Topic 4: Corporate Aviation: A Political Punching Bag

Corporate aviation has been under a lot of scrutiny the past five to ten years. Many believe that companies do not need their own airplanes to fly executives and other employees around. I understand why people think it is a source of money that could be better spent on other things, but at the same time I do not think people understand all of the benefits that corporate aviation offers. As most people know, aircraft are not cheap to purchase, maintain, and fly, which I believe is the first, and only, thing they think about when hearing or talking about a businesses aviation department. When used correctly, these corporate aircraft can save a company a good bit of money in the long run.

Everyone has heard the saying "time is money", and downtime is one problem that corporate aviation aims to solve. Think of the different times you have flown on a domestic airline, I am sure there is one instance that you can remember where you were stuck in an airport because of some sort of delay. Think of the long lines at security checkpoints and while waiting to board the plane. Remember sleeping in the hotel room bed the night before your flight because you had to be at the airport at five in the morning? All of these things cost a business money when it is their executives or employees involved. These are all areas that corporate aviation can improve upon (Donnelly, 2012).

It is understandable that airplanes occasionally break down and require maintenance, but delays due to transporting mass numbers of people and congestion at airports is an area that can be targeted. Business aviation allows people to go where they want to go, when they want to go there, that is the beauty of it. No need to worry about making your connecting flight in Atlanta. Business aircraft can get into significantly more airports than commercial passenger jets can, which takes out the need to stop at unnecessary points along the way. All of the meals and hotel rooms that employees require while on the trip are payed for by the company, so less nights in hotels and less meals on the road means more money for the company. Many companies conduct meetings while they are in the air traveling from one place to another, this is another advantage that flying on a business plane has over flying commercially. "Business aviation has simply become a way of life for the successful, thriving business of today," says Kim Showalter, the president of Showalter Flying Services (Donnelly, 2012).

I agree that corporate aviation is a very important tool that businesses can take advantage of. Any downtime that the business person faces while on the road is not only a hassle for the traveler, but it is also time that they could spend being productive which costs the company money in the long run. I do think that corporate aircraft have been used for the wrong reasons in the past, but when used in the right way they are a great tool for companies to utilize.

President Obama made comments that if business can afford corporate aircraft, then they can afford the elimination of accelerated depreciation for purchasing the plane. Accelerated depreciation allows companies to account for most of the depreciation expense the first year the asset is used. This lowers the amount of depreciation that the company has to pay in future years (Murray, n.d.), Obama's comment refers to a very small number of the businesses that actually use corporate aircraft. Sure the huge multimillion dollar corporations could afford this elimination of tax break. But what about the small to mid-sized businesses, which are the largest number of companies that use corporate aviation, that cannot afford to lose this tax break? Not only would eliminating this procedure hurt the small to mid-sized companies, but it would also hurt the smaller less traveled airports that these planes fly into (Loyd, 2012).

I agree with president Obama when referring to those very large businesses that have a lot of money to spend, but I disagree completely with eliminating the tax break for the small to mid-sized companies. If it is cut these companies aviation departments would most likely be gotten rid of or receive smaller funding. If their aviation departments were to get cut, it would make them much less competitive in their market and would only stimulate the large corporations even more. Eliminating this tax break would affect the small airports that these business planes fly into as well. If an airport gets one of these business planes every week, they will lose out on that money which the plane brought in.

The NBAA does not agree with president Obama's plans and Ed Bolen, president and CEO of the NBAA, has written to Obama letting him know that he does not agree. In his letter to the president of the United States he explains that Obama illustrates a complete "lack of understanding" about the role corporate aviation plays in business in the United States. Bolen brought up that business aviation accounts for 1.2 million American jobs and contributes around $150 billion annually to the U.S. economy. During the debates, Obama was quick to point out the auto industry in Detroit and how it is helping to re-build America. Bolen pointed out to the president that the business aviation workers deserve his support as well and concludes his letter with, "Please consider promoting, rather than disparaging, business aviation -- it's a great American industry," (Patiky, 2012).

In conclusion, I believe that corporate aviation is a good thing when used correctly. By correctly, I mean for businesses to send employees to meet with potential/current customers to discuss business, for sending officials to meetings, etc. I do not agree with how fancy some corporate planes are or when corporate officials use company planes to go on vacation with their families or to travel the world, that is not how they are intended to be used. I believe that president Obama's plan to cut accelerated depreciation for companies that buy business aircraft will only hurt the business that benefit the most from having these aircraft. I think that when used properly and effectively, corporate aviation planes can be a great tool for companies to use.

Thanks for reading,
Kyle Wagenknecht





References

Donnelly, B. (2012) Business aviation: The unfair advantage. Retrieved February 11, 2013, from http://www.forbes.com/sites/businessaviation/2012/08/06/business-aviation-the-unfair-advantage/

Loyd, L. (2012) Aviation group: Obama off base on corporate jet breaks. Retrieved February 11, 2013, from http://articles.philly.com/2012-10-06/business/34280737_1_business-jets-corporate-jet-national-business-aviation-association

Murray, J. (n.d.) Business tax savings using accelerated depreciation. Retrieved February 11, 2013, from http://biztaxlaw.about.com/od/businesstaxes/a/acceldeprec.htm

Patiky, M. (2012) Zinger from the president stings business aviation. Retrieved February 11, 2013 from http://www.forbes.com/sites/businessaviation/2012/10/05/zinger-from-the-president-stings-business-aviation/