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Tax Reform Highlights for Business Aviation

The House and Senate have both voted to pass major tax reform legislation, and are expected to send the Tax Cuts and Jobs Act (“Tax Bill”) to the president for his signature before Christmas. The legislation contains important changes for business aviation in several areas.

100-Percent Expensing (Bonus Depreciation)

A 2015 Act extended bonus depreciation for qualified property (including commercial and non-commercial aircraft used in a trade or business with a recovery period of 20 years or less) through 2019, with a phase-down over time from 50 percent to 30 percent.

Under the Tax Bill, however, the current law would be amended to provide for 100-percent expensing, which will allow taxpayers immediately to write off the cost of aircraft acquired and placed in service after Sept. 27, 2017 and before Jan. 1, 2023 (Jan. 1, 2024 for longer production period property and certain aircraft). Through the efforts of NBAA and a coalition of general aviation groups, the new law would permit 100 percent expensing by the taxpayer for both factory-new and pre-owned aircraft so long as it is the taxpayer’s first use of the aircraft.

For tax years after 2022, the bill provides for a phase down of bonus depreciation in increments of 20 percent each year for qualified aircraft acquired and placed in service before Jan. 1, 2027 (Jan. 1, 2028 for longer production period property and certain aircraft).

Like-Kind Exchanges

Under current law, when property (including business aircraft) held for productive use in the taxpayer’s trade or business or for investment is exchanged for property that is “like-kind,” a special rule under Internal Revenue Code (IRC) § 1031 provides that no gain or loss is recognized to the extent that the replacement property is also held for productive use in a trade or business or for investment purposes.

The Tax Bill modifies this special rule only to allow for like-kind exchanges of real property. As a result, taxpayers will no longer be eligible to defer taxable gain on the sale of aircraft via a like-kind exchange, and the gain would be subject to recapture for tax purposes. This provision is effective for transfers after 2017, and is a permanent repeal of application of IRC § 1031 rules to exchanges involving aircraft and other tangible personal property.

However, a transition rule preserves like-kind exchanges of personal property if the taxpayer has either disposed of the relinquished property or acquired the replacement property on or before Dec. 31, 2017. Further, 100 percent expensing of new and used property helps to compensate for the repeal of like-kind exchanges for tangible personal property, though unlike such repeal and as noted above, 100 percent expensing is scheduled to expire in 2023/2024 with an additional phase down until 2027/2028.

Prohibition on Deduction of Employees’ Commuting Expenses

The Tax Bill prohibits employers from deducting the cost of providing transportation to employees to commute between the employee’s residence and place of employment unless provided for the safety of the employee. It is unclear whether this new provision would allow the deduction of commuting expenses included in income, and if so, whether such deduction is limited to only the actual amount of the expense included in income.

Disallowance of Travel Expenses “Directly Related” to Business

The Tax Bill makes far-reaching changes to the basic deduction disallowance rules for business entertainment which could affect many aircraft owners. Historically, the general rule of IRC § 274 disallowed all entertainment expenses (assuming no exception applied) unless directly related or associated with the active conduct of the business. Therefore, the 100 percent deduction disallowance did not apply to the entertainment of business customers, prospective clients, company retreats and other entertainment events where business was conducted immediately before, during or after the entertainment, or the entertainment was clearly associated with a business goal unrelated to providing the entertainment such as the opening of a new business location. Beginning in 2018, the Tax Bill disallows all entertainment expenditures, regardless of whether they are directly related to a business goal.

Repeal of Miscellaneous Itemized Deductions, Including Employee Business Expenses

The Tax Bill eliminates miscellaneous itemized deductions, including employee business expenses beginning in 2018 and before Jan. 1, 2026. Prior to the amendment, employees could deduct expenses incurred in performing their work, subject to the limitation that such expenses (along with other miscellaneous itemized deductions) were only deductible to the extent that the total of such expenses exceeded 2 percent of adjusted gross income.

