Anyone got any experience of lease-back?

[RDRickster]

I'm giving serious consideration into purchasing an R22 with a leaseback program to a local training school. They are building a small fleet of R22's & R44's via leaseback program. Basically, I purchase the aircraft in my name and lease it back to the school. What are the downsides?

In return, they make the payments (whether or not it flies), pay for the insurance, provide the maintenance, and store the aircraft in the hangar. In addition, I would receive 50% of the net adjustable income earned from training on that aircraft (allbeit small profit margins).

I'd be able to fly it about 5 hours a month (no charge) and $100/hour after that. After all, it needs to be flown by students to make money. U.S. tax laws are VERY favorable for the next couple of years... you can depreciate up to 50% of the aircraft your first year (temporary break to help stimulate airline industry).

I suppose this is a common practice, but I don't know all the variables. Nice program, but the risk is all mine (not theirs). What questions should I ask? Since I rent my aircraft already, it wouldn't be any different for me in terms of helicopter quality. Students are going to bang up and abuse learning machines (just as I did). I understand that - and I can accept it, as long as it is maintained very well.

If you've already done this or are doing it, where did you finance the aircraft? Are you satisfied? What would you do differently? Can anybody recommend a finance company or bank that specializes in aircraft purchases?

Thanks in advance!

[rotorusa]

RDRickster, WOW! That's the best R22 leaseback deal I've ever heard of! Better sign the contract before they change their mind!

For comparison; a typical leaseback deal on an R22 would look something like this: You pay for the aircraft, the overhaul reserve, hangaring and maintenance (perhaps at a reduced rate), and hull and liability insurance. The flightschool pays for oil and fuel. You'll get around USD 70.00 per hour for your troubles, and there will be no guaranteed minimum (oh, and no freebie flight hours either).

As you can see, hardly a moneymaking proposition. More of a cost-offsetting proposition. Again, your deal is great! Did these people just start? To be fair, they may discover shortly that they got the short end of the stick and you should perhaps be ready to negotiate a more equitable deal at some point in the future.

What do you mean, by the way, that the risk is all yours? They pay for insurance, don't they? Just make sure you get as much hull and liability as possible! (and preferably not with Pathfinder; their rates are lower, but good luck dealing with an insurance company headquartered in the Bahamas when you get into a claim dispute).

[Dantruck]

Give some thought as to whether you will allow engine-offs all the way to the ground, and if so, under what minimums of instructor/student/location/weather, etc.

Also, double check your insurance cover for everything that can happen.

Apart from that, if it works for you, go for it!

[nulian]

He's talking about the fact that since the helicopter is in his name, the onus of making the payments is on him if the school goes under or reneges on the deal.

On the face of it, it looks like an awesome deal. The school I fly with here has done leasebacks in the past where they paid something like $80/hr to the owner, with a guaranteed minimum of some number of hours sufficient to cover most, if not all of the fixed costs.

Of course, it was still the owner's helicopter in reality - he made all the payments. Your deal seems like the opposite end - it's your helicopter in name, but you have to have permission to fly it, etc.

Still, not bad work if you can get it.

[rotorusa]

Nulian, of course the onus is on him to make the payments on the helicopter. It's his helicopter, isn't it! The difference in lease deals you describe is a function of the mindset of the owner.

Does he (or she) view the helicopter as an asset to be worked, with the benefit of having the aircraft available for a few hours each month (which is about all most private owners fly anyway), or does the owner insist on having his high-priced toy all to himself whenever he wants it and let others play with it only when it suits him and under certain conditions.

Obviously, the owner who looks at his helicopter as a tool, to be used (and used up, ultimately), will get the better deal.