how to figure engine reserve price per hour

[tathepilot]

For a light twin. How do you calculate how much of the hourly operating cost goes to maint.?

 

[avbug]

A very rough number is the cost of fuel per hour. If you're burning Fifty bucks of fuel an hour, there's your maintenance cost, as well. This is a rough number, as there's a lot you can't predict, but when you consider maintenance you're considering not only ongoing maintenance costs, but engine replacement as well. You can mutiply that number out by the anticipated time before overhaul to see what your balance will be without any maintenance, then deduct the cost of a replacement powerplant. The balance is what actually gets spent on maintenance.

That's assuming a relatively trouble free life. Some aircraft, twice that value isn't enough, but for most, it should be adequate, plus a little. It's not a very scientific approach, and it certainly doesn't work for all aircraft, but it's a starting point.

Another good rule of thumb I've often heard is to take what you think it's going to cost...and double it.

 

[tathepilot]

Thanks Avbug. With this formula it's hard to see how small flight schools make any money..

 

[brokeflyer]

you take the cost of an overhaul and divide it by the number hours per you plan/actual fly per year.

so just a gues using something simple like a c150, if you fly 300 hours per year and want a cheap overhaul of $5000

$5000/300 = $16.6 per hour

If you want a factory like-new guesstimate $12,000

$12,000/300 = $40 per hour.

Same formula can be used for insurance and other costs. All these can change if you fly more/less. If you rent out for more than 300 per year but use 300 as your baseline than you can see things get cheaper for you.

 

[avbug]

Maintenance costs are high. There are no two ways about it.

One of the big mistakes a first-time owner often makes is underestimating maintenance costs. Where the powerplant is concerned, for example, the owner may mistakenly believe that forecasting a reserve is as simple as dividing the TBO for the engine into the cost of a new engine, and using that as a per hour figure. It doesn't work that way, however.

For one thing, the engine may not make TBO. For another...TBO isn't a realistic number for a second-run, or overhauled engine...because the definition of overhaul is quite variable and non-specific, and there are no guarantees after the first overhaul. (Many don't realize that in an overhaul, the only requirement is that parts be tested and found in tolerance...they need not be replaced). Another problem is that throughout the life of the engine, additional consts are going to crop up, ranging from routine preventative maintenace to unforecast items such as cylinder changes, AD's which develop, etc. These are all part of the engine reserve that should be set aside.

Many owners never make it to the point of replacing the engines...they'll sell the airplane before that time. However, before that sale is finalized, they may find that they have significant maintenance to do. It's not at all unusual to find the first annual inspection costs six thousand dollars or more on a light single or twin...sometimes substantially more (even with a good pre-buy and quality maintenance). I've seen it happen time and tim again.

You could break it down as an engine reserve strictly for replacement, then separate reserves for things like vacum pumps, cylinders, generators, starters, etc...but it's far easier to incorporate the cost of an engine replacement or overhaul into the total maintenance reserve...because it's all coming out of your pocket.

With that in mind, you can see how a twenty five thousand dollar, or forty thousand dollar engine is going to eat into the total reserve, leaving considerably less for other maintenance issues that develop with use. These issues could range from propeller replacement or overhaul to avionics repairs, to rebuilding of the engine mount, repair to landing gear, etc.

Even if you discount airframe and customer system maintenance, the cost of engine reserve still higher than the cost of engine replacement because of all the many factors that come into maintaining that engine to get it to the point of replacement or overhaul. Especially if the engine doesn't make TBO, or gets replaced prior to that time in whole, or parts (a top overhaul, for example, or individual cylinder changes).

An old axiom about people starting a business is that all too often, they forget to pay themselves. Likewise, many owners find themselves caught out when they fail to pay the airplane as a function of normal operations. Far too many launch into airplane ownership, or operation, in the blind hope that nothing will go wrong...but find when the cost balloons above their savings that they can't afford to sell it either, because the aircraft value won't be correct until the maintenance is performed. The only way to ensure this doesn't become a problem for you is to either start with enough capital to offset costs as they develop, or to pay out a reserve to handle problems that occur, and ultimately major expenses such as engine overhaul or replacement.

 

[brokeflyer]

yeah a lotta owners screw up the engine reserve. That is why you find out how much you wanna use/rent the plane and use the yearly hours figure. It works everytime. If you fly a lot then use a realistic hourly figure, i.e. 500+ per year.

If you dont fly a lot use 200 or so. IF you fly more/less than your figure then you will know what the hourly figure is.

I've owned several planes and had several overhauls from cessna's up to a king air and learjet I operated. PM if you have any more questions....glad I could help.

 

[PBRstreetgang]

Hello,
It has always been the cost of overhaul/reman divided by TBO X number of engines. Unscheduled MX costs are above and beyond the engine reserve. MX reserve can be another line entirely.
PBR

 

[avbug]

That really doesn't work, in real life.

If you're talking a new engine and could always plan on the engine making it to the scheduled TBO, possibly. If it's not a first-run engine, if it's been overhauled before, all bets are off, and one should not base reserve on the factory TBO, and especially not on any adjustments up from there.

Further, from an owner point of view, rather than an operator point of view, there's little point building separate accounts or consideration for each category of maintenance. One might as well have a reserve established separately for avionics, for powerplant, for electrical, yada, yada. It's not practical, especially for a light airplane.

 

[brokeflyer]

yeah that wont work.....try it the way i suggested