The 2% floor was a simplification measure in the 1986 Tax Act under which very few taxpayers needed actually to calculate their miscellaneous itemized deductions. For the same reason, eliminating the deduction is expected to affect relatively few taxpayers. However, the effect on the taxpayers whose adjusted gross income is not extremely high and who are currently able to deduct their aircraft expenses as employee business expenses to the extent they exceed the 2 percent floor could be substantial. Such taxpayers may want to consider restructuring their compensation arrangements into accountable plan arrangements, which are not affected by the Tax Bill.

Transportation Excise Tax Does Not Apply to Owner Flights on Managed Aircraft

The Tax Bill also amends IRC § 4261 by adding a new subsection to clarify that owner flights on managed aircraft are not subject to Federal Transportation Excise Tax (FET) ticket tax, but rather are subject to the non-commercial fuel tax. This issue has been the subject of controversy for more than 60 years, and this amendment clarifies the law consistent with the understanding of most people in the industry.

The FET exception applies to payments by the aircraft owner (or lessee) for aircraft management services related to maintenance, support or flights on the aircraft. The exception does not actually require that the owner be on the flight or that the flight be on the business of the owner, but only that the owner (or lessee) pay for the aircraft management services.

“Aircraft management services” are defined broadly, and no distinction is drawn between payments for aircraft management services versus payments for transportation services. It is sufficient that the payments by the owner (or lessee) ultimately cover the aircraft functions identified in the statute as aircraft management services. Since the only requirement is that the payments for aircraft management services be made by the owner or lessee, there appears to be no need to analyze whether or not the management company exercises possession, command and control of the aircraft.

The amendment includes new IRC § 4261(e)(5)(D) that appears to provide that if a portion of any payment is for taxable transportation but such portion is not paid for “aircraft management services,” then such portion of the payment is taxable. While this provision could cause confusion, we believe it is intended to mean that when a payment includes a taxable portion (such as payment for a flight on an aircraft not owned by the payor) and a nontaxable portion (such as payment with respect to a flight on an aircraft owned by the payor), only the taxable portion is subject to FET.

The FET exception only applies with respect to flights paid for by the owner or lessee. Accordingly, if an owner leases the aircraft to a management company, and an affiliate of the owner pays the management company for the flight, the exception would not appear to apply. In contrast, if the aircraft owner leases the aircraft to its affiliate and the affiliate (being a lessee) pays the management company for services related to the flight, then the exception would apply.

Entities that may be disregarded for income tax purposes (such as single-member LLCs, qualified subchapter S subsidiaries and grantor trusts) are respected as separate entities for FET purposes and can expect to be respected for purposes of this exception. For example, if a company owns a single-member LLC which owns an aircraft, the FET exception would not appear to apply to payments by the company to a management company to manage the aircraft. However, if the LLC leases the aircraft to the company, then the company’s payments should be covered by the exception.

The FET exception will not apply to payments by a lessee that is leasing the aircraft from the management company under a lease with a term of thirty-one (31) days or less. This is intended to prevent the exception from applying to one-off customers of a charter company who structure their charters as wet leases. Such a wet lease structure may also be problematic from an FAA regulatory perspective.

The provision is effective for payments after the date of enactment, which could be as early as Dec. 22, 2017. While the provision will not be directly applicable to owner flights prior to this date, we understand that the IRS has recently been (correctly) interpreting current law to not impose FET on management fees with respect to owner flights and we would hope that this provision would reinforce that approach.

Acknowledgments

This article was written by NBAA Tax Committee members John B. Hoover, Cooley LLP, and Ruth Wimer, Winston & Strawn LLP, with thanks to Richard C. Farley, Jr., PwC, and Jeff Wieand, Boston Jet Search. Learn more about the NBAA Tax Committee.

by NBAA Tax Committee

2018-01-11T13:26:55+00:00 January 11th, 2018|Aircraft Tax, Aviation News, Blog, Economics of Aviation|

U.S. Business Aircraft Flying Ends 2017 with a Gain

Business aviation flight activity last month in the U.S. fell short of forecast (5.6 percent growth), but still managed to post a 2 percent year-over-year increase, according to TraqPak data released today by Argus International. Analysts at the business aviation services company are calling for a 3.3 percent gain in flying this month.

