8,000 member companies. So there’s likely going to be a walk-back on the tax-break issue.
But as far as perception is concerned, this episode has already had a big impact. Private jets were a sore point during the TARP bailout in 2008-09, and the Wall Street Journal brought the whole issue to the forefront again in May 2011 by acquiring and making public records of every private aircraft flight recorded by the FAA between 2007 and 2010.
The WSJ jet-tracker database offers a fascinating insight into how private jets are used. Turns out that 30 percent or more of the trips made by planes belonging to publicly traded corporations are to or from resort destinations.
The most popular resort destination for private planes taking off from New York is Palm Beach, Florida. For private jets taking off from Los Angeles, the most popular resort destinations are Las Vegas, Scottsdale and Palm Springs, California. From Chicago, the most popular resort locations are all in South Florida.
There also are some high-profile individual flights that the WSJ highlighted, such as the eight-hour flight from the United States to Tahiti by two planes belonging to Google co-founders Larry Page and Sergey Brin, that combined cost an estimated $430,000. Apparently, they wanted to see an eclipse visible only from a small area in the South Pacific.
It’s their planes, their money, and they buy carbon offsets, so it shouldn’t be an issue. But the point is that for a brief post-recession period, it was acceptable again to own and fly around in private jets. That translated directly into more sales for the general aviation industry, which delivered $7.9 billion worth of airplanes in 2010.
But putting an end to the $3 billion tax break for corporate jets, combined with the President’s remarks and media reports about corporate flights to resort destinations, could bring this nascent recovery in general aviation to a screeching halt in the second half of 2011.
Photo – public domain (source)
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