For companies who are flying 20+ year old jet aircraft they are facing some hard decision points. Do they keep flying the current aircraft and spend $500,000 to over $1,000,000 to fly in portions of the world and airspace now or to be ready to fly in certain US airspace in 2020? In addition, some of these planes are reaching points in their careers where in addition to high operating costs, large inspections might be 1/3 or more of the value of the aircraft. You could easily spend over half the value of the plane just to keep flying. At what point are you throwing good money after bad?
What if anything can replace the current plane and do the job? What price do you have to pay to get the same mission capability? The plane is fully paid for and depreciated and off the radar, new capital costs can raise eyebrows.
What will the residual value considerations be? We know they are low based on the current economy, will they come up or continue to deteriorate? On some older aircraft the values have come and gone, meaning they are at salvage and will not improve significantly. For those of you operating planes not yet 20, these are good discussion points about changing aircraft prior to this legacy group to maintain higher residual values.
There is a psychological issue that executives start to have when operating older equipment. Every company is unique when it comes to those. How do your executives feel about the age of the aircraft?
All of the above are important considerations.
One item that is worthy of analysis is the reliability and availability of the aircraft. Keeping track of maintenance and reliability factors becomes critical on older aircraft. For companies that can afford to spend large amounts on maintenance, reliability becomes one of the most limiting factors. And I am not necessarily talking about dispatch reliability. It is the amount of maintenance downtime it takes to keep the plane flying and how at some point that will limit the number of days and amount of hours you can fly the aircraft. It is calculating productivity of a machine. The boss always has a plane no matter how many days, nights and hoops it takes to get it ready. However, at some point, there are not enough extra days and hours based on your scheduled flying days and hours to keep the plane in the air.
I think it is a calculation that should be done on every aircraft, even new aircraft, but at a minimum it should be part of anyone operating an older aircraft’s routine tracking. At any given point you will know your availability, be able to see trends and be able to advise management on how efficient the plane is doing from a productivity standpoint. You will also know if they decide to increase your flying 10 hours or more a month whether the current equipment can actually meet the scheduled demand. Or, you may be able to advise management that we can keep the current planes flying but expect no more than X days/hours availability on a consistent basis.
There isn’t an easy answer and not a one size fits all. However, I do feel that reliability and availability records are an excellent resource that supplements the operating cost portion of the picture as well as many other considerations. When a plane can’t keep up it will require supplemental lift or multiple aircraft to do the mission of one, and that might be OK or it might not be acceptable. This is just another tool you have to help management make a well informed decision.
Hawkeye Aircraft has developed a simple to use basic tool for calculating reliability and availability. Please contact us for details.
Hawkeye Aircraft Acquisitions
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