By operational category, Part 135 flying came out on top, rising 4.6 percent from a year ago, while fractional activity wasn’t far behind, with a 4 percent increase. But Part 91 flying once again slipped into negative territory, falling 0.5 percent year-over-year, with gains in midsize and large-cabin jets more than offset by losses in turboprops and light jets.

Despite an 8.3 percent resurgence in fractional turboprop flying last month, the turboprop aircraft category remained flat year-over-year. Light jet activity was equally anemic, logging a 0.1 percent decrease. However, midsize and large-cabin flying saw solid gains last month, ascending 4.2 percent and 5.5 percent, respectively, from a year ago.

In individual categories, only Part 135 large-cabin jets experienced double-digit gains, climbing 11.2 percent year-over-year. Large-cabin fractional activity recorded a 5.8 percent loss over the same period.

Argus’s TraqPak data provides “flight-number-specific aircraft arrival and departure information on all IFR flights in the U.S., Canada, and the Caribbean.”

by AINalerts

2018-01-11T13:16:51+00:00 January 11th, 2018|Aviation News, Blog, Business Aircraft Industry News|

LEGISLATION PROMOTES AVIATION CAREER PATHS FOR WOMEN

More than half the nation’s workforce is female, but only six percent of pilots are women. Legislation introduced in the Senate seeks to improve on those numbers by encouraging the aviation industry to help women pursue aviation careers.

Sen. Tammy Duckworth (D-Ill.) is among many veterans who have pursued training in general aviation after leaving the military. Photo by Chris Rose.

Sen. Tammy Duckworth (D-Ill.) is among many veterans who have pursued training in general aviation after leaving the military. Photo by Chris Rose.

 

The bipartisan bill, titled the Promoting Women in the Aviation Workforce Act of 2017, is sponsored by Sens. Tammy Duckworth (D-Ill.) and Susan Collins (R-Maine).

It would “express the sense of Congress that the aviation industry should explore all opportunities to encourage and support women to pursue a career in aviation.”

Other provisions include directing the FAA to establish a Women in Aviation Advisory Board “to promote organizations and programs that provide education, training, mentorship, outreach, and recruitment of women in the aviation industry,” directing the FAA to report to Congress on trends that discourage women from pursuing aviation careers; expanding existing scholarship opportunities for women in aviation; and coordinating professional training and recruitment programs, according to a news release announcing the measure.

“Our bipartisan legislation encourages the aviation industry to offer opportunities, such as pilot training, STEM education, and mentorship programs that would help women to pursue and succeed in aviation-related careers. Senator Duckworth and I urge our colleagues to join this effort to improve and increase the educational opportunities for women in aviation,” Collins said.

In a statement, Women in Aviation International President Dr. Peggy Chabrian noted that the bill cites WAI’s Girls in Aviation Day “as a program that helps ‘young women be introduced to the different opportunities that are open to women in the aviation and aerospace industry.’”

She also noted the recent passage by the House of Representatives of the Women in Aerospace Education Act, which was “designed to engage girls at a young age” to set their sights on fields with low participation by women.

By Dan Namowitz

2018-01-03T11:14:08+00:00 January 3rd, 2018|Aviation News, Blog, Business Aircraft Industry News|

Tax Bill Wins Praise for Expensing, Managed Fee Stances

Negotiators on Capitol Hill agreed to retain two key provisions in the final version of the tax overhaul package: one that would extend immediate expensing measures to both used and new aircraft and another clarifying that the 7.5 percent air transportation tax does not apply aircraft management fees. The package could receive a final vote in the House and Senate this week.

