The bad news is…….
the value of your airplane has probably dropped around 50% over the last three quarters.
The good news is……
if you are paying ad valorem taxes in your state, you should pay significantly less this year than over the last several years. For many states, this is the time of year that the central appraisal district performs an appraisal on aircraft for the purposes of imposing ad valorem taxes. This is an annual tax imposed on a company based on the value of an asset, like an airplane. Many of these districts utilize publications like Bluebook or Vref as a guide to establishing values.
The trouble with this approach is that the marketplace changed so quickly last fall that neither of these publications was able to adjust prices down quickly enough. The tax is typically imposed based on the appraised value as of January 1st. Prices on aircraft tumbled across the board starting in late summer, but the value publications did not start to reflect these drops until their new editions came out the first of the year. When those publications were released, they were already almost two quarters behind, so I would argue that the publications released last month are truly more reflective of values for the first of the year.
There is quite a bit of lead time involved in the sale of an airplane. When an airplane transaction closes March 31st, the terms of that deal were likely negotiated in early January. There are then several weeks taken up negotiating a contract, several weeks of pre-purchase inspection, a couple of more weeks working off squawks, test flight, then delivery. All this to say, I think it is worth your time to do your due diligence in 2009. Don’t just accept that appraised value your tax man might suggest. It’s worth a little research and possibly employing the service of a consultant (like JBA) to make the case for some significant tax savings.
The bad news is…….
the public image of corporate aviation has taken quiet a blow this year.
The good news is……
We all have an excellent opportunity to educate the public on the value our industry adds to the business world and overall economy of the United Sates. Ever since the Big 3 auto makers made their fateful flight to D.C., the news media seems to have taken a strong dislike to corporate aviation and the image it portrays. The bad side of corporation aviation has been covered ad nauseum by the talking heads. One thing that a reporter seems to hate even more than our industry, is regurgitating a story that has been over-covered by other sources.
However, give the media a new angle on that story, specifically covering the opposing view, and it is something fresh and “newsworthy”. It sure would be nice to start seeing some coverage of all the value our services provide when utilized properly. Let’s see some coverage of statistics like the ones NBAA references – 80% of the passengers on corporate aircraft are middle managers who need to get to their destinations quickly and efficiently in order to save the company money, as opposed to the corporate fat cat traveler most media assume fly the most. Let’s hear about the 1.2 Million jobs our industry supports in the U.S. (wonder how many that has fallen by so far this year?).
The bad news is……
Your corporate flight department is being more highly scrutinized for overspending and waste than ever before.
The good news is……
scrutiny and re-evaluation is a good thing. This is a great opportunity to re-evaluate your operations and equipment in order to be as efficient as possible. If a professional evaluation determines that you have too many aircraft or could operate more effectively by selling your 20 year old aircraft and purchasing a new aircraft, it’s a great time to streamline.
Let’s face it, most companies are not going to report strong earnings in 2009 compared to past years. You might as well spend a little money this year to streamline your operations as much as possible, so when things improve, the flight department will not be a big red spot on an otherwise black income statement. Even though your 20 year old airplane has lost 50% in value this year, so has that 2 year old replacement aircraft. If you are upgrading, the trade difference between those two aircraft has come down considerably, saving your company money. Anything you can do to proactively streamline operations should be looked upon favorably in today’s environment.
I think I could go on giving counter points all day. As with anything in life, these hurdles we are all facing should be looked on as challenges. If we can overcome them, we will all be stronger for it. This down turn forced my family to re-evaluate our spending habits and I think it will end up being a great thing for us in the future. We jumped on the “Dave Ramsey Plan” just in time last year. If only Dave could come up with a book for corporate flight departments, our image could be quite different in years to come. Hey NBAA, you might give Dave a call and see if he’s available for a little consulting!
If any of you needs help fighting that tax man, be sure to let one of us here know how we can help.
Toby J. Smith
Vice President
JBA JETS, Inc.
918-834-9100
toby.smith@jba.aero