What replaces old C-402 / PA31's ?
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What replaces old C-402 / PA31's ?
Can anybody out there tell me what logical, cost effective replacement will take the place of our old fleet of cabin class twins because I sure can't work it out ???
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Re-manufactured and Zero timed C402's. The life extension program was instigated by the FAA. Cessna decided to impliment the program but Piper did not. Beech is still to decide if they will go down this track.
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PY
Any idea how much the re-man. work on the c400 series aircraft would cost.
I think after sending the aircraft back to the states (cost) or even getting it done here (where) then the cost of the work (??) the 1.8 or so for a new Caravan would not seem so bad, Maybe.
No one that I know of makes piston cabin class twins anymore. But several companies make SETA and even 8+ seat piston singels now days. So if you want new thats all thats available.
As said before eventualy the cabin class twins will not be around anymore, but the big question is still what will be here to replace them.
Will the SETA take over ??,
or will the manafacturers start a new range of 8-9 seat twins, no one seems interested at the moment, but if demand is there, well who knows.
I can certinaly say that after my first turbine twin endorsement the other day that I am sold on the turbine twin idea, fast, high and ohh that smell of burnt turbine fuel. Other than that the C404 comes second, a wonderfull twin to fly.
Any idea how much the re-man. work on the c400 series aircraft would cost.
I think after sending the aircraft back to the states (cost) or even getting it done here (where) then the cost of the work (??) the 1.8 or so for a new Caravan would not seem so bad, Maybe.
No one that I know of makes piston cabin class twins anymore. But several companies make SETA and even 8+ seat piston singels now days. So if you want new thats all thats available.
As said before eventualy the cabin class twins will not be around anymore, but the big question is still what will be here to replace them.
Will the SETA take over ??,
or will the manafacturers start a new range of 8-9 seat twins, no one seems interested at the moment, but if demand is there, well who knows.
I can certinaly say that after my first turbine twin endorsement the other day that I am sold on the turbine twin idea, fast, high and ohh that smell of burnt turbine fuel. Other than that the C404 comes second, a wonderfull twin to fly.
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Not so old C402/PA31's.
The biggest problem with the C208 and the PC12 is the purchase cost. Operators of the old cabin class twin don't have $1-2 million AUD to buy one aircraft. The OZ $ is less than 50c US at the moment. In reality the OZ$ needs to reach 60-70c US before any company could considered purchasing any of the newer aircraft.
Other options include the the Reims F406, Late model Beech 99C, and Beech 1300's. These aircraft range in price from $400000-$800000 USD.
The biggest problem with the C208 and the PC12 is the purchase cost. Operators of the old cabin class twin don't have $1-2 million AUD to buy one aircraft. The OZ $ is less than 50c US at the moment. In reality the OZ$ needs to reach 60-70c US before any company could considered purchasing any of the newer aircraft.
Other options include the the Reims F406, Late model Beech 99C, and Beech 1300's. These aircraft range in price from $400000-$800000 USD.
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Bannanannanana
I like your prices:- The Reims is around the $1.2 mil USD mark.
Its been well debated on the prune as for replacements, but capital outlay aside:-
C402/PA31 - C208, PC12, C406
B58/C310 - Piper Meridian?
C206 - GA 8 airvan.
By the way have you seen the new proposed GA8T - Stretched GA8 with a PT6 due for production soon, with a cruise of around 180kts apparantly.....
I like your prices:- The Reims is around the $1.2 mil USD mark.
Its been well debated on the prune as for replacements, but capital outlay aside:-
C402/PA31 - C208, PC12, C406
B58/C310 - Piper Meridian?
C206 - GA 8 airvan.
By the way have you seen the new proposed GA8T - Stretched GA8 with a PT6 due for production soon, with a cruise of around 180kts apparantly.....
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bannanabender and others.
You've got it all back to front.
It is not becasue these types are too expensive its because you don't charge enough.
