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"Massachusetts airport businesses prepared for takeoff"

Sunday, March 24, 2002

Airport businesses prepared for takeoff
By Andi Esposito
The Worcester (MA) Telegram & Gazette

     In a corner of the aging, cavernous Hangar 2 at Worcester Regional
Airport, three aircraft are being repaired or inspected, work that can cost
thousands of dollars or more if owners replace parts and upgrade equipment.

     Paul G. West, owner and president of Horizon Air Services LLC, a
2-year-old aircraft maintenance and sales company that leases space in
Hangar 2, said annual inspections are the bulk of his work.

     They cost $1,500 to $4,000 for a small single-engine aircraft.

     "If something like an alternator or carburetor has to be replaced, it
can go up," he said. A major upgrade in a small plane, such as an engine
rebuild, can cost $12,000 to $40,000, said Mr. West.

     But shops like Horizon Air Services and Mr. West's neighbor, The Radio
Shop Inc., haven't always been able to snag such higher-cost work because of
the state's tax laws.

     "Many Massachusetts pilots would give routine work to the local shop,
but when it came time to do the expensive work they would go to Nashua or
Manchester, N.H.," Mr. West said.

     That is expected to change. An exemption to the 5 percent sales and use
tax on aircraft and parts went into effect March 1. The tax was one the
aviation industry said discouraged aircraft owners from buying and basing
planes in Massachusetts and sent those based here winging to more
tax-friendly neighboring states when big-ticket items needed replacement.

     "Now there is no competitive advantage to take the plane out of state
when it comes time to spend significant money," Mr. West said last week.

     The exemption will save average aircraft owners several hundred dollars
a year, he said, with significantly higher savings for air charters and
corporate aircraft.

     Mr. West and Radio Shop owner Conrad P. Wondolowski said they hope to
benefit as aircraft locate or return to Massachusetts, beefing up demand for
aviation services, such as repairs, hangars and fuel, and creating jobs.

     "For me, a lot depends on how I respond to it," said Mr. West, who
intends to market to aircraft owners in Rhode Island and New York, which
have taxes, and to small aircraft owners in Connecticut.

     Sponsored by state Rep. Cele Hahn, R-Westfield, the exemption was
backed by a number of groups, including the Aircraft Owners and Pilots
Association, Associated Industries of Massachusetts and the Massachusetts
Aeronautics Commission. A MAC study found that the state's aviation tax
policy had resulted in "a compelling economic incentive for Massachusetts
aircraft owners and operators to locate or relocate their aircraft to
Connecticut or New Hampshire."

     New Hampshire has no sales tax on aircraft and parts, nor does
Connecticut on aircraft larger than 6,000 pounds. That meant, for example,
that the buyer of a $16.5 million Citation X corporate jet would save
$825,250 in sales tax and $17,000 in parts taxes on a major engine
inspection and overhaul, were the jet bought or overhauled in New Hampshire
or Connecticut instead of Massachusetts, according to the MAC study.

     With a flying time of minutes from the popular business flight
destination at Hanscom Field to Connecticut, "it was convenient for
Massachusetts-based corporations to drop off their CEOs at Hanscom and
hangar and service the aircraft at Bradley," said Wayne C. Kerchner, MAC
general counsel. "A lot of jobs went because facilities here could not

     Chaz Harris, chief pilot and director of operations for K2 Charters,
which bases its Mitsubishi MU-2 turboprop at Worcester airport, said he has
been solicited to move the plane to other states. (Mr. Harris, a Worcester
airport commissioner, declined the invitations.)

     The state tax exemption and a federal tax law change that allows an
additional first year depreciation of 30 percent on aircraft bought after
Sept. 11 "is a definite plus for general aviation and corporate flight
departments," he said.

     There are 925 general aviation aircraft registered in Massachusetts to
businesses, the same as a decade ago, according to MAC. Yet over the same
period, general aviation aircraft shipments grew substantially, peaking in
2000. (Last year, general aviation activity declined nationwide, following
the terrorist attacks that shut down airspace and kept general aviation
aircraft grounded, in some cases for months.)

     The state's 41 MAC-supervised airports, which do not include Logan,
generate $900 million annually in economic activity, including $260 million
in wages and nearly 10,000 jobs. MAC expects the tax exemption will
encourage more aircraft to base in Massachusetts, creating an economic
spinoff that will more than offset lost tax revenue.

     And Mr. Kerchner said early anecdotal evidence from airport businesses
that provide maintenance and hangar services suggest "there are definitely
more aircraft" coming back into the state.

     "It is a great time to recruit businesses and aircraft to the
 airfield," said Eric N. Waldron, director of Worcester Regional Airport.

     Registrations show 61 general aviation aircraft based at Worcester last
year, down from 70 in 2000. But Mr. Waldron said two more business aircraft
have recently decided to base at Worcester, and he is in discussions with an
aviation-related company that, drawn by the tax exemption, may want to
locate at the airport.

     The airport hopes to get a new general aviation tie-down ramp under way
this year, said Mr. Waldron, and he has had talks with several entities
about the potential of constructing more hangar space.

     "Tax relief was a great thing. It has given Massachusetts aviation
interests a chance at a level playing field with our neighbors."

     Because there is a 2007 sunset provision for the exemption, MAC will
closely monitor its economic and revenue impact, soliciting information from
maintenance facilities, fixed-base operators and aircraft dealers, said Mr.
Kerchner. "It is our hope there will be sufficient data to show this has
been a real benefit and has offset any losses so it will be continued."

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