destination. Therefore, if Aircraft A flies 400 hours
annually, Aircraft B will require 432 hours to cover
the same missions.Annual Variable Costs
Table B(right) sets out the annual variable cost for
each, factoring the required annual hours. As
depicted, Aircraft A costs almost 10% less in
variable cost per year than Aircraft B.
With both aircraft having about $650k per year
in fixed costs, the annual operating budget favors
Aircraft A slightly. While not enough to make up
the $3m price difference, it does account for about
$1m over 10 years. But before we can draw any
conclusions, there is more...Life Cycle Costing
Let’s assume Aircraft A is a popular model and is
currently selling better than Aircraft B. Current
market values for Aircraft A are being maintained
better than for Aircraft B – therefore, after 10 years
the estimated value (in dollars and percent) is
higher for Aircraft A. Table C (right) represents our
ten-year Life Cycle Cost for each aircraft.In Summary...
Aircraft A costs about the same to own and
operate as Aircraft B. Our analysis has shown that
making the purchase decision based on acquisition
price alone doesn’t tell the entire story.
In the above example, we needed to evaluate
parameters beyond the costs alone to determine
which aircraft would provide the better value. And
once you’ve achieved a solid cost analysis, there
are additional factors to consider. Does Aircraft A
have better support and a longer range than
Aircraft B, for example?
Never let a spreadsheet make a purchasedecision for you. And, never just look at a single
cost item when evaluating the aircraft that best fits
your budget. Aircraft are not commodities sharing
essentially the same characteristics, which is why I
stress to my clients to look for a best value when
making the aircraft buying decision.
Costs are a very important part, but even the
total costs do not tell the entire story. For the
record, my client has yet to make the final decision
on which aircraft to purchase... Are you looking for more BizAv Operating Cost articles?
Visit http://www.avbuyer.com/articles/operating-costsDavid Wyndham is co-owner & president of Conklin &
de Decker, a JSSI Company, where his expertise in cost and
performance analyses, fleet planning and life cycle costing
are invaluable. He’s formerly an instructor pilot with the
US Air Force. Contact him via [email protected]Advertising Enquiries see Page 12 http://www.AVBUYER.com July 2018 - AVBUYERMAGAZINE 51$2,740400$1.096M$2,758432$1.192MAIRCRAFT A AIRCRAFT B$VARIABLE COST PER HOURREQUIRED ANNUAL FLYING HOURSVARIABLE COST ANNUALLY$VARIABLE COST PER HOURR
Table B - Annual Variable Costs^
VARIABLE COST PER HOURR$20.0M$10.96M$6.5M$17.0M$11.92M$6.5MAIRCRAFT A AIRCRAFT BACQUISITIONVARIABLE (TEN YEAR) COSTSFIXED (TEN YEAR) COSTSRESALE VALUETOTAL COST($10.0M)$27.460M $27.914M($7.5M)Table C - Life Cycle Costing
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