The real costs in GA and can we lower them?

[Whiskey Oscar Golf]

I have been listening to a few people put forward the idea we can reduce costs to GA ops. I don't have much experience in this but would like to know where the hidden costs are. Here are what I think are the main ones but could someone show me what I am missing out and the percentage of the ones I have included. Could they also explain what could be done to reduce them.
1. Maintanence and actual Aircraft.
2. AOC, CASA inspections and paperwork.
3 Hangar, spares and offices.
4 Various landing, airport charges.
5 Wages
6 Fuel
Now I know I've probably missed a few points given my lack of intelligence but which ones of these can we decrease? Of the hidden ones I haven't mentioned how can we reduce them. Where are the changes in infrastructure borne by the industry, hence the consumer and how big is that to the bottom line.

[the wizard of auz]

I didn't see insurance on there.
Basically, they can't be cut as they are already cut to the bone (and in some ops, even further).
what needs to happen is instead of cutting costs, we need to start charging what aircraft really cost to run, plus your profit margin.
If the end user can't afford it............. so be it, don't use it. pretty simplistic way to view it I know, but that clearly is, how it is.

[gaunty]

the wizard of auz

Game set and match, thank you linesmaen, thank you ballboys.:ok:

Twas always then in the good ol days t'is so now and will be till time immemorial.

There are some amongst us have the quaint idea that the aviation business runs differently to any other and that somehow we can turn back time, guess what?

EVERY other business or industry has compliance costs some higher some lower but they all have them.

[PLovett]

wiz & gaunty

Amen. How long can we continue to subsidise our clients? :uhoh:

Who in this great brown land is allowing for depreciation on assets? :confused: No one that I know of. Perhaps in the upper echelons of GA but somehow I doubt it.:ugh:

Its not going to be long before there is a very tired fleet in GA without the never ending supply of second-hand aircraft to be flogged that little bit further.:=

[gaunty]

PLovett :uhoh:

That Its not going to be long has been upon us for the last 10 or so years its just that the operators haven't worked it out yet.:sad:

And there are still new guys trying to start new businesses with the same tired old aircraft.:{ They will tell you they are making a "killing" the same way that Qantas could lower "costs" airfares by a half. As you point the real trouble starts when you have to replace them new or used.

High end is going absolute gangbusters, the entry level is waaaay too high for the wannabes and stops the dreamers pretty much in their tracks. The sheer weight of capital required demands proper accounting and costing and the clients are sick to death of rattling around in, well rattletraps. They have no problem paying real money for real modern professionally operated aircraft, just like they used to over 35 years ago.:ok:

[Andy_RR]

It's all very well saying if the customer can't afford it, then they can shop elsewhere. That's a recipe for the industry falling on its arse. If the market won't bear your costs, then it will search elsewhere for an alternative - this is market economics in action.

In any business, if you aren't continuously trimming your costs, you are heading for disaster. If some of the costs are regulatory, then a company needs to continuely ensure they are always handled in the most cost-effective way possible.

Industry bodies need to continuously campaign for regulatory reform to improve the cost-effectiveness of regulation. It's the success of their industry at stake.

Aother aspect to making things financially viable is improving the economies of scale. This is especially true when you have relatively high 'fixed'-costs (such as regulatory compliance) This is why small players fail and larger players tend to grow - assuming they are competing in the same market segment.

Yet another is to value-add. Sell something the customer's willing to pay extra for, but doesn't cost the company (much) more to provide, given you may already have the infrastructure in place.

Business is business, not rocket science. It doesn't matter how passionate you are about your product or service, if the business plan doesn't allow growth and the making of a reasonable return, the bubble will burst, eventually. Change it, or pack up and go home.

A

[Torres]

WOG you missed the greatest costs - PLovett is on the money!

I won't comment on the "average" Aussie GA aircraft, but a real GA aircraft and a smart business operator knows debt servicing, aircraft depreciation and aircrew Award wages probably amounts to around 50% of the total hourly costs for any modern GA aircraft, such as the C208.

I'll dig out the actual percentages and post later.

[the wizard of auz]

Andy-RR, mate, this industry has been trimmed almost out of existence.
there really isn't any fat left to trim from it. basically, the incomes need to go up, as the industry has been undercharging for years. If the end user cannot afford to use the service, well the business plan simply will not work.......... and as you say, pack up your ball and bat and go into hot dog sales.
It has been tried, and to be quite truthful, the only real success stories are the ones that charge as they should, and even then the margins are slim.
Like you said, it aint rocket science. incoming needs to exceed outgoing and thats all there is to it.

