Opinions on leaseback proposal

[iranse]

Just wondering if anyone out there can give me an opinion on a leaseback proposal for a King Air 200 based in the NE. The fixed costs will be about $3000/month for the hangar and with current quotes, insurance will run about $34-37,000/year. The charter company will kickback $450/hr to the owner. They anticipate doing 400 revenue generating hours per year on the aircraft. When the owner uses the aircraft for his own flights, operating costs will be about $800 per hour including just about everything. Also, does any know if $150/hr is a good number for maintenance reserve? Purchase price should be between $1-1.5 million. From my research, these numbers seem pretty fair to me but then again, I'm a flight instructor so I'm not the most knowledgeable on this aspect of aviation. Hopefully everything works out and I can upgrade from the right seat of a 172 to a King Air. Thanks a lot in advance. You guys have always been great on info.

 

[cjh]

First, $150 per hour sounds way too low to me. I don't have KA experience, but that number is closer to the smaller twins I do/have flown, so I can't imagine it's anywhere close to accurate for a KA.

Regards leaseback, my opinion of them: RUN, run fast, run far, run away while there's still a dollar in your pocket!!

There's a reason they're looking for someone else to own the plane. The people who make money in leasebacks are the people providing the hanger, fuel, passengers, and maintenance. None of those people are your student. Your student is the person who's ultimately going to be paying all those people. The part of all those terrific numbers that will eat him alive is the maintenance. The required inspections, the things they WILL find, and then the unexpected items that WILL happen WILL eat up any profit he hopes to make. Plus, hope to hell that nothing happens to the aircraft or any of the passengers, or your friend will also be included in the litigation that will surely follow.

Leaseback: assuming you have a large fortune to start with, it's a great way to turn it into a small one. (That old joke didn't come into existance for no reason.)

RUN RUN RUN RUN RUN RUN RUN RUN RUN RUN RUN

If the above hasn't convinced you, I have a friend who purchased a KA being used as a charter plane by "the" charter company in our area. So far, it's cost him over $250K out of his pocket. He's absolutely sick. Can't unload it, doesn't want it, totally regrets it. Having been through the horrors once myself, I tried to tell him before the purchase, but the leaseback bait had been dangled and he bit. Now he sees the sharp barb the bait was hiding. He's older, wiser, and unfortunately, poorer.

Leaseback only works if you buy an old beater plane and put no money into it (sound like your friendly FBO's rental planes). That's not apt to "fly" with a plane in charter.

 

[cvsfly]

$150/hr for maintenance is low. We have a 1996 BE-B200 and we use aprox $140/hr for routine maintenance reserves and $130/hr for engine reserves. We fly about 400 hr/year. Fuel averages about 100 gal/hr @ about $2.60/gal on average + oil. Hanger cost sound high. We are in a communal hanger at a major FBO chain with office space and we pay about $1200/mo. Insurance sounds about right these days with an aircraft used for charter and $50 million liabilty. Your purchase price is alot lower than ours, though. Be aware of the insurance requirements for yourself. When we renewed this year, we are now required to have a co-pilot with an open co-pilot requirements of 1000 ttl/500 twin and 25 type (the PIC is 3500 ttl/ 2000 twin/100 in type and annual school at FSI/Simuflite). Of course you can submit as a named insured and then every stipulation is up to the insurance co.