Biz Jet

         Corporate aviation in the past few years has been in a critical light and has been frowned upon by many. When a company was able to develop and sustain their own aviation department, this use to be viewed as symbol of success and reward for the companies. With the recent downturn in the economy people and news outlets have taken a more critical view on corporate aviation with many believing that it is a waste or misuse of money. When looking closer at the issue it makes sense for corporations to use or have their own flight departments. Corporate aviation can not only help the company's bottom line but help with the logistics of a company. When many people look into corporate use of a flight program they see the times when board members, CEOs, and presidents use it for personal use, they are not looking at the other areas that it effects or can help with. I do feel that corporate aviation can help a company on multiple levels and have effect on the profitability of that operation. I believe that the negative connotation of corporations with an aviation departments comes from the mismanagement of company money coming from higher management, with a focus on growing their own wallets not the growth of the company. The easiest example is in 2008, when the three major automotive makers flew to the government asking for millions of dollars in bailout money for their mistakes and misuse of money.

            Corporate aviation also provides a practical and convenient way for transportation on a short notice or closest to a destination. Many times with larger corporations there is little time for planning, with meetings needing to take place or situations that call for quick action. If a CEO has a meeting to attend and only has a couple days to plan for the event they could be spending hundreds or thousands of dollars trying to get a flight to a destination that is within a reasonable distance to where they need to be. Higher management is most likely going to fly in first class with a short notice ticket prices can be extremely high in price and many times low in availability. It is too costly in time and money to fly standby and could delay a trip for several hours. Another down side for corporations flying on the airlines is they locations and networking for the routes being flown, there may need to be a connection flight or a layover to reach their final destination. Companies with their own aircraft because of the size and weight can reach more remote areas or smaller airports that may be more convent for accessibility and distance. Most major airlines only fly into larger airports with a high volume of traffic in the air and on the ground. Using these larger hubs can also be very time consuming not only due to the high amount of traffic but security as well, which at times can take an hour to get through. On the other side of security, many times it is CEOs and presidents of large corporations being exposed to many and having to deal with the stresses of flying on commercial airlines can be a major turn away. Many of these higher personnel like the idea of pulling their cars up to the plane unloading their luggage and just getting on the plane, not having to worry about parking or shuttling, baggage checks, security, and waiting in line. It puts them at ease and comfort knowing that all they have to do is show up at the airport and get on the plane. Having not to deal with busy terminals is also appealing to many corporations and can be more catered to and have more of a say on what operation works best for them. Larger airports can also pose higher user fees and taxes that can cause corporations to look at smaller less busy airports for their base.

            I do believe that corporate aviation can help the economy on a smaller level. There are many moving parts that could be needed in the operation of a corporate aviation department and outside the department. The first obvious effects it would have is the personnel that is needed for the basic operation pilots, mechanics, and possibly flight attendants. Most mid-level corporations could have one to two planes having one to two crews per plane, crew being two pilots and maybe one flight attendant. If a company has a couple planes within the fleet there could be a need for at least two mechanics to help maintain the fleet. There could also be a need for a flight program manager to help with scheduling and logistics. Indirectly corporate aviation can have effect on other jobs outside of the flight department. Some jobs that it could effect could be the company they are using the hanger from, the fueling service they are using, parts manufactures, aircraft cleaning services, catering companies, rental car services, hotels, local restaurants, local entertainment, taxi services, local FBOs, and other airport companies or facilities. When looking at the corporate aviation closely and only seeing the few amounts of people that it can employ, it can be easily over looked the hundreds of thousands of jobs that it helps support directly and indirectly.

            Organizations similar to National Business Aviation Association (NBAA) and General Aviation Manufactures Association (GAMA) believe that corporate aviation is a critical part of aviation and the economy. In fact, NBAA and GAMA have joined together to create No Plane No Gain, a website that is an advocacy campaign for business aviation. Both NBAA and GAMA provide points and reason to support their arguments. First, business aviation can reach locations that have little to no airline service, can service ten times (5,000 airports) the amount of airports than airliners can (500 airports). Corporate aviation can also reach multiple designations in a shorter amount of time and more efficiently, than any other form of transportation. 72% of the passengers that fly on corporate aviation are non-executive employees, by a survey done by NBAA, showing that it is not just used to take executives on vacation. Business aircraft can also transport critical equipment that may be needed in a quick manner. Most importantly it provides a company with the flexibility of traveling far on short notice. Many times companies may have opportunities or situations arise on short notice, having that flexibility allows companies to act quickly and meet these demands. Companies that have their own personal aircraft can allow them to be more productive, allowing them to work together en route and discuss confidential information in a more secure environment. Business jets can also be more tailored to the companies needs allowing the passenger be in constant contact with other employees while in flight. Studies have shown that companies that have their own aviation department have a higher return to the shareholders than companies that do not. Corporate aviation help with scheduling for the companies, with no cancelations or delays (No plane no gain, 2013). 