The bill would allow for the write-off of the expenses for both used and new aircraft in one year. Past “bonus” depreciation measures have covered only new aircraft. Currently, businesses depreciate aircraft over a five-year period. The bill repeals like-kind exchanges for business property, but NBAA said it believes the immediate-expensing measure will offset that elimination. The immediate-expensing measure is set to expire in 2022, but has a phaseout period through 2026. “It is a priority for NBAA and will help provide the tools necessary to grow our economy,” said NBAA president and CEO Ed Bolen.

Meanwhile, the managed aircraft measure, meanwhile, will provide certainty on the tax treatment of the fees for the first time, bringing to an end an issue that that had been at the forefront for management businesses for years. The issue became particularly critical after a 2012 IRS Chief Counsel opinion left aircraft management firms vulnerable to back taxes and penalties. The IRS had audited a number of companies, assessing hefty taxes on the management fees. But after an outcry from industry, the IRS put the opinion on hold in May 2013 and stopped enforcing the audit findings surrounding the fees, pending clarification. However, the agency still has not issued a clarification.

“NATA is deeply appreciative that…conferees retained provisions in the tax bill that provide our member companies with long-sought certainty as to the tax status of aircraft management services and encourage investment in the new and used aircraft markets,” stated NATA president Martin Hiller.

NBAA noted that the legislation contains a number of other helpful provisions, including the reduction of the corporate tax rate from 35 percent to 21 percent, as well as a new 20 percent deduction for pass-through businesses. The association added it would work with a broad coalition to restore like-kind exchanges.

2017-12-18T13:41:38+00:00 December 18th, 2017|Aircraft Tax, Aviation News, Blog, Government Regulation|

NBAA Calls on Members To Contact Congress on Tax Bill

NBAA is encouraging its members to weigh in with their lawmakers on bonus depreciation, like-kind exchanges and business aircraft management fee measures as Capitol Hill negotiates a final comprehensive tax bill this week. The House and Senate versions of the tax bill address different aspects of these measures.

Both provide for 100 percent immediate expensing, or “bonus depreciation,” of business assets, but the House bill covers both new and used aircraft. The measures would apply to purchases through 2023, but the Senate has a phase-down that continues through 2027.

Like-kind exchanges for business assets would be repealed under both bills. Under like-kind exchange, taxable gains on the sale of a business asset can be deferred if that asset is exchanged for a similar asset. “The immediate expensing provision helps make up for the like-kind exchange repeal, but there is, of course, a sunset date for immediate expensing,” said Scott O’Brien, the senior director of government affairs for NBAA. “But the Senate language, which does not allow immediate expensing for preowned equipment, is a disincentive for the purchase of preowned business aircraft.”

NBAA also noted the Senate bill measure clarifies that business aircraft management service fees are not subject to the commercial airline ticket tax. The association created an electronic letter to help members contact Congress specifically on accelerated depreciation.

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By AINalerts

2017-12-13T10:23:49+00:00 December 13th, 2017|Aircraft Tax, Aviation News, Blog, Government Regulation|

FAA drone registration is now part of the law

FAA drone registration is now part of the law

Get ready to fork up a few dollars to register that hefty but totally innocent drone of yours. The FAA’s requirement to have drones of certain weights registered is now back and this time it has some staying power. More than just an FAA rule, it has become part of the US law. That is partly due to the fact that the registration requirement is just a very small part of a larger, and more expensive, National Defense Authorization Act that US President Trump just signed into law.

 The Federal Aviation Administration’s 2015 rules requiring owners of drones weighing between 0.5 and 55 lbs to register their flying robots was shot down just last May by a D.C. appeals court. The court argued that the FAA didn’t have the authority to regulate such products, which it categorized under model aircraft. The FAA, naturally, said it would think of another strategy.

That strategy might have been to sneak in the requirement into a broader law, one that Trump would undoubtedly sign. The $700 billion act was, after all, in line with Trump’s goal of boosting the US’ military chops. He might have been willing to overlook a minuscule part of the Act that would have repercussions for unassuming consumers.

