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Old 11-01-2011, 01:50 PM   #1  
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Default Multi Engine Risk Pool - Input Needed

Okay so here's my plan:

Buy a 1980 Beech Duchess. $95,000 with 15% down = $81,000 financed.

Monthly payment = $782. Insurance = $1,000/month for a total of $1,782 per month.

Engine Overhaul = $56,000/1,700 hours = $33/hour
Prop Overhaul = $8,000/1,700 hours = 5/hour
Maintenance Reserve = $50/hour
100 Hour = 20/hour
Total Variable Cost / Hour = $108 with markup = $117/hour dry rate.

I would market to between 3 and 5 flight schools. They bring in the students and pay $500/month for a 'subscription' to multi-engine access as well as my hourly rate of $117 tach time and then bill their own rate (wet or dry/hobbs or tach). I get first dibs on their multi engine students as the MEI and they get access to a twin without having to worry about utilization/insurance/maintenance on their own.

Thoughts? Concerns? Critiques? I really want to launch this idea but not sure what sort of market is out there for multi engine training.
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Old 11-01-2011, 02:04 PM   #2  
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How many hours/year are you planning on? That resets all the math. Will the 3-5 schools guarantee a certain # of hours?

Have you paid to hangar/park it? what about taxes? Paint, Interior, and avionics should be accounted for as well.

What about the 1K Attitude indicator that slowly dies, or worse - a cylinder or whole motor. How will that be paid for? Does the 100 hour excuse the annual?

I owned a Mooney for 9 years - I can send you an Excel spreadsheet that might help - PM me an email address.

Has a lawyer looked at any "agreements"? Is this your only source of income?
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Old 11-01-2011, 02:33 PM   #3  
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As 73M said, don't forget about the annual. The big thing is going to be whether a school is going to give you "first dibs" because it's your plane. You're basically double dipping with leasing them the plane then making money instructing for them.

The incidentals are what gets you. I have an old Saratoga. Landing gear maintenance crept up that cost me $2200 with no warning. Air conditioning work cost nearly $3k. New avionics? $10K. Little things are what picks you apart and grounds the plane with no warning. A Beech is going to be more expensive on average than a Piper or Cessna, and for an older plane the backlog for parts can catch you too. Oil sample comes back iffy? That can get pricey quick.

Remember also you're wanting to use it in a training enviroment. It's not going to have any easy day. It's going to be landed hard, flown hard, lots of cycles on the wear parts, gear, engines (and how do you think a multi likes being shut down at altitude?). Students have little incentive to baby a plane they have no vested interest in.
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Old 11-01-2011, 02:39 PM   #4  
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None of you'se guys mentioned Airworthiness Directives that pop up from time to time, Service Bulletins, insurance deductables when it gets wrecked, time not producing income because it was wrecked, money to pay lawyers to sue the guy from Angola who won't pay you even if you do get a verdict in your favor, the airplane that won't start at an airport that has an FBO that will "help you out" for $1200.

Two decades of aircraft ownership, and only a tiny bit of that with leasebacks/rentals.

The best way to make a small fortune in this endeavor is to start with a big one.
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Old 11-01-2011, 02:45 PM   #5  
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Agree with your points. Hangar should not be an issue. Working on that now. I figured that the $50/hour maintenance reserve should cover incidentals. I also think the monthly 'subscription' fee would help build an 'incidental' reserve. I have not yet consulted a lawyer as this is in its infancy.

To your point about 'double dipping' think of it less like me leasing to the school and more like me being an independent company that provides twin training and 'partners' with area flight schools to funnel students to me. The positive is that they don't have to own their own twin and they also can provide a whole new set of ratings without farming themselves out to the competition in the area that has a twin and charges $300/hour plus instructor. This way they get a cut (difference between hobbs & tach) and they only have to pay me $35 of the 45-50/hour dual rate they normally charge and keep the rest.
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Old 11-02-2011, 03:54 PM   #6  
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Where does the $1782/month for Payment and Insurance come from? If you fly 60 hours/month (which is a pretty high average), that is another $30/hour. Plus, your markup of less than 10% is way too small.

A few months ago at my FBO, the FAA came out and "suggested" we replace all the plastic fairings on a 172 because of a few cracks. There went $2,500 just like that... You will also likely need to fly the plane to other airports for some of your mainrenance (extra$$$), unless you have avionics and everything else at your airport.

Also, there will be down time when you overhaul your engines, but the insurance and payment is still there. You could exchange and save lots of time, but that cuts out many of the lower cost overhaul options.

You may have a good idea there, just keep your prices high enough to make you some money and low enough to attract some customers.
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Old 11-02-2011, 06:02 PM   #7  
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Quote:
Originally Posted by Duckdude View Post
Where does the $1782/month for Payment and Insurance come from? If you fly 60 hours/month (which is a pretty high average), that is another $30/hour. Plus, your markup of less than 10% is way too small.

A few months ago at my FBO, the FAA came out and "suggested" we replace all the plastic fairings on a 172 because of a few cracks. There went $2,500 just like that... You will also likely need to fly the plane to other airports for some of your mainrenance (extra$$$), unless you have avionics and everything else at your airport.

Also, there will be down time when you overhaul your engines, but the insurance and payment is still there. You could exchange and save lots of time, but that cuts out many of the lower cost overhaul options.

You may have a good idea there, just keep your prices high enough to make you some money and low enough to attract some customers.
$12,000 a year for insurance. The $782 is based on 10 years at 2.99% interest - 85% of the purchase price financed. The $1,782 would be covered by the monthly $500 that each flight school would contribute - 4 schools x 500/month = $2,000 per month.
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Old 11-03-2011, 04:52 PM   #8  
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OK, I see how that would work with the $500/month per school. I might consider something like that at my school as we are too small for a full time twin.
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Old 11-04-2011, 05:14 PM   #9  
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Ever heard of Murphy's Law??? You'll find out soon enough with airplane ownership on a leaseback.
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Old 11-05-2011, 09:05 AM   #10  
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Originally Posted by wizepilot View Post
Ever heard of Murphy's Law??? You'll find out soon enough with airplane ownership on a leaseback.

Well it isn't so much a leaseback as it is me running an independent company. Basically, the idea is for small flight schools that cannot afford a twin trainer full time to farm out their ME training to someone that isn't a direct competitor. In the area I live - MSP - there is one flight school that has a twin in the metro area. It is a marginal flight school and the twin is poor quality. What I would like to do is spread all the twin ownership costs out over these 'subscriber' flight schools so they can truly offer every flight rating from PVT - CFI-I/MEI. I am thinking if I am an independent contractor I will have more flexibility and freedom than one would have in a traditional leaseback. Not to mention, it is my plane and I'd be the only one to fly it - so I know it would be cared for and not abused.
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