Tax Aerobatics Involved In First 777 Delivery Boeing Already Working On A Second Version Of Its Newest Jumbo Commercial Jet
Delivering a new jet to its owner involves more than just handing over the keys and signing papers.
Before The Boeing Co. formally turns over United Airlines’ first 777 twinjet Wednesday, the airplane will take a few short trips to prove it will be used internationally. And the jet must return to the United States with evidence it will make money for its owner.
The sale to UAL Corp., United’s parent company, closed Monday when UAL made its final payment for the jet and Boeing turned over title to the plane.
Then the jumbo jet nimbly started maneuvering through some tax loopholes.
The widebody was flown by United to Portland and then to Vancouver, B.C., where it was to be parked for about 12 hours.
The Vancouver touchdown was to satisfy requirements of tax laws that will qualify the airplane as an export product. Designed as an incentive to help U.S. manufacturers sell products for use outside the United States, the tax code requires proof that the item - in this case, the jet - will be used internationally.
The special status gives the buyer a chance to get better financing, experts say, though no one would reveal details of the Boeing-United deal.
The flight back to the United States must be revenue-bearing so the airplane may carry something as mundane as a bag of mail or even a loaf of bread, insiders say.
Such circuitous, tax-induced delivery routes are not unusual in the aviation industry.
Delivery location and tax benefits vary depending on use of the airplane and financing. Jet deliveries reportedly have been completed over the Pacific Ocean, with pilots changing seats in flight as papers are signed, and some are completed in Nevada where state taxes are lower.
The 777 will return from Vancouver to Paine Field in Everett early today for demonstrations and crew training, and then fly back to Boeing Field in late afternoon.
After the formal delivery Wednesday, United will fly the 777 to Los Angeles to show it off to UAL Corp. shareholders at their annual meeting Thursday.
United will inaugurate 777 service June 7 with flights aboard three airplanes - from London to Washington, D.C.; Chicago to Frankfurt; and Denver to Washington, D.C., and Chicago.
Meanwhile, the company already is working on a “B” model of the $125 million jetliner that will fly nearly 7,000 miles nonstop with 305 passengers, as compared with the first model that flies 4,500 miles with up to 375 passengers, a Boeing spokeswoman said Monday.
Boeing says it also is looking at a shorter version of the 777 with about 50 fewer seats than the one being delivered this week. It would fly up to 8,000 miles nonstop for long routes such as New York to Tokyo and would appeal to Asian carriers with routes across the Pacific.
Boeing also has considered a stretch version of the 777 that would carry more passengers shorter distances as a way to enlarge a “family” of 777s. It is less costly to build a variation of an airplane than to develop an all-new airplane - about $1 billion for a different version of the 777 vs. about $5 billion for the new 777.
“We’re looking at different concepts to see what airlines want,” said Donna Mikov, Boeing 777 spokeswoman.
Boeing’s European competitor, Airbus Industrie, also is considering a smaller version of its competing A340 to carry about 265 passengers up to 7,450 miles, The Wall Street Journal reported Monday.