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TAXES: TWO STEPS FORWARD...
Face facts: Taxes are both the bane and benefit of purchasing and
operating a business aircraft, no matter its size. Whether levied at the
federal, state or local levels -- or figured into the cost of operation
through existing excise taxes -- taxes are as much a factor in a
company's decision to operate its own aircraft as they are in deciding
where to build a new factory. As a result, business aviation's bean
counters are always watching for new ways to reduce costs of acquisition
and operation while taking advantage of incentives designed to spur
economic investment and retain manufacturing jobs. So it comes as no
real surprise to see the industry getting up close and personal from
time to time with those who decide tax policy. It's also no secret that
one person's desire to use the government's power to tax in a manner
that fosters desired behavior can be balanced by another's plan to tax
activity deemed unworthy. Three recent developments highlight
government's willingness to use taxation not only as a carrot, but also
as a stick.
Our first example also happens to be one with the
most potential impact on the industry, a favorable one in this instance:
Both the U.S. House of Representatives and the Senate are working on
economic-incentive legislation that would continue an existing tax break
designed to encourage purchases of business aircraft. Both bills, H.R.
4520, passed by the House on June 17, and S. 1637, passed in the Senate
on May 11, would extend for an additional 12 months the
placed-in-service requirement for purchasers of general aviation
aircraft wishing to qualify for 50-percent accelerated or bonus
ALBUQUERQUE ANTES UP...
Vern Raburn apparently knew what he was doing when he chose Albuquerque,
N.M., as the site for his then-new company, Eclipse Aviation, giving
rise to our second example. Still in the process of getting its first
aircraft through the FAA's certification process, Eclipse recently was
the beneficiary of substantial largesse from the city it calls home.
According to the Albuquerque Journal, city fathers earlier this month
"approved a $45 million industrial revenue bond package to help Eclipse
Aviation deliver" its light-light Eclipse 500 jet. According to the
Journal, the city also approved a proposal to reduce the company's
property taxes by some $777,000 over a ten-year period. The Journal said
that Eclipse would use the bond proceeds "to purchase equipment for
various manufacturing, research and office support functions."
EXECUTIVE PERKS ARE ONCE AGAIN A FOCUS
It's been a while -- the 1980s, to be exact -- since any major action by
Congress or the IRS to address what some perceive as abuses of business
aircraft by the businesspeople who ride in the back. Our third example
harks back to Reagan-era tax-reform legislation, which gave the industry
terms like "personal use" and "empty-seat"; both common non-business
uses of company-provided transportation were targeted as fringe benefits
during that time frame as Congress clamped down on perceived tax-code
abuses, if not the perceptions themselves. But, according to U.S. Rep.
Rahm Emanuel (D-Ill.), there's a $3 billion corporate jet tax-shelter
loophole in the U.S. tax code as a result. Naturally, Emanuel has
introduced a bill to address the situation. More...
GETS CERTIFICATION APPROVALS FROM TWO COUNTRIES
Its been a good month for Bombardier Aerospace. On June 22, the
company announced that Transport Canada had awarded the certification
papers for Bombardier's Learjet 40, six months after the light jet
entered corporate service last January. Earlier, on June 17, Bombardier
received FAA approval to install the Honeywell TFE731-20BR engine in the
Learjet 45 XR upgrade package. Bombardier's Learjet 40 is based on the
model 45 platform, of which some 240 copies have been delivered, and
shares major systems with its parent. Introduced in 2002, the Learjet 40
received U.S. type certification in July 2003, less than 11 months after
the aircrafts first flight on Aug. 30, 2002. A total of nine
Learjet 40s are in service with both Bombardier Flexjet fractional
owners and traditional customers in the U.S. and Germany. Meanwhile, the
Learjet 45 XR upgrade is designed to deliver greater payload-range
capabilities through a 1,000-pound (454-kg) increase in maximum takeoff
weight (MTOW) and enhanced performance from the new 20BR engines.
