Aircraft purchase

[Guest Crashbait]

Can anyone give me a headsup as to the incurred costs assoc. with buying an aircraft. I'm only a student pilot but would love to get into my own rig someday. Something in the $90-100 000 mark would be the go ( I especially like the new CTMC). Insurance, maintenance, registration, running costs and repayments need to be addressed.

 

Is there much call for hire aircraft (either to FTF's or other rec. pilots) to help cover these costs. Is it feasible that a hire aircraft could earn enough to pay for itself completely if the purchase amount was borrowed over say 5 years?

 

I recall an article in the RA-Aus mag. a while ago that dealt with some of this but can't find the issue. Thanks.

 

 

[FlyingVizsla]

There are lots of variables to getting an aircraft to earn its way. My experience is with GA aircraft. It depends on the level of risk you are willing to take and how much you want to use it yourself. If you have borrowed then you should insure for total replacement value (to cover your borrowings should it be totalled).

 

Lowest risk - hire to a select few experienced pilots.

 

Medium risk - hire to a school for training

 

High risk - place on line for private / casual hire

 

Tricks & Traps:-

 

Considering placing it with a school for training and private hire - there may be an agreement with the school giving them control of the plane including ordering of any maintenance they or their LAME think should be done (I know one school where the LAME was on the Board and made a fortune out of their hire fleet). Usually get paid by the hour; they might promise 50 hours a month but in reality favour other planes and leave yours as a last resort. Alternatively the school might not be very active and your plane under utilised. Get a basic agreement in writing over who controls maintenance, what costs have to be authorised by you etc. Saves lots of angst later.

 

Running costs fall into Fixed and Variable. Fixed costs happen whether you fly or not (insurance, repayments, interest, rego, hangarage etc). Variable depend on the hours flown - eg the life of the prop, time between overhaul for engines, 50 & 100 hourly services (which become fixed if you do less than 100 hrs and it becomes an annual cost).

 

Do a budget and work out how many hours you need and how much per hour you need to put aside. Example = The engine lasts 2,200 hrs before overhaul. Yours is now at 1,200 hrs = 1,000 hrs to overhaul (o/h cost guess is $40,000) - put away $40 per hour towards overhaul. Keep doing that for propeller, services, fuel etc; include "profit" margin and margin for inflation and unforeseen dramas. This is your base hourly rate.

 

Now the hard part - guess how many hours you think the plane will be income producing in a year and divide your fixed costs by that and add your base hourly rate. This is what you should hire it out for. Would you pay that much? If the hourly rate is too high people will vote with their feet and take the other plane.

 

Putting something away each hour is the key - too many people I know ran their aircraft into the ground and then had nothing in reserve to replace important time expired components.

 

I had several hire rates. Casual hire for circuits (the tacho goes slow so you might get an hour's flying for 45mins on tacho - so I charge more to cover wear & tear and more fuel). Wet hire of more than an hour - I include fuel, oil & landing fees in that. Dry hire - I provide full tanks and you bring it back full tanks.

 

Talk to your tax agent - costs for keeping current are deductable if you say you are required to certify hiring pilots or positioning your aircraft, things like AFR, memberships (AOPA, RAAus), maps, ERSA. You need to do things that show it is a legitimate business - advertise, hire agreements and low private usage (alternatively you can hire your own craft back at business rates). Losses are quarantined against future profits if you are a sole trader (talk to your tax agent about this - it doesn't automatically get negatively geared against your wages income.) You may be up for GST too. If you use it in conjunction with your business - eg flying piano tuner / vet / electrician it will be tax deductable and you might not need to hire it out.

