The Trump administration’s 2017 Tax Cuts and Jobs Act, which, among other provisions, allows private jet buyers to write off the full amount of their new or newly-purchased pre-owned airplane’s cost on their tax return, is prompting the nation’s wealthiest to drop large wads of cash for their own exclusive winged-digs.
“From an aircraft ownership perspective, regardless of anyone’s political vibes, it is clear that this latest tax bill, which changed how airplanes can be depreciated, was a shot to the industry in a good way,” said Casey Miller, president of Latitude 33 Aviation, which manages, charters and sells aircraft and is based in McClellan-Palomar Airport in Carlsbad. “Now that 100 percent of a new or pre-owned plane can be depreciated from day one of purchase, people are coming out of the woodworks saying, ‘I have this tax liability looming over me; how can I alleviate that?’ Our answer is, ‘buy a new plane and offset that tax liability.’ ”
Adding to the Fleets
Thanks in large part to big local industries like biotech and the updated US tax code that allows 100 percent bonus depreciation for items such as aircraft, San Diego is seeing its share of uptick in the growing trend of purchasing and, subsequently, flying private jets. As a result, in early October, Latitude 33 Aviation, founded in 2006, added two new aircraft — a Phenom 300 and a Challenger 300 — to its 35 aircraft fleet, 14 of which are based in San Diego. Schubach Aviation, a Carlsbad-based jet operator founded in 1991, has 15 aircraft and also made some recent additions to its 15-aircraft fleet with the inclusion of a Challenger 350 and a Hawker 850XP. A Citation Latitude will be available in November.
San Diego State University accounting professor Steven Gill says the tax deduction is an added incentive for local businesses to purchase and/or fly via private jets.
“Between security issues and timing, I can see a reasonable claim that having (a CEO) arrive at least one hour prior to the flight, stand in line at the TSA security and take off his shoes, deal with weather delays in a city across the country causing delays in arriving flights, is a good business reason for permitting corporate jets if the business reason can support that choice,” he said. “This has always been true, it’s just now the deduction is earlier.”
Data gathered by Statista on the business aviation market in the United States shows the total fleet size in the country increased from 20,477 in 2016 to 20,978 aircrafts in 2017; and the total business aircraft flight hours in the United States increased from 1.41 million in 2016 to 1.57 million in 2017, with the majority of flights taking place in California, Texas and Florida.
On the sales side, according to data released early 2018 by Jetnet, a provider of business aircraft research services, there were 2,938 pre-owned jets for sale in 2009, and 2,143 in 2017 for a 28 percent decrease. Aircraft prices vary widely from under $1 million to $100 million. A new super-midsize jet would range from $15 million to $25 million.
According to Kimberly Herrell, president of Schubach Aviation, clients, which include local business leaders and families with private wealth, are choosing to fly private because of the lifestyle it provides and the quality of life they choose to live, as flying private relieves the hassle and headaches associated with traditional travel.
“Corporations realize they can get so much more done with their time when they fly private, like with C-level employees that can fly somewhere, reach meetings, visit sites and get back the same day, especially for those harder to reach destinations,” said Herrell.
Miller says Latitude 33 Aviation has approximately 80 flights per week for a total of roughly 320 per month and about 600 flight hours per month. He adds Latitude 33 Aviation has seen a 40 percent year-over-year increase on the charter side of the business over the last six years. Herrell says, as a result of the uptick in private aviation recently, Schubach Aviation has increased its revenue. In 2016, it garnered $15 million, in 2017, it saw $18.5 million, and 2018 is looking at an even $19 million.
The cost to fly private can fluctuate, says Miller, with variables including length of trip, the distance of the location, how long the passengers will stay at the destination and the number of passengers, the latter of which dictates the size of the plane.
A trip from San Diego to Las Vegas ferrying four to six passengers for a one or two nights getaway can cost anywhere from $2,000 to $3,000 per hour of flight time, Miller said.
Clarification: This story has been updated to reflect the per hour flight time cost of a San Diego to Las Vegas trip ferrying four to six passengers for a one or two nights getaway.