Archive for the ‘Jack Olcott’ Category

Still Disappointed

Friday, May 30th, 2014

I continue to be disappointed by the abuse that Business Aviation suffers from the general media.  Op Ed writers and critics obsess over corporate jets when they write about the convoluted provisions in our nation’s tax code, insisting that companies owning aircraft receive an obscene share of special tax privileges.

For example, a column on the front page of a prominent newspaper’s business section addressed loopholes in the rules governing corporate taxes.  The first provision discussed was the tax treatment of “carried interest”, which allows hedge fund executives to treat their earnings as capital gains rather than ordinary income even though their profits are often generated through trades that are transacted in a matter of milliseconds. You and I must hold our investments for a full year to have them subject to treatment as capital gains.   We are not talking about chump change here:  The tax rate on ordinary income can reach as high as 39.6 percent, while the capital gains tax is capped at 15 percent.   Furthermore, other industries such as private equity firms, venture capital houses, the oil & gas industry, and investment partnerships related to real estate enjoy the advantages of carried interest.  In the course of a year, billions of dollars are shielded from the tax rate that applies to ordinary income.  The subject deserved to lead a column on loopholes.

The next tax treatment to be challenged dealt with penalties charged by the government for wrongdoing, such as the fines big banks paid for their transgressions associated with the recent financial crisis.  Corporations are allowed to deduct fines when paying federal taxes, but individuals can’t.   Admittedly, not all corporations take advantage of that provision—the Government Accounting Office found that in 2005, 14 of the 34 corporations with settlements of over $1 billion elected to not deduct their penalty costs.   But you and I have no option.  We cannot deduct the cost of speeding tickets.

Then the newspaper writer penned  a very short paragraph attacking the tax provision that allows a corporation owning a business aircraft for industrial aid (i.e., no commercial flights such as charter) to depreciate the asset over five years rather than seven years, as would be the case if the same aircraft were flown in some form of commercial service.  The minimum period for depreciating a commercial airliner, for example, is seven years.   The difference in depreciation schedules if closed would be less than $400 million per year—not insignificant but certainly not in the same league as the author’s other example of what he called “Corporate Loopholes to Covet”.

Yet the lone picture illustrating the article was…yes, you guessed correctly, a corporate jet!

Writers assume that any piece of metal called a corporate jet is eligible for favorable tax treatment, including depreciation.  Such is not so.  In general, a business aircraft is subject to the same IRS rules as other capital assets.

To be considered a business expense eligible for depreciation, an aircraft (just like other items of capital equipment) must be ordinary, necessary and helpful to the business.  The use of the asset must be a common and accepted practice, and the expenses claimed must be reasonable.    Owning an aircraft solely for personal use—dashing off to the Hamptons, for example—does not entitle the owner to depreciate the asset or deduct expenses.  Corporations that allow non-business (i.e., personal) use of the company aircraft must follow IRS rules imputing the value of the travel to the beneficiary’s personal tax return, and personal use hours cannot be included the corporation’s calculation of operating expenses.  There is no bright line, however, that separates when too much personal use deems the aircraft ineligible for tax treatment as a corporate asset.  But the IRS is diligent in disallowing claims that an aircraft is a business tool when its use is primarily personal.

A case can be made that our nation’s tax laws need examination, but corporate aircraft should not be the poster child for reform.

Aviators All

Friday, February 7th, 2014

Juliet said to Romeo, “What’s in a name? That which we call a rose by any other name would smell as sweet.” Perhaps those who embrace the vast arena of aviation should follow the advice that William Shakespeare ascribed to the heroine of his tragic tale of two lovers from warring clans. What things are matters, not what we call them.

The aviation community spends far too much effort labeling the various segments of flight: Business Aviation, Military Aviation, Airline Aviation, Private Aviation, Recreational Aviation, Whatever Aviation. All such words relate to the pursuit of flight, regardless of what name we give to the endeavor.

Richard L. Collins, possibly the world’s the most prolific aviation journalist, questioned whether the community focused too heavily on Business Aviation. He encouraged his multitude of readers to grasp the many dimensions of flight and embrace aviation’s benefits. Being an aviator opened a new world of inspiring sights and significant personal accomplishment. Aviation provided unique emotional pleasure as well as effective transportation. He seemed to be saying that flying was worthwhile simply because it was flying.

