Sep 11, 2017|
Alan Levin (Bloomberg, Private Jets & Taxes) by The Financial Exchange
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
You'll learn something new every day football champions and CEOs the light side step taxes. With private jets were joined by Alan Levin from Bloomberg to talk about the story he wrote it was posted actually last week I don't today Allen. Good good so power commercial air passengers. Subsidizing. Private jet travel. Was so unlike most countries around the world which larger user C. For flying. The US has a patchwork of different taxes. And a private plane only pays for the fuel tax. And we did a little. Model. Ten. Different types of flights ranging from cross country too little short hops. In it turns out to. That that. Fuel tax alone only amounts to about seven. Percent of war time. Typical airliner would pay almost equivalent routes. So let's use in his example. On flying American Airlines reverse it to Los Angeles verses. Taking a private jet to Los Angeles the private jets gonna have a lot less. To air attacks it is is that we caught an air attack to a kind of tax to call. With a short answer is yes so an airliner is subject to read different types of taxes one is an excise tax on the Costa ticket. Than there's surtax of about. I think it's 425. Ford post when it five cents per passenger. And then there's some small. Fuel tax it's much less than the business jet tax. It and so. Wrote a cross country route like that obviously there's a lot of variables to how many passengers are on board the flight and all that. But. We visited my model well it looks like. Typical cross country flight would pay about you know. Three to 5000 dollars. In and I say the flight paying but eventually the passengers. Pitting the vast majority of that money. Whereas Oakland. I'm sorry it's those three to 5000 on a jetliner. And how much is it in a private plane. Now that very much depends on the type a private plane mutate bugged. If you take one of the highest. And part that jets we looked at album party eight global expelled which actually capable of flying to Europe and many long distance locations. That that would. Yield about 500 dollars. But you know if you took a smaller jet and were stopped at refueled and Denver something like that you know would probably be the range of 20400. Dollars. So beauty could end and and some of the routes where we have really small fuel efficient private jets in the model. It was as little as you know to work 3% of what. What are the big ones play you pay like FedEx and UPS and they considered private jets are today painful vote on taxes. You know I did not look at the cargo appears because they have a different tacks on the cargo on board. But they still end up paying for more than the present check out. So how does this work in other countries like Canada president trump earlier this year referenced the Canadian system for air traffic control. And and airline regulation how does that work up there. Well that's very interesting question I think looking at that explains why we have such a bitter battle at the moment over whether to. Put peace federal aviation administration's air traffic division into the hands of a private corporation. Because that's what you have in Canada it's a nonprofit corporation. In the charging users see. If it's. Based on weight. So private jet would pay. Be between 13 and one half of what typical jetliner would pay. And and that's probably fair you know because they fly into airports that are less busy it require less air traffic infrastructure. But. That difference is fugitive between here where it's ten or fifteen to one there it's. To the water may be freed on. And the other point that's we're making is if you look what a typical airliner pays fair. It's a half for less than half. In terms of the CD compared to what the seas are. On an airliner in the US and so that's I think it helps explain why the airlines are so adamantly in favor of going to a private system. And right now who is bill Shuster and how did he kill it changes to this system that might have happened this year because the president. I remember late as yesterday he was talking about this he wanted to change this in 2017. We'll see interest are still on the same page in the sense that they both want a an air traffic system run by a private nonprofit corporations and they believe that'll help would they air traffic innovation and and allow them to system to be more fleet footed it's better. Put. For years. Serious. People dating back to the Clinton administration have been trying to do that go to such a scheme and it's. Always been blocked by the credit aviation floppy. Bill Shuster. He's chairman of the house transportation and infrastructure committee. He floated this idea of starting about two years ago. He hasn't been able to get any traction at least a full. Quote in the house yet. But he's he's decided that he would exempt the private aviation industry for many text changes. In an attempt to. And help get some of their support. And now extremely it has not paid. The price that the aviation. World is just as adamantly opposed it was before. Right Allan thank you very much for your time we appreciate. Oh Michael Allen eleven from Bloomberg. But he does feel about a year like Tom Brady in the boys who think they should be thing painful freight in terms of their taxes because that was the example. The patriots have their own jet now. Yeah eight and in clearly what you see. Is that the average commercial flight as we just discussed pays in. Awful lot more to deny her pregnancy in terms trying to maintain the system because that's how the FAA's funding effectively. And so the problem you get is that again these new high performance private aircraft make up 10% of the overall flight patterns in the US. They only pay about point 7% of the revenues than they're clearly not paying in accordance with what they're using. So I do think it's something that needs to be looked at but obviously. In some of these cases these private business jets. They are servicing areas of the country. That are not covered by the major carriers are you talk but some of the smaller flights that are out there. And the question is how do you differentiate between someone flying a small Cessna and some appliance you know a gulfstream.