[Andy_RR]

Wiz,

if the margins are slim and the costs are fully trimmed (hard to believe - it's really an ongoing process), then you need to scale up, collaborate, merge, takeover etc.

I don't know the industry much, but I'm guess Rex is an example of something bigger and perhaps more efficient than anything that's gone before.

Also, I don't see/hear a lot of noise on these esteemed pages about regulatory reform. A lot of bitching and moaning, perhaps. Maybe it just happens quietly and we'll see it when it bears fruit.

A

[gaunty]

Andy_RR

business plan, business plan?, what is this business plan business???:rolleyes:

[Andy_RR]

Sorry Gaunty, lets get back to being passionate about flying aeroplanes.

:}

[mattyj]

My Uncle is an Autoelectrician(retired)
My Auntie..his wife..works as a catcher at their local skydive outfit.
My Uncle asks owner why no flying today.
Owner says..alternator has packed in..waiting for a replacement.
Let me have a look says my uncle.
Oh..just an American standard GM Alternator with a funny sticker on it..I can be back with one in 20 mins for a couple of hundred..I will even install it for you....

..You can fill in the rest..$1000 plus blah blah..approved parts..blah blah..overnight from flightline in Auckland blah blah..signed off by a LAME blah blah...thats why!!

[Icarus2001]

Of course your uncle knows that it is just an...
American standard GM Alternator with a funny sticker on it
and he is of course qualified to fit said part to the aircraft. Clearly he has experience with aircraft electrical systems? No?
This in the wonderful world of skydive & parachute operators, where everyone except the pilot gets paid.:rolleyes:

God (whichever one) help us from these people.

Whisky oscar golf what problem are you trying to solve? Flying is TOO CHEAP. See above from people that know.
It's like saying, I want to buy an Audi TT, how can we reduce costs so that I can afford one. I know mattyj's uncle could assemble it from parts for me.:ugh:

[gaunty]

That bit that cracks me up is that those operators have for the last several decades been subsidising their clients big time. The irony is their clients actually have the money and the saving through the subsidy goes straight to their clients bottom line or the baot pen.

It gets worse those operators have actually convinced their clients that it actually gets cheaper over time. How do they do it? simple really, when they run out of engines they refinance the aircraft.:ugh: :ugh: :ugh:

The sight of local mining magnet driving away in his new very exotic and very expensive car (value $250,000) to spend the evening on his $2,500,000 motor yacht, with the pilot watching wistfully as he walks back to his Chieftain/C402 (notional value $250,000 actual value maybe half) to pack it up for the night and go home in his clapped out Kinger is Monty Python stuff.

Not one thing to do with "unecessary costs" or overregulation, just a bunch of dumb operators indulging their hobby and calling it business.

If they were charging what it really costs the so called aviation business killing compliance costs would come back into proper focus and are as a percentage actually at international best practice levels or lower.

[the wizard of auz]

I might just add for clarity, that Rex is a RPT operation, and not your average billy blowfly baron operation. they have many customers on the one flight, unlike billy blowfly, who has one customer needing the whole aircraft to go to Ooolabalonga. Billy blowfly has to pay his regulatory dues, but these are beyond his control and regardless of how much they are, they need to be worked into his operating costs and charged out prorata, not cut costs somewhere else to compensate so Ooolabalonga man will use his service because its cheaper. because the billy blowflys of the industry have been robbing Peter to pay Paul for so long to get the customer, the rates no longer support the costs of operation, and Peter aint got any bucks left to lend to Paul.
We need to charge the end user what the rate should be, not what we can cut it to, to get his business.
Business is business, to many hobby pilots out there making it hard by operating below cost and ooolablonga man will go to the cheapest man on the strip 90% of the time.

[Andy_RR]

Business is business, to many hobby pilots out there making it hard by operating below cost...

I read that as 'too much competition out there to make it worth one's while'

Well, maybe that's the case, but frankly that's the market for you. If it's easy for someone to start up a business and compete with you on price, then you're in a buyer's market - profits ain't going to go up.

It's a fact of life that people pay more for things that are hard to come by and less for things that are a-dime-a-dozen.

Understand this and plan your business accordingly...