I believe that Collin’s perception that love of flight is the basis for being a pilot is valid. Very few, if any, individuals become professional pilots because their parents forced them into some form of Business or Airline Aviation. Becoming a military aviator requires more than a decade of training and typically results in the individual remaining in the service for 20 or more years. Who would embark on such a path other than those who found flying fulfilling? A career as an airline pilot requires a similar long-term commitment, often marked by many years of relatively low pay and challenging working conditions as the cost of obtaining seniority. Experienced aviators who fly for a living say that an early passion for flight motivated them to build time and strive for stature within aviation.

Obviously the high cost of aviation drives the focus on Business Aviation. Gaining experience without being engaged in some form of commercial aviation is far too expensive for even the affluent to purchase. Thus the would-be professional aviator often turns to flight instruction or possibly utility aviation, perhaps followed by charter flying—all aspects of flight that fall within the general category of business. If truly fortunate, the aspiring professional might find employment with a corporate flight department with a mentoring program, although most corporations demand considerable experience before adding personnel to their flight staff.

For many aviators, however, Business Aviation is a means to an end, not the sole reason for engaging in flight. Consider the pilots you know. In our area, at least three highly successful physicians fly aircraft typically identified with Business Aviation—two each operate Beechcraft King Air C90s and one flies a Cessna CJ 1. The Citation operator covers his responsibilities at a network of clinics, flying single-pilot. One of the King Air operators retired from his medical practice and captains his Beechcraft in charter services. The other King Air pilot flies for personal business and holds an ATP certificate. Each of these highly accomplished professionals embraced what we think of a Business Aviation while engaged in non-aviation careers.

The challenge and joy of aviation link all aviators, regardless of what we name their activities. Also, gravity does not differentiate among those who venture aloft. All who fly are aviators. Let all who fly join each other in advocating the benefits of aviation as an enabling technology for economic development and enhanced quality of life.

The Dream Delayed

Tuesday, January 14th, 2014

Winston Groom, author of Forrest Gump as well as many other best sellers, released last year a factual account of three famous pilots; Eddie Rickenbacker, Jimmy Doolittle and Charles Lindbergh.  Titled The Aviators, Groom’s book is a fascinating read, especially for those of us who enjoy flight and participate in the adventure of being aloft.  As well as most of us know the stories of those famous flyers, there is more to learn and much to admire.  I am impresses by the discipline exhibited by each of Groom’s subjects.  Each believed strongly in the value of aviation and the role this form of transportation would play in the development of our nation.

While Groom offers many interesting vignettes of those three famous men, one involving Eddie Rickenbacker in particular resonated with me.  Emerging from World War I as the leading US “ace” with 26 enemy aircraft downed, he continued in aviation and eventually became an unstoppable force within the emerging airline industry as long-time head of Eastern Airlines.  Rickenbacker was too old to be a military aviator when the US entered WWI, however.  He obtained his chance to fly through the intervention of aviation pioneer Colonel (soon to be General) Billy Mitchell, the officer Eddie served as an enlisted man assigned to be Mitchell’s personal driver during the initial US efforts in war.  Those who wish to fly do not take no for an answer.

The initial exploits of Rickenbacker, Doolittle and Lindbergh took place during a dozen or so years when the world seemed fascinated with flight.  Prior to Lindbergh’s New York to Paris nonstop crossing of the Atlantic in 1927, the public looked on aviation as the stuff of thrill seekers and daredevils—fun to watch, but of little practical value.   Post Lindbergh’s historic feat, the public’s attitude transitioned from awed observer to anxious participant.  People wanted to be pilots, and the press wrote about airplanes becoming almost commonplace.  Everyone, it seemed, wanted to fly.

In the 1930s, reality and the Great Depression combined to inhibit the dream of everyman becoming a pilot. Post World War II, when thousands of servicemen returned home with belief in the importance of air power, the dream of a robust private aviation movement was renewed.   During the first two years following WWII, well over 30,000 light aircraft were produced.  By 1950, the production of small GA aircraft was down to a few thousand, and they were not selling.

Realizing the dream—and the potential—of private flying is still within our grasp.  Being able to fly from A to B in a straight line and at two to four times the speed of today’s automobiles is a capability of great value, whether the trip is for business or pleasure.  As a community of private aviators, however, we need to address the factors that prevent the dream from being a reality.

Costs will come down only if the number of people participating in General Aviation increases.  Even the most basic automobile would cost considerably more than a new Bonanza if they were sold to as few people as purchase light aircraft today. 

Learning to fly can be made simpler and more effective through innovative use of simulators and computerized training aids.   Perhaps talented organizers can apply their insights to create club programs were costs can be shared and participants can enjoy the comradeship of likeminded aviators.