 

Here are some typical costs - and lets say I get 100 hours per year

 

Fixed Costs

 

Insurance $3,000

 

Hangar $2,500

 

Repayments & interest $5,500

 

Depreciation (what you need to put away to eventually replace the plane) $5,000

 

Annual landing fee for home airport $500

 

= Total $ 16,500/100 = $165 per hour

 

Variable costs per flying hour

 

Engine overhaul - $20

 

50 & 100hr services $40

 

Prop replacement $8

 

Oil / Fuel (25litres) $45

 

= Total $113/hr

 

Grand total $278 plus fudge factor = $285 per hour - would you pay that much?? No? Either up the hours or reduce some costs - but be realistic - too many people will tell you the 100 hrly is about $500, in reality it is much more because instruments have to be calibrated / repaired, expensive things break, wear out, time expire, ADs from CASA, etc etc.

 

Another issue I found when I was a plane owner but student pilot at a country airstrip - you cannot sign out the aircraft for another student even if the instructor said it was OK for them to go for a jaunt - it had to be a commercial pilot. Also couldn't do basic maintenance. A Catch 22 for private hire - you take potential hirers for a familiarisation flight before letting them take your steed. If anything goes wrong you are damned if you do (you not being an instructor so what would you know) and damned if you don't (why didn't you check they were OK first?)

 

We also have an ultralight on hire - or is that a charity we are running .. Over 20 years expenditure exceeded income. The old adage that to make a small fortune in aviation you start with a large fortune and let time take care of it. I'll give up here ...

 

Sue

 

 

[sseeker]

Just my two cents worth.

 

RA-Aus registration is $220 per year for a two seater and $110 per year for a single

 

-Andrew

 

 

[Guest Walter Buschor]

Hi Sue,

 

What an informative report .... and ever so sobering!

 

Must say though it is better to jump in knowing all the facts than get burned later .

 

It's probably better to shatter a dream than to create a nightmare.

 

fly safe

 

Walter

 

 

[Tomo]

A very informative - depressing - and helpful lot of information there Sue :thumb_up:

 

 

[Guest basscheffers]

I do this and in my experience I would say the rule of thumb is you are going to need 400 hours a year hired out to comfortably break even and pay off the aircraft. I'm not quite there yet...

 

And because it is a business, like Sue pointed out, technically you need to hire it yourself for your own flying.

 

Insurance cost are around 3% of value plus fixed cost for liability. To have a $100K aircraft insured for "anyone can fly it" including ab-initio and first solos, expect $4500.

 

The other way to lower your costs is to form a syndicate; get 5 people together. Now all you need to find is $20K. You share the fixed cost (hangar, insurance) and pay a low hourly rate into the syndicate bank account to cover fuel and maintenance.

 

 

[patrick55]

very helpful insight Sue, thanks !

 

 

[rgmwa]

Thanks Sue. Answered a lot of questions I have been wondering about too.

 

rgmwa

 

 

[FlyingVizsla]

It would make more financial sense to start with a second hand aircraft - you will get nearly the same usage with far less borrowings, lower insurance and it will hold its value longer. Getting a RAA registered aircraft will let you use a Level 2 who may be cheaper than a LAME - must be maintained by a Level 2 if it is for training, or get your own Level 2 accreditation and do it yourself.

 

If you have the ability, buy a sound aircraft that is looking a little sad in the costmetic areas (presumably cheaper) and tart it up with gleaming paint or just a spruce up with some modern decals and upholstery. You'll get near the same hire rate as for the U-Beaut, provided it is reliable. Pay attention to a fully working panel, get rid of cracked, split or other tatty stuff so it gives the impression of a well maintained aircraft.

 

I have never borrowed to buy an aircraft - it is too much of a risk. But looking over 20 years and 5 aircraft, I think I could have bought them all with the amount I paid the insurers.

 

Sue - Aviation Mogul

 

 

[Neil_S]

Hi,

 

A friend and I have a second hand Gazelle, not online to a flying school, just for us, and Black Rod's figures are about right. We have an account for the plane, and deposit $200 per month each into it for fixed costs (mainly hangarage and insurance). We then each pay for our own petrol (premium unleaded) and refill after use.

 

If there are any unexpected one-off costs for which the account doesn't have enough then we just split it 50-50. We fly around 100 hours per year, so we have assumed the 100 hourly is an annual fixed cost too.

