Part 135 Business Questions

[69 Charlie]

I am considering the acquisition of a L31 which I would lease to a 135 operator in the Northeast. I have several questions regarding the business arangement:
The charter company is proposing that I buy fuel at their cost plus a surcharge of $.75 per gallon. What do others charge?
What about the going rate for hangar fees? What's the range of charter rates per hour for a L31? How much commission should the charter company get? They will also provide maintenance services. Should they charge me wholesale costs for parts and discount labor rates? If so, how much? Thanks in advance for any feedback.

 

[Capt1124]

The $0.75 per gallon charge definitely doesn't sound right. What service are they providing you that they should get a huge markup like that? They aren't pumping it, for that much they should be refining it. They should be getting it at a deeply discounted rate, and passing it along to you, assuming you're paying for the fuel. If they are pumping it (they own the truck and pay the line guy) insist on $.50 over cost.

In cargo leases are usually dry, meaning the customer pays for the fuel. Since fuel is a big variable cost I would suggest whatever they pay you for the use of the airplane does not include fuel, and when you use the airplane and buy fuel at your base you get their (again, deeply discounted) rate.

You can go on controller.com and get current charter rates. Brokers usually get 5 or 10 percent commission at most.

Shops will charge you their cost for parts. If the airplane is going to be based there and they will be working on it a lot, you may be able to get a discount on the shop rate.

There is an article in a recent Business and Commercial Aviation about management services, but I can't tell you the date as I left it on the plane.

 

[mach.81]

This fuel mark up is ridiculous, and you are trying to be taken advantage of.

It is very typical in the 135 management industry to charge 10-20% commissions for the costs associated in the operation of the aircraft on the certificate. This is always negotiable and don't sign with the lowest bidder, look for a balance of quality and service. I would say a great deal is in the 10% to 12% area-if you are not providing lots of additional service, such as you own personal crew.

Hangar rates for Lear 31 are typicaly in the Northeast area
$1,800 and up through $4,000.00 in the NY area. If the management company that you select owns there own hangar try to negotiate it a little better, otherwise you will be leasing the hangar form the airport authority and will pay there price and annual increases.

Expect to pay a fair management fee for a quality operator, for a lear 31 expect around $4,000.00 per month in the north east, again this is negotiable, and look for quality-does the management company operate as a repair station with high FAA oversight or are you going to have only A&P mechanics working on you aircraft, this can affect the resale value on the aircraft.

Just remember all sevices are negotiable, and use good judgement in the selction of the management company, a Lear 31 is multimillion dollar asset-the best choice might not be in you back yard either.

 

[69 Charlie]

Thanks for the feedback. Is there any source that publishes the wholesale/ distributor cost of fuel, say in the NYC Metro area? What's a typical hourly charter rate for a L31A?

 

[Snakum]

The charter company is proposing that I buy fuel at their cost plus a surcharge of $.75 per gallon.

Eeeeek!

 

[bocefus]

1800-2000 perhour

 

[aeronautic1]

Why Lear31

Sure, the longhorn wing will get you to altitude in quick step, but you can't go very far. I know, I used to fly one. Personally, for the money, I would go Hawker.

You would be best served buying an aircraft that is already 135 certified and RVSM'd. Getting a non-135 Learjet up to specs for conformity is costly and time consuming. And no one wants to go bashing thru weather at 270.

A little more research on your part is in order. You may want to contact other certificate holders outside of New York and get their quotes for management. TAG, EJM, Amercian Air Network, etc... This will give you a valuable asset when comes time to negotiate.

Dry lease. Contract fuel thru Mercury, UVair etc... Most Florida certificate holders I know charge $1500-2000 per month to be on their certificate plus a % of charter.

And lastly, Power by the Hour.

 

[G100driver]

Hold onto your wallet when dealing with management companies. If you want to go 135 be sure and have your eye's wide open. Think about it, if the management company charges $1800-2000 per hour, then they are only going to be willing to give you $1500-1600 per hour. It will be impossible to "make" money in a Lear 31. There is not enough margin in small jets to make a real dent in operating buget of lear 31.

If I could offer any advise. Hire your own crew and take care of them. They will take care of you and your wallet. If you allow the management company to crew you airplane the pilots will not be loyal to you but the management company. In the end they will not do right by you.

Good luck on this. I am always a fan of someone who invests in business aviation.