As published in BusinessAir magazine issue #11 2021.
Chances are, if you are perusing the pages of this magazine you are considering buying a plane. Whether written down or not, you have a comfort zone for the capital that you have to spend. Before you take the plunge, make sure you know how deep the water is.
Understanding the operating costs to own the aircraft is very important. There are different kinds of aircraft operators. There are those where the capital and operating costs are of little concern, and then there are those who have the capital but the cash flow for operating costs is not as flexible and another group who lacks the capital, however has the cash flow to support higher operating costs.
If you are the more typical buyer and the operating costs are important, it is important to understand the operating costs within the parameters of how you plan to use the aircraft. Many people fail to notice the footnotes in operating cost projections. Just like in an annual report, the footnotes can be more important than the actual numbers. I know of one OEM that based all of their operating costs for one model on 800 hours per year. Not even typical for that model of aircraft. Fuel prices and accurate fuel burns are important as some projections quote long range cruise fuel burns versus normal fuel burns. Are you really going to fly at long range cruise?
An example will help clarify this. Most of the cost programs only include routine maintenance and not the major inspections. For example, when looking at a Hawker that has a 24 and 48 month inspection that have significant costs, they are not included in the normal routine hourly costs. The same is true with components like landing gear overhaul, windshields, and other life cycle limited components. On a Hawker, if you only fly around 250 hours a year, you might have your maintenance cost per hour double when you add in the calendar inspections.
These calendar costs exist on all aircraft. The larger and the older the aircraft, the more expensive these inspections can become. Failing to fully understand this can make a big difference in your budget. Add to that, your utilization might be less than average, and the costs per hour can shoot up. When making a budget, read the foot notes of their assumptions, make sure you are including the major inspections, understand how many hours per year you are going to fly so you can accurately project what your hourly cost is going to be and ultimately your budget. You will minimize your surprises.