The reason that operators don't have the cash to buy new equipment C208/F406/PC12 is because they haven't been charging enough or keeping their charges in line with replacement cost for the last 20 or more years. Or if they tried there was always some ******** going to knock them off, with an even older crock of s hit. There are these little accounting terms called depreciation and capital reserves which are really to allow replacement of things that will wear out.
Ansett is a more recent example of this in reverse, they were charging the same but the money was going in the wrong direction thus NO money for fleet replacement. And worse they fell for the old trick of selling and leasing back, that's fine if you mobilise the cash back into growing the business, but if you send elsewhere you will die.
Where do you think the other airlines get the funds to keep their fleet around 5-7 yr avge age.
HA, sorry mate not of your doing,
but I get really cross when it is soooo obvious why. 
Simply the industry has spent the last 30 odd years convincing the market that it can get cheaper every year, year on year.
Clearly this was not so and clearly the condition of the GA fleet proves that this is not so.
I'm also here to tell you that the B99s and 1300 will send you broker even quicker.
There is a message in the used price of any type. When they get to the point where they are worth (wholesale) about what their engines are, do I need to draw you a picture.
I'll bore you again with the fact that we charged the equivalent of around $12-1300 ph for brand new baby Navajos (PA31-310) in the late sixties. We were paying then around $130,000 for a new IFR one. One way or another and just about any way you figure it the rule of thumb "correct" rate per hour has always been around 1% of the $USD NEW price of just about any type up to and including the bizjets. I never worked it out for the airliners, but wouldn't be surprised if it wasn't similar.
You price under that at your own risk.
You've got it all back to front.
It is not becasue these types are too expensive its because you don't charge enough.
The reason that operators don't have the cash to buy new equipment C208/F406/PC12 is because they haven't been charging enough or keeping their charges in line with replacement cost for the last 20 or more years. Or if they tried there was always some ******** going to knock them off, with an even older crock of s hit. There are these little accounting terms called depreciation and capital reserves which are really to allow replacement of things that will wear out.
Ansett is a more recent example of this in reverse, they were charging the same but the money was going in the wrong direction thus NO money for fleet replacement. And worse they fell for the old trick of selling and leasing back, that's fine if you mobilise the cash back into growing the business, but if you send elsewhere you will die.
Where do you think the other airlines get the funds to keep their fleet around 5-7 yr avge age.
HA, sorry mate not of your doing,
but I get really cross when it is soooo obvious why. Simply the industry has spent the last 30 odd years convincing the market that it can get cheaper every year, year on year.
Clearly this was not so and clearly the condition of the GA fleet proves that this is not so.
I'm also here to tell you that the B99s and 1300 will send you broker even quicker.
There is a message in the used price of any type. When they get to the point where they are worth (wholesale) about what their engines are, do I need to draw you a picture.
I'll bore you again with the fact that we charged the equivalent of around $12-1300 ph for brand new baby Navajos (PA31-310) in the late sixties. We were paying then around $130,000 for a new IFR one. One way or another and just about any way you figure it the rule of thumb "correct" rate per hour has always been around 1% of the $USD NEW price of just about any type up to and including the bizjets. I never worked it out for the airliners, but wouldn't be surprised if it wasn't similar.
You price under that at your own risk.
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Now that's a great idea, ok now every operator in GA, 1st of January 2002, shall put up their prices, after all the only way it will work is if everyone put their prices up at the same time, otherwise you'll get some little b@stard of an operator charging their normal rates, and getting all the work, thus stuffing everything up.
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Gaunty Huge Arse etc, I can recall that ATI had a battle with the Tax Ofiice in Determing that cost increase, visa vi one year to the next, for an equivalent replacement aircraft, should be deductable and be charged against profit.
But I suppose we do not do this know, as most operators do not seem to own any Aircraft outright. I think Ralph Cooper started this and I can recall seeing it in an annual report during the mid seventies.
But I suppose we do not do this know, as most operators do not seem to own any Aircraft outright. I think Ralph Cooper started this and I can recall seeing it in an annual report during the mid seventies.
