When you commute to work you think: Subway, maybe car, or bus.

Fortunately, some of us get to do it in a G-IV. The problem is that going to a loan application meeting in your G IV can cause the banker angst, especially when you didn’t bring your balance sheet with you. Then there is the uncomfortable question: How do you guys afford the G-IV?

That event marked the day the music died for many private aviation folk, no matter how much No Plane No Gain they had been exposed to.

But, there’s good news.

When the IRS, the SEC and Obama administration see private jets for what they are, they plan to tax them for what they are: luxury that some elect to use. The Part 91 flight department as we know it today is on its way to being passé… and fast too. Best case scenario, for continued private use? Get a Part 135 certificate to legitimize use.

The rest of the civilized (and fairly socialist taxed) world doesn’t provide for as many nifty cheats in their tax code. That’s because giving corporations or individuals deductions on their private ownership of a G-IV is counter productive. Note: I’m fully aware that that is not what the GM crew were doing. They were just using the company jet…. You know… to go to a meeting.

Legitimacy doesn’t carry a lot of weight when a CEO can be that dumb & out of touch. They made it worse by applying (the next day) for the “let’s hide our tail number from the web based flight tracker folk.” Clearly with black or red ink.. they felt it was alright to use the jet. And so does the tax man, so long as you pay the taxes on the benefit you received from using it. And I’m not talking SIFL. I’m talking $30K per Aspen trip. That’s the benefit you obtained by taking the jet skiing or golfing. And the tax man cometh.

It is darkest before dawn

The reality is that patently private use will most likely cease to exist as we know it in the coming years.

It has to. There is too much money on the table, it looks bad, is patently opulent and the gang that does it can afford to pay. Whether we agree or not, one observation might be true: Like the tide, it’s coming. Will taxes on the private use of a jet remove the incentive for the great American dream of accumulating wealth by hard work, saving and building via small incremental gains? Not likely.

The good news: If you are a Part 135 operator you can have your cake and eat it to.

The fractionals will die as a business model and the stand alone Part 91 flight department will also dry up as the reality sets in that airplanes above 12,500 pounds really belong on a Part 135 certificate. If they aren’t they are going to be viewed and taxed with unfavorable eyes. Unfavorable enough to alter the mood of Bombardier, Cessna, Hawker Beechcraft, et al overnight.

What now?

Now would be the time, if you are looking to grow your managed fleet (air carrier) or plan for the future (jet owner / fractional owner) types of utilization that suit you best: Own, operate, or charter. Everything else is on its way out.

If you are an air carrier be the guru to your local jet owners. Being the helpful advisor that shows them how your interests are aligned, suddenly became a lot more of a believable story.

If you are a fractional or jet owner, that currently does not operate under the umbrella of a Part 135 certificate - start looking. It is cheaper to be a pioneer than a sheep or laggard.

This, in part, explains why EJM is doing ok now while NetJets is getting clobbered. Same company, two different approaches. One is timeless.. the other hinges on a mathematical model that still leaves 40% of the capacity unused.

The side of the business that promotes the Part 135 revenue operation (i.e. a business) is safe from the tax man, populist rage, etc. since the aircraft is essentially a commercial aircraft that must work to earn its tax deductions. There is an effort to build a business around the aircraft and that the FAA, the IRS, the White House and the SEC can stomach.

If you’d like to know more less depressing things about the future, your jet or your 135 operation, don’t hesitate to send mail.

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