 

We bought it outright, so we have no interest on loans.

 

Has worked well so far.

 

HTH

 

Neil

 

 

[Guest rocketdriver]

Agree with Sue re costings etc ...but you DON'T have to hire the 'plane out ... get a syndicate together .... 3,4,5 mambers, charge a monthly fixed fee that covers the fixed costs, charge an hourly fee that realistically covers the real cost of required future maintenance, bank the monies needed for the future maintenance and go for it! Done properly, you will find that you have all the access you want plus reduced costs plus a real asset to sell if you want to move on .... check out my earlier article on syndication for some ideas on how to make it happen!

 

RD

 

 

[Guest basscheffers]

We bought it outright, so we have no interest on loans.

Neil, not commenting on your specific situation here, which I don't know anything about, but in general...

You need to take the total cost of ownership into account. That means if you have *any* loan, you are paying interest. Money from savings/inheritance/lottery/etc. that you use to buy the aircraft (or boat, or car, etc.) "outright" could also have gone into paying off the mortgage.

 

I too have no specific loan on the aircraft, but I could certainly save a fortune in interest and slash years of my mortgage if I didn't own it!

 

Bas.

 

 

[jetjr]

I own and agree with Sues numbers and it is depressing.

 

Something like a RAA will cost a bit less if you do maint yourself but that costs your time so really ends up similar.

 

Biggest area I think people (including some flight schools I think) underestimate is finance costs.

 

If you borrow of not theres ~8% interest you need to allow. Now thats $8000/year and any financier needs you pay off a fair chunck of principal too.

 

Another example - Lease for $80K AC, 5 years, $1200/month, $30K owed at end. You will have equity in AC at end but thats the best deal lenders will come up with.

 

Summary @ 200hrs/year (which is a lot of private flying even in a syndicate) thats $72/hr up front, maybe another $70/hr in costs.

 

Finance is HALF the cost , next is insurance and hangerage. These are fixed costs even if you dont use it. Cost of fuel, repairs and maint are very much down the list.

 

 

[Mick]

Is it feasible that a hire aircraft could earn enough to pay for itself completely if the purchase amount was borrowed over say 5 years?

I have had an aircraft on line & know a few people that have cross-hired to schools.

 

I am sure that if what you ask was truely possible then all flying schools would own their aircraft and not cross hire them from others.............

 

 

[Neil_S]

Hi Bas,

 

You are right, of course, and having come to a similar conclusion at a relatively young age I paid off my mortgage as quickly as I possibly could, leaving me in the fortunate position in my later years (well - fifties!) of having no mortgage. I still put extra (pre-tax) into my super, and what little is left goes to supporting wife, daughter, and Gazelle (not sure if that's the right order , and I think daughter probably costs the most!) I have also not assumed any resale value or tried to cost depreciation as I simply can't be bothered to try and work it out! :big_grin:

 

Cheers

 

Neil

 

 

[FlyingVizsla]

Flying schools hire partly because the yearn to learn is very seasonal. My experience is that more people decide, late December, to get into it. Not sure if this is because Christmas is finally a bit of time off work to think about where life is going, or because they have hols in January and figure we can do things on short notice, or these are Christmas gifts or New Years resolutions. The instructors want to go home to the folks and avoid the thunderstorms, thermals and long days but the students are lined up at the front door. Also peak season for private hire.

 

Not sure if this is the case across the board.

 

The other issue is schools only pay by the hour, so when they are not earning, they are not paying, and when it comes to maintenance someone else gets the big surprises. Large schools with volume prefer to buy their aircraft because the utilisation makes ownership worthwhile. They can also afford to buy new and sell when they have put some hours on rapidly but have few years.

 

Sue (the view from both sides)

 

 

[bushpilot]

Jabiru 160 cost

 

This might give you an idea of the overall cost of operating a $75,000 a/c. Of course, as others have said, the biggest factor is hours; the more it does the lower the hourly cost; that's common sense, I know, but often not projected very accurately.

