Sport Pilot Talk

LSAflyer · Joined: 12 May 2011 Posts: 9

I am trying to do some research to find out the feasability of getting into a partnership and if it would really be cost beneficial. I have done research, but most articles talk about older GA planes and I cannot find much on LSA's.

I was wanting to know what I could expect to pay (talking about a 4 person share) for a brand new LSA:

Insurance
Engine overhaul at 2000 hrs (rotax 912uls 100HP)
maintenance
hanger where I am is $289/month
annual (I know you can take the repairman and do it yourself, but not something I am interested in right now)
anything else I am forgetting

I do not have much knowledge, so any information you have would be helpful. I am thinking a brand new LSA would require much less in the way of an annual, mx, ect so it could work out very cost effective after the initial capital investment. That said I can currently rent the LSA I fly for $75/hr wet almost anytime I want it, which seems like it might be a better deal to just rent.

As far as hours go, I am working on my ticket, so I fly pretty often now. I think my renting would go down after the ticket since $75 an hour adds up and would rather put capital down for lower monthly costs. If I owned I think I would easily fly 10 hrs/month. Anyway, sorry for being so long winded and thanks in advance for the responses

bshort · Joined: 09 Jul 2010 Posts: 59 Location: Ca

I guess it really depends on the plane you decide to buy. 100K/4 starts off with a 25K buy in, then fees for all you listed, and fuel? If you bought say a Challenger II new at 20K, your initial would be lower but eng maintenance with time could be more.

The thing that usually stinks about renting is beat planes and limited availability. If you flying a good plane that's avail most of the times you want, then I think I'd stay with that route until certificated. I know the rental rate is usually high, but you're paying for all those thing you listed above.

zdc · Guest

You're right about lower hourly operating costs the more you fly. If you are going to have four pilots, you are going to need a lot of rules which are stricly enforced. Find a club that has been in operation for a long time and see what kind of arrangement they have. I've seen a many partnerships head south that weren't structured properly.

The more people on an insurance policy the higher the premium and the premium will be based on the least qualified pilot of the group, so it will be expensive.

Maintenance and repairs are real wild cards. You never know what kind of SB's will come out after purchase or what may break down. If nothing major happens figure a couple of thousand for routine work and inspections.

Engine overhauls, last time I checked were 10-12 K, a new engine 19K. I would just plan on a new engine when the time came. I've seen plenty of problems with recently overhauled engines.

Myself, I would rather buy a used plane with a few hundred hours on it. Buying a new plane is not like buying a new car. You can expect even a new plane to have some bugs in it that need to be corrected. This way you not only save thousands of dollars but some one else took care of those annoying problems.

Jack Tyler · Posted: Thu May 12, 2011 10:11 am Post subject:

LSAF:

The class or type of a/c you place into partnership won't have a major impact on the benefits and homework necessary for a good partnership. In all cases, there will be both fixed costs (e.g. that monthly hanger fee, the annual insurance premium, the anticipated annual inspection cost, charts & pubs that routinely need updating, and so forth) and also per/hr operating costs (oil & filter changes, tire replacement, the FBO's monthly fuel bill, etc). When flying cross-country and buying fuel away from the home FBO, the partner on the trip usually just pays for this individually.

In addition to the above, there are two other kinds of expense to consider: Partnerships will often 'bank' the estimated future cost of an engine rebuild & propeller service on a per/hr basis. This is then added into the per/hr operating cost and collected, so that the money is available (in the partnership's bank account) when TBO is reached and the major work needs to be done. I believe there are also some interim, significant Rotax service requirements that a partnership might want to anticipate by building into the per/hr operating cost - essentially your call. The second (and not partnership-related) expense will be your own personal costs, which will lie outside either a per/hr rental fee you would be paying or your monthly assessment for the partnership's costs. AOPA and/or EAA dues, 3rd class medical, your own piloting gear are all such examples.

I found the best single resource to draw on when educating oneself about a/c partnerships was the kit published by AOPA. It offered a sample Partnership Agreement, identified issues that warrant exploration among the potential partners so there are no surprises, and so forth. That proved to be one of the two main contributors to the successful partnership I set up (the other were the partners themselves). These days, the social networking phenomenon also makes finding partners easier. AOPA operates its own matchmaking service, and David Kruger created Aircraft Partnership Association (APA) for the specific purpose of finding/matching potential partners wanting to fly an LSA. So...there are lots of resources out there for you.

