Upgrade or Replace Your Aircraft. Now.

At the recent NBAA I was taking a very informal poll. The question was (a) Double-dip recession or (b) Really sluggish recovery. Most folks opted for (b), including me. Even most market analysts and economists agree that we are very slowly climbing into a recovery. The aviation economy is still very sluggish.

The slow activity in business aviation leaves plenty of opportunity for those of you looking to upgrade your current aircraft or acquire a new one. Here are four reasons to consider the move right now.

Reason #1

Prices of used aircraft are still competitive in favor of the buyer. Aircraft values have bottomed out for much of the business aircraft market. There are a number of good aircraft to choose from. If you are considering upgrading to a more capable aircraft, do it now. 

The manufacturers still have aircraft to sell. Not every model is available new for “immediate delivery,” but delivery times are as short a ever. This is true for the mid-size and smaller jets, turboprops and pistons. It looks like the big cabin market is continuing its improvement.  Big cabin jets seem to be a leading indicator of a recovery.

Reason #2

Upcoming aircraft models in development are mostly set for the next four to six years. Look at the lead times for brand new designs, take into account the weak order books for most of the business aircraft industry and there is not much cash left over to finance a complete new design. Today's designs offer a number of outstanding aircraft. Unless you are waiting for the super-long-range-global business jets from Bombardier and Gulfstream, there is “something for everyone” out there right now.

Don’t forget with the end of the year comes the push by all the manufacturers to close out 2011 with strong deliveries. There may be a white-tail or two available!

Reason #3

If your upgrade path is with the aircraft that you currently have, once again, now is the time to act. The Maintenance, Repair and Overhaul (MRO) facilities have had some tough economic times. Their schedules are not as tightly booked as a three years ago. Depending on the upgrade, you may be able to negotiate good pricing and favorable delivery schedules. Paint and interior upgrades, and avionics enhancements to current production model standards are some good bets right now. Performance enhancements that can save fuel are worth looking at, too. Engine upgrades may be worth the expense if you are at or near engine overhaul with your current engines. A lot of MRO's may be offering deals. See what they offer, get references and go with quality upgrades that have value for your operation.

Reason #4 - 100% Bonus Depreciation

Important Note: The following information in not tax advice. Consult with your accountant or certified tax advisor to see if your situation qualifies for the 100% Bonus Depreciation allowance.

From the Economic Stimulus Incentives in 2010 & 2011 Tax Relief Act: Businesses that acquire and place qualified property into service after Sept. 8, 2010 can claim a depreciation allowance of 100 percent of the cost of the property. The property must be placed in service before Jan. 1, 2012 (Jan. 14, 2013 in the case of certain longer-lived and transportation property). 

New aircraft purchases and new equipment purchases for used aircraft can be expensed in the year of purchase through December 31, 2011. To qualify, the property must be new, used primarily for business purposes, and meet other tests necessary to qualify for Modified Accelerated Cost Recovery System depreciation (MACRS) for the entire time the owner has the aircraft. The 100% Bonus Depreciation is not limited in amount. 

Whether upgrading to a newer, more capable aircraft, or upgrading the capability of the one you already have, now is a good time to evaluate your available options. Do your homework and plan to take advantage of today's market conditions.