 

I have this data set up as a formula driven Excel - so that any variable can be changed, including hours - and it calculates the hourly cost. But that file type cant be uploaded here.

 

J160 Cost base 0410.pdf

 

J160 Cost base 0410.pdf

 

J160 Cost base 0410.pdf

[Just H]

This has been a very interesting read, and very informative. I must admit I have had some silly ideas about a Cessna 150 or a Piper Tripacer. I have seen some of these (obviously older aeroplanes) at what seem to be very reeasonable prices for sale, and in what seems to be reasonable condition.

 

The cost of the 100hr service, general maintenance and engine rebuilds, when they become necessary, is what I seem to not be able to find out too much about, and this has been of great interest.

 

I would imagine that maintenance and repair costs would vary by engine / aircraft type?

 

 

[Guest basscheffers]

Those aircraft may not be so silly. Around these parts, you often hear: "Don't do it, buy a brand new $80K Jabiru, the operating costs are so much lower!".

 

Well, the $40K difference between an older aircraft and a new one can pay for a *lot* of maintenance and fuel burn. What's more, if you only have $40K, you can buy the aircraft now and pay for the fuel and maintenance as you go. It's a cash flow vs. capital thing.

 

For about the same price as my second hand SportStar, I could have bought a second hand DA-20. Faster, nicer. But the LAME maintenance cost and certified parts would be prohibitively expensive. But a $40K C172 can be excellent value, especially if only you fly it for the average 50 hours a year a private pilot does.

 

 

[Just H]

Indeed, that was similar to my thinking.

 

But what is an average or a sensible amount or budget amount suitable for a 100 hr service on one of these older aircraft? I realise that such a question is like asking how long is a peice of string, as no doubt they would all vary with availability of parts, how far you want to go etc, but some idea of where to start cost wise, would be very handy.

 

I would expect that like any older machinery, (I have a big background in antiquated buses and some rail vehicles), availability and cost of parts may be a big issue? Even for a Tripacer or an older Cessna?

 

 

[facthunter]

Cost of 100 hourly.

 

The first one can be a shocker if the aircraft was serviced somewhere else and you gave not had it inspected carefully prior to purchase by someone who is very familiar with the type and Knows what AD's should be done and goes over the plane and logbooks carefully.

 

After that, I would suggest about 600 minimum plus whatever extra work needs to be done. If the workshop has high overheads you might have to part with more, but all in all probably not much more than a luxury car, (or a Landcruiser, at times) Cheers .Nev

 

 

[old man emu]

Facthunter is right on the ball (What a Kewell expression )

 

Rule No 1 for buying any aircraft:

 

The owner of an aircraft is responsible for ensuring that all ADs etc have been carried out. Therefore, research the ADs and Service Bulletins appliable to the aircraft, the prop and the engine. Also make yourself aware of any time-limited components used in the aircraft.

 

Rule No 2

 

Have a reputable, independent of the sale, LAME or LSA equivalent inspect the aircraft AND thoroughly examine the log books and provide a written report. It is even better if the person doing the inspection is experienced in servicing the aircraft type.

 

Rule No 3

 

Obtain an estimate of the cost to attend to outstanding ADs and Service Bulletins so you can haggle the purchase price of the aircraft.

 

Bear in mind that the inspection may miss some defects that are hidden in the bowels of the airframe or engine, and will only become apparent during a full annual or periodic service.

 

I wouldn't be taken in by any mention of "Fresh 100 Hourly" in a For Sale ad. If the aircraft passed the pre-Purchase inspection, then any time left on the M/R is yours to use anyway.

 

If you've had the pre-purchase done, and completed your research on ADs and Service Bulletins, then you are better prepared to discuss an estimated cost of a Periodic.

 

Let's look at the costs involved.

 

You can expect something like 8-10 man hours for a straight forward Periodic.

 

Next you'll need an oil filter and oil. Costs for these depend on engine type (Lycoming -v- Jabiru/Rotax), and maybe a fuel filter.