A

[dragchute]

PLovett :uhoh:

And there are still new guys trying to start new businesses with the same tired old aircraft.:{ They will tell you they are making a "killing" the same way that Qantas could lower "costs" airfares by a half.

Yep. A new turbo-prop or fan jet will come with all the latest in safety equipment and cabin comforts. Air conditioning, reclining leather seats, galley, toilet and ambience! The first twelve months of operation will give you a parts bill of just a few dollars per flight hour, rising to twenty or so in the second year but escalating to about a hundred or more when the aircraft achieves maturity. If you buy a mature aeroplane expect high operating costs. A high parts bill means a high labour component.

The performance of some of the new mid-size business jets is incredible. Even a humble ‘slowtation’ exceeds 400 knots and lifts a one tonne payload out of 1200 metres with eight hundred miles in the tanks.

New generation turbines have TBO’s of six thousand hours or more, some are on condition.

Passenger appeal is important. You hear the comments about the appeal of a Navajo over a Caravan. What crap. I bet the passengers don’t travel to the airport in FJ Holdens!

The charter industry in this country is behind the times and desperately needs revamping. If you want to hobby farm with old aircraft the punters will not part with their readies until they have no alternative. Charter rates are like fuel prices, when they rise you hear a mumble about buying smaller cars but people don’t, they just fork out. Unleaded fuel prices have increased by thirty per cent in just two years with diesel even higher and we are still forking out!

[the wizard of auz]

I read that as 'too much competition out there to make it worth one's while'

Competition to do what?. go broke?. I am in no hurry to go broke and I have planned my business to deal with it. 9 years and still going ok. I was talking about the charter game. it is highly competitive, but it takes a while for some of these people to go broke......usually when the engines and props need replacing, and then the next bloke steps in and does the same. who would want to compete for this market?. Not me I can assure you.
If the customer can't afford to fly with me at my price, they are welcome to go to billy blowfly up the strip. doesn't mean I haven't planned my business properly, it means I'm not prepared to go broke by subsidizing the customer.
I call that good business.
you tell me how someone is supposed to compete in a market that is generally price driven, and has people lining up to go broke, thinking they will do better than the last guy, but make all the same mistakes. I certainly don't believe cutting costs that are already stripped to the bone is going to make you competitive, as your just going to be another billy blow fly that can't afford engines and props when the time comes........and then move over for the next guy.

[gaunty]

Ahhh wiz me old, 'tis music to me ears.:D :D :D :D :D :ok:

dragchute sometimes your clients have to learn the hard way.

Had a case recently we were as usual busy, valued and loyal client had an urgent need we couldnt fill and there wasn't a turbine suitable to us to be had anywhere and the only alternative was to bring one from interstate with deadheads both ways. Hmmmm and ouch he says I've been offered a piston twin (generic 35 yr old/new clunker bright new paint and probably the 7th or 8th new interior) think I'll give it a go, your call we say but we dont recommend it. Yup 2 days later from call from outer woop woop, asking how soon can the interstate aircraft pick him up from there to finish the job and sent the clunker home. And this company watch their dollars too.

Now if you want to pin the tail on the uneccesary costs donkey, a good bit of it is going into keeping aircraft flying that should be in the knackers yard or enjoying a snooze in the old persons home or in the local museum instead of into equipment that will return your capital. Having said that there are some great bargains to be had by private owners looking for a nice cabin class twin to restore.:E

[Torres]

Said I'd dig out some numbers..........

Cessna 208B, purchase price US$2 mill, 1,000 hours per annum utilisation, the costs are approxoimately (including percentage of total cost):

Insurance $50/hr 5.7%
Interest $229/hr 26.3%
Other $13/hr 1.5%
Total Annual Costs $292/hr 33.5%%

Fuel $258.60/hr 29.7%
Maintenance & parts $129.09/hr 14.8%
Overhaul Provisions $51.50 5.9%
Crewing $80/hr 9.2%
Charges $60/hr 6.9%
Total Hourly Cost $579/hr 66.5%

Total Aircraft Operating Cost $871/hr 100%

And that does not include depreciation, administrative and operational overheads etc - and operator profit margin.

Now, which part of those costs do you wish to lower? And more importantly, with inflation and rising costs - how?

If your dreams include operating a Cessna Caravan and don't include 1,000 hours per annum at $1,200 plus per hour minimum revenue, may I suggest either a long cold shower or stand outside burning up $100 bills!