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rpt2
As far as I am aware depreciation has always been deductible against income, unless they have changed the rules. It was and still is a mechanism to provide for replacement.
That's the trap with the lease routine, the lease costs are supposed to be deductible, you have to be making profits for it to mean anything, but neither is there any capital returned or accrued. You are trapped in an endles cycle of releasing. The hopefuls imagine that at the end of the day the aircraft will be worth more than the residual and that that is where what they call "the profit" is.
The lease thing became a substitute or excuse for not having any capital at all or a means of shipping it out of the company. This was not the original concept of leasing, it was meant to release (note that word again) capital back into the business.
That it was prostituted as an easy means of starting an aviation business without anything but the first months lease and fuel payments is where it all started to come unglued. The 'lease' as it is used in the GA business has now joined the pantheon of other bulls hit financial instruments such as junk bonds, derivatives and suchlike.
Whatever happened to the idea of capital.
Capital has it's own discipline, in that its owners demand it be looked after and return a bit more than they put in. It takes a great deal of effort and discipline to put together, the owner is much more careful than someone who just rents it.
As far as I am aware depreciation has always been deductible against income, unless they have changed the rules. It was and still is a mechanism to provide for replacement.
That's the trap with the lease routine, the lease costs are supposed to be deductible, you have to be making profits for it to mean anything, but neither is there any capital returned or accrued. You are trapped in an endles cycle of releasing. The hopefuls imagine that at the end of the day the aircraft will be worth more than the residual and that that is where what they call "the profit" is.
The lease thing became a substitute or excuse for not having any capital at all or a means of shipping it out of the company. This was not the original concept of leasing, it was meant to release (note that word again) capital back into the business.
That it was prostituted as an easy means of starting an aviation business without anything but the first months lease and fuel payments is where it all started to come unglued. The 'lease' as it is used in the GA business has now joined the pantheon of other bulls hit financial instruments such as junk bonds, derivatives and suchlike.
Whatever happened to the idea of capital.
Capital has it's own discipline, in that its owners demand it be looked after and return a bit more than they put in. It takes a great deal of effort and discipline to put together, the owner is much more careful than someone who just rents it.
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Did I read that correctly in that the nominal hourly charge-out rate for an aircraft should be 1% of the NEW price in today's USD$?
ie. C208B supercargo master purchase price $1.2 million USD.
Hourly rate is then $12000 USD.
A great thought, but...ahh, YOU'RE DREAMING! We currently charge $760CDN/hr for the C208B ($500 USD). I guess our customers wouldn't mind if we increased the price by 2400%.
Or did I read that incorrectly?!
ie. C208B supercargo master purchase price $1.2 million USD.
Hourly rate is then $12000 USD.
A great thought, but...ahh, YOU'RE DREAMING! We currently charge $760CDN/hr for the C208B ($500 USD). I guess our customers wouldn't mind if we increased the price by 2400%.
Or did I read that incorrectly?!
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gaunty…..I don’t know how to write such glittering pieces as yourself, in fact my kids think I’m illiterate after reading some of your treasures, but I’ll put this as best I can…..What the **** are you trying to say.…….
Yes, the prices charged are lower than what would be required to support the purchase of new aircraft, and yes, if prices were increased, the obligatory arshole would come along and undercut you, but, until the Australian Financial World pulls it’s head out of it’s collective arse’s and works to help the Australian Business Community in general, then we will be stuck with the same old same old. Just to supply some quick figures for the gathered throng…..You suggested the use of NEW PC12’s, C208B’s & the Reims F406. I don’t got no figures on the 406 ready to hand, but I know that they average in price between USD$800K – USD$1.2m…..I will just do the numbers on the C208B for the purpose of the exercise, but as a matter of interest, insert USD$3.3m per aircraft for the PC12.
