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How do you Calculate Maintenance Costs?How do you Calculate Maintenance Costs?

Maintenance costs are generally the largest expense in a club’s budget other than the cost of acquiring an aircraft and purchasing fuel. Finding a maintenance shop that meets your needs is important. While price is a major factor, you should also consider the shop’s reputation and the quality of the work, as well as the turn-around time it takes to complete repairs. It also is good to know how familiar the shop is with the type of aircraft you have or want to add to your club. You may even choose a backup shop for small, time-sensitive repairs to your club aircraft.

A maintenance shop can be a good resource to consult before acquiring an aircraft. It can be useful to talk to your mechanic about which make and model of aircraft best suits your clubs needs. Mechanics can help identify major concerns with different aircraft, such as expensive airworthiness directives (ADs), recurring costs for specific maintenance on an aircraft type (like a ballistic parachute repack), or the ease of finding parts.

Once you’ve settled on a mechanic, it’s time to set some expectations for your future expenses. Traditionally, owners plan on an annual inspection once a year and a series of (hopefully) small repairs throughout the year. This is a reasonable expectation for an aircraft that will be flown 100 hours or less each year, however club aircraft generally get much higher use.

Flying clubs are not considered commercial operations and are not required to conduct 100-hour inspections like a traditional rental aircraft. That said, having your club aircraft looked at every 100 hours isn’t a bad idea. You may want to discuss an abbreviated 100-hour inspection with your mechanic in which your mechanic looks at certain items to help maintain the aircraft’s reliability and lower repair costs over time. For example, a standard 100-hour inspection for a Cessna 172 is about 12 hours of billable labor. In five hours a mechanic could do a few critical inspections and give your airplane the tune up that it needs to ensure reliability for all your members. Talk with your mechanic and draw up a plan that will help the club maintain the aircraft in good condition and establish expectations for your cost of maintenance.

Hourly Maintenance Costs

Once you have discussed inspections and shop rates, you should be able to accurately estimate the maintenance budget for your aircraft. It’s helpful to develop an hourly cost for maintenance. For example, if you have maintenance done every 100 hours and your mechanic estimates costs to be $600 in labor and $400 in parts, the club can plan $1,000 for every 100 hours of flying, which works out to $10 per hour. Remember this estimate covers basic inspections and occasional repairs, and will vary inspection to inspection. This budget does not include engine overhaul, prop overhaul, transponder inspections, or GPS updates.

Engine Overhaul

In addition to the routine maintenance accounted for in the hourly costs, the engine overhaul is probably the largest recurring expense a club will have. Talk with your mechanic to understand the engine overhaul options and the cost and downtime involved with each. Most clubs opt to overhaul their engine rather than purchase a replacement. The benefit to this option is a huge cost savings, but the trade off is long downtimes—an engine overhaul can take six to 10 weeks. If you choose to overhaul your engine, you can either have it overhauled by a local mechanic (called a field overhaul), or ship the engine out to an engine shop that specializes in overhauls. Keep in mind that field overhauls can vary in craftsmanship and for this reason may lower the resale value of your aircraft.

When selecting an aircraft, consider the future cost of replacing the engine when it becomes due. Every hour your aircraft flies is an hour closer to its engine overhaul. For this reason, most clubs have an engine reserve fund. The basic formula for estimating an engine reserve is below:

Required Savings per Hour of Flight Time = Engine Cost
                                                                  
(TBO – Time SMOH)

Thus, if a club purchased an aircraft with 800 hours since major overhaul (SMOH) with a manufacturer recommended time between overhauls of 2,000 hours (TBO), and an overhaul and installation cost of $20,000, the club should save about $16.67 per hour of use.

These costs will contribute to the hourly operating cost of the aircraft. Consider the worksheet below outlining a basic hourly aircraft use cost.

Routine Maintenance:        $10/hr (based on mechanic’s recommendation)

Engine Reserve:                $16.67/hr (based on engine hourly cost formula)

Fuel:                                   $50/hr (based on 10 gph @ $5 per gallon)

Total hourly cost:                $76.67

Calculating your routine maintenance costs, engine reserve, and fuel costs will provide your club the information it will need to set fees and hourly rates to support the aircraft now and in the future. Having a sound financial foundation will help the club succeed.

Topics: Ownership, Overhaul

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