Incidentally, I am not denigration the Caravan - a wonderful aircraft and the future of the Australian GA industry - simply pointing out fixed costs are just that - fixed - and anyone wishing to hire the aircraft must pay all the fixed costs plus operator's profit margin. Same principals apply to any aircraft type.

"Profit" is not a dirty word!!! :ugh:

:}

[Whiskey Oscar Golf]

Icarus, the point I was trying to make has been illustrated beautifully by the posters here. Aviation is too cheap right now, but I am hearing from people on other threads that we can make it cheaper. My question is which part of ATC and CASA reform can save money and make it more affordable while staying safe?

I've been in GA long enough to know the fixed costs are huge and can't be reduced in any significant way. I've worked for companies that had such tight profit margins we were working just to keep aircraft flying rather than making money. Hoping the money would come later with rep and goodwill. Not fun but they survived and are making money now, and I'm still alive.

[tinpis]

I've worked for companies that had such tight profit margins we were working just to keep aircraft flying rather than making money. Hoping the money would come later with rep and goodwill. Not fun but they survived and are making money now, and I'm still alive.

No different to the majority of Orstrayan small businesses be it aviation or corner store
Hustle to pay the rent, unpaid tax collection for the gov , hope to strike Tatts one day :rolleyes:

[Andy_RR]

Competition to do what?. go broke?.

...who would want to compete for this market?

My point entirely.

If there's no profit in it, direct your energies elsewhere.

[the wizard of auz]

If there's no profit in it, direct your energies elsewhere.
No, I think I'll stay doing what I do and keep my airplanes, I just won't be competing in the market by Cutting costs to increase my profit margin or operating at a loss. I think I'll charge my aircraft out at what it costs to run them and then my profit margin, so I don't have to cut costs to operate, and I'll continue to service the customers that will wear my charges.
pretty simple business plan really. make a profit by charging what it costs, and not by cutting costs that cannot be cut. I think that was where this thread started........ someone asking where we can cut costs. :eek:

torres, mate your figures are so close to what we work on it is uncanny. (you need $1400PH to remain viable, and strange enough, thats what the going rate is from me. :) )

[Andy_RR]

No, I think I'll stay doing what I do and keep my airplanes...

...not by cutting costs that cannot be cut. I think that was where this thread started........ someone asking where we can cut costs. :eek:


I'd argue that if a business is not expanding then it's in decline. Or perhaps it's not really a business - just a trade with an expensive toolbox.

You say costs cannot be cut, but I'd say one of the first way of cutting costs is to expand the business and create better economies of scale. Sure, the costs aren't actually less, but maybe they are spread over a wider base.

Like I said before, if a business isn't continually trying to reduce costs, then it's setting itself up for a slump. Some of your competition will find a way of doing it. I think the problem is that cost-cutting is viewed so negatively (probably because it's normally done badly and short-sightedly) that many small enterprises don't actively pursue it.

A

[PLovett]

Andy RR

With respect, some of your arguments sound a bit like an MBA, great to hang on a wall but not very useful otherwise.

GA in Australia has been massively distorted by people wanting a business that will support their desire to fly aircraft. As wizhas pointed out, there are any number of operators only too willing to undercut to get yet another job. All operators are constantly looking at costs but the better one will recognise that some costs cannot be cut and properly factor them into their business plan.

Now if you want to see real pain, go and have a look at the Australian Cattle Industry. I have just come back from a day spent flying some government types to a couple of stations looking at the effect of drought. It was painful listening to one wife explain how they foresaw the drought (they are heading into a 6th year) by selling a large amount of stock. That made a tidy sum for them but the ATO is now into them over the next 5 years (averaging provisions) and with an interest bill that would make your eyes water with pain and thats without spending a penny on keeping the property operating. They are pulling 10 or so dead cattle a day out of the water holes and the breeders are next to be culled.

[Andy_RR]

PLovett

Maybe it sounds MBA-ish, but I don't have one, nor any business 'qualifications'.

However your post highlights one of the problems facing GA businesses and farmers alike - many are 'businesses' to support a lifestyle rather than the other way 'round.

People running these types of 'businesses' are so emotionally tied to their lifestyles (be it a dream or reality) that they can't accept the reality of it or make the really tough decisions - like admitting their 'business' won't make money in a month of blue moons and acting accordingly.

