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Business Aviation & The Boardroom - Focus on the Objective

As politicians position themselves for an election that is 12 months in the future- disregard hollow rhetoric aimed at leveraging the public’s misunderstanding about the value of Business Aviation- cautions Jack Olcott.

AvBuyer   |   1st November 2011
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Focus On The Objective
As politicians position themselves for an election that is 12 months in the future- disregard hollow rhetoric aimed at leveraging the public’s misunderstanding about the value of Business Aviation- cautions Jack Olcott.

The objective of President Obama’s American Jobs Act is to free our nation’s economy from its recessionary mud and to move toward recovery. More jobs generate higher tax receipts naturally- without impeding the ebb and flow of commerce by erecting speed bumps along the road to growth. Why- then- does the Obama Administration propose a $100 fee per flight for business aircraft?

Clearly the Obama team has a sense of history. They should know that when the Clinton Administration proposed a similar access fee over 15 years ago- surveys showed that business aircraft operators would decrease their use of Business Aviation rather than accept a fee that added no value to the productivity of their flight operations.

For larger aircraft (such as Gulfstreams)- the anticipated reduction in flight activity was in the 10 to 15 percent range- but for light jets and turboprops the decrease approached 50 percent. Thus the effect of such a user fee would be to reduce business travel to the many locations throughout our nation that rely of business aircraft for their access to economic opportunity.

Many cities and towns depend upon Business Aviation. Scheduled airlines serve about 10 percent of the airports in the 50 states- but the most business- friendly service is to less than 50 locations. Thus it is understandable that 77 mayors from cities in 44 states recently signed a letter to President Obama expressing their objection to the proposed fee.

While the overall intent of the American Jobs Act is to balance reductions in payroll taxes and other hiring initiatives with offsetting tax revenues- the unintended consequences of imposing higher user fees on business aircraft would be fewer jobs and therefore lower revenues flowing into government coffers.

In 1990- when President George H.W. Bush passed a 10 percent “luxury” tax on new business aircraft- lumping them into the same category as yachts and high-end automobiles- demand was reduced and nearly 1-500 jobs in aircraft manufacture were lost. (Incidentally- the yacht-building industry in the USA was nearly decimated by the Bush luxury tax.) Rather than generating forecast tax revenues of $31M annually- the legislation destroyed jobs- cost the government more than $24 million in unemployment benefits and lost income taxes- increased the cost of doing business- and reduced the U.S. economy by much more than the legislation’s anticipated tax revenue. Congress repealed the law in 1993.

Let us not forget that approximately 1.2 million U.S. workers earn their living in the manufacture and servicing of non-airline and non-military aviation- principally in tasks associated directly with Business Aviation. Nor is it insignificant that the nation’s economic activity related to all non-airline and non-military aviation totals $150 billion- of which about 70 percent is attributed to Business Aviation. Placing obstacles in the path of Business Aviation is not good governance.

As if the Obama proposal for access fees isn’t sufficiently flawed as a revenue generator- consider the inefficiency of administering such charges. Unlike the present system of collecting user fees by charging a tax on gallons of fuel purchased and having the oil companies remit funds to the federal government- collecting fees for each departure would require a new bureaucracy. Just imagine how efficient that would be.

The chances of Obama’s access fee proposal making it through to final enactment are low- especially considering the excellent communications the DC-based lobby organizations such as the General Aviation Manufacturers Association- National Air Transportation Association and the National Business Aviation Association have with leaders in Congress. But one never can be sure. As is said in Washington- “There is no killing a bad idea.”

President Obama knows how important Business Aviation is to productive and efficient use of people and time. He uses Air Force One more than any previous president. Why? Because air transportation is absolutely essential to fulfilling the tasks he faces. Like CEOs of American companies- he understands that a business aircraft is a necessary business tool.

But when campaigning- politicians like to play the populous card. They know the value of Business Aviation- but they believe the electorate does not know or appreciate the necessity of this form of transportation. As we have seen in recent years with our nation’s penchant for sound bites based upon questionable logic- the cheap shot is often fired- even by an administration that should know better.

As a Director- look beyond the rhetoric. Have confidence that Business Aviation is a sign of a well-managed company. Be proud of your governance- and be willing to tell your associates and shareholders that your company benefits from its use of business aircraft.

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