Owning Your Own Aircraft

My needs were fairly simple, I really only wanted to get airborne once a week or so for the odd trip and the occasional session of circuits and bumps. I assessed the Musketeer as a fairly honest aircraft on my familiarisation ride (although no great beauty) and it wasn’t going to cost me an arm and a leg, so I bought in. I confess I’ve rather grown to like the old bird and it will do me until I win Lotto.

However, it is not normally as simple as that as there are many factors to consider in what will normally amount to the second biggest financial commitment, after buying a house, that most people will make.

• The essential questions to be answered are;
• what is your experience level?,
• what do you want the aircraft for (or think you do)?,
• how much money can you outlay?
• do you have a particular aircraft type in mind?; and finally,
•  have you weighed the pros and cons of entering into a partnership with others?

Your Experience Level

There is one thing you can’t buy and that is experience. With due respect to the doctors and lawyers in the community, it is a well known fact that in the USA, there is a tendency for the professionals to buy above their experience level and to often suffer the consequences. The V Tail Bonanza and the Piper Malibu are two examples of relatively high performance aircraft that have gained bad reputations as a result of accidents caused by the limited experience levels of some of their owners.

If you are a newly licenced private pilot, it would be wise to stay with the category of aircraft in which you obtained your licence. Normally this means staying with the four seater, fixed undercarriage, fixed pitch prop, 172 Warrior, which will serve you well until you have a few hundred hours under your belt. For a brand new licensee to rush into a hot Mooney is definitely not to be recommended.

I hear cries of “military pilots fly fighter aircraft straight off course”, why shouldn’t I fly a hot retract? The answer is fairly simple, military pilots graduate with around 200/220 hours which have all been very closely supervised. They also remain under close supervision in squadron service whilst building up their experience level.

It is possible for a private pilot to gain his licence and not come under scrutiny again for a period of two years. In that time all manner of bad habits can be developed which if not sorted out can kill you!

The Reason for Buying the Aircraft

Generally, people buy an aircraft for one of the following reasons;

• For pleasure flying

• For use in their business

• As a financial investment A combination of the above.

The use to which the aircraft will be put will have a considerable bearing on the type of aircraft best suited to your needs. If all you are interested in is just getting airborne, ie the sheer fun of flying is enough for you, then perhaps the light personal aircraft (LPA) scene may be the way to go. There are aircraft in the European Joint Airworthiness Regulations – Very Light Aircraft (JAR-VLA) category which have recently come into the market such as the Skyfox and Jabiru, to name but two, which are streets ahead of the old concept of the “ultralight”.

Comprehensive updates on the booming VLA scene in Australia were outlined in the October and November 1992 issues of AA. These aircraft have a maximum gross weight limitation of 750kg (1664lbs), two seats, a stalling speed of 45kts or less and are restricted to day VFR. They are generally VH registered, but can also be ultralight registered, the decision being based on what the aircraft is going to be used for rather than its capabilities.

The big advance in the new generation light aircraft scenario has been the introduction of the 80hp Rotax 912 four cylinder/ four stroke, which is not unlike a mini 0-320. Displacing a mere 74 cu in and with internal reduction gearing which reduces prop revs to a maximum of 2545rpm, the 912, which has a combination of air and liquid cooling is a quantum leap forward from the earlier twin cylinder Rotax two strokes. (Refer p13 Dec 92 AA) There are strong moves to bring JAR-VLA aircraft in at the bottom level of the conventional commercial GA flying training system for which they are well suited in terms of capability. Having taught people to fly in the Drifter, which is a generation behind the current crop of VLA’s I am personally satisfied that JAR-VLA aircraft should be well capable of slotting into the Cessna 150/Cherokee role as abinitio trainers. Time will tell, however, whether they are capable of standing up to heavy long term commercial usage.

Finally, there is one major problem with this type of aircraft, and that is that they must be hangared, or at least kept out of the elements when not being flown because of the nature of their construction which is generally fibreglass or fabric. Unlike a conventional metal aircraft they can’t just be tied down and left out in the sun on the flight line. Their long term ability to hold a viable resale value is also at this point in time a very grey area.

A last word on the Ultralight tack; if your pleasure flying includes going places, and your not a masochist, then I would suggest that you give the earlier aircraft in this category a miss. Having flown instructional cross countries in the middle of a Canberra winter, often times with a ground speed down to below 40kts (75kmh), I can safely say that there are better ways of getting from A to B! Still with the flying for pleasure theme, the recommended entry level into conventional GA flying is as outlined earlier, ie the fixed gear/fixed pitch Cessna, Piper etc. The question of the number of seats however, is clearly a personal one to decide, but experience shows that even though there might not be a clear need for four seats at the time of purchase, the need will certainly develop, and it would be wise to make this a requirement in your specification. This is not to say that there is not a place inlifefor the Cessna 150/152, Beech Skipper, Piper Tomahawk two seaters, but they were mainly developed as trainers and it is a simple fact of life that you can’t add the extra seats should your needs expand. Perhaps the final word on the two/four seat question is that some unkind people have alleged that Cessna only built the 150 to provide a cheaper entry level for first time buyers knowing full well that they would have to trade up to the 172 in the fullness of time!