A

[gaunty]

Well I spent the better part of this morning attending a debrief on some contract bids for a very large aviation contract where only the big kids get to play.

I the end it came down not to Quantitative = lowest bid but to Qualitative issues.

My point? there was a very narrow band of total prices, maybe 6% top and bottom between them. But in the numbers that we discuss here little if negligible differences. It came down to how much profit you were prepared to make or forego. The lowest margin was still acceptable in normal business practise and was not as far as I could tell from the operator with the lowest Qualitative score which while it might sound back to front would be expected.

The total was an 8 figure sum for an extended period.

While the CASA compliance cost number was not insignificant in dollar terms to the average person, as a percentage of the total hourly/annual costs 'twas a drop in the ocean. It was the same low single figure %age as it is for a small operator operating a single or a PVT guy and his C172

Simply proves to me once again that the whole grandstanding "unnecessary costs" and "Airservices ripoff" mantra is simply an attention getting device and as meaningless as me saying that Father Christmas is real. Isn't he?:sad:

[the wizard of auz]

I'd argue that if a business is not expanding then it's in decline. Or perhaps it's not really a business - just a trade with an expensive toolbox.
I tend to disagree with your definition of business then.
What would you define expansion as?. expansion into a market that cannot justify the expansion is a faster way to go broke than cutting costs that cannot stand cutting.
I define business as some thing that will carry itself, pay all costs and return a profit for the investment. (gives me something to do with my day as well :) )
I have been poking away at my business for 9 years, and get a wage and pay my bills. my assets base increases at a moderate rate (I guess you could call that expansion) and I service a market that remains viable at my charges, but wouldn't if I charged more, so I remain in business. I think mine is a good business.
Just out of interest, hows your business going?........or is it you wish you were in business?..:hmm:

[Trash Hauler]

There are few industries that have so many passionate people involved as aviation does. It is what makes this industry great to be in at times but also brings you to tears when you see some how people will throw away their own hard earned (or owed) money to get an other hour in the air or hour of revenue. Hopefully a few more in the industry will make business decisions with their head rather than their heart, yet manage to keep the heart in the business.

TH

[Torres]

WOG
I've worked for companies that had such tight profit margins we were working just to keep aircraft flying rather than making money.

:ugh: :ugh:

Can't say I've ever operated one minute of flying in over 30 years that did not include my realistically expected profit margin. :ok: And I've never employed any staff on any remuneration less than their legal entitlement.

There are better things to do in life than lose money

Wiz
Been doing aircraft DOCs for 30 plus years on every aircraft I ever operated from C150 to DHC-8, including turbines and executive jets. Send me a PM if you want the formula and spread sheet!! :ok:

And you are probably right - $1,400 per hour for a C208B sounds about where the charge should be today!! My figures may be a little out of date.

Trash
Love those operators. They don't last long then all the work comes back - at an appropriate premium.

But a few words of Torres advice:
1. Read up on "debt to equity ratios". If you don't have the brass to invest at least 33% equity in your total assets (i.e. a maximum 2 : 1 debt to equity ratio), don't get into the game because you will fail.
2. Never pay off someone else's asset in the mistaken belief you will make money (i.e. never cross hire).

[Whiskey Oscar Golf]

Torres, I worked in survey in the late 1990's and the line Km price meant if you dropped a flight you you lost money. It got that tight coz of demand dropping and competition. That changed and the ones who weathered the storm either got bought out or are now going great guns. Our wages stayed the same and the industry is doing well now. Cyclic with that flying, charter is an too competetive with too many new players ready to step up to the plate. Hence the turnover and fiscal firesales.

[Andy_RR]

Just out of interest, hows your business going?...

It's fine thanks. Turnover is anticipated to be up 20% on last year and more importantly profit by closer to 30%. I'm not complaining. I'm not flying aeroplanes though, except for fun.

A

[the wizard of auz]

Goodo for you then. Just don't apply to many of your business idea's to the aviation business, as I think it might jump up and bite you. :}
Its just a little different than a normal business, and the margins are slim and the cost cutting has been done by our predecessors and left for us to live with. :eek:

[Charlie Foxtrot India]

PLovett
Maybe it sounds MBA-ish, but I don't have one, nor any business 'qualifications'.
However your post highlights one of the problems facing GA businesses and farmers alike - many are 'businesses' to support a lifestyle rather than the other way 'round.
People running these types of 'businesses' are so emotionally tied to their lifestyles (be it a dream or reality) that they can't accept the reality of it or make the really tough decisions - like admitting their 'business' won't make money in a month of blue moons and acting accordingly.
A

Have watched with amusement so far but you've gone a bit too far now....