Through training that provides competence and justifiable confidence, private pilots can use GA aircraft safely and efficiently for personal business and pleasure.  Pioneers such as those described in The Aviators demonstrated the value of believing in the value of aviation and living their convictions.

Winning the Common Battle

Wednesday, November 6th, 2013

Aviators have many things in common. We all deal with the unrelenting force of gravity, no matter what we fly or why we engage in the technology of flight. When we enter the airspace, the elements of wind, moisture and density treat us the same. Whether motivated to go aloft by pleasure or profit, we all need the proficiency to win our battle over the forces of nature.

Business Aviation garners much attention these days as the scheduled airlines engage in a practice they call capacity discipline, which is designed to increase airline load-factors and profitability on available flights. Anyone who has booked a trip on scheduled air carriers recognizes that there are fewer choices now compared with several years ago. In the last five to six years, even as the economy has improved, departures from major hub cities have been reduced by nearly nine percent. Secondary and smaller airports with scheduled service have been hit more dramatically, with departures reduced by over 21 percent. Finding seats on flights is difficult without ample lead time, and airliners often are full (if not overbooked). Furthermore, scheduled airlines service can be found only to about one out of every 10 airports in the entire USA. More important to business travelers, convenient schedules are available to approximately 50 hub cities.

Thus it is understandable that Business Aviation—the use of a General Aviation aircraft for business transportation—is starting to grow once again. The National Business Aviation Association (NBAA) just admitted its 10,000 member company, TCB Air, LLC, which serves two manufacturers that jointly own a Beechcraft King Air C90A for the transport of sales, engineering and other Staff to customer sites thought out the country.

Unlike AOPA, NBAA focuses on company membership rather than offering membership status to individuals. It is significant, however, that many of the companies that belong to NBAA have one or more aviation personnel who also belong to AOPA. Fortunately for the entire General Aviation community, AOPA and NBAA have an honorable and successful tradition of working together to assure access to airports and airspace and to guard against unwarranted user fees.

The two associations also have active programs to promote safety. AOPA’s Air Safety Institute provides a wealth of educational materials that are applicable to all aviators, regardless of hours flown or type ratings earned. Embracing the ASI’s pamphlets and seminars is an excellent way to learn and stay current. NBAA’s leadership role in promoting the International Standard-Business Aircraft Operations (IS-BAO) offers a process-management approach to safety that provides insightful direction to everyone who flies. The pleasure pilot can benefit greatly from developing his or her own personal operations manual along the lines promoted by IS-BAO for sophisticated flight departments.

In our quest to fly safely, efficiently and successfully in all aviation endeavors—be the purpose business or pleasure—we are wise to understand the resources of our aviation associations such as AOPA and NBAA. These organizations are our best means of maintaining a friendly relationship with the forces of nature.

IFR Required

Sunday, September 22nd, 2013

Fortunate is the businessmen or women who is certified as a pilot, maintains proficiency in the art and technology of flight, and has access to a General Aviation aircraft. Such capabilities enable access to a world of opportunity unmatched by public transportation.

Scheduled airlines offer transportation to approximately 10 percent of our nation’s public-use airports, but they provide frequent schedules to less than 50 locations across the USA. Furthermore, an airline trend known as “Capacity Discipline”, which is designed to increase passenger load-factors, has exacerbated the lack of transportation to smaller markets and rural America. According to a recent report from MIT’s International Center for Air Transportation, scheduled air carriers reduced departures by 8.8 percent from major hubs and by 21.3 percent from secondary hubs since 2007. Increasingly, scheduled air transportation is not able to satisfy the needs of an active business person in this era of high speed commerce.

Obviously, charter is a viable means for utilizing the benefits of General Aviation for business transportation. But in some cases the options are limited, cost can be high, and it is challenging to select a suitable provider among the nearly 2,500 companies licensed by the federal government to provide on-demand commercial air transportation.

An owner-flown aircraft enables travelers to have the flexibility and control of a private automobile while benefiting from significantly greater travel capabilities. A modest GA aircraft travels about two to three times the speed of a car. Thus the area that a pilot can cover per hour of travel is four to nine times the area reachable by auto. Business calls that might require several days of travel can be completed in one. No need to compress a meeting in order the fit into an airline schedule. GA pilots know well the advantages of controlling their own air travel.

Utilizing the benefits of General Aviation for business travel—the arena known as Business Aviation—requires piloting knowledge and skill sufficient to be safe and proficient with instrument flight procedures. While VFR-only capabilities may be adequate in certain parts of the USA, such as areas where traffic is light and the weather is often severe clear, maintaining business appointments is highly problematic when IFR capability is not available. Furthermore, in many areas of the country (e.g., near the nation’s busier airports) even VFR procedures for transiting Class B and C airspace demand IFR-like proficiency. The non-professional pilot who uses his or her aircraft for business transportation must possess a high degree of knowledge and skill. Such are the requirements for being an active participant in the world of business travel.