The FAA is naturally happy about the turn of events, but it’s not going to be smooth-sailing forward. Before the courts shot down its registration rule, the FAA already collected $5 from the 838,620 owners who already registered. The agency already started refunding those in response to the ruling. Now both the FAA and drone owners are left in limbo on how to proceed now that the requirement has been reinstated.

While many consumers, especially those with tiny drones, will be none too happy, it’s not exactly surprising that the law has headed in this direction. The number of drones taking to the skies is growing rapidly, and some of them flying into places they have no business being in. Unsurprisingly, there are even those, including US officials, who have come to see drones as potential weapons or, at the very least, spying machines for other governments.

by JC Torres

 

2017-12-13T10:21:12+00:00 December 13th, 2017|Aviation News, Aviation Safety, Blog, drones, FAA|

Lower prices tempt buyers into private jet market

 

 

 

 

 

 

 

 

 

 

The proportion of the global business jet fleet on the market has fallen to levels not seen since before the worldwide financial crisis. Yet while the sector is keen to view this as a sign of the good times returning, market messages are mixed.

The most recent business jet market report by Swiss bank UBS says used aircraft accounted for 10.5 per cent of the aircraft for sale in July. This was the lowest level since November 2007.

“We’re now at a new beginning point of steady, healthy growth,” argues Chad Anderson, president of sales agent Jetcraft. “The market is back to a point where there is more than one buyer for aircraft that are correctly priced, marketed and positioned. Inventories are back to pre-recession levels.”

Steve Varsano, who founded The Jet Business, broker of sales of super-midsize and larger business jets, says this is feeding into prices.

“Prices of second-hand jets have come down drastically over the past two years,” he says. “Now prices are really starting to stabilise.”

15%
Reduction on the total number of recent model jets listed for resale YoY

The used-jet market has also acted as a brake on sales of new aircraft. In its latest Global Business Aviation Outlook last month, Honeywell, the industrial group, said this was one of a range of difficulties for plane makers.

“Declining used aircraft prices, continued low commodities prices and economic and political uncertainties in many business-jet markets” remain concerns for new jet purchases, says Ben Driggs, president of Honeywell’s after-market sales in the Americas.

Another important factor is the cost of depreciation. This will be “much more on a new jet than the maintenance cost on an old jet”, points out Oliver Stone, managing director of Colibri Aircraft, a European jet broker.

The balance between depreciation and maintenance illustrates the case for buying nearly new planes, especially aircraft that are still under a manufacturer’s warranty or have a good maintenance contract.

“Take a 2005 Bombardier Challenger 604,” says Mr Varsano. Owning that $6m large-cabin, long-range jet would cost about $400,000 a year in maintenance, he adds. “But if you spend $10m more you could get a 2014-15 Challenger 605. If borrowing costs are 3 to 4 per cent, the interest would be $300,000 to $400,000 a year. And with the newer aircraft you would have better reliability and a better residual value.”

The falling prices of used aircraft have tempted new buyers, according to Mr Stone. “There’s been a pretty significant uptick in first-time buyers buying pre-owned aircraft,” he says.

620-640
Expected deliveries of new jets in 2017 according to Honeywell

A huge number of aeroplane transactions are driven by a “liquidity event”, he adds. “People who have sold companies, or who have more cash flow from growth — they’ve been chartering for a while, and have seen the business benefits, so they want to try owning a plane.”

Choosing the right aircraft is difficult, especially when rising numbers of buyers lack experience, says Mr Varsano. “Twenty years ago people first bought a small plane and worked their way up.” Now “more and more first-time buyers are getting into a bigger aircraft.”

Catering to this is The Jet Business’s showroom on central London’s Park Lane. It contains a mock-up of an Airbus Corporate Jet cabin and a sophisticated computer tool that displays life-size images of jet interiors on a wall of screens. This allows buyers who may have little knowledge about aircraft to compare models easily, says Mr Varsano.