BTW one of the other benefits of a partnership is that the workload of ownership is shared. So e.g. you may not want to tackle the 16 hr LSRI course right now, but one of your partners might. And it only takes one for all the partners to benefit from that cost savings for the Annual. When we kicked off our 4-pilot partnership, we divided up the duties as follows: Accountant (handled paying bills and doing the monthly assessments to each partner), maintenance (kept track of what work was required when, organized 'work parties', etc.), scheduler (published the monthly allocation of weeks to partners and made adjustments as days were traded, vacation blocks assigned) and Pubs (which was a bit of a job since it was an IFR a/c). Worked great.

A final data point: In the 4 years I was in that partnership (which is still ongoing, 15 years later), there was never a single scheduling conflict (the issue that most worries owners considering partnerships). Partly it was due to all of us wanting to accommodate one another's spontaneous needs (since we knew we'd have them too), partly to the nature of the pilots chosen (some retired, some working 8-5), and partly (mostly!) because a/c just aren't flown all that often. 100 hrs/year seems to be as good an average as any.

Good luck on your research. I've been both a single owner and a partner and, of the two, I would have to recommend - either one! <G>

ct4me · Guest Joined: 02 Mar 2007 Posts: 42 Location: Phoenix, AZ

Great information... gotta love these forums!
I researched and prepared for a small partnership, but a good deal popped-up, and I ended up purchasing as a partnership of one.
Aircraft partnerships are a well-traveled road. If you look around on the Internet, EAA, AOPA, etc, you'll find lots of examples. There's even a paperback or two on the subject.
I'd suggest you use technology to your advantage, and smooth out the communications by setting up a website for the partnership/aircraft. For $5-$10 a month, you can have a wiki or blog-based website that could work wonders. My aircraft's website, azctflyer.com, was setup to facilitate scheduling, logs, squawks, phone numbers, partnership rules, manuals, inventory, and the like. Copies of virtually all paperwork, including accounting info, is easily posted and readily accessible by all partners.
The website has a "private" section, accessible by password, and a public portion (for pictures etc). A favorite feature for friends and family is a link to the aircraft's SPOT track. It is easily maintained, right from the website itself, without need for any external website publishing programs.
I ended up not having any partners, but am ready-to-go if I change my mind.

Jack Tyler · Posted: Fri May 13, 2011 7:04 am Post subject:

A couple of quick follow-ups spurred by zdc's post:

IME whether a partnership generates a higher insurance premium (or not) is a function of the pilots' quals and not the existence of a partnership. You are a low-time LSA student, so you will be the lowest common denominator for the premium re: experience AND certificate. So in your case, I doubt the premium will have a reason to be higher if there are multiple owners.

The overhaul cost mentioned by zdc - and the issue of new vs. rebuild - are very important points to consider whether you purchase new or used, LSA or Part 23...and so you need to fold these into any discussion with potential partners and reach agreement. What do I mean? When I formed my partnership, the a/c had ~800 hrs on an 0320, or not quite half way to published TBO. We estimated an overhaul of the caliber we wanted would cost ~$20K (at that time). So the partners needed to agree on whether their per/hr operating cost should include a prorata per/hr cost to fund that full $20K after 1200 hrs of further flight time. (The alternative would have been to collect less per hr with everyone understanding - and the Agreement written to reflect it - that an assessment would be necessary and create an obligation of each partner at the time overhaul was needed). Any decision would be acceptable; it was reaching the agreement upfront, as each partner was accepted that was the important factor.

It can begin to sound like there are a lot of nits to pick on forming a partnership and so the choice can begin to look unappealing. But as mentioned by ct4me, this is well traveled ground and these days with many resources to make a partnership viable, so don't be put off by the initial homework. It's very do-able.

3Dreaming · Posted: Fri May 13, 2011 9:10 am Post subject:

One thing to watch with insurance premiums is if you have more than 4 partners the insurance company may consider you a commercial operation and adjust the premium accordingly.

drseti · Posted: Fri May 13, 2011 10:40 am Post subject:

I think I am in a position to give you some real-world operating costs, for my Evektor SportStar Max operated as a primary trainer in a flight school environment. You can see my numbers (extrapolated from 16 months of operation) at http://avsport.org/acft/N66AV_opercost.pdf. Note that, in addition to insurance (high for a flight school), maintenance, hangar rental, wear items, recurring service bulletins, and inspections, I've also factored in engine TBO and airframe depreciation. My bottom line is $106.37 an hour; aircraft rents for $109/hr wet (including fuel surcharge). So, I'm running the plane at break-even. Any money I make is from instruction.

