- 25 May 2020
- David Wyndham
- Operating Costs
What are the big areas of expense attached to owning a business aircraft? How can an owner save on their operating costs? David Wyndham shares some tips from several decades of advising aircraft owners and operators…Back to Articles
Exactly when people will start returning to more frequent travel patterns remains uncertain, although it’s reasonable to hope that it will happen this year. One thing to note from 2020 is that there were a lot more first-time aircraft owners.
According to industry veteran Jim Donath, Q4 pre-owned aircraft sales were the highest he has seen in 12 years.
Whether you’re one of those who is new to aircraft ownership, or you’re looking to sharpen up your fiscal performance, there are things that you can do to help minimize, or reduce, your operating costs without sacrificing safety or service.
Tip 1: Track Your Costs
If you want to minimize your business aircraft operating costs, track them in detail. You cannot manage what you don’t measure. That means you will need sufficient enough detail to identify the sources of the costs.
One major area of your aircraft’s operating cost will be maintenance. Just having a single cost category is insufficient to track those costs properly. I once had a client who was surprised at the magnitude of their actual maintenance costs (compared to the budget, and the Conklin & de Decker benchmark).
Their maintenance costs were double the budget. A glance at their budget, however, revealed one amount for parts, and one more for shop labor. Parts and labor are not enough for a full cost-control of maintenance.
This client also had significant charter hours being flown by their management company. Most of the unscheduled maintenance on their aircraft was away from the home base. Often, several parts were sent via overnight freight so the management company could continue a revenue-making trip.
Sometimes a maintenance technician was also flown out, via the Scheduled Airlines, at a moment’s notice to do the work. Shipping, airfare, hotel, and meals didn’t come under the ‘Parts’ and ‘Labor’ categories on my client’s budget. The lesson is that if you want to control your costs, you need to track them adequately.
Tip 2: Hire a Maintenance Manager
Next, consider having someone manage those maintenance costs. Typically this will be a maintenance professional who knows the aircraft. You may wonder how an additional salary can save money. Let me pose a couple of questions of my own…
The time-value of the leadership team, plus the cost of a last-minute charter flight, could easily justify the salary of a maintenance professional you hire to manage your costs.
In addition, that maintenance professional can shop around for parts, and, in the case of a major maintenance event, tender the work for bids, all of which saves you money.
For the major maintenance, there could be two or more shops who provide quality work (i.e. the OEM and qualified third-party shops). But what is included in a bid, and what is excluded? A maintenance professional will be able to tell.
They’ll also consider the bigger picture – such as whether the lowest bidder takes longer to perform the required work, resulting in possible charter costs that outweigh any initial cost saving.
And the maintenance professional will keep an eye on the progress of the work, helping keep it to schedule. They’ll question certain unscheduled work that comes up, and provide important details as to issues that are not obvious from the maintenance logs.
The value of your maintenance technician tends to rise with the cost and complexity of the aircraft owned. If your Management Company or local FBO has this ability, then you may not need the additional staff member. Just be aware that there are many days when hiring a maintenance technician on staff is like having the fire department located around the corner:
You don’t need them every day, but when they are needed, they are truly essential.
Tip 3: Fuel Cost Savings
Beyond the maintenance of your aircraft, fuel cost is another major expense – especially for turbine airplanes. The cost of fuel accounts for somewhere in the region of half of your variable operating cost.
Last month we covered managing fuel costs with appropriate fuel discount programs (AvBuyer February issue, p48). We mentioned that you should work with your FBO to arrange for fuel discounts at your home base airport, as well as while you’re on the road.
Understanding the term ‘tankering’ will also be crucial to making some savings on fuel costs, and means (for example) buying extra fuel at a low cost at your home base to avoid paying higher costs while you’re on the road.
You should look to tanker fuel whenever it makes sense, and also evaluate the total cost of a stop (both for fuel, and the other FBO services you require).
Tip 4: About Those Deadhead Trips…
Look for ways to reduce the amount of deadhead, or unoccupied, trips. This can be achieved if you look to combine trips wherever possible. This may mean opening up access to the business aircraft to more than just the top level executives within your corporation.
If 50% of your current trips are one-way, the cost savings from trying to reduce the unoccupied legs could be significant – but achieving this will require a plan for who, and when, the aircraft is to be used.
Tip 5: Charter Your Aircraft When Not in Use
Finally, consider chartering your aircraft when it’s not in use. Done appropriately, the aircraft owner will offset operating costs with charter revenue.
Owning a turbine business aircraft is undoubtedly costly – though the value of owning an aircraft can be even more significant. Understanding and managing the costs as far as possible is the recipe for a happy ownership experience.
While the tips in this article are by no means comprehensive, they should help highlight some of the major cost savings that can be made by the savvy business aircraft owner today.