As someone who was a graduate farm manager prior to changing careers to aviation, rather more qualified in business management than yourself (by your own admission), I take exception to these sweeping and somewhat patronising statements.

Isn't it preferable to make a good living and have the lifestyle you want than being someone else's wage slave?!

It is QUALITY, not price, that keeps the punters happy. If other operators want to work for charity, that's fine, it's never affected me, (cos I don't extend credit). I neither know nor care what their overheads are or what they are charging per hour.

And as for your views on expansion, good management principles state that you should be able to adjust with the market, and sometimes that means consolidating, recognising and getting rid of things that have become dead wood. Expansion for expansion sake, which means more cash flow required to service more debt, can make any business very vulnerable to collapse if the market changes - and aviation can change very quickly.

So, how can "WE" (?) reduce costs? Hardly something the successful operators are likely to divluge on these pages! It's not a case of simply reducing them, but recognising and managing them, factoring them in to the buisness plan, and setting workable margins.

Aviation businesses fail for the same reason as other businesses; bad financial management, unrealistic market expectations, bad debtor control and cr@p customer service.

There is no such thing as cheap flying, have a nice day.

[the wizard of auz]

bad debtor control Hmm, I never thought to mention that one, and its a lesson that I had to learn the hard way. It was the one that nearly got me. :eek:

[Trash Hauler]

Quote WOG


But a few words of Torres advice:
1. Read up on "debt to equity ratios". If you don't have the brass to invest at least 33% equity in your total assets (i.e. a maximum 2 : 1 debt to equity ratio), don't get into the game because you will fail.
**********

For those operators who do not invest enough where are they most likely to attempt cut costs (or cut corners as the case may be)?

Pilot wages?
aircraft maintenance?
Compliance and other fees?
Loan repayments?TH

[Whiskey Oscar Golf]

Cheers for the realistic and informative posts people, the real question I'm asking and the one I know nothing about is how much could changes in regulation effect the TOTAL viability of GA ops. There is another thread about, suggesting that the US has a cheaper industry due to changes in airspace and ATC .Rather than a subisidised home built domestic market. There are also inferences that regulation changes would also make flying cheaper.

Is this the case? What is the percentage of regulations in the overall costs of a GA op? Would any significant changes make profits greater? While keeping us safer? Is a $50.00 landing fee going to make your business unviable? Is a change in flight level for seperation going cause you to lose money and your business?

[Sunfish]

Well I actually do have an MBA and spent considerable time working out aircraft costings as well. It's not rocket science.

You have to make a profit - and that profit has to match or exceed the (real) industry average - which is going to be the long term bond rate plus a margin for industry risk. Aviation is not the first, nor the last industry to have "players" who are in it for the lifestyle, or sex or whatever, and they are a royal pain in the backside until they go broke.

The best that you can do to protect yourself is to send your worst clients (the non payers/ chisellers/cheapskates) to these guys with your warmest recommendations because these guys deserve each other.

As for cutting costs, I've yet to see a well managed business that can cut costs more than 2% - 3% per annum in real terms and even that takes herculanean efforts.

Your best bet in business is to be seen to be providing value for money. If you find customers who have a problem with your charges, then either;

(a) There is someone elsewhere providing a cheaper and better product - translation, pull your socks up.

(b) Your customer has unrealistic expectations - in which case send him elsewhere.

I suspect that the only way your costs can be lowered by industry action is by a concerted attack on the structure of liability legislation which is what drives insurance costs - and that goes for the producers of the mythical "automotive part with the aviation sticker" as well.

Personally, as highways clog with trucks and families in SUV's, and using an major RPT operator continues to be slow torture, GA or flying yourself around becomes increasinglty attractive. My only regret is that I didn't get my licence ten years ago.