RAYTHEON SHAKE HANDS AGAIN
And the big get bigger. NetJets, widely considered the largest
fractional-ownership operation in the world, is buying another 40
aircraft from the Raytheon Aircraft Company -- a mix of 20 Hawker 800XP
mid-size jets and 20 Hawker 400XP light jets -- in a deal announced
Monday. Total value of the contract will exceed $300 million, according
to Raytheon, and the new aircraft will be based in Europe and the United
States. Deliveries are set for the 2005-2007 time frame. This agreement
between the two companies is the most recent in a spate of NetJets
purchases from Raytheon starting last year. In December, NetJets ordered
50 new Hawker 400XPs and eight Hawker 800XPs. Then, in February, the two
inked a 10-year maintenance contract for the present and future Hawkers
in the NetJets fleet. Also in February 2004, NetJets ordered two
additional Hawker 800XPs. The December order of 58 new jets came at Cessna's expense, which saw NetJets cancel plans to buy
50 Citation CJ3 aircraft. More...
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FALCON 2000EX EASY GETS FAA TYPE CERTIFICATE
Less than a year after its introduction of the Falcon 900EX, Dassault
celebrated its June 22 FAA certification for the Falcon 2000EX EASy.
Introduction of the non-EASy equipped Falcon 2000EX took place in March
2003, while the EASy flight deck made its debut late last year on
Dassault's flagship trijet. In the past year and a half, the 2000EX EASy
test aircraft flew 143 flights, accumulating 335 flight hours. According
to the company, 15 Falcon 2000EX EASy aircraft are now in various stages
of completion at Dassault's Little Rock (Ark.) Completion Center.
Customer deliveries will begin almost immediately. Key components in the
EASy flight deck are Honeywell-supplied hardware, including four 14-inch
Primus Epic screens. More...
UPGRADES ORLANDO CITATION SERVICE CENTER
Cessna Aircraft Company announced June 22 that the companys new
Orlando, Fla., Citation Service Center is open for business. The new
facility began serving customers the previous day. According to Cessna,
the new service center is a significant upgrade to the company's
previous facilities, boasting some 155,000 square feet, versus the
47,275-square-foot operation it replaces. Located on the west side of
the Orlando International Airport (MCO), the new service center operates
around the clock and can accommodate all Citation models for
inspections, maintenance, repair, overhaul and other services.
Meanwhile, Cessna says it has plans to expand the facility to nearly
200,000 square feet by October 2004, and will add a humidity-controlled
paint room and aircraft detailing area. More...
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WATCH I: "FALSE SENSE OF SECURITY"?
If any TSA-watchers remain unconvinced that aviation security and
national politics are hopelessly intertwined, last week's comments by
Department of Homeland Security (DHS) Undersecretary Asa Hutchinson to
the Washington Aero Club should set you straight. At that luncheon,
Hutchinson told attendees that Ronald Reagan Washington National Airport
(DCA) would not be reopened to general aviation in the foreseeable
future (read "not before the November election"). Any such move in the
next few months would be at odds with the widely acknowledged Bush
administration campaign strategy to ensure the electorate has the
potential for new terrorism acts uppermost in its mind as Election Day
approaches, according to seasoned observers. More...
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WATCH II: CONGRESS TO LEARN MORE ABOUT "GOVERNOR ERNIE"
The June 9 episode involving a failed transponder aboard a Beech King Air carrying Kentucky Gov. Ernie Fletcher (R)
into DCA on a waiver has had a broad impact on general and business
aviation in the Washington, D.C., airspace. And it ain't over yet. Since
widely acknowledged communications failures resulted in a panic
evacuation of the Capitol as the King Air's primary target flew into
protected airspace with ATC's full knowledge and permission, a new NOTAM
warning operators about the consequences of a failed transponder has
been issued and a flurry of local media coverage has detailed previous
and similar instances. More...
YOUR INBOX ...
The next issue of AVweb's BizAVflash will be e-mailed to you on
July 7. AVweb is changing our production schedule during July to
avoid potential conflicts with the 2004 edition of EAA's AirVenture. In
August, we'll get back to our regular schedule. See you at Oshkosh!
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