Whatever your view of this summer’s Car Allowance Rebate System, more easily remembered as Cash for Clunkers, it certainly was a boon to those 611,373 clunksters who took advantage of it. Getting a maximum $4,500 credit, plus the scrap value of your old car—minus a $50 administrative fee for the dealer—was a mighty persuasive stimulus package for individuals. A lot of new cars moved off of dealers’ lots because of it.
So why not one for aviation? Certainly the industry could use such a spike in new-aircraft purchasing. It would be euphemistic to say that sales of new general aviation aircraft are in the tank. Deliveries of new piston-powered aircraft are off 58 percent compared to 2008, and some business jet manufacturers expect to record negative sales volume in 2009 because cancellations of aircraft already ordered have outpaced sales.
A congressionally blessed Airplane Allowance Rebate System could have the same effect on the aviation industry that the Cash for Clunkers program did on the automotive industry—providing life support to dealers and manufacturers by clearing out existing inventory. It would be wildly successful even if it achieved far more modest results than Cash for Clunkers. Moving just 1 percent of the volume of the car program, about 6,100 airplanes, would be a tremendous boon to an industry that shipped just under 4,000 new general aviation airplanes in all of 2008, which was the third best year on record since 1981.
So how would you duplicate Cash for Clunkers in aviation? First, it would take a lot more than a maximum $4,500 credit to dislodge an on-the-fence new-airplane buyer. The clunker credit was limited to vehicles with a maximum base price of $45,000, so for the most expensive cars the credit capped at 10 percent of base price. A 10-percent credit on a new GA airplane with a base price of, say, $450,000 would be $45,000. Not bad.
Problem is, we already have an attractive financial incentive to buy a new airplane this year called bonus depreciation. Basically, it allows for a business that puts a new airplane in service before the end of the year to depreciate 50 percent of the cost of that airplane in the first year. When bonus depreciation is combined with another IRS stimulant, higher expensing write-offs for depreciable property, the effect on the bottom line of the business’s tax return is far more significant than a 10-percent discount. Despite these alluring tax incentives, new-aircraft deliveries of all types—pistons, turboprops, and jets—were off nearly 46 percent in the first half of 2009.
Along with providing the automotive industry with a highly effective tool for temporarily cleaning house, the Cash for Clunkers program had an important commensurate goal—replacing older gas-guzzlers with new vehicles that are significantly more fuel-efficient. (The $4,500 credit applied if the new car you bought got at least 10 miles per gallon better fuel economy than the one you were sending to the shredder.) Replacing a “clunker” that gets 18 mpg with a new car that gets 28 mpg represents a nearly 55-percent improvement in fuel economy.
Reducing the amount of money spent at the gas pump was an attractive added benefit for clunksters who stepped up to the plate—one that would play well in aviation, too. Better fuel efficiency means lower cost of operation, which is of much greater concern if the vehicle you’re operating is an aircraft rather than a car. Fuel is the largest single expense on the airplane I fly, representing about 29 percent of the total cost of operation.
The problem is that aircraft have not kept pace with cars when it comes to improving fuel economy. I don’t think it’s possible to replace the “clunker” I fly with a new airplane capable of achieving the same fuel-efficiency objectives of the car program. The fuel-efficiency objective of the Cash for Clunkers program worked because of the dramatic and ongoing technological improvements that have transformed car and truck engines. Not so with piston powerplants for airplanes. (Turbofan technology is active, and contemporary jet engines are significantly more fuel-efficient than those of 10 to 20 years ago.)
One other difference that makes Cash for Clunkers difficult to apply to GA is that a pilot’s choice of airplane is far more mission-dependent than is the car. If I need a road vehicle to get to the airport and around town, I have hundreds of makes and models from which to choose. That’s not the case with my flying. A replacement for the Aztec would have to be a minimum six-place twin because that is what our mission requires. The list of new aircraft that qualifies is very short indeed.
One other aspect of the Cash for Clunkers program that would make it a non-starter in aviation is that it was limited to cars that were manufactured no longer than 25 years ago. A 25-year-old airplane is still a young pup. The Aztec I fly is celebrating its thirty-fourth birthday this year.
In the long run, it probably would be more beneficial to the aviation industry, not to mention aircraft operators, if a national economic stimulus program for aviation was directed at sustained research aimed at improving and implementing engine and airframe technology rather than focusing on temporary incentives to rid the skies of perfectly serviceable, mission-specific clunkers.
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