ost misconceptions about aircraft
cost result from connecting
something that we’re familiar with
(such as the cost of running an
automobile or building a house) and
using those as an analogy for the unfamiliar cost of
owning and operating an aircraft.
The biggest misconception is focusing too
heavily on the acquisition cost, to the detriment of
operating costs and asset value over time. Let’s
illustrate with an example...
I have a client who has a maximum acquisition
budget of $20m. This is a real limit and not one to
exceed. There is, however, a possible
misconception that can arise if we were to look at
Aircraft A (with a selling price of $20m) and Aircraft
B ($17m) and conclude that Aircraft B is the less
costly option.
The only way to know which aircraft costs “less”
would be to evaluate the total costs to acquire ,
operate and dispose of the aircraft. Two of the
major costs that must be factored are the
operating costs (including maintenance) and the
estimated residual value after a set timeframe.Hourly Variable Costs
Looking at our current scenario (represented in
Table A, below), Aircraft A has a lower fuel
consumption than Aircraft B while the engine
maintenance costs are similar. Aircraft B has lower
airframe maintenance costs, meanwhile.
Yet even in factoring variable costs, there’s more
to consider. For example, Aircraft A flies 8% faster
than Aircraft B. The faster aircraft will use fewer
hours to fly the same trips form point of origin toAvoid Misconceptions
About Aircraft Costing
M
50 AVBUYERMAGAZINE– July 2018 http://www.AVBUYER.com Aircraft Index see Page 129What are some common misconceptions about aircraft
costs? David Wyndham details some that he comes across
on a regular basis, providing advice on how to avoid them...
OWNERSHIP OPERATING COSTS
FUELENGINESMAINTENANCEPER HOUR$1,376$580$784$2,740$1,521$560$2,758VARIABLE COST AIRCRAFT A AIRCRAFT B$$677VARIABLE COST PER HOURRTable A - Hourly Variable Costs
OPERATING COSTS JULY.qxp_Finance 19/06/2018 10:38 Page 1