He also stresses the interplay between the used and new jet markets, citing the Gulfstream G550. “There are about 540 in the world,” he says. There were about 35 for sale when deliveries of the more capable G650 started, he adds, partly from people upgrading to the newer jet. Now, of the G550s “with the preferred forward galley, less than five years old, there are just three for sale.”

“Prices have come down so far, people are keeping their aircraft for longer,” he says. “It used to be four to five years. Now it’s six to seven years.” People used to buy a small plane and work their way up. Now more first-timers go for a bigger aircraft

Honeywell’s expectation was of 620-640 new jets being delivered in the 12 months to the end of 2017 but statistics about the global fleet can be misleading, says Mr Versano. “A lot of aeroplanes are 30-40 years old,” he notes. “Fifty per cent are more than 30 years old. How many of those will get sold? I don’t know anyone buying a 30-year-old plane.”

Mr Varsano, who started his aviation career in statistics, says a cut-off that excludes jets over three decades old would give a better idea of the state of the market. His figures put the number of jets for sale at 2,208, with 562, or just over a quarter, more than 30 years old.

There is a problem with the oldest business jets, says Mr Stone of Colibri. “A Challenger 601 from the late 1980s that needs its engines overhauled will cost $1m per side . . . but then the aircraft will still be worth just $1.7m.”

A looming concern is upgrades required by regulators to avionics equipment. One key US deadline is the end of the decade. There are not enough maintenance facilities to overhaul all the fleet, so “we’re starting to see a negative impact [on value] of not having had the upgrade done,” says Mr Stone.

But opportunities exist in cheaper jets and what remains a sluggish market for used aircraft. Lower hardware prices are cutting jet chartering costs. Leasing company Global Jet Capital is putting its aircraft out to charter when it takes them back at lease-end, until they are sold or re-leased to new clients.

Ben Murray, Global Jet senior managing director of asset management, says this can throw up customers who might never have thought of leasing. “We might approach a charterer [of the aircraft],” he says, “and actually sell them a lease.”

by 

2017-11-30T15:43:41+00:00 November 30th, 2017|Aviation News, Blog|

IRS AUDITS AND RECORDKEEPING

The IRS audit process can be challenging for any business aircraft owner or operator, so NBAA has created resources to help Members prepare for audits and understand how the process functions. Developing a record-keeping system that maintains the information commonly requested by IRS auditors is one of the most important steps in preparing for a potential audit. In general, taxpayers have the burden of proving they are entitled to a specific tax deduction or credit, which makes having the necessary records for substantiation very important.

In NBAA’s Member resource, Record-Keeping Rules for Business Aircraft (300 KB, PDF), the history of IRS substantiation and record-keeping rules is reviewed, and specific best practices are provided regarding the types of records that an aircraft owner or operator should keep. For example, the resource provides details on how to substantiate the business purpose of a flight, which is a common audit topic.

NBAA also created a Navigational Guide for Audits (225 KB, PDF), which describes the IRS audit process from start to finish and includes details on appeal options for taxpayers. Starting with the initial contact by the auditor and moving through the information document request process to the audit findings, the guide provides business aircraft owners and operators with resources to manage IRS audits.

by NBAA

2017-10-26T10:28:20+00:00 October 26th, 2017|Aircraft Tax, Blog, Government Regulation|

White House Announces Drone Regulation Pilot Program

AeroVironment Qube quadcopter

The U.S. Department of Transportation (DOT) will conduct a pilot program to evaluate how state and local governments might participate in regulating drone traffic at low altitudes—a role the FAA now serves. The department expects to select at least five industry-government partnerships to test the proposition.

According to the October 25 announcement, President Donald Trump issued a memorandum directing Transportation Secretary Elaine Chao to begin the Unmanned Aircraft Systems Integration Pilot Program. The DOT will issue an official public notice in the Federal Register in the coming days with details about the application process. Selections will be made within 180 days of the notice for what is planned as a three-year program.

Participating local governments and drone operators will have “regulatory certainty and stability” to conduct various operations, including night flights, flights over people, flights beyond the pilot’s visual line of sight and package delivery, the DOT said. The program also will serve as a testbed for detect-and-avoid and counter-UAStechnologies.