Now, you walk on down to you local NAB and see your Business Banking Manager and say, “Hey Steve. I got this Business Proposition for you. Here’s my business plan, cash flow, projections etc. I want to run 5 NEW Cessna C208B’s outa Sydney to Belmont to replace the Aero Duck aircraft.”(insert any viable plan here) Steve looks at you and says, “How much is ‘dis gonna cost us up front.” “Well Steve, the purchase price of NEW C208B Caravans is USD$1.6m ex USA.” (Steve buckles at the knees), “But, I have to then allow for Ferry to Australia, Australian C of A, fitment of a HF radio, fitment of a EGPWS, so you had better allow a further USD$150K per aircraft.”…..You pull out the smelling salts because Steve has now lost his footing and hit the floor.
Now we are talking about USD$1.750m per aircraft (for those that don’t know, or don’t want to know, that’s USD$8,750,000.00 or in Pacific Pesos, AUD$17,748,478.70 at today’s exchange rate)…...Assuming you have pictures of Steve in an embarrassing position with a German Shepherd, and you sign over your house at Caloundra, your commercial buildings, land, wife, children, mother in law (she goes first), your life saving, shares, floating charge over your entire life, all up worth we’ll say, AUD$2m (you have to give them this, as they won’t accept the aircraft as full collateral), and Steve agrees to advance you the money, not because of the security, but because of the pictures…..The NAB, being probably the most pedantic bunch of money sharks in the industry, will tell you to **** off before you have a chance to present your Business Plan, why, because you have dared to suggest they finance one of the 4 F’s (again, for those who don’t know, the 4 F’s are, Flying, Floating, Freighting and F******)….but, we are living in dream world here, so let’s assume they don’t tell you to **** off and continue.
Just suppose that the pictures you have of Steve are real embarrassing, and the NAB agrees to 84 months 40% residual at current interest of say 8% (more than likely, the best they will do is 60 months)…..that equates to approx USD$10,850.00 per month, per aircraft, or AUD$22,010.00 approx…..I say approx because I have not allowed for stamp duty and stuff like that…..Somewhere between 4 – 12 weeks later, you will get the funds, so don’t try and do this expecting to get service or assistance……You will have to do everything to get the money and will have to pay each step of the way.
That’s AUD$110,050.00 per month you have to meet, every month. Is it possible to run the 5 C208B’s from Syd to Belmont (I use this as an example only) and make a profit and meet the AUD$110,000.00 per month, YES if managed and operated properly…..Is it possible to go to the NAB, or for that matter any of the major finance institutions, and secure the funds, NO
Now let’s take the same example, and walk into a bank in the USA……The first thing you will find, is that you don’t have to walk into the bank…..It can all be done by fax, phone & e-mail……The possibility of getting the USD$8,750,000.00 is very real, and they will accept the aircraft as full collateral, with obvious directors security etc, but no mortgage over your sex life…..You will get rates of approx 8% interest (today), up to 180 months, 50% or better residual, and you don’t feel like you have been raped, pillaged and p!ssed on at the end of the day…..and it will happen inside seven days……That equates to USD$8,036.00, or AUD$16,300.00 per month per aircraft approx.
In relation to the comment about Ansett, I think that the why’s and how’s of that debacle could be debated for ever and a day, and we would be agreeing, so there would be no debate
BTW…..I couldn’t agree with you more re the 99’s & 1300’s.
In respect of the capital, I’m not real sure what you are referring to there……Are you suggesting that you don’t lease the aircraft, but pay cash for them, or a goodly portion of them????…..If this is the case, what do you use for other incidentals, like staff wages, maintenance, fuel bills, airways charges, super, tax, cash flow…..If you are suggesting that one should have sufficient funds to be able to purchase outright and cover the cost of these necessities, then why the hell go into business in the first place…..place your money in a long term investment and live nicely off the interest……if everyone did that, then we would have no aviation industry……Leasing is the only viable way of purchasing plant & equipment, regardless of the form it takes.
As usual, we don’t agree on this subject, but, wouldn’t it be boring if we all agreed
Dockjock…..I usually allow for .013% (oops edited) per month of the value of the aircraft as an indicative leasing factor.
