Why Rhetoric Shouldn’t Put You Off Aircraft Ownership

Business Aviation analyst Brian Foley highlights why the escalating rhetoric vilifying the use of business jets shouldn’t discourage aircraft ownership...

Brian Foley  |  09th May 2024
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    Brian Foley
    Brian Foley

    Brian Foley formed Brian Foley Associates (BRiFO) in 2006 to assist aerospace firms and investors with...

    Smiling business jet passenger


    In the past, business jets were predictably vilified whenever there was economic downturn. The public perceived them as a conspicuous display of wealth while they themselves were struggling, all while politicians pandered with no-risk rhetoric that these jets and their owners should somehow pay their “fair share”.

    One of the most legendary examples of this was during the 2008 Financial Crisis when the top three US auto executives went to Capitol Hill to plead for taxpayer-funded loans to bail out their companies. When asked by Congress which of them flew to Washington commercially, no hands went up – they had all flown there on private jets.

    In 2011 during President Obama’s speech regarding ways to lower the national deficit, “corporate jet owners” were again called out a half dozen times to give up tax breaks.

    Most recently in March 2024, during his State of the Union address, President Biden parroted virtually the same message. What makes this time unusual is that the economy is relatively okay; all that’s changed is that the National Deficit has since ballooned more than twofold from $15tn in 2011 to $34tn earlier this year.

    Rather than reduce spending and risk political suicide, the strategy seems instead to increase tax revenues while hoping for a vibrant economy to generate more tax receipts.

    The latest three shots across the bow of Business Aviation is a proposal to subject dozens of US private aircraft owners to tax audits, increasing the fuel tax nearly four-fold and extending an aircraft’s tax depreciation period from five to seven years.

    Even before this, aircraft owners had other ongoing external factors to deal with, such as flight trackers (think Elon Musk and Taylor Swift), shareholders of public companies, and environmentalists.

    So, should all of this discourage people from buying or owning private jets? While that is an individual choice, consider the following...

    Tax Audits and Shorter Depreciation

    Most business jet owners have tax professionals who keep the books in strict order. They should already be aware that business flights and personal flights are viewed differently by tax authorities, and recording these properly should emasculate any audit.

    The tax depreciation schedule being extended from the current five out to seven years really only affects those owners who need the tax credits. Regardless, the write-off isn’t lost, it’s just not realized as quickly.

    Fuel Tax Increase

    It doesn’t matter if you’re an aircraft owner, or a fractional or charter user. One way or another, increased fuel operating costs will be passed along to passengers.

    Flight Tracking

    Most headline instances have been following a few big, public celebrities around and publicly making their comings and goings known.

    The average aircraft owner isn’t as interesting and wouldn’t generate as many clicks. Simply requesting that your identifying flight information be mostly blocked from public view, which most owners already do, should be sufficient to protect you from unwanted attention.

    Rabblerousers

    Remember, there will always be haters. While private owners don’t have the risk of facing shareholders, for public companies the industry associations have already developed talking points that discuss the benefits of Business Aviation to shareholder value.

    On the climate side, owners can hedge criticism by buying a modest amount of Sustainable Aviation Fuel (SAF) or employ such tactics as carbon offsetting, carbon tax credits or book-and-bill.

    While we won’t go into the details of each program, owners (or their advisors) should at least be aware that they exist. Bill Gates famously pushed back against public criticism of his jet use by reasoning that since he used some SAF, he wasn’t part of the problem but part of the solution.

    In Summary

    Those who can afford it simply aren’t going to stop flying privately. Some potential buyers may (and in some cases should) research fractional ownership or charter which provide anonymity while passing on the tax, climate and other issues to those operators.

    Still, there continues to be many benefits to full ownership that far outweigh these, and with a solid accounting team and awareness of sustainability programs and shareholder value arguments, potential owners of bizjets should not be dissuaded.

    MI www.brifo.com

    Read more market commentary and trends in the AvBuyer May digital edition for free. Click the link below…

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    Brian Foley

    Brian Foley

    Editor, Market Intelligence

    Brian Foley formed Brian Foley Associates (BRiFO) in 2006 to assist aerospace firms and investors with strategic research. In addition to his work as Market Intelligence Editor, AvBuyer, he is a regular contributor for Forbes.com and his views are published in the media worldwide.

    Currently, Brian serves the Transportation Research Board as a member of the Business Aviation, helicopter, commercial airline and UAV system subcommittees, and he previously served on the Wall Street financial firm Board.

    Before starting his consultancy business, Brian was marketing director at Dassault Falcon Jet for 20 years, and started his career at Boeing. He is an instrument-rated private pilot.


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