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Business Travel RUNWAY TO SUCCESS
Passing The Buck: Expensing Biz Travel
Expensing business travel is one of those areas where the world seems to frown on general aviation travel. After all, if a client reimburses your travel expenses, they will likely pay all but a first-class airline ticket with no questions asked. But if you try to get reimbursed for flying your own airplane to a meeting, you’re seen as some kind of jet-setter bent on burning through their cash.
You can avoid conflict and keep everyone happy with some prudent planning and a few simple steps.
The FARs state, “A private pilot may, for compensation or hire, act as pilot in command of an aircraft in connection with any business or employment if: (1) The flight is only incidental to that business or employment; and (2) The aircraft does not carry passengers or property for compensation or hire."
In most cases, unless you are being hired for your piloting skills, the flight is incidental to the business purpose of the trip. Also, if you are carrying co-workers or clients to the meeting, you are not carrying them “for hire,” so you’re OK on that front. So how do you figure out how much to charge? If you rent an airplane, you have a fixed hourly rate that you are charged for the airplane, and you can simply pass that rate along to the client. If you are an aircraft owner, it may be best to set up a separate corporate or limited liability partnership to own and operate the airplane, then pay the corporation a fixed hourly fee for each hour of use.
With either approach, you’ll wind up with an invoice at the end of the trip that you can submit to the client as proof of the expense.
One sticky question that sometimes crops up is determining what is a fair amount to charge the client. It may be difficult to justify a $1,000 aircraft rental fee when flying to a location that is served by a $69 each way low-fair carrier. Clients who agree to pay “all travel and related costs” may balk at a $2,500 invoice for your aircraft cost, hotel rooms for your team during a week-long snow-storm, and other “related costs.”
The simplest approach is to get an agreement with the client up front. You can simply state in your contracts that you will travel by general aviation airplane at a specific hourly rate, or other such acceptable means of travel.
This may require a bit of salesmanship up-front, but it can eliminate confusion later on. It’s worth pointing out, for example, that flying your own aircraft means you’re better able to travel on a moment’s notice without incurring huge last-minute air fare charges, or dealing with airline schedules.
But don’t over-sell it. There will be times when GA travel is more costly or time-consuming than airline travel, and you’ll need to have a plan for dealing with that situation in a way that both you and your client feel is fair.
One approach is to establish airline-based travel fee for the trip at the time the trip was planned, and charge the client that fee or your general aviation travel fee, whichever is lower. You may not always cover the full cost of the trip, but at least your clients will feel that they’re being treated fairly, while you enjoy the benefits of flying yourself.
Because in the end, when you travel for business, business is the operative word. And keeping clients happy is the key to every successful business.
—Sean Fulton
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