Donald Trump in 1987, flying his Puma helicopter from NYC to Atlantic City.
Some in the private jet industry are running with their hair on fire lamenting how Trump’s proposed 25 percent tariff will spell the end of the US aerospace industry. We’ll let them get on with it since they’re fun to watch, but there’s a glass-half-full story to share with everyone else.
For starters, there will be less “I’m going to end the private jet tax cut” rhetoric as read off the teleprompter by the last Commander-in-Chief. Trump has been an active user of business aviation, both airplanes and helicopters, long before his political career. He and others in his circle already understand the benefits in terms of time savings, improved productivity and safety.
On the subject of taxes, shortly after this speech the IRS began IRS tax audits of business jet owners. Some saw it as searching for low-hanging fruit, as the cost of operating an aircraft and the subsequent tax write-off can be high.
Still, others saw it as arming another government agency in response to the Inflation Reduction Act of 2022, the largest piece of climate legislation in US history. Examples of funding included reducing carbon emissions (think business jets) and making big corporations and the ultra-wealthy “pay their fair share.” Whatever the case, there will be a reassessment of IRS audits of aircraft owners after Trump takes office.
Other tax-related situations should get a second look. Bonus depreciation tax deductions, for example, have been steadily reduced each year from what had been 100 percent. With a new administration, the hope of getting back to 100% is at least on the table. Likewise, the current proposal to increase business aviation fuel taxes by a whopping factor of five could be reconsidered.
With the US expected to withdraw from the Paris Agreement, climate activism will slow down. A potential bizav benefit will be fewer protesters painting business jets orange and sticking to their wings, and fewer ESG shareholder activists calling for a ban on private aviation.
The new heads of the FAA and Secretary of Transportation supported by the new administration would also be a plus for the industry. Additionally, changes to current government hiring practices will provide a larger and more qualified candidate pool to reduce labor shortages, such as air traffic controllers.
Back to fees. Our excitable friends would indeed be right that a theoretical tariff of 25 per cent would have an adverse effect on business aviation. But what these gullible pundits don’t realize is that Trump’s negotiating style is to start with a high number to extract maximum leverage. Because he says that 25 percent, or that Greenland, Canada, and the Panama Canal will become part of the US, it’s just an attention grabber to set the stage for future negotiations.
In addition, it would not allow General Dynamics’ Gulfstream to be charged with increased tariff costs for using UK-based Rolls-Royce engines, or Cessna Textron and other US aircraft manufacturers that use Pratt & Whitney Canada. This would not be in the spirit of putting America first to keep American business aircraft manufacturers competitive.
As such, high-value foreign engines and other critical content will almost certainly be exempt from fees or significantly discounted. Similarly, financially strapped Boeing will never be expected to pay more for its aircraft parts built by its partners around the world.
The National Business Aviation Association (NBAA) states that “business aviation accounts for more than 1.2 million manufacturing and service jobs in the United States. It is part of an overall aviation industry that contributes more than $150 billion to our economy each year and contributes positively to our nation’s trade balance.” With this in mind, it would be counterintuitive to believe that it would be deliberately weakened by excessive fees.
Overall, it is believed that the new administration will be more friendly to business aviation, bringing with it the possibility of an improved business environment. Fees will not be one size fits all and there will be strategic exemptions and discounts once the dust has settled.
For those still running with their hair on fire over fees, maybe it’s time to stop, drop and roll over.