This is the edit
Grogmonster…..I nearly forget to answer your question…..IMHO, Australian GA is evolving, albeit slower than the rest of the world, and the reason for the that speed is, IMHO, explained above……Cast you mind back, approx 5 – 10 years ago…..Most movements with freight and charter RPT, were being done with C310’s, C402’s, B58’s, PA31’s etc…..Now we use Metro, J31’s, SAAB’s, even RJ’s to do the RPT and freight, and King Air 350’s etc to do the charter……It is my belief that we will mature to operating Metro’s and SAAB’s and EMB120’s etc etc, but not until the $$$ improve dramatically, and not until the Financial houses look at financing these types of aircraft, at realistic rates and conditions, instead of financing the older pistons…..It’s relatively easy to get finance for a piston, but try it for a turbine.
[ 01 October 2001: Message edited by: nasa ]
[ 01 October 2001: Message edited by: nasa ]
Yes, the prices charged are lower than what would be required to support the purchase of new aircraft, and yes, if prices were increased, the obligatory arshole would come along and undercut you, but, until the Australian Financial World pulls it’s head out of it’s collective arse’s and works to help the Australian Business Community in general, then we will be stuck with the same old same old. Just to supply some quick figures for the gathered throng…..You suggested the use of NEW PC12’s, C208B’s & the Reims F406. I don’t got no figures on the 406 ready to hand, but I know that they average in price between USD$800K – USD$1.2m…..I will just do the numbers on the C208B for the purpose of the exercise, but as a matter of interest, insert USD$3.3m per aircraft for the PC12.
Now, you walk on down to you local NAB and see your Business Banking Manager and say, “Hey Steve. I got this Business Proposition for you. Here’s my business plan, cash flow, projections etc. I want to run 5 NEW Cessna C208B’s outa Sydney to Belmont to replace the Aero Duck aircraft.”(insert any viable plan here) Steve looks at you and says, “How much is ‘dis gonna cost us up front.” “Well Steve, the purchase price of NEW C208B Caravans is USD$1.6m ex USA.” (Steve buckles at the knees), “But, I have to then allow for Ferry to Australia, Australian C of A, fitment of a HF radio, fitment of a EGPWS, so you had better allow a further USD$150K per aircraft.”…..You pull out the smelling salts because Steve has now lost his footing and hit the floor.
Now we are talking about USD$1.750m per aircraft (for those that don’t know, or don’t want to know, that’s USD$8,750,000.00 or in Pacific Pesos, AUD$17,748,478.70 at today’s exchange rate)…...Assuming you have pictures of Steve in an embarrassing position with a German Shepherd, and you sign over your house at Caloundra, your commercial buildings, land, wife, children, mother in law (she goes first), your life saving, shares, floating charge over your entire life, all up worth we’ll say, AUD$2m (you have to give them this, as they won’t accept the aircraft as full collateral), and Steve agrees to advance you the money, not because of the security, but because of the pictures…..The NAB, being probably the most pedantic bunch of money sharks in the industry, will tell you to **** off before you have a chance to present your Business Plan, why, because you have dared to suggest they finance one of the 4 F’s (again, for those who don’t know, the 4 F’s are, Flying, Floating, Freighting and F******)….but, we are living in dream world here, so let’s assume they don’t tell you to **** off and continue.
Just suppose that the pictures you have of Steve are real embarrassing, and the NAB agrees to 84 months 40% residual at current interest of say 8% (more than likely, the best they will do is 60 months)…..that equates to approx USD$10,850.00 per month, per aircraft, or AUD$22,010.00 approx…..I say approx because I have not allowed for stamp duty and stuff like that…..Somewhere between 4 – 12 weeks later, you will get the funds, so don’t try and do this expecting to get service or assistance……You will have to do everything to get the money and will have to pay each step of the way.