The Business Flyer

If you are a prospective private owner who has an occasional need to travel on business, say between the capital cities, you should perhaps be looking at a retract, constant speed, IFR aircraft with a reasonable turn of speed. A very good point to remember however, is that there is no such thing as a weekend instrument rating! Instrument flying requires constant practice which naturally involves time. You would need to very carefully determine whether you can spare that time from your business.

Finally, before committing a lot of money to what will be a fairly expensive aircraft, it may well prove cheaper to hire this type of aircraft if the need is limited. Much depends on indi- vidual circumstances which is beyond the scope of this article.

As a Financial Investment

The question of whether to buy your aircraft with the intention of putting it on line somewhere, ie “cross hiring”, or keeping it for your own use can be an unhealthy mix of money and emotion. Given the right circumstances ie, an arrangement with an operator who can guarantee a minimum annual hours usage, and who will look after your aircraft, plus allowing you ready access to it when you want it, could be a very good way of having your aircraft pay for itself. On the other hand, if you enter into such an arrangement using borrowed money to make the initial purchase, and the hours usage doesn’t meet your expectations, you could be heading down the path to disaster. This is a common occurence On the emotional side, if the purchase of your aircraft is to be the realisation of a life long dream, and you are the type of person who can’t even bear to have someone else drive your car, then this is not the way for you.

Some will argue that buying an aircraft and putting it on line is like having your cake and not being able to eat it – you may as well hire, or join an aero club, because you are denying yourself the joy of having your aircraft totally to yourself. It is like buying a new car and then hiring it out as a taxi! There is no clear cut path to follow on the question of whether to buy with the intention of cross hiring, it really all depends on your personal perceptions of what owning an aircraft is about.

One final point to bear in mind is that the Federal Government’s proposed Safety Tax will be considerably higher for aircraft that are being used commercially which could possibly cream off what little you might make out of the deal.

Financial Considerations

Before considering what to buy, the question needs to be asked, should you buy or hire? In other words have you got a full understanding of the total costs involved in aircraft ownership? There is one truism that stands out from all the others in aircraft ownership and that is you must make allowance for the predictable unpredictables. In other words no matter what, something will always occur maintenance wise that you hadn’t allowed for, and the older the aircraft becomes, the worse this gets. By way of example, a blown exhaust flange gasket ended up costing me something just short of $900 by the time it was all over.

The costs of owning an aircraft can be divided into standing costs and operating costs. By standing costs I mean the costs just to have the aircraft sit on the tarmac even if it is never flown. These include annual insurance, FAC GAIT (General Aviation Infrastructure Tariff) charges, annual inspection and Safety Tax (what ever that might end up being!).

GAIT charges are calculated on aircraft weight and airport category. By way of example, Canberra is a group two airport. It will cost you $605. 00 per 1000kg MTOW (pro rata) just to have your aircraft stand on the tarmac there for twelve months. For a Musketeer which has a MTOW of 1089kg this currently works out at $658. 85.

Lets assume your aircraft is worth $60,000; then the standing costs will be in the order of; annual insurance $3000, annual inspection $800, GAIT charges $660, Safety Tax $200, Total $4600.

In addition there could be the cost of hangarage but for the purpose of this exercise I have assumed that the aircraft will, like most, be left out in the elements. Operating costs consist of fuel and oil, percentage for engine and propeller overhaul, and unscheduled maintenance.

The question of engine overhaul can be looked at in two ways. The cost of overhauling say a Continental 0-320 which has a TBO of 2000hrs, will be at least $15,000 and most likely higher. If you had a brand new engine and flew at the rate of 100 hours a year then theoretically it would take you 20 years to fly off the life. You could either set aside the sum of $750 a year (adding a percentage for inflation each year) for the overhaul, or you could ignore the whole question of engine overhaul on the basis that you will have sold the aircraft long before then and will accept the lower value commensurate with the hours remaining. This is the common practice where there are extensive hours remaining on the engine.

However, lets assume that your aircraft has 500 hours left on the engine and that you have no reserve set aside at the moment for engine overhaul. Each one of those hours is going to have to pay its share of the overhaul when it comes due and simple mathematics indicates that this will have to be $30 (assuming the figure of $15,000 for overhaul).

Again with the propeller, lets assume 500 hours to overhaul at a cost of $800, each hour will have to include $1. 60 (say $2). Operating costs per hour can thus be calculated (on the basis of the assumption as to hours to TBO’s) as follows; fuel and oil $3, engine $30, propeller $2, unscheduled maintenance $10, Total $72/hour.

Now lets assume you fly 100 hours a year, the standing charges will cost you $46 per hour ($4600 divided by 100), which will make your total costs something in the order of $120 per hour. Should you fly more, the costs per hour will come down, but should you fly less, which is most likely the case they will climb quite steeply.

There is nothing you can do about the standing charges, they will be incurred regardless of whether the aircraft flys or sits on the ground all the year. However, as mentioned earlier you could elect to ignore the cost of engine overhaul if you intend to sell the aircraft before that occurs.

