There is no question that Ken Gray flies his 2008 Cessna Citation twin turbofan engine jet for business.
After all, he is the CEO of CAMP Systems International, a Merrimack software company recently acquired by Hearst Publishing, which provides maintenance and inventory monitoring and flight scheduling to thousands of aircraft owners. So he travels mostly to small general aviation airports, much like where he is based: Nashua Airport.
It would take him all day to fly commercial to a place like, Wichita, Kan., where he would probably be routed through Dallas. But on his six-seater, he can soar above those commercial airlines at 480 miles per hour straight and arrive in three hours, hold a meeting along the way, laptops plugged in, coffee brewing nearby.
Still, there is no denying it. It’s also nice to use it to fly nonstop to Florida to vacation with the family.
“You could leave after breakfast and get there by lunch. No lines, no security. A private jet is a very good business tool, but it’s a very nice personal luxury too,” he said.
So it’s worth it to Gray, even if the aircraft cost him millions of dollars to purchase, hundreds of thousands of dollars a year to fly and tens of thousands of dollars in registration fees to just sit on the ground in New Hampshire, which is now one of the most expensive places in the region to base a jet.
In fact, when it comes to attracting new high-end corporate jets, the state of New Hampshire is now at a clear disadvantage. An attempt to change that reality has stalled in mid-flight and may be blown off course by turbulence coming from competing interests — those representing the corporate jet owners, hobbyist flyers and those looking out for the interest of the airports themselves, particularly the smaller ones.
And although this issue is flying under the radar, aviation is a big deal in rural New Hampshire.
Massachusetts’ move
There are more than 1,600 aircraft based in New Hampshire, according to the Federal Aviation Administration’s database, more per capita than any surrounding state, though Maine is pretty close.
And while most of these aircraft are a far cry from the aforementioned corporate jets — small propeller planes, drones or hot air balloons — they do contribute to the economy.
General aviation — that means everything but commercial airlines and military aircraft — contributed at least $100 million to the state’s economy in 2013, generating 776 jobs, according to the 2015 State Airport System Plan released by the NH Department of Transportation’s Bureau of Aeronautics. That doesn’t include the three primary airports offering commercial airline service — Manchester, Pease and West Lebanon, which contribute $1 billion, even though they offer general aviation as well, indeed a large chunk of it.
The prevalence of aviation in New Hampshire should come as no surprise.
The Granite State, without a personal income tax, ranks as among the best places for highly paid executives to call home. Until a decade ago, it was also the best place to park his jet. There were low landing fees, fuel taxes and, most importantly, no sales tax. Yes, New Hampshire did have an annual registration fee — six mills for new aircraft, which was reduced a mill a year until the owner of a seven-year-old jet was only paying $63, plus a penny per pound. Still, that was nothing compared to Massachusetts’ 6.25 percent sales tax, which was 10 times the registration fee.
But about a decade ago, Massachusetts exempted aircraft from its sales tax. It now costs $300 to base a new corporate jet at Hanscom Field in Bedford, Mass. —even a Gulfstream 550, the ultimate luxury jet, which would cost about $340,000 to hangar in Nashua Airport. Hanscom is 40 minutes by car from Nashua, and less than 10 minutes, as the Gulfstream flies.
As a result, some 72 jets have registered in the last four years at Hanscom, where only four were in Nashua, said Shane McLaughlin, an attorney who represents jet owners. Hanscom hangars now have a waiting list, while Nashua’s is looking for customers.
“Tax-free New Hampshire is in an ironical position,” he said. “Massachusetts, which taxes everything but the air you breath, now exempts aircraft.”
House Bill 124
McLaughlin says he is talking to many high-end clients who are reluctant to speak for themselves, because they value their privacy and often register their jets under corporate names.
Gray’s jet for instance was registered under Mountainview Aviation. Auto mogul and former Balsams partner Dan Dagesse’s 2009 Hawker Beechcraft is owned by D and E Aviation. John Abele, co-founder of Boston Scientific and the richest man in Vermont, is one manager of Independence Aircraft, which owns a 2002 Cessna 560XL.
McLaughlin also has a personal interest in the matter. The Hollis resident, who learned to fly from his father and soloed when he was 16, also followed in the family business, developing and leasing hangars at Nashua. So he brought the issue up to Don Lebrun, a Nashua alderman who is the board’s liaison to the airport and a state representative. Lebrun promptly sponsored House Bill 124 which would eliminate the fee.
“The other states saw our fees and they kept on going lower and lower, so we are losing them [planes] by leaps and bounds to other states,” Lebrun said. “For every aircraft that leaves the state, we lose their hangar fees, maintenance work, rooms and meals. It effects the entire economy.”
The bill flew though the House on a voice vote, but it was grounded in the Ways and Means Committee, which retained the bill on March 16. That was primarily because of the concerns voiced by pilots and operators.
The registration fees collected by the state is the only source of operational aid the airports get, at least from New Hampshire. The state does contribute about $1.4 million to some 42 active improvement projects. The federal government picks up 90 percent of the rest of the $33.7 million bill and the state’s share is matched by local airports.
Even when it comes to the registration fee — $1.25 million collected in 2016 — the airports only receive a quarter of what they generate, some $291,000. The rest goes to the general fund, as well as about $250,000 raised through the jet and aviation fuel tax.
And no doubt about it: Many of the state’s 25 airports, particularly 13 small airports that don’t get any federal funding, are struggling. The state used to subsidize them, but that ended around the recession, and unless there is some future funding source, only a few might survive, according to the Airport System Plan.