That’s AUD$110,050.00 per month you have to meet, every month. Is it possible to run the 5 C208B’s from Syd to Belmont (I use this as an example only) and make a profit and meet the AUD$110,000.00 per month, YES if managed and operated properly…..Is it possible to go to the NAB, or for that matter any of the major finance institutions, and secure the funds, NO
Now let’s take the same example, and walk into a bank in the USA……The first thing you will find, is that you don’t have to walk into the bank…..It can all be done by fax, phone & e-mail……The possibility of getting the USD$8,750,000.00 is very real, and they will accept the aircraft as full collateral, with obvious directors security etc, but no mortgage over your sex life
…..You will get rates of approx 8% interest (today), up to 180 months, 50% or better residual, and you don’t feel like you have been raped, pillaged and p!ssed on at the end of the day…..and it will happen inside seven days……That equates to USD$8,036.00, or AUD$16,300.00 per month per aircraft approx.In relation to the comment about Ansett, I think that the why’s and how’s of that debacle could be debated for ever and a day, and we would be agreeing, so there would be no debate
BTW…..I couldn’t agree with you more re the 99’s & 1300’s.
In respect of the capital, I’m not real sure what you are referring to there……Are you suggesting that you don’t lease the aircraft, but pay cash for them, or a goodly portion of them????…..If this is the case, what do you use for other incidentals, like staff wages, maintenance, fuel bills, airways charges, super, tax, cash flow…..If you are suggesting that one should have sufficient funds to be able to purchase outright and cover the cost of these necessities, then why the hell go into business in the first place…..place your money in a long term investment and live nicely off the interest……if everyone did that, then we would have no aviation industry……Leasing is the only viable way of purchasing plant & equipment, regardless of the form it takes.
As usual, we don’t agree on this subject, but, wouldn’t it be boring if we all agreed
Dockjock…..I usually allow for .013% (oops edited) per month of the value of the aircraft as an indicative leasing factor.
This is the edit
Grogmonster…..I nearly forget to answer your question…..IMHO, Australian GA is evolving, albeit slower than the rest of the world, and the reason for the that speed is, IMHO, explained above……Cast you mind back, approx 5 – 10 years ago…..Most movements with freight and charter RPT, were being done with C310’s, C402’s, B58’s, PA31’s etc…..Now we use Metro, J31’s, SAAB’s, even RJ’s to do the RPT and freight, and King Air 350’s etc to do the charter……It is my belief that we will mature to operating Metro’s and SAAB’s and EMB120’s etc etc, but not until the $$$ improve dramatically, and not until the Financial houses look at financing these types of aircraft, at realistic rates and conditions, instead of financing the older pistons…..It’s relatively easy to get finance for a piston, but try it for a turbine.
[ 01 October 2001: Message edited by: nasa ]
[ 01 October 2001: Message edited by: nasa ]
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Dockjock
Just checking to see who was awake?
Pesky decimal point here should have been 0.1%.
It is complicated a bit by the USD, or more correctly the weakness of the OzD.
This has gone from around AUD$1.25 down to less than AUD$0.50c over the period discussed.
The rate you charge when calculated back to the Oz eqivalent actually goes a fair way to support my "rule of thumb" in so far as it is possible.
I am talking about the Oz market here and although we share a number of things in common like huge landmass, wilderness and few people, we have a few little peculiarites like kero at near the same price as gas, a taxation system designed to drive you out of business and blah blah blah
Just checking to see who was awake?
Pesky decimal point here should have been 0.1%.
It is complicated a bit by the USD, or more correctly the weakness of the OzD.
This has gone from around AUD$1.25 down to less than AUD$0.50c over the period discussed.
The rate you charge when calculated back to the Oz eqivalent actually goes a fair way to support my "rule of thumb" in so far as it is possible.
I am talking about the Oz market here and although we share a number of things in common like huge landmass, wilderness and few people, we have a few little peculiarites like kero at near the same price as gas, a taxation system designed to drive you out of business and blah blah blah
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Well from my backpacking days meeting Aussies around europe, it seems we have more in common than our friendly demeanor. Now we have government and economny as well.
Actually the Canadian economy is very similar to yours, in that we are taxed to death, and the CDN$ is worth around $0.65USD.
