Corporate Aviation... Pros and Cons

In today's fast-paced world, business and corporations have come to rely on getting from one place to another complete deals, market their name, and expand the reaches of their business.  One thing that a number of corporations rely on is corporate aviation.  There have been a number of publications stating the benefits corporations can gain from a corporate aviation division; on the other hand, there have been just as many exploiting the select few that abuse the idea of corporate aviation.

By definition, corporate aviation is the use of aircraft by companies for the transport of passengers or goods for business purposes (McMurchie).  Over the last decade, however, abuse of these business-purposed services have been brought in to the publics eye on numerous occasions.  In 2004, a study was conducted and found that over 250 CEOs logged personal flight time valued at $50,000 in addition to over 100 CEOs logging personal flight time valued at over $100,000; in comparison, the same study was conducted in 2002 and found that the numbers of CEOs utilizing these services for personal flight time was drastically lower, 140 and 33 respectively.  In addition to the flight time being covered, some CEOs received additional benefits for utilizing business aircraft for personal use.  On the other hand, companies encourage the use by CEOs because of the efficiency and speediness corporate aviation provides (getting from city A to a more remote city B that would otherwise be out of the way financially impractical).  (Strauss, 2005)

While I think Corporate Aviation does play an important role in the success of some businesses and do in fact benefit out economy, I think the abuse of corporate aircraft that we are constantly reminded of makes people question the importance and necessity.  With all the questions and doubts brought up with corporate aviation, information sharing is important; there are very few companies, however, that choose to disclose the type of aircraft, flight hours, and cost CEOs spend on trips, be it personal or business.  (Strauss, 2005) There are a number of Fortune 500 corporations that utilize corporate aviation and quite a few that do not.  Ron Sargent, the CEO of Staples, flies upwards of 170,000 miles a year, most of those miles are flown on commercial airliners, saying "It's not like there's a security risk if I'm flying (commercial). Besides, if you're the CEO, you have to set an example. I usually fly coach." (Strauss, 2005)

Since entering office in 2008, President Obama has made numerous mentions of eliminating tax breaks for corporate and general aviation, even adding to fees in an attempt to help balance the governments deficit.  During the presidential debates this past Fall, President Obama made numerous statements that fired up business jet companies and companies with corporate aviation divisions.  In President Obama's generalization, he said that if a company can afford a corporate aircraft, they should pay more taxes.  While large corporations may not have been happy with this and could probably afford any taxes levied on them, a majority of businesses with corporate aircraft are small to mid-sized business owners.  These small business owners do not have a fleet of jets and are typically not using these for frilly vacations; these business owners are trying to spread their name, branch into new markets.  Following the debate, the president and CEO of the NBAA, Ed Bolen, wrote a letter to the President, saying "Your comments seemed to illustrate a complete lack of understanding about the importance of business aviation in the U.S., and appear to be at odds with your stated interest in promoting job growth, stimulating exports, driving economic recovery and restoring America to its first-place position in manufacturing."  (Patiky, 2012)

The current tax break that President Obama is trying to eliminate is the accelerated depreciation applicable to certain corporate aircraft.  This law allows businesses to write off the cost of the aircraft over a period of five years in comparison to commercial or charter aircraft which can be written off over a seven year period. While President Obama's idea of eliminating tax breaks, and even making additional fees and taxes, would provide funds, these funds would total $3 Billion over the course of 10 years.  (Frank, 2013)  

Today's world demands businesses to leave their comfort zone.  Everyday, companies are ordering supplies, manufacturing their product, and turning those products around, selling them not only to their local cliental, but to customers across the nation.  Growth is necessary for a business, and many businesses find growth, marketing, and stability through corporate aviation.  Corporate aviation is important to businesses, whether a business owns or leases an aircraft or a company they do business with utilizes these amenities.

Sources

Frank, R. (2013, February 6). New dogfight between Obama and private jet industry. Retrieved from: http://usatoday30.usatoday.com/money/companies/management/2005-04-26-corp-jets-cover_x.htm

McMurchie, J. What is corporate aviation?. Retrieved from: http://www.ehow.com/facts_6849315_corporate-aviation_.html

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

Rubin, R & Zajac. Corporate jet tax gets six Obama mentions, $3 billion estimate. Retrieved from: http://www.bloomberg.com/news/2011-06-29/jet-tax-break-cited-six-times-by-obama-would-cut-debt-by-about-3-billion.html

Strauss, G. (2005, April 26). The corporate jet: necessity or ultimate executive toy. Retrieved from: http://usatoday30.usatoday.com/money/companies/management/2005-04-26-corp-jets-cover_x.htm