Maintenance economics

[IO540]

The standard Annual for a SEP is about 40 hours.

That's about 1 man-week.

This is normally charged out at £2500+VAT.

The cost of employing the bloke for that week is about £500.

So the maintenance company should be making loads of £££££.

If you can get say four planes in your hangar, that's £8000 of contribution towards your fixed costs, per week.

Yet most aren't (or apparently aren't). Why aren't they?

Is it because many/most are disorganised and spent too much time waiting for parts, with the plane sitting in their hangar? (IOW, under-utilisation of assets resulting from poor project management.)

In some cases it may be due to non-chargeable work but, from what I have seen, all extras go on top of the 2.5k under the heading of "defects and ADs". This should be minimal on a new plane but on a 30 year old one it could add a few k.

[Katamarino]

How much do they have to pay in protection money to the CAA...?

And is the cost of employing a qualified engineer really that low, after the employer's national insurance contributions, etc?

I can't imagine that hangars, or liability insurance, or the like come cheap either.

[IO540]

Fair comments but let's see some actual figures.

BTW the person doing the work does not have to be an EASA part 66 certified engineer (formerly CAA LAME), usually. He can be just a kid who did a college course. Most companies employ kids (like most solicitor etc firms).

[JUST-local]

Where I work we charge for 40 hours, sep annual as mentioned but much more work goes into it than the 40 hours!
The overheads are large for a small outfit and have GROWN considerably in the last few years, not really with EASA but general overheads.

Getting four annuals done in a week even with enough "suitable" staff very little chance. :ugh:

JL

[dirkdj]

If you are self employed, you do what you want, but if you have employees, it's a different ballgame. I had to fire someone who had worked for me for 31 years. No complaints about his work, but no way to get him to adapt to the new digital type of work we do now. Total cost so far: 194K€ of which about a third goes to the ex-employee. The cost of labour is horrendous, the end customer pays for it all.

[A and C]

Above it has been said that companys employ kids, whel this is partly true but these kids have to be supervised and you can't let them do a lot of stuff because it is far to safety critical.

These "kids" are also the next generation of LAME's so you have to give them the time to aquire skills, this all costs money and eats into the (very small) profit.

The CAA is also a big expense with the way they administered the introduction of Part M, last week they sent us a letter telling us that they will reduce the cost of approvals for part M, the one thing that was missing from the letter was any numbers! however I can assure Bose-X that we will pass on the savings to the customers in full.

[IO540]

The aim of my post was not to slur the maintenance business; it was to dig out some numbers which one could add up to see why apparently not a lot of firms are making money.

I've been in a manufacturing business for 32 years so can probably add up OK.

What would be the rent/rates on a hangar big enough for four 10m-wingspan (PA28) planes to be worked on? From leases I've seen down here, I reckon it is about £50k/year; half that if you own a freehold or a long lease so you pay just a ground rent and rates.

Insurance should be a few k. I have seen a quote of £500/year for a non-maintenance 6-plane hangar - building and contents. With maintenance there is a liability cover also. Few k /year?

There has to be an "elephant in the room" somewhere.

but much more work goes into it than the 40 hours!Why cannot you bill the extra hours?

[Rod1]

“but much more work goes into it than the 40 hours!”

Could you give us an idea of “normal” total hours and a high level breakdown?

Rod1

[Chief Erwin]

we pay $50000 au for data to maintain the aircraft.
tooling is needed too
keeping tooling calibrated
electricity, rates, stocked store, freight.
insurance, workers comp, super, employee benifits
employee training
some more costs there, they all start to add up

[Malcom]

The standard Annual for a SEP is about 40 hours.

That's about 1 man-week.

This is normally charged out at £2500+VAT.

Thats £62.50 / man-hour - Any GA MOs really charging that amount??

[what next]

Thats £62.50 / man-hour - Any GA MOs really charging that amount??

No, I don't think you will find a GA MO (here in Germany at least, but the UK has the same level of prices/cost) that only charges the equivalent of 62 GBP. That would be the hourly rate of a typical car maintenance garage (not Mercedes or BMW though).

Aviation? Not below 100Euros/GPB per hour...

[Malcom]

The standard Annual for a SEP is about 40 hours.

That's about 1 man-week.

This is normally charged out at £2500+VAT.

The cost of employing the bloke for that week is about £500.

So the maintenance company should be making loads of £££££.

If you can get say four planes in your hangar, that's £8000 of contribution towards your fixed costs, per week.

Yet most aren't (or apparently aren't). Why aren't they?

