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Tue, Feb 24, 2009

Economic Stimulus Tax Incentive Draws Mixed Reviews

Most Feel The Tax Plan Will Help, But Will It Be Enough?

President Obama's recent signing of the economic stimulus bill incorporating a tax incentive for purchases of new aircraft during 2009 has received a somewhat mixed bag of reactions from congressmen, pundits, and the aviation industry itself.

With his state reeling with the recent layoffs of thousands of workers from Cessna and Hawker Beechcraft, Representative Todd Tiahrt (R-Kansas) lauded the incentive. "This is exactly the type of financial incentive that should be included in a stimulus bill," he said. "It's not a silver bullet as a stand-alone effort. (But) this will certainly be helpful. This will sell aircraft that we wouldn't have sold before."

Aviation consultant Richard Aboulafia of the Teal Group in Fairfax, VA, was not so optimistic, suggesting that although the industry needs help, he doubted whether it's the right kind of help. "People and companies buy jets when they need new planes and feel good about the economy," he said. "If they don't feel good about things, a tax break isn't going to help."

Ed Bolen, CEO of the National Business Aviation Association, feels that the President's accelerated depreciation tax plan will be an effective stimulus. Bolen said, "It's trying to give you a reason to act now, rather than sit on the sidelines for the next two years," waiting until economic conditions take their forecasted upturn.

Cessna spokesman Doug Oliver, preferring Obama's plan to cutting prices to increase sales, said, "It is a big deal. Planemakers don't like to discount pricing because it cheapens the value of planes they already sold. You are not going to see deep discounting on business jets, but we still negotiate with customers."

Piper Aircraft spokesman Mark Miller said the tax plan of accelerated depreciation of aircraft "is promising," but sales would also be helped if banks were willing to lend more for aircraft purchases. Some institutions are requiring down payments of up to 20 to 30 percent for new aircraft loans, the Associated Press said.

Miller said that a down payment that large puts new aircraft purchases out of reach for many prospective buyers. "Our customers are small business owners and professionals like lawyers. They're recession-resistant, but they're not recession-proof."

FMI: www.cessna.com, www.hawkerbeechcraft.com, www.piper.com

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