To capture fully the many capabilities of a General Aviation aircraft, pursue instrument qualifications and maintain IFR proficiency. The goal is well worth the effort.

Proficiency: A way of life

Wednesday, September 4th, 2013

Some clichés contain solid truths.  Regarding Business Aviation, a saying attributed to Confucius comes to mind:  Choose a job you love, and you will never have to work a day in your life.  Rarely—never might be more accurate—will you find an aviator who flies for a living saying that he or she became a salaried pilot because of family pressures or the expectation to make millions.  They choose aviation out of a passion for the field.  Furthermore, that love of flying most likely began at an early age.

Being a professional pilot is not easy.  Those who pursue that field must pay their dues—intense training, long days laboring in the vineyards (so to speak), selecting areas of operation that often are far removed from home and hearth.  Obtaining the knowledge and skill to be successful in professional aviation is expensive in money and time.  Those sufficiently fortunate to be admitted to a military aviation program commit to a decade or more of service.  Aviators who enter the profession from a civilian track invest considerable funds as well as years of “building time”.   Their commitment is Confucius’ wisdom personified.

Mostly, the professional aviator must develop a proficiency in aeronautical knowledge and skill that is sufficient to deal with the many challenges of flight.  Mastering the latest in technology found in today’s business jet requires in-depth training and understanding.  Possessing the skill to smoothly (and obviously successfully) negotiate an instrument approach at an unfamiliar airfield is the stuff of real-world accomplishment.   Knowledge and skill, maintained at the highest level of currency, are necessary requirements for the professional aviator.

Similarly, a high level of proficiency is required for all who fly.  While the private pilot enjoying the pleasure of flying a Top Cub on a CAVU day requires a different tool box of knowledge and skill than does the captain of a business jet operating internationally, in each case the pilot’s proficiency must be aligned with the flight’s requirements.  All aviators are wise to embrace the professional’s respect for flight and dedication to being prepared.

The “Sunday Pilot” can learn from the “Seasoned Professional”.  The need for relevant proficiency is universal.   The opportunity for professionals to serve as aeronautical role models is real and fulfilling.

Gravity challenges all who fly

Thursday, August 15th, 2013

It is human nature, I suppose, to compartmentalize activities—to classify them as unique while discounting what they have in common.  Perhaps such segregation offers some feeling of being special.   As an example, consider aviation.  We often separate this broadly interconnected field into specific activities:  Airlines, Military, General, Utility, Sport, Ultra-light, and probably others that we have yet to pigeonhole—each with its own attributes and advocates.  The captain of an Airbus 380 ranks higher on aviation’s food chain than the charter pilot carrying passengers in a Piper Navajo.  The professional aviator somehow has more of what Tom Wolfe called “The Right Stuff” than someone who flies for pleasure.

When broaching the subject of trends within today’s aviation community, a respected colleague commented that he notes signs of separatism among different aviation groups.  If you were not operating heavy iron, he observed, some in aviation argued that you were not really in the realm of Business Aviation.  Others say, he continued, that the minimum entry requirement for the BA club was at least a twin turboprop, and aviators who flew for sport argued they had little in common with those who flew for a living.

I trust such segregating attitudes are not commonplace, and if they are we can change them before our community is hurt.  Aviators share a special respect for the privilege of flight.  The omnipresent force of gravity treats all objects equally, and countering its force requires knowledge, skill and great attention to detail.  Each aircraft presents its own challenges.   Such is the universality of aviation, and all who go aloft as pilot in command share that ethos.

Reflecting the universality of flight, Business Aviation is simply using a general aviation aircraft for business transportation.  It is not a function of the aircraft’s size or performance.  Thus, in my opinion, the owner pilot who is able to use his single-engine Cessna to cover his sales territory is a much of a business aviator as the captain of a G-650 flying to Asia.  Obviously their book of knowledge is different—it must be—but their use of aviation is similar.  And their need to be proficient also is similar.  Regardless of what we fly, we have an obligation to our family, our passengers, and ourselves to be safe and fly proficiently.

I think a separatist attitude toward aviation limits the vast opportunity that being an aviator offers.   Rather, we should look for what is common among all form of aviation and celebrate the universality of what it means to be an aviator.  As aviators engaged in an endeavor we know to have great value, we should share our knowledge and love of flight with others who fly.