Category: Aircraft Business

Aviation Business News – A View From The 2012 FATA Conference

Aviation Business News
A report from the 2012 FATA Conference

For those looking to keep up on Florida’s aviation business news, one of the best events of the year was the 2012 Florida Aircraft Trades Association (FATA) annual conference.  This three day event included aviation business news, recent developments in aircraft sales tax laws, aviation industry outlooks and, of course, golf, dinner and drinks!

Of the many excellent presentations one of my favorites was the “manufacturers’ panel”.  Leaders from Gulfstream, Piper, Cessna, and Embraer talked a little about the state of the aircraft industry and recent sales data.

Dustin Cordier, Regional Vice President for Cessna Aircraft Company, was pleased that in addition to sales of new aircraft being up slightly from last year there is also a robust market in the used aircraft market.  Aircraft between 3 and 10 years old constituted a combined 80% of the near 1000 Cessna transactions that occurred in Q1 2012, with an emphasis on the North American market.

Steve Cass of Gulfstream reported that sales of their largest aircraft continue to improve.  Simon Caldecott of Vero Beach-based Piper Aircraft expressed “cautious optimism” about the remainder of 2012, encouraged by well-improved numbers from the last few years in Piper’s newer models.  Clint Clouatre of Embraer, the “new kid on the block” confirmed everyone’s recognition of the BRIC countries (Brazil, Russia, India and China) as major markets for general aviation aircraft going forward.

Special thanks to lobbyist Eric Prutsman, who worked tirelessly in Tallahassee to bring about positive changes for Florida’s aviation business, such as extending the state “maintenance and repair” aircraft sales tax exemption to aircraft of 2,000 GTOW and smaller, Association President Sandy Showalter for his excellent leadership and consummate skill as the Conference MC, and of course Paula Raeburn, without whom FATA would not be nearly as colorful, effective or fun!

If you’ve never stayed at the Four Seasons Palm Beach, I might add, I absolutely recommend it, and I would also like to thank whatever tech company was there with the same color badges for not throwing me out when I crashed your unbelievable buffet breakfast on the veranda.  Look, it was an accident!

Year End 100% Aircraft Bonus Depreciation

Aircraft Bonus Depreciation
Aircraft bonus depreciation still in sight

From year-end 2011:  “As the holidays approach our thoughts become preoccupied with but one thing: how can I purchase an aircraft and write off 100% of the cost basis in the first year? Well, perhaps not for everyone, but here’s what you need to know: if you purchase an aircraft and place it in service by December 31, 2011 you will qualify for the 100% bonus provision provided you meet all of the other requirements. This is a considerable benefit under any circumstances.

If this is NOT possible, however, and you must place your aircraft in service next year, you are probably still better off than you would have been had you “only” been able to take the 50% bonus. This is because assets placed in service in the fourth quarter of the year do not receive the full first-year depreciation allowance. Your bonus allowance reverts back to 50% for assets placed in service in 2012. By waiting until early next year, you still receive this benefit, but are now able to take the full year MACRS depreciation allowance. In other words, unless the value of your depreciation allowance is considerably greater than it will be next year, you’re better off taking your time and making sure you have done your tax planning carefully, not only at the federal but also at the state – sales tax – level.”

Update 2012:  The good news:  100% bonus depreciation is still with us on qualified aircraft purchases through the end of this year.  What’s “qualified”?  There are several factors, including that you purchase a new (or substantially rebuilt) aircraft, and that you take delivery and place it in service before the end of the year.

The bad news:  This might not be around forever, which as bad news goes is pretty acceptable in my book.

The Jet Market: By The Numbers

The following September data comes from Chase Equipment Finance:

September Overview:
o Approaching crunch time for 2012 delivery outlook
• Order activity for the remainder of the year, particularly Q4, will be critical for determining whether next year’s deliveries will meet estimates
• Analysts forecast a 20% increase off the bottom in 2012, but this will require a pickup in demand that has been slow in coming and confined to the larger segment of the market
o Used market trends flipped in August
• Last month saw higher prices and higher inventories, the opposite of what has been observed for most of the year
• The increase in prices is a positive sign and the bump up of used inventories may be a reflection of broader economic weakness, but one data point is not enough to determine that the trends are changing
o Used jet inventories increased by 20 bps
• Inventories for sale as a percentage of the active fleet increased to 10.5% in August
• By category, Heavy (+0.3%), Medium (+0.1%) and Light (+0.2%) jet inventories were all up from the prior month
o Average asking price increased 0.2%
• Average price rose to $10.64MM in August, and is down 6.4% y/y
• Heavy jet prices decreased 0.3%, while Medium and Light jet prices increased 1.1% and 1.6%, respectively