Thursday, October 4, 2012

Economics 101 on Corporate Jet Ownership

The President has on more than one occasion, thrown the, "tax the 'Fat Cats' who fly the corporate jet" card into his economic strategies. We can only speculate on why he does this. Most likely to win a few votes from the people who don't understand Economics 101, and those who think being wealthy is a bad thing.

In the first Presidential debate, the President once again tossed the "corporate jet is bad" card out there. Here is what he said, "Why wouldn't we eliminate tax breaks for corporate jets? My attitude is if you got a corporate jet, you can probably afford to pay full freight, not get a special break for it." Here is a guy that gets to fly around in the world's ultimate corporate jet on the dime of the taxpayers, "calling the kettle black." Seems a little hypocritical there.

If you increase the cost of ownership on anything, there are those that are going to bail out of owning those items.For the most part, individuals and companies that can afford jets, yachts and the like, got to that point because they are smart and know how to manage their assets. A great example is the luxury tax put on the yachting industry in the early 90's.  When the luxury tax was implemented on the purchase of yachts, buyers went elsewhere to buy their yachts. Who gets hurt the most when this happens? The workers that build the yachts. Many lost their jobs.

I am obviously biased when it comes to the corporate aviation, because that is how I make my living. However, let me give a little lesson in Economics 101. I work for a company that manages corporate jets. We also charter these aircraft. If you have the money, we can take you to just about anywhere in the world. We employ pilots, flight attendants, mechanics, line service technicians, and office personnel.  On many occasions we contract out our maintenance. We use catering companies that provide meals for our customers. These companies hire food preparers, drivers to deliver the catering and the support personnel. We employ a computer tech company. The list could go on and on to the other peripheral industries we support in operation of our aircraft. None of us are getting rich doing what we do, however, we make livable wages and enjoy what we do. 

To illustrate how this engine of the economy works, I give you this real life example. On a recent charter we flew to New Orleans from Houston, to pick up a customer to take them to NY. Two pilots and one flight attendant employed by my company flew the trip. We ordered catering from a company to provide meals for our passengers enroute to NY. Our flight attendant had also bought beverages and other special items for the passengers at different businesses in Houston before we left.

On landing in New Orleans, we bought fuel at the FBO (Fixed Base Operator). They employ line service techs, who fuel and provide service to the crews who fly there. The FBO employs CSR's (Customer Service Representatives) who handle fuel payments, make hotel reservations, arrange catering and transportation for customers and crews. The list goes on.

When the passengers arrive, the line service techs assist the passengers in unloading and loading baggage. In this case the passengers tipped the line service techs for their help. As we took off from the swamps of south Louisiana, the company that owns the aircraft that we were flying, and pays our salaries, was responsible for leaving thousands of dollars in the New Orleans economy.

Once arriving at the general aviation airport in the NY area and taxing to one of the FBO's, a transportation company met our passenger, and took them to their destination in NY. The line service personnel were also tipped nicely by the passengers. After securing the aircraft, a driver took us, to our hotel. The driver was tipped by us. More money inserted into the local economy.

Three rooms were waiting for us at the hotel for our three night stay. Money into the economy. While in the NY area, we, patronized several restaurants, who employ quite a few people. We spent money at local stores. We spent money on transportation to the city.

I will give one example how of people don't understand basic Economics 101. While we were walking the streets of NY City, I stopped to look at some t-shirts being sold by a sidewalk vendor. I bought a shirt for one of my kids for $10. Not a whole lot of money, but cash into the economy. We started chatting with the vendor. He asked us where we were from and ultimately, asked us what we did.  We told him we were a flight crew on a private jet. He wrinkled up his nose and asked how much that costs. I don't know the exact cost of the charter, but I do know it was several, several thousands of dollars.

When I told him this, I could see the scorn in his face for the rich customer, who was able to pay the money to charter our jet. I told the vendor, "If it wasn't for the rich guy that chartered our airplane, I wouldn't be here buying a t-shirt from you." He looked at me with a blank stare, without responding. We then continued our walk through the city spending more of our money, provided by rich guys and successful corporations who employ us.

So after fours days and three nights, we departed from NY to drop some passengers back in New Orleans and take some to Houston. We bought more fuel, more catering, spent more money and helped each local economy we were in. I don't know how many people were on the receiving end of the money we spent, but it had to be dozens. We spent tens of thousands of dollars, all because some rich guy that owns a company wanted to visit his daughter.

No one knows how many companies or individuals in general aviation would be hurt if the President goes through with his increase in taxes on corporate aircraft. However, we do know that people would lose jobs if this does happen. How many lost jobs would be worth his increase? The fact is, the general aviation industry generates $150 billion in revenue a year and employs 1.2 million people. If companies don't buy airplanes, then aircraft manufactures don't build as many airplanes and then those who build the airplanes are laid off, and the irony of it all is this. Many, if not most of those who build aircraft, are union workers who support the policies of a President who wants to implement policies that will put them out of work.

Economics 101 folks. It not rocket science. Don't mess with the rich people.

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