Corporate Aviation: A Political Punching Bag

Corporate Aviation: A Political Punching Bag

When auto industry CEOs arrived in Washington to support the 2008 pending taxpayer bailout, they unintentionally compromised their position in the public eye.  At first glance the hypocrisy of nearly bankrupt corporations asking for bailouts from taxpayers while travelling in corporate business jets is glaring.  This event directed the attention of many critical eyes to speculate on why these corporations are struggling to begin with, and in this way the practicality of the corporate aviation industry was questioned.  Public perception concerning companies utilizing business jets quickly solidified in to the generalization that it is a luxurious toy for corporate executives, and not a profitable business asset.  The incident lead to a large amount of negative exposure for an American industry that creates thousands of jobs, promotes business growth and efficiency, and enables companies to expand markets. 

Within the economic stimulus package put in to effect in 2009, President Obama included a tax break called accelerated depreciation.  The break allows companies to write off a larger portion of an asset’s value, such as a business jet, earlier in the asset’s life while it is still most useful.  As a result, a company’s taxable income is reduced while the asset is most profitable to the business, and encourages the acquisition of new assets.  Obama’s support of this tax break indicated support of company’s using private jets.  His stance has significantly changed to the opposite as he now proposes tax hikes for general aviation, and moves to close the corporate jet tax loophole that promoted economic growth.  The National Business Aviation Association (NBAA) retorted with only relevant argument and more than a little disbelief to his back pedaling, saying the industry employs 1.2 million people and generates $150 billion of revenue yearly.  The company’s that utilize business jets are relatively small or midsized operating in areas where airline service is unavailable.  Although the facts support business aviation, the damage to public perception has been altered to generate political opposition.  A small portion of corporate aviation that belongs to multi-billion dollar companies is the tip of the iceberg, and unfortunately this completes the public’s knowledge of the industry, further, the public’s opinion is politically influential to Obama’s decisions.  This may be the root cause of the NBAA’s struggles; defending business aviation from false public perceptions that create negative attention from political figures.

The benefits that companies obtain from operating their own aircraft are substantial to revenue, market growth, and efficiency.  Having the capability of transporting key personnel, equipment, and resources quickly can be invaluable to time sensitive business opportunities, and also strengthens business relationships by providing face to face contact.  As alluded to above, business jets are a necessity to companies operating outside the reach of major airline routes, where time and resources would be wasted on travel to a major hub, passing through security, and airline delays at the gate. 

In conclusion, proposed actions to increase taxes and close ‘loopholes’ that allow tax breaks to acquiring business jets are politically sound, and factually unjustifiable.  Results could include endangerment of business livelihood, but will very likely cause loss of jobs, revenue, and stunt market growth industry wide.  Business aviation needs associations like the NBAA to defend the industry from skewed public image and actions politic that seek to ameliorate, rather than correct this gross misperception.

References

Andersen. (2001). Business aviation in today’s economy: A guide to the analysis of business aircraft use, benefits and effects on shareholder value. Retrieved from http://www.nbaa.org/news/backgrounders/AndersenPart02.PDF

Fernholz, T. (2011, June 29). Obama’s taxing corporate jet policy. National Journal. Retrieved from http://www.nationaljournal.com/

Hartwig, R., Hodkiewicz, W., Nelson, C., Neveau, N., Safford, M., Wille, T. (2010). Corporate jet upset. Cessna.

Lucas, F. (2011, June 30). Obama for corporate jet tax break before he was against it. CNS News. Retrieved from http://www.cnsnews.com/

Patiky, M. (2013, July 31). There are no fat cats on these corporate jets. Business Aviation Voice. Retrieved from http://www.forbes.com/sites/businessaviation/