“A lot of these airports were hit hard,” said Martha Drukker of the Granite State Airport Management Association. “Some of them, with grass runways, need volunteers to mow the lawn. They host 5K races or golf fundraisers just to keep going.”
“We don’t want to hurt the airports,” added Sean Collins, eastern regional manager of government affairs for the Aircraft Owners and Pilots Association. Collins said he understands the state’s need to lower fees, but suggested other possibilities. One is to allow airports to keep a greater amount of the registration or fuel fees. The other would be to raise the fuel tax. The current tax of 2 cents on jet fuel and 4 cents on gasoline is far below Massachusetts’ rates of 8 cents and 24 cents, respectively.
But Drukker said that the fuel tax would amount to a “drop in a bucket” and not make up for losing more than a million dollars in funding.
Collins also suggested it might make sense for the vast majority of aircraft owners on the lower end of the scale to pay a little more, so as not to lose corporate jets, which pay almost all of the fees, he said, though he acknowledged “that might not be such a popular idea with our membership”.
Above: PlaneSense CEO George Antoniadis. PlaneSense operates similar to a timeshare. With double-digit growth in recent years, PlaneSense contributes $27 million to the state’s economy.
Economic impact
There aren’t that many high-end aircraft in New Hampshire. Of the 1,670 aircraft registered in the state, only 60 are above 12,000 pounds, and two of them are helicopters. About half of them are more than 20 years old and one — of 1944 vintage — is owned by Dakota Aviation Museum Inc.
So it is no surprise that in 2015, for instance, 18 aircraft were responsible for about 83 percent of all registered fees, said attorney McLaughlin. Indeed, one aircraft was responsible for 28 percent of the total.
But it’s more than fees, he said. There are pilot salaries, maintenance crews, insurance and hangar fees. The jets are used to fly in clients who spend money.
“They create jobs, they pump life into the economy,” he said.
It isn’t just corporations, executives or millionaires who are owners of the aircraft. They’re also owned by charter jet companies that rent out their planes and, more prominently, PlaneSense, a fractional share company that houses 24 turboprops and a handful of small jets at Pease.
PlaneSense is like a timeshare in the air, allowing customers to buy a part of a new plane — a minimum cut of $342,000 for an aircraft worth about $5 million — plus a monthly management fee and an hourly rate when you fly.
If you add it all together, including depreciation, it all comes out to about $3,000 an hour. (The cost is different for a jet, which can be as much as $11 million).
That, when it comes to the business traveler trying to avoid the hassles of either ownership or commercial air travel is “a responsible choice,” in the words of CEO George Antoniadis.
Apparently, it’s one that is becoming increasing desirable. Antoniadis said that PlaneSense has experienced double-digit growth in the past few years and now contributes $27 million to the state’s economy alone, including about a fifth of the $1.25 million in registration fees paid to the state last year.
“We want to be a good player in New Hampshire, and we are a good player. Damn good player, I would say,” he added.
Antoniadis is not about to skip over the border because of fees, but he would devote more resources in the state without it, he said. Besides, he thinks the fees are unfair. His customers expect a new aircraft, so he pays the “quasi-sales tax” for six years on a plane that he unloads in 10. The tax has a perverse incentive of discouraging the purchase of new, more efficient equipment, he said.
“Why don’t you pass a TV tax?” said Antoniadis. “That would result in a revolution in New Hampshire, so tax aviation then.”
The fuel tax, he said, at least has the benefit of prioritizing fuel efficacies but he is against increasing fees on smaller planes.
“We are a community in aviation,” he said. “There are fewer pilots as it is.”
Where the fees go
That is a position echoed by David DeVries, president of the NH Pilots Association. There are 420 private pilots in his group, and the whole registration fee issue is a “sticky wicket”
On the one hand, he said, “my position is that what is good for the jets is good for everybody.” On the other hand, “we are not looking to raise our rates on the little guys,” particularly since it won’t make that much of a difference.
He might also favor increasing the fuel tax (particularly on jet fuel), but that won’t make much of a difference either. Rather, he would prefer that airports be allowed to keep more of the registration fees they generate, and spread them out more, since lowering registration fees for the larger, pricier jets would benefit the larger airports that can accommodate them.
Since the fees would go back from where they came, 97 percent would go to five airports: Manchester, Nashua, Keene, Laconia and Pease, said Tricia L. Schoeneck Lambert, administrator of the Bureau of Aeronautics.
On the Seacoast, for example, in the last fiscal year, Pease received $123,500 in registration fees, about 5 percent of the airport’s $2.5 million budget, said Paul Brean, Pease’s airport director. Skyhaven, in Rochester, collected $229, or about one-tenth of a percent of its $175,000 budget.
This seems to indicates that the small airports really don’t have much to lose if the fee goes away, but a lot to gain if they get a larger piece of a smaller pie.
Finally, there is the question of whether the fee would actually drive anyone to base their plane elsewhere. Part of the reason you want to own your own plane is convenience, so you want to live near where it’s based, said Ken Gray of CAMP Systems.
“And I wouldn’t want to live in Massachusetts,” he said.
But he noted others might not be very loyal. Charging that much up front, and so little later on, “is very punitive. It’s like chasing them out of the state before they get started here.”
Indeed, Gray would favor spreading the fee out more, so older planes would pay more, even if that it meant he would pay more himself.
“It is just less regressive,” he said.
Original article can be found here: http://www.nhbr.com
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