All this leads to the conclusion that you would be far better off in financial terms by hiring. However there is another alternative and that is to enter into shared ownership with a group of like minded fellow aviators, ie form a syndicate.

Syndicates

The advantages and disadvantages of syndicate ownership require very careful consideration and should be thoroughly thought through before entering into such an arrangement.

Clearly, sharing the costs of the standing charges makes sense, but on the other hand you may feel that it is no better than belonging to an aero club as you may feel denied the sense of ownership that you are seeking.

The size of the syndicate also requires careful thought; generally this will vary between two and four although of course bigger syndicates exist. What is important is to have a clear written agreement covering just how the syndicate is going to operate. More on this later. There is no clear starting point for setting up a syndicate, it depends a lot on circumstances. Somebody may already own an aircraft and wants to lighten the financial burden and hence sets out to seek partners, or it might start as an idea on a clean sheet of paper with someone seeking partners to purchase an as yet unspecified aircraft.

Approached from a purely financial point of view, that is discounting the pride of ownership aspect, the sums previ ously mentioned show that unless the aircraft is flown for a certain minimum number of hours per annum, it is again cheaper to hire. This is simply explained by the fact that the syndicate members will have to cover the costs of the standing charges whereas in say an aero club, these are spread over a much larger membership.

Now there are two ways of tackling the financial aspects of syndicate management, the first is to separate the standing charges from the flying rate and to charge syndicate members their share of the former, say on a monthly basis. In the example given above ($4600), with two members in the syndicate this would amount to $192 a month, with three $127, four would be $95 and so on.

The flying rate which is then based on operating costs alone, would be a set rate per hour regardless of the number of hours each member flys each year.

The second method is to attempt to estimate the number of hours that will be flown in toto each year by the membership combined and to calculate a flying rate which covers both the fixed and operating costs.

Both methods have their merits, the first accepts ownership as being separate to actual flying and the second apportions the total costs in relation to the hours that are actually flown by each member.

The question of engine overhaul assumes greater impor- tance in syndicates because of the normally higher flying rate, for example a syndicate buying a low life engine aircraft (normally thought of as less than 400 hours to overhaul) and flying off the hours at a fairly high rate (say 200 hours per annum), will, in two years have to foot a bill of at least $15,000. This will require some serious soul searching when setting the cost per flying hour rate for the syndicate members. A similar, although less alarming situation applies to the propeller.

On the practical side, there is a need to allocate functions or duties within the syndicate such as responsibility for financial control, maintenance liaison, booking clerk etc.

The bigger the syndicate, the greater the need to formalise matters, particularly the question of bookings. An agreed method of resolving conflict in this area is essential. Other matters that should be addressed in the agreement are;

•  procedures for the dissolution of the syndicate.
• the procedures to be followed when a member wishes to leave the group, ie, whether the person buying the share is acceptable.
• accident damage, arrangement for recovering costs over and above insurance payouts.
• extraordinary maintenance costs, is the share to be related to the hours flown by members or straight equally shared?
• capital improvements to the aircraft, eg avionic update costs.
• are other than syndicate members to be allowed to fly the aircraft and if so the hourly rate to be charged.

finally, but not least, aircraft husbandry ie, cleaning and polishing, the method to ensure that this is equally shared. Finally the question that everyone wants the answer to is what to buy? Only a foolish person would attempt to answer that one! So much depends on the amount of money available, what the aircraft is going to be used for and of course personal preference. Generally, however, it would be wise to stay with the well known brands if only for greater spares availability. For example, the Musketeer has an orphan engine which makes obtaining such things as rings very difficult.

There is no better way of ferreting out the pros and cons of a particular aircraft type than asking around. Most owners will give you an honest appraisal of their aircraft if asked and if you get the same comments from more than one then perhaps there is something in it. Hangar talk in flying clubrooms is another source of worthwhile information. You might have to do a lot of sifting wheat from chaff but again grains of truth will start to emerge.

Aviation magazines are a valuable source of information on the peculiarities of individual aircraft types, for example, the May 1992 edition of the American AOPA Pilot has an excellent article on the various models of the Cessna 172 which anyone contemplating buying a 172 would be well advised to read. Our own AOPA magazine is well patronised by commercial and private sellers and a study of recent back numbers will provide a good indication of the local going rate for the particular aircraft you may be interested in.

A trap to emerge in recent times which provides an interesting update on the old dictum of caveat emptor, is aircraft being sold with outstanding FAC GAIT charges. You would be well advised to check this one out because you could find that the FAC has a lien on your particular machine.

It also goes without saying that an independent airworthiness and maintenance standard inspection is a must before considering purchase. Of particular concern is that all directives have been complied with and that you’re not going to be up for a main spar in a few hours! Finally for those venturing into aircraft ownership for the first time, the old axiom of “Its not what you don’t know that is the problem, its what you don’t know you don’t know” holds very true. All you can really do is as much homework as possible and think with your head instead of your heart.

My thanks to Hawker Pacific, Allan Bligh, AOPA and many others consulted in the preparation of this article.