Given my experience, the $75 hour wet you cite is an incredible price. If this is a cruiser-style LSA with a Rotax 912ULS, then the FBO must either be amortizing fixed costs over a huge number of annual hours, or they are going to lose money in the long run. Not that I'd presume to tell anyone else how to run his or her business, but my numbers indicate actual costs for a properly maintained rental aircraft.

drseti · Posted: Fri May 13, 2011 12:51 pm Post subject:

drseti wrote: My bottom line is $106.37 an hour

Within three hours of posting the above, my home airport just raised its 100LL price to $5.66/gal. This adds $2/hr to my operating costs. I'm going to have to up my fuel surcharge... :cry:

3Dreaming · Posted: Fri May 13, 2011 2:26 pm Post subject:

drseti wrote: drseti wrote: My bottom line is $106.37 an hour

Within three hours of posting the above, my home airport just raised its 100LL price to $5.66/gal. This adds $2/hr to my operating costs. I'm going to have to up my fuel surcharge... :cry:

What was the cost of fuel when you started?

drseti · Posted: Fri May 13, 2011 2:35 pm Post subject:

3Dreaming wrote: What was the cost of fuel when you started?

In January 2010, when I started the flight school, I was running 93 Octane premium mogas, at around $2.80/gal. Last Summer, the state legislature mandated ethanol in all mogas sold in the state -- so I had to go to 100LL at $4.70/gal (although Rotax allows ethanol, the airframe mfgr does not). In April, I instituted a $10/hr fuel surcharge. Now that 100LL is $5.66, I'm probably going to have to raise that to $13/hr, effective next month. :(

deltafox · Guest Joined: 06 Apr 2010 Posts: 89

Thanks Paul, this was VERY helpful. All the numbers make sense to me except Airframe Deprec. Obviously I'm not a businessman, how did you calculate $25/hr?

drseti · Posted: Sat May 14, 2011 12:10 pm Post subject:

deltafox wrote: Thanks Paul, this was VERY helpful.

Happy to assist.

Quote: how did you calculate $25/hr?

Since LSAs are fairly new, nobody knows exactly what the airframe service lifetime is going to be. I took a guess at 20 years, and amortized the $120,000 aircraft cost over that period, based upon our current utilization of 240 hours/year. Of course, I don't expect to still be instructing in it 20 years hence, but 5% of purchase price per year is probably a reasonable estimate of loss of value over time.

For tax purposes I am of course depreciating the plane over a much shorter period, but that's just an accountant's procedure - after 5 years, the plane may be fully written off as far as the IRS is concerned, but it damned well better still be airworthy! :wink:

Note that I calculate airframe depreciation separately from engine TBO. I'm expecting the aircraft to always have a serviceable engine, and to probably go through several during the airframe's lifetime.

Targetbuster · Guest Joined: 04 Mar 2011 Posts: 36 Location: Sultan wa

I think just about every new or seasoned pilot thinks about getting their own aircraft. Like Paul, I fly an Evektor Sportstar Plus only I rent. 105/hr plus $3 fuel surcharge. Frankly, no matter how I look at it, I don't think I could own one for that as I only fly about 8 hrs/mo.. The aircraft is nearly always available. I fly then I walk away. If money gets tight, I'm not committed to payments. It goes against my grain to rent, and I'm still looking for deals on a plane, but it would have to be a great deal to make it worth it.
I'm coming to peace with the fact that I may not ever own an airplane. Is that a bad thing? I'm thinking perhaps not.

drseti · Posted: Sun May 15, 2011 12:15 pm Post subject:

Targetbuster wrote: I fly an Evektor Sportstar Plus only I rent. 105/hr plus $3 fuel surcharge.

That's actually a very fair rate. I've been renting mine for $99/hr, wet Hobbs. In April I added a $10/hr fuel surcharge. In June, that's going to have to go up to $13. So, your rate is competitive.

Quote: Frankly, no matter how I look at it, I don't think I could own one for that as I only fly about 8 hrs/mo.

Whenever I do the math, the breakeven point comes up at 100 flight hours a year. Less than that, and you might as well rent. At more than that, you can probably own economically, especially since an individual's insurance is much less than an FBO's costs.

Quote: It goes against my grain to rent, and I'm still looking for deals on a plane, but it would have to be a great deal to make it worth it.

One way to ease the pain is to consider a leaseback arrangement with a flight school. But, this only works if you have high enough taxable income to make the accounting advantages matter. Unless you're in the 25% or higher marginal tax bracket, it probably won't pay. Talk to your accountant, as your mileage may vary. At best, you won't lose any money, and you'll get to fly as much as you want, while the income generated covers your operating expenses. At worst, you'll be no better off than renting (except that you get to call it your plane). After a couple of years, you can take the plane off leaseback, have it for yourself, and not be significantly out of pocket.

To see how leaseback works, take a look at my standard contract: http://avsport.org/docs/AIRCRAFT%20LEASEBACK%20AGREEMENT.pdf