Is it because many/most are disorganised and spent too much time waiting for parts, with the plane sitting in their hangar? (IOW, under-utilisation of assets resulting from poor project management.)

In some cases it may be due to non-chargeable work but, from what I have seen, all extras go on top of the 2.5k under the heading of "defects and ADs". This should be minimal on a new plane but on a 30 year old one it could add a few k.

I think the answer lies within your business plan, if I read it correctly. I expect the bloke doing 4 annuals a week and being paid £500 is in hospital suffering physical & mental exhaustion and thus not raking it in any more .
4 Annuals - 4 x 40 hours = 160 hours. (7x 24 hour day = 168 hours).

[IO540]

Not quite; what I was thinking is that one man can complete a straightforward SEP Annual in one week.

Then, how many planes you can work on concurrently depends on the size of the premises. If you had a place big enough for four planes, then you would probably have four mechanics working there.

I suspect the #1 issue is that one doesn't get the steady business to keep the "line" occupied the whole time.

In practice, you would put two men on each plane. A lot of operations are much easier with 2 anyway. I have been using such a company; they do the Annual in 2-3 days.

[Ultranomad]

In the long run, it may be more advantageous for the aircraft owner to get his/her own Part 66 license...

[S-Works]

That would be the hourly rate of a typical car maintenance garage (not Mercedes or BMW though).

However a garage doing car maintenance does not take 40hrs to do an inspection......

[IO540]

it may be more advantageous for the aircraft owner to get his/her own Part 66 license...

Or an FAA A&P/IA.

Without a doubt, the only way to really cut into aircraft operating costs is to be an authorised engineer and do your own maintenance. I knew a few people that do that.

One thing which keeps tabs on this practice is the scarcity of hangars in which maintenance is allowed by the freeholder.

[Fuji Abound]

I suspect the same is true of many businesses that largely charge for their time - some are very well run and very profitable, others a complete disaster. I always find it fascinating to do the charge out rate sums of what could be charged, and compare these with what is actually charged AND paid. More often than not therein you have your answer.

It never ceases to amaze for how many businesses there are tried and tested formula and yet people try to rewrite the recipe book. The very best example is resteraunts. If you consider the average resteraunt that actually manages to produce good food it is superficially very difficult to understand why they dont make money, but the majority dont and the vast majority of new start ups fail in the first few years. They have no idea what their GP is and when they eventually find out they think 60% is ok. The sad truth is you cant make a resteraunt pay with a GP of 60% any more or less than you can make a garage or an aircraft maintenance op pay if you are only recovering 60% of your chargeable time; and recovering doesnt mean recorded hours on the time sheet, but money in the bank account (after bad debts :}). After that have a viable model for the fixed costs and you will at least make a living.

[IO540]

Do maintenance shops suffer a lot of bad debts, and do they often have to reduce bills due to complaints?

I'd think outright bad debts are not an issue because you can stick a lien on the hull.

[cockney steve]

I have had experience running a one-man repair garage.

Owners would expect a lower hourly rate than the majors/franchises.
They would expect me to be intimately aquainted with the tricks ,foibles and quirks of their particular make /model.
They expected me to carry every part for their vehicle ,at a more competitive price than the franchise.
They expected Ihad all the specialised jigs and workshop tools for their pride and joy.

Sadly, I only had 1,000 square feet, special tooling had to be done without/expensive universal substitutes used/the job contracted-out,-parts had to be ordered as required and their delivery awaited. Favours called-in,relationships "used" to find the resolution to some problems.

All this translates to a workshop cluttered with "work -in-progress", a huge phone-bill, a lot of running around and general admin time.....not forgetting the "wasted " time booking-in the work, collecting contact-info,discussing the work-schedule envisaged, exploring alternatives and presenting the customer with their options.

Anyone thinking the "retail" business of GA aircraft -maintenance will achieve "book-time" turnarounds is on another planet.

Oh, and what about the inaccesible nut that requires a special (and expensive) spanner It's rusted solid, shears it's stud which then necessitates extensive dismantling,drilling-out,thread-reclamation and rebuilding!

" To removing /replacing bracket with rusted nut £300"
It didn't usually happen, -you bit the bullet on a lot of the cost!

I usually worked~60 hours a week and hoped to book ~30
And that, friends, is one of the reasons that hourly rates are high...also don't forget things like Statutory holidays, sick-pay,redundancy,mandatory safety-tests/insurances/employee workwear etc. this all has to be factored into that hourly rate!