Importantly, the partnerships will evaluate the issue of federal preemption as applied to drones—testing where and when a community should regulate low-flying aircraft relative to the FAA. The federal government has claimed sovereignty of the airspace since 1926, but drones have complicated that understanding.

The pilot program will draw on the findings of a “roles and responsibilities” work group of the FAA’s Drone Advisory Committee (DAC) called Task Group 1. In July, AIN reported that state and local governments largely were not participating on the work group, apparently due to concerns that industry was over-represented. More recently, The Washington Post, citing internal documents and emails, reported that the process “has been riven by suspicion and dysfunction.” One of the newspaper’s sources complained that a representative of Shenzhen, China-based DJI, the world’s leading small-drone manufacturer, co-chairs the task group.

Plans call for Task Group 1 and other work groups to summarize their findings at the next full DAC meeting, which is scheduled for November 8 at Amazon headquarters in Seattle. Pre-registration is required to attend the meeting, according to federal advisory organization RTCA, which manages the committee.

 
2017-10-26T10:23:34+00:00 October 26th, 2017|Aviation News, Blog, FAA, UAV|

Teal: Bizav Market To Return to Peak Levels in 2021

Gulfstream G500

Aerospace and defense market intelligence and analysis firm Teal Group, in its latest industry forecast, is calling for business aircraft deliveries to return to 2008 peak levels in 2021. However, it predicts deliveries will be down 2.3 percent this year, followed by “modest” market growth through the end of this decade.

Overall, Teal is forecasting production of 11,434 business aircraft worth $272.1 billion over the next 10 years. This includes 8,253 business jets worth $236.3 billion; 213 bizliners, $18.3 billion; and 2,968 business turboprops, $17.5 billion. For comparison, 11,247 business aircraft worth $260.1 billion were delivered over the last 10 years—7,800 business jets, $211.5 billion; 447 bizliners, $31.8 billion; and 3,000 turboprops, $16.8 billion.

Teal expects Gulfstream and Bombardier to be the market leaders for business jets, commanding 31.5 percent and 28.3 percent, respectively, by value of deliveries, followed by Dassault Falcon (17.4 percent) and Cessna (13.8 percent). Next in line is Embraer Executive Jets, with a 6.6 percent share by value, which Teal said is a “very significant increase” and particularly affects Cessna, which had 21 percent market share a decade ago. Honda Aircraft, Eclipse and Pilatus would share the remaining 2.4 percent, according to Teal’s forecast.

 

2017-10-26T10:24:39+00:00 October 26th, 2017|Aviation News, Blog|

Global Jet: Finance, Lease Demand To Rise

Even if sales of new business aircraft are forecast to be relatively flat over the next few years, demand for financing and operating leases is projected to grow, according to new research from Global Jet Capital. Much of the growth will come from upward trends in operators’ reluctance to use their own capital for aircraft acquisition in the current economic climate. The projections stem from surveys among a panel of 144 business aviation professionals conducted by the company in September.

Results from Global Jet’s research indicate that more than 77 percent of business aviation professionals surveyed expect demand for business aviation finance to increase over the next five years, with more than one in six of those expecting the increase to be “dramatic.” Sixty-two percent of the professionals interviewed identified what the company called “a growing trend” for potential buyers to use less of their own capital. Meanwhile, 21 percent also pointed to operating leases as being attractively priced.

In fact, rates on operating leases are now so competitive that 46 percent of business aviation professionals surveyed expect to use them for private jet acquisitions increase over the next 12 months, with one in twelve (8 percent) also expecting a “dramatic” increase. Offsetting the risk of pre-owned aircraft residual values is expected to lead to greater use of operating leases by 43 percent of those surveyed.

