October 1, 2009
Since November 2008, turbine flying has taken a body-blow. That’s when Ford, GM, and Chrysler executives flew to Washington, D.C., to ask Congress for bailout money. Each flew in their own large-cabin twinjet. The notion of corporate tycoons in Gulfstreams asking for federal subsidies was too much in an already stressed economy. Predictably, a public outcry against corporate excess ensued. It effectively stigmatized business aviation. Seeking to inoculate themselves from criticism, one flight department after another cut flight activity, laid off pilots, and even sold their fleets. Now, a year later, the dust has begun to settle.
Table of Contents
D-JET Dawn Moving to turbine power Up and coming The next airplane Brazilian breakaway Before you buy, prebuy
And it’s time to get back to business. Business aviation has always made good economic sense, and that hasn’t changed. That goes double for turboprops and turbojets. For those who have been staying out of the game, here are some truths that can steer you toward a justification for getting in. First are the natural advantages of turbine aircraft. Chief among them are their cruise speeds, and their ability to operate out of airports both small and large. What might be a three-hour trip at lower altitudes in turbulent air in a piston single or twin becomes half as long and much more comfortable high in the flight levels. And don’t forget the convenience of flying point to point that all GA flying offers. In good economic times or bad, no one needs the hassle and wasted time involved in navigating the airlines’ hub-and-spoke network of airports. Besides, many airlines don’t serve the smaller airports that are close to so many vital business destinations.
A byproduct of the recession has made turbine flying more affordable. Those who’ve been forced to shed their airplanes have created a glut on the used market, which has led to some great deals—and values. One broker noted that some mid-1970s Hawker 125-700s (no, not the ones with the old Viper turbojet engines, the ones with Garrett turbofans) are selling for less than a million dollars. One, with mid-time engines, went for $500,000. That’s a 415-knot, 2,000-nm, mid-size jet for less than the price of a new Cirrus SR22 GTS. Other, similar deals can also be found—but beware engine condition and number of cycles. Dig around and you’ll see bargains galore.
Fuel prices have moderated since 2008’s highs, so this is another argument for buying. Perhaps not as strong, given the vagaries of the world fuel and political situation, but a welcome sign.
Airplanes used for business purposes more than 50 percent of the time (60 percent is a safer percentage, some experts say) may qualify for accelerated depreciation (see “Buying New, Now,” August 2009 AOPA Pilot). This is a deduction against your taxable income—something that can help your bottom line come tax time. In the past few years, bonus depreciation rules have let you deduct 50 percent of a new airplane’s purchase price in the first year alone. These rules must be enacted year by year, so we’ll see if Congress grants another extension of bonus depreciation for 2010. In this economic climate, it seems a reasonable bet that it will. Standard or accelerated depreciation can provide similar tax benefits—just not at the short-term levels that bonus depreciation allows.
It’s also worthwhile to remember the dynamics of the business cycle. This Economics 101 concept has stood the test of time; only the length and depth of the up- and down cycles are subject to variability. Right now, we’re in a downturn, but a return to profitability and more secure times is in the future. That future, in large part, will belong to those who make the right moves when markets are down.
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