 

Spark plugs usually last a few hundred hours in Lycomings, but usually get changed every periodic in Jabs and Rotaxes. However, a full set of plugs for a Jab is about the price of one plug for a Lycoming.

 

The next most common replacement parts are brake pads. For the aircraft that is only flown by its owner, or doesn't do a lot of circuit work, brake pads will last over a couple of periodics. The more work the brakes get, then obviously the quicker they will need replacement.

 

Based on the above, I'd say that you should budget about $1000 - $1200 for a periodic.

 

REMEMBER: Your engineer has to earn a living from his labours. Expect him to charge the same hourly rate at least as the mechanic who services your car. If you are offered a periodic for less than about $600 on your average LSA of small GA aircraft you are either:

 

1. Sleeping with your LAME, or

 

2. Being screwed by your LAME.

 

Old Man Emu

 

 

[FlyingVizsla]

Here's some recent 100 hourly figures for a C152

 

Labour $115.60 /hr regardless of who does the work (apprentice, AME, LAME)

 

Oil analysis $39.78

 

Oil $46.20

 

Spark plugs $78.60

 

Filters Air/oil $44.80

 

Various hoses, bearings, cups, clamps, sleeves etc $490.63

 

Freight $15.91

 

Extras - Transponder repair & calibration (has to be sent away - so removal etc included) $694.10

 

Replace door window (broken by hirer's beast) $136.50 (to be paid by hirer)

 

Labour for all the above = 33hrs = $3,811.50

 

Total incl GST $5358.02

 

One before that $2,381.32

 

One before that $2,000.54

 

Keep in mind that there are things that happen on a regular basis. Instruments to be taken out inspected and recalibrated (for me this means they all have to be removed, sent away, returned, reinstall and compass reswung). Fuel tanks drained and inspected - twice I have failed to ask first and presented with tanks full - the avgas can't be put back but I suspect it gets used in something ... The fire extinguisher gets sent away to be tested. The batteries in the ELT get replaced (not a big issue now). Battery replaced.

 

Other surprises / extras - Elevator repair (hinge was coming loose) $1343.76

 

DG & Turn co-ordinator both died

 

Carby problems

 

Battery alternator problems - $385.43

 

Starting problems - new starter & battery $2,318.62

 

Probably the biggest "surprise" was when my engine, fresh from expensive overhaul, did a warranty number - problem was the owner had just retired and broken up the company and the new owners were not required to honour any warranty. In the end they did, with no pushing from me, but aware that word gets around. It did cost me approx $18,000 before I had an engine back and flying as it should have been after it returned from overhaul. That could have killed someone who had not been putting away a bit from each hour's hire. There was the contaminated fuel problem some years back - fortunately I was not caught up in it put a lot out of action and caused the LAME's some cheer.

 

Now having seen the costings on the Jab I wonder why I stick with GA.

 

Sue

 

 

[Spin]

Thanks Sue, that's gold getting those figures from the horses mouth, as it were. Now if we could just get equivalent figures for a GA registered Jabiru 4/430 I could make a better informed choice of which direction to push a syndicate in, assuming that a C172 isn't going to be that dramatically more expensive to run than your C152.

 

 

[Just H]

Wow, thats sterling info Sue, and also Old Man Emu, thanks :)

 

What sort of donk is in the avergae Piper Tripacer? I do like the sound of the Lycoming, as it sounds like a good "hack" engine, a bit like a 250 Ford motor - get bits for them anywhere!

 

I have been mortified in the past with rarer engine types in land vehicles - looking into traction motors for English built locomotives, gearboxes for English buses, and other things - even simple fan hub bearings for an American diesel thats getting a bit log in the tooth can be almost impossible, and if you can get them, theyre as dear as poison. So to me, the Lycoming sounds like parts availability is good, which should also mean comparatively, the cost will be within reason too?

 

Either way, Im still at least a year off from even seriously looking at a purchase, but you can never start gathering info and chatting about such things too early, given my lack of background & knowledge of such :)

 

H.