1st Jan 2006, 15:05
I was hoping to buy a plane and lease it out to the local airport to recover costs and was wondering how the process works..I'd appreciate if you could shed some light on it and also answer the following questions for me:
A) Also, since you rent it to the airport, thers probably a lot of wear and tear ( since low hours students are training on it ) so probably need more maintainence.. Do you have to pay for the maintenance or do they manage everything ( repairs & costs ) and all you have to do is fly it ?
B) If they want you to pay for the maintenance, is their monthly payment to you sufficient to cover this maintenance and your original costs in the long run ( 1-2 years ) ?
C)If you wanna fly, do you get priority and are given the plane whenver you need to ( Within reason ofcourse ) ?
I"d also appreciate it if you guys could suggest any other ways by which I could cover the cost of buying a new plane.
A lot of people think about this. The usual answer is that it will never make money, probably not even cover the costs, yet you end up with a wrecked plane.
A lot of planes "owned" by flying schools are in fact leased/rented/etc from private owners and they usually are...... wrecked.
I think that in the right situation - a classy IFR plane, and an IR training school nearby - it might work, largely because you can then insist on named instructors always in the P2 seat i.e. no solo self fly hire. I did that very briefly, but there were "certain problems" with the management of the school.
There can be substantial Revenue and VAT benefits in doing even a limited amount of such hire, which is why a lot of people do it.
1st Jan 2006, 17:16
hmm.... so I guess,
leasing it to the airport but putting the following restrictions would make it worthwhile?
a) the plane cannot be flown solo and
b) needs to have the instructor I have mentioned in the contract ( which in this case would be my own ) be present in the plane
Is that above true? The problem is, how does one enforce such a restriction?
Also, how good are airports with their payments? If i may ask, what are the "certain problems" your talking about? do they include late payments,etc?
isnt your insurance higher because your allowing students to fly it ( even though its with an instructor ) ? Does this cancel out due to the money you get from the airport?
1st Jan 2006, 17:46
Hmm that sounds a laugh. Hiring a plane but having someone sat in with you!!!!
I hire out my very high end (very expensive) and immaculate IR plane and it has been OK so far but you have to not think too much about it because I would much prefer that it just got flown by me but the VAT and Tax situation and the huge cost of owning this type mean I have to rent it.
I have no doubts that I cannot make a profit even though I am renting the plane for nearly £200 per hour and a monthly fee but I figure that if I get some money towards the annual costs it all helps. I have set up a sort of group with up to five members who have been selected because of their high hours or good flying ratings and have a good management agreement with the flying club that look after and maintain it. None the less due to an engine fault this year that we have no idea how it was caused I managed to make about a £20k loss on the financial year. Including the depreciation which you are obliged to include in your company accounts the total loss was a shade over £45k and I flew 55 hours myself. The plane was out of the air for 4 months for repairs.
The other day I rang to book the plane and someone else had already booked it so I couldnt go where I wanted to. That is the downside but you have to accept that.
Hopefully 2006 will be a happy new year and instead of loads of faults we will have a cheaper year with more renting and then it may be a bit more cost effective but we will see by this time next year.
I hope you can gather from this that I wouldnt recommend airplane ownership and rental by a club as a good business venture. You have to do it for more reasons than that. I am not sure what my other reasons are but I do have them.
"how does one enforce such a restriction"
Ultimately you have to trust the instructor. The trouble with GA is that there are soooo few people that one can trust (as you will rapidly discover). Poor cashflow goes hand in hand with such personal characteristics, and debt collection is normally a substantial challenge. I could post a few shocking stories involving some well known maintenance businesses (paying only on the bailiff's second and final visit) but of course won't.
You do have to trust people. You have to trust them to manage the engine correctly (most instructors, even IR types, have their own weird ideas on this). You have to trust them to not tamper with the fuel flowmeter FOB setting (very tempting, I got this). Fiddling the airborne times is pretty routine. You end up downloading the EDM700 engine logs and measuring off the airborne times and checking them against the declared times. Etc.