Your comments re:landmass and population are spot on as well.
Your figures give me an estimated hourly rate of $1200, which makes ALOT more sense than the latter. We too are in a "lowest-bidder" market, with no thought given to better service/operating costs/profit etc. which is pretty well the reason for our rate. There is an operator across the field from us that charges the same...
We're strictly cargo, and (I'm a relative newbie) I'm amazed at what we will bid for work...but as they say "You fill'em, we'll fly'em" I try not to worry about it.
ps. my wandering eyes have seen the lease agreements. The current payments with Cessna Finance are (2001 model C208B) in the range of $15000USD per month ea. Yikes!!
Actually the Canadian economy is very similar to yours, in that we are taxed to death, and the CDN$ is worth around $0.65USD.
Your comments re:landmass and population are spot on as well.
Your figures give me an estimated hourly rate of $1200, which makes ALOT more sense than the latter. We too are in a "lowest-bidder" market, with no thought given to better service/operating costs/profit etc. which is pretty well the reason for our rate. There is an operator across the field from us that charges the same...
We're strictly cargo, and (I'm a relative newbie) I'm amazed at what we will bid for work...but as they say "You fill'em, we'll fly'em" I try not to worry about it
.ps. my wandering eyes have seen the lease agreements. The current payments with Cessna Finance are (2001 model C208B) in the range of $15000USD per month ea. Yikes!!
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Dockjock
It seems your operators have the same mentality as ours, keep chasing the price down until everyone goes broke then start again with the same aircraft bought at fire sale prices from the liquidator, which means they can go even lower again.
nasa
Sound familiar mate.
I am glad we are in heated agreement on this subject.
Thanks for going to all the trouble to prove my argument re revenue rate and lease v capital financing: D
The penny will drop soon I hope .
I understand your feelings towards the banks but they have subsidised the GA industry to the tune of over $200,000,000 in the recent past. I know coz I helped em sort it out, teach them that the prudential issues are no different in the aviation business than they are in any other. They already knew that but got “mystified” by the you won’t understand it this is “aviation” but it works so trust me.
I taught them the difference between being a shareholder/venture capitalist and being a lender.
I taught them, for example, that a 2 line $1,000,000 “valuation” on a certain high wing twin type that could be bought in the market at $0.35million all day every day, was just a little suss and that the writer should have been prosecuted. They didn’t I guess, because it would not have looked too good for them either, so they wrote it off .
I taught them that they should do the same due diligence and valuation process they would do if they were being asked to lend on a $1,000,000 building.
They already knew that but got “mystified” by the you won’t understand it this is “aviation” but it works so trust me.
I taught them that just because the engines are on the airframe they don’t necessarily belong to them.
I taught them how to go look for disappearing airframes at Simsmetal, sold by the much-abused staff to pay for the Christmas party.
So why are we not surprised?
Almost all of the duds did not have an adequate capital base to start with, and the loss in the company was almost always AT LEAST the difference between what they were charging and what they should have been, PERIOD.
I also taught them that the import costs, exchange rate, C of A, stamp duty, ferry and whatever do not add any value to the US market price in the usual sense and in fact the cost of return to the US register should be deducted form the USD wholesale as part of the valuation process.
The size (very small) of the Oz aircraft market and the even fewer numbers of Oz operators of a given type can mean in fact, that as far as Oz market is concerned the aircraft is valueless. Value = buyers, no buyers = no value.
And that doesn’t even begin to include the regulatory maintenance issue.
I agree that the US banks have a different view, but it is also a hugely different market. But I have yet to see one that wasn’t a venture cap just hand out money because you think it’s a good idea.
In regard the capital v leasing argument have a little chat to an accountant or consult some texts in “Starting a Business 101” about this little matter.
I agree in the current context if you use your own capital you are better and safer leaving it the bank, at least until the operators go take the same lessons. But if the revenue was where it should be then you would get a better return, otherwise everybody would have their money in the bank and nobody would be investing in anything, but neither would they get any interest.