[Trash Hauler]

This was posted by Torres

Cessna 208B, purchase price US$2 mill, 1,000 hours per annum utilisation, the costs are approxoimately (including percentage of total cost):

Insurance $50/hr 5.7%
Interest $229/hr 26.3%
Other $13/hr 1.5%
Total Annual Costs $292/hr 33.5%%

Fuel $258.60/hr 29.7%
Maintenance & parts $129.09/hr 14.8%
Overhaul Provisions $51.50 5.9%
Crewing $80/hr 9.2%
Charges $60/hr 6.9%
Total Hourly Cost $579/hr 66.5%

Total Aircraft Operating Cost $871/hr 100%

********************

As you can see the cost of compliance (charges) is relatively small and even a significant reduction will not change the overall cost by more than a percent or 2. While the regulator mandates maintenance to maintain continued airworthiness the majority of maintenance task requirements are manufacturer mandated and unlikely to be reduced.

Personally I believe Guanty is on the money. GA in particular should be increasing their charges to ensure an adequate margin thus maintaining the overall viability of the industry.

[Charlie Foxtrot India]

Whisky Oscar Golf,

My CASA compliance costs (renewals, audits, medicals etc) are a fixed cost and constitute 0.001% of my annual turnover.

Other costs such as landing fees are variable, and passed directly on to the customer, they do not affect the gross margin.

Good post Sunfish, amazing how the uneducated think that all customers are good customers...and are prepared to give them an indefinate interest free loan (ie extend credit) then moan and groan "so and so owes me X thousand dollars since a year ago so I can't pay the my bills" :ugh: as they lean out of their $60 000 car window.

Which leads me to another "cost" directors taking unrealistic amounts out of the business for themselves, rather than a commission or dividend; or financing assetts that don't produce an income (such as brand new cars) when their aeroplanes are falling to bits.:rolleyes:

[dragchute]

CFI

It isn't the minor compliance costs that impact upon an operator, it is the major costs to add additional equipment when the regulations change. Admittedly some lead time may allow negotiation or budget review but sooner or later compliance hits.

I'm referring to major cost items such as TAW-B or EGPWS for example. I wouldn't be surprised if GNSS goes through some sort of a revamp requiring more ergonimically enhanced equipment to gap the early installations into something more akin to the Proline 21 base on new turbo fans/props. Probably an over-exageration but I'm sure you get my drift.

I guess brand new executive cars at least come with a warranty ... not so a thirty year old meat-tray! I thought most executives would salary sacrifice into a fleet lease arrangement and enjoy a tax saving as well.

[185skywagon]

Any ideas of real operating cost of TBM 700's and the like?
Anyone with operating experience on them in Oz?

What about the Airvan??

It seems that these are the sort of machines that will be around in 20 years time.

If they can get a 400 hp Turbine or Diesel into the Airvan, they could be real handy in the airwork field, although I haven't flown one of the current models.

[mattyj]

Theres still no getting around it..Aircraft parts are way over priced. Maybe not the main aircraft structure..built in a smaller scale factory. But a huge amount of nuts bolts washers generators/alternators etc are just generic automotive stuff that is available at supercheap auto for one ten the price of the Cessna dealer. I worked for three years in GA and the owner operator of my company was constantly tearing his hair out over ridiculous prices. Especially for seals.

[Sunfish]

Remind me never to fly in an aircraft maintained by you or your fellow believers in supercheap auto.

Without wishing to rant, just because it looks the same doesn't make it the same. there are an infinite variety of mechanical properties, let alone design properties, metallurgical properties and tolerances in even a humble washer to provide an almost infinite number of ways something can be different from something else.

For the record, a very great deal of automotive products are of tighter tolerance than aircraft stuff and of excellent quality, and at very cheap prices because of economies of scale. For all I know, Cessna, Piper and others may indeed by their fastening or whatever from Bunnings, Wal Mart or Supercheap Auto and charging us zillions for them - but you and I don't know that, and we cannot see into the minds of the engineers to discover why they specified certain parts.

However if you replace an aircraft part with an automotive part, (apart from it being illegal) you are now an instant test pilot. Even if your "high tensile bolt" from supercheap has exactly the same "load rating" (leaving aside the obvious question of how this rating was arrived at), you have absolutely no way of knowing if it's performance is going to be identical in an aviation environment.

While someone may like to correct me, the item may have an equivalent tensile strength but be different in hardness, ductility, fatigue resistance, elasticity, corrosion and temperature limits and so on.

The properties of materials can be quite subtle as unfortunately demonstrated by this accident. You can even bugger things up by using a higher performance (or so you think) substitute item.

http://www.atsb.gov.au/publications/investigation_reports/2003/AAIR/pdf/aair200303579_001.pdf