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by AINalerts  10/12/2017

2017-10-12T14:52:58+00:00 October 12th, 2017|Aviation News, Blog|

Jetcraft Forecast Sees Upward Sales Trend

In its annual 10-year business jet market forecast released October 4, Jetcraft (SD01) predicted an upward trend for new business jet sales. Jetcraft acquires, trades and brokers both new and preowned executive and VIP jets.

Jetcraft’s 2017 forecast calls for 8,349 business jet deliveries by 2026, representing $252 billion in revenues (based on 2017 pricing). North America leads the way with 62 percent of deliveries (5,176 aircraft), followed by Europe with 17 percent and Asia with 12 percent (1,420 and 1,002 aircraft, respectively).

Over the past decade the average aircraft list price increased by 56 percent. The forecast sees that number growing by an additional 16 percent by 2026. How might that happen? Jetcraft predicts that 98 percent of the forecasted revenues from new programs will be for widebody or large business jets such as the Citation Hemisphere, Global 7000 and Gulfstream G500 and G600.

“Pinpointing the transition into a new business cycle is challenging,” said Jetcraft chairman Jahid Fazal-Karim. “Our forecast indicates we are finally exiting the post-2008 recession period, entering several years of steadier, healthier growth and expanding revenues.”

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by AINalerts  10/9/2017

2017-10-09T10:53:23+00:00 October 9th, 2017|Aviation News, Blog, Business Aircraft Industry News, Economics of Aviation|

UBS Bizjet Index Jumps 10% as Pre-owned Turns Corner

The latest UBS Business Jet Market Index jumped 10 percent from the August survey as respondents noted healthier pre-owned business jet inventories and improved pricing, as well as higher customer interest. Now at 53, the index score returns to its post-U.S. election high and denotes an improving market.

By cabin size, midsize jets took the lead with an index score of 54, up 7 percent sequentially. This was followed by light jets at 53, a 15 percent increase, and large-cabin jets at 51, which climbed 12 percent from August. UBS Global Research said the straight-up measure of absolute business conditions came in at 5.4, up 5 percent from the previous survey and the highest since before the financial crisis.

According to UBS aerospace analysts David Strauss and Darryl Genovesi, the overall index reflects an improved view of pre-owned aircraft pricing and inventory, with those scores soaring 24 percent and 22 percent, respectively, along with higher customer interest, which rose 11 percent. North American customer interest increased 11 percent and remains strongest at a score of 70, followed by an “improving” Europe (56), while Asia (51), Latin America (48) and the Middle East (47) “appear stable to slightly improving.”

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by AINalerts  October 5, 2017

2017-10-05T13:29:49+00:00 October 5th, 2017|Aviation News, Blog, Economics of Aviation|

North American Bizav Flying ‘Sizzles’ in August

Business aviation flight activity in North America “sizzled” last month, recording a 5.2 percent year-over-year increase, according to TrakPak data released today by Argus International. This is the largest month operations-wise since May 2008 and shattered the business aviation data firm’s 3.3 percent growth forecast for August; it is predicting 3.2 percent this month.

Last month’s results were fueled by a 10.9 percent year-over-year increase in Part 135 charter activity. Part 91K fractional flying also posted a solid 7 percent gain and, for the first time in several months, Part 91 activity was in the black, rising 0.9 percent.

Large-cabin jet activity continued to dominate the aircraft categories, climbing 7.2 percent year-over-year in August. This was followed by light jets, up 5.5 percent; midsize jets, up 4.8 percent; and turboprops, up 4.5 percent.

In individual categories, the Part 135 segment nearly had across-the-board double-digit gains, with the exception of light jets under this catergory, which rose 9.1 percent from a year ago. Part 135 turboprop, midsize jet and large-cabin jet flying soared 11.3 percent, 11.4 percent and 12.6 percent, respectively. Meanwhile, fractional light jet activity rose 17 percent year-over-year. Only Part 91 light jets recorded a slight loss, falling 0.2 percent.

 

by AINalerts  9/13/2017

2017-09-13T13:28:23+00:00 September 13th, 2017|Blog, Economics of Aviation, General Aviation, Uncategorized|