            President Barack Obama believes that corporate aviation should be taxed more and should not receive tax breaks that they do now. Even though he signed two acts in 2009 and 2010 that allowed such tax breaks for corporate aviation. After doing so his thoughts quickly changed on the matter and since believes that there is no place for corporate aviation and if it were to exist there should be higher taxes on the companies for being successful and having their own aviation departments. The stimulus plans signed by Obama also included incentives on large manufactured goods including jets, known as “accelerated depreciation,” to persuade more companies to purchase planes as a means of helping the slumping aviation industry. In a statement in reaction to Obama's claims Ed Bolen President of NBAA stated, "The president has inexplicably chosen to vilify and mischaracterize business aviation – an industry that is critical for citizens, companies and communities across the U.S., and one that can play a central role in the economic recovery he says he wants to promote” (Lucas, 2011). Obama is simply looking for taxable items that can be raised to help cover deficits set by this country.

            Depreciation is what happens to an item or something of worth loses its value over a given time or over the time of its useful life. This happens to all items, there is a cycle of buying, using, and updating or upgrading, this is the way our economy functions. Accelerated depreciation on the other hand, is what it sounds like depreciates quicker than normal. There are main two methods for accelerated depreciation: Double Declining balance and sum-of-the-years digits. Double declining is taking the yearly depreciation rate and doubling it, depreciating twice as fast as normal per year. For example, if the given lifetime for the item is 10 years double decline that same item will have lost all its value in 5 years. Sum-of-the-years digits, is more complex on how the deprecation is calculated and determined. The depreciation is faster than straight line depreciation but slower than double decline balance. For example, if the items life is 5 years, each year is added up, 5+4+3+2+1 = 15. This number is divided by the year of its value life starting from the top down; 5/15 for the first year, 4/15 for the second year, 3/15 for the third year, and so on and so forth. If the asset's cost is $1000, 5/15, or $333.34 would be expensed the first year, $266.67 the second year, and so on (Murray, 2013). There is Modified Accelerated Cost Recovery System (MACRS), which is currently the method the IRS has approved for companies wanting to accelerate depreciation on business equipment, is based on the qualifications and classifications of items to determine the accelerated depreciation. There is a stimulus classified under bounce depreciation, which allows companies to have a larger tax write-off of up to $500,000. The plan also allows companies that had a loss that year to have a 50% bounce depreciation on new equipment only, which allows those losses that year to be carried forward to more profitable years. The stimulus plan was supposed to be phased out by 2008, however, it has only be modified and adjusted and is still in-effect today (Section 179). 

           

References

No Plane No Gain (2013, October 14). Why Companies Utilize Business Aviation. Web.                          Retrieved October 12, 2013, from http://www.noplanenogain.org/Advocacy_Tools.htm?                   m=47&s=407#.UlyFgjK9KSP

Murray, Jean (2013). What is Accelerated Depreciation - Accelerated Depreciation Definition.                 Web. Retrieved October 12, 2013, from http://biztaxlaw.about.com/od/businesstaxes/a/              acceldeprec.htm

National Business Aviation Association (2013). NBAA Business Aviation Fact Book. Web.                     Retrieved October 13, 2013, from http://www.nbaa.org

Lucas, Fred (2011, June 30). Obama for Corporate Jet Tax Break Before He Was Against It. CNS           News. Web. Retrieved October 12, 2013, from http://cnsnews.com/news/article/obama-                corporate-jet-tax-break-he-was-against-it

Section 179 (2013). Economic Stimulus Acts impact on Section 179 and Bonus Depreciation.                   Web. Retrieved October 13, 2013, from http://www.section179.org/stimulus_acts.html