Leasing is not a substitute for capital unless the lessor is a venture capitalist as well in which event he will want or should have a say in running the business day to day and I guarantee he will want a guarantee on the revenue rate as well.
Using Mum and Dads house and selling the kids is not the way.
I guess what we are talking about here is who is taking the risk and who gets the profit.
That is why the big end of town investors in this business, are conspicuous by their absence.
This business has always required heavyweight capital and heavyweight management of it. That and how it has arrived in the hands of ma and pa Kettle is a long and interesting story.
The myth that nowadays, or ever, that you could start a business on a wing and a prayer is just that. All of the successful businesses including Ansett in its past glory grew out of properly capitalised growth.
Let the games begin
It seems your operators have the same mentality as ours, keep chasing the price down until everyone goes broke then start again with the same aircraft bought at fire sale prices from the liquidator, which means they can go even lower again.
nasa
Sound familiar mate.
I am glad we are in heated agreement on this subject.
Thanks for going to all the trouble to prove my argument re revenue rate and lease v capital financing: D
The penny will drop soon I hope .
I understand your feelings towards the banks but they have subsidised the GA industry to the tune of over $200,000,000 in the recent past. I know coz I helped em sort it out, teach them that the prudential issues are no different in the aviation business than they are in any other. They already knew that but got “mystified” by the you won’t understand it this is “aviation” but it works so trust me.
I taught them the difference between being a shareholder/venture capitalist and being a lender.
I taught them, for example, that a 2 line $1,000,000 “valuation” on a certain high wing twin type that could be bought in the market at $0.35million all day every day, was just a little suss and that the writer should have been prosecuted. They didn’t I guess, because it would not have looked too good for them either, so they wrote it off .
I taught them that they should do the same due diligence and valuation process they would do if they were being asked to lend on a $1,000,000 building.
They already knew that but got “mystified” by the you won’t understand it this is “aviation” but it works so trust me.
I taught them that just because the engines are on the airframe they don’t necessarily belong to them.
I taught them how to go look for disappearing airframes at Simsmetal, sold by the much-abused staff to pay for the Christmas party.
So why are we not surprised?
Almost all of the duds did not have an adequate capital base to start with, and the loss in the company was almost always AT LEAST the difference between what they were charging and what they should have been, PERIOD.
I also taught them that the import costs, exchange rate, C of A, stamp duty, ferry and whatever do not add any value to the US market price in the usual sense and in fact the cost of return to the US register should be deducted form the USD wholesale as part of the valuation process.
The size (very small) of the Oz aircraft market and the even fewer numbers of Oz operators of a given type can mean in fact, that as far as Oz market is concerned the aircraft is valueless. Value = buyers, no buyers = no value.
And that doesn’t even begin to include the regulatory maintenance issue.
I agree that the US banks have a different view, but it is also a hugely different market. But I have yet to see one that wasn’t a venture cap just hand out money because you think it’s a good idea.
In regard the capital v leasing argument have a little chat to an accountant or consult some texts in “Starting a Business 101” about this little matter.
I agree in the current context if you use your own capital you are better and safer leaving it the bank, at least until the operators go take the same lessons. But if the revenue was where it should be then you would get a better return, otherwise everybody would have their money in the bank and nobody would be investing in anything, but neither would they get any interest.
Leasing is not a substitute for capital unless the lessor is a venture capitalist as well in which event he will want or should have a say in running the business day to day and I guarantee he will want a guarantee on the revenue rate as well.
Using Mum and Dads house and selling the kids is not the way.
I guess what we are talking about here is who is taking the risk and who gets the profit.
That is why the big end of town investors in this business, are conspicuous by their absence.
This business has always required heavyweight capital and heavyweight management of it. That and how it has arrived in the hands of ma and pa Kettle is a long and interesting story.
The myth that nowadays, or ever, that you could start a business on a wing and a prayer is just that. All of the successful businesses including Ansett in its past glory grew out of properly capitalised growth.
Let the games begin