AvBuyer Magazine – August 2019

70 
 Vol 23 Issue 8 2019 
 AVBUYER MAGAZINE http://www.AVBUYER.com

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AvBuyer - Read by Aircraft Owners Throughout the World

Myth 2: You Should Focus on Only

one Cost... ‘Acquisition’

Every pilot report and airplane review article

mentions three things:

1. Cabin and amenities;


2. How far the airplane flies;


3. Acquisition cost.

Whenever I do an analysis of costs, I look at the

total life cycle cost. This includes not only the

acquisition cost, but the operating costs, and

disposition.

While the acquisition cost – less the recovery at

resale – is significant, the operating costs can

amount to just as much over time.

Myth 3: Operating Costs are Consistent

At least a couple of times each year I have a client

who is shocked when confronted with their

maintenance costs. A recent situation involved the

owner of a large-cabin business jet. The

management company had told the owner to

budget $3,500 per hour for fuel and maintenance,

yet when they looked at their total expenses for

2018 those items averaged over $5,000 per hour.

Working through the management company’s

reports, while also running our own “should-cost”

analysis, we found a cost listed under maintenance

for international travel, for which the mechanic

accompanied the jet on a multi-week trip overseas.

Though this was smart planning, it was not

necessarily a ‘routine’ maintenance expense.

The owner also had an inspection every 2,400

flight hours. They flew less than 300 hours in 2018

and averaged the cost of the 2,400-hour inspection

over the 300 hours they flew, not the 2,400 hours it

took to accrue the expense.

In my should-cost analysis the accruals for the

maintenance from Conklin & de Decker’s data,

adjusting for the cost of fuel, came to

approximately $3,600 (per hour) over time. In any

given year, the average for that year varied from

about $2,400 to over $7,000 per hour.

The bottom line is that maintenance costs are

cyclical. Unless you are on a guaranteed hourly

maintenance program provided by the OEM or a

third-party provider like Jet Support Services, Inc.,

the cost in any given year can fluctuate greatly.

In Summary...

All of the above misconceptions can be cleared up

by listening, explaining and budgeting correctly. It

also helps to have someone who understands both

the costs and the operation to assist in the

understanding.

More information from http://www.conklindd.com ❙

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