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Cost of Operation
Date: 02/18/99 Newsletter No. 03
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Concept: This newsletter is about presenting information on a
wide range of aviation subjects of interest to pilots and/or
aircraft owners. The author has been a pilot for thirty years
with a wide range of flying experience. The author has also
sold General Aviation aircraft for over twenty three years.
Roger W. Carpenter 1901157 ATP, CFI/II (not current),AGI, IGI.
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Published Bi-Monthly.
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Suggestions and constructive criticisms are eagerly invited.
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near and dear to their heart. We will do our best to come up
with intelligent answers. Hopefully other readers will help out.
Also, I hope that readers will submit articles for publication
in this newsletter.
Feature Article:
Aircraft Prices.
There are several prices that can be calculated for a given
used aircraft. It depends on who is buying or selling. For
obvious reasons stocking dealers must buy at a lower price
than the end user (owner). A finance organization will
determine a loan value. Insurance companies will always come
up with a value for their coverage.
Several years ago when the factories were turning out a
thousand plus new airplanes every month (18,500 in 1978), the
airplane business was more like the automobile business. Used
aircraft values were based on depreciation curves and the like.
People still depreciate aircraft for tax reasons but the vast
majority of used aircraft have had a steep appreciation curve
the last ten years or more. The aircraft business has become
more like the antique business rather than the car business.
What is really wild, this high appreciation of used planes has
come in a period of some of the lowest inflation rates in
recent history. Amazing, that supply and demand thing. Now the
average aircraft owner is more worried about capital gains tax
than he is about losing money on his bird.
Various Prices -
1. Retail Price - for a new aircraft, this is usually
the Manufacturer Suggested Retail Price. For a used aircraft,
the price can vary greatly from aircraft to aircraft. A retail
price is usually calculated by some form of physical appraisal
and a Used Aircraft Price guide or Blue Book. Most prices
usually fall into a fairly close range when market studies are
done in various used aircraft for sale publications. However,
it is not uncommon to see some published prices to be
substantially higher on a given aircraft just because the seller
wants to give it a shot. Maybe catch an eager buyer asleep. If
an asking price is substantially lower than the market, be
careful. There is a reason.
TIP: Unless you really know what you're doing, do NOT become
involved with government confiscated aircraft. You will probably
regret it big time.
2. High Wholesale Price - this price applies to a used
airplane. It is generally in the area of twenty percent less than
the retail price. It is a often a maximum price a stocking dealer
would pay for an aircraft. The plane is usually very clean, low
to mid-time airframe and engine, well equipped and no damage. In
other words, very sellable. However, in today's market, it is not
uncommon to see a dealer step to the pump and pay close to book
retail for a choice airplane.
High wholesale, as determined by a Blue Book appraisal, is often
a price a finance company like Cessna Finance or Nations bank
will use as a loan value. This is the amount they will loan on
the plane and the buyer will have to put up the rest of the
selling price out of his or her pocket.
3. Low Wholesale Price - this is a price that is not used
as much today as it was several years ago. It is usually ten
percent less than high wholesale. This price and LESS is usually
reserved for the rats. Bad paint, bad interior, high airframe
time, high engine time (Since Major Overhaul), lots of poorly
repaired damage, missing logs, poor or missing equipment etc.
In other words, any feature on a plane that is expensive to fix
will hurt the price. Common sense; it comes in handy.
In either case, wholesale prices are usually a factor that
concerns a dealer as opposed to a retail buyer. A dealer will not
stay in business long if he consistently pays too much for
inventory.
4. Selling Price - what a buyer actually pays for a plane.
This is the price that makes the whole industry go around. From
dealers, to individual owners selling their own plane, to
insurance companies, and finance companies, the selling prices
paid for the various models of General Aviation airplanes
determines the health of the industry.
In another newsletter, we will discuss how you, the individual
buyer, can determine a fair price for your next plane.
Questions and Answers:
The following is correspondence between a reader from The
Netherlands and myself. I thought it might be of interest.
Hi Roger,
Thank you for the newsletter.
Just a short note to remind you that some subscribers live
outside the USA. Articles about calculating flying costs are
interesting, but not applicable for us poor souls in Europe. We
can only look with envy at the costs of flying in the USA. For
the sake of comparing: to rent a simple C150 costs $ 110 per hour
(hobbs) in The Netherlands. And we pay landing fees at the rate
of about 12 bucks per landing on a 'green' field. It may be an
idea to conduct a survey of flying costs for different countries.
Even if only to show your fellow countrymen how lucky they are.
Best regards, en good luck with your initiative.
Theo Gouwerok
Amsterdam - The Netherlands
Roger wrote:
Theo Gouwerok:
Thank you for your letter. No question, I'm happy to be living
in the USA. I will include your letter in my next publication. As
for determining the cost of operating aircraft in Europe or other
parts of the world, I afraid I'm not that smart. It's like being
a good pilot, one must know his or her limitations.
I would, however, like to receive some material from you fellows
in Europe about flying conditions and how you handle crossing
borders of other countries. We in America have no problem going
from state to state but crossing borders is another situation. I
still laugh when I think of that fellow that landed a 172 in the
front yard of the Kremlin several years ago. I have enough
trouble with different accents let alone different languages.
Regards, Roger
Theo Gouwerok wrote:
Hello Roger,
Thank you for your email. In my opinion you don't have to be
smart to determine the cost of operating aircraft in Europe.
Just ask your subscribers for the average rental fees in their
country. Would be interesting to see the differences.
As for crossing borders in Europe, this is surprisingly easy.
With most countries just filing a flight plan one hour in advance
is sufficient. Customs are virtually non-existent since the
Schengen agreement. I fly regular to the UK, Ireland, Belgium,
Germany and France. It is most enjoyable to see the differences.
The Netherlands is very strict (f.i.: there is only ONE spot in
The Netherlands to land a seaplane so you cannot even go from A
to B). Ireland is very easy whereby you can even land on a field
if you have the owners permission. Radio work is sometimes
difficult with controllers with thick accents. In France they
often don't bother to answer if you don't speak French. German
controllers answer mostly in German and Italy......, enough said.
I do some rally competition flying (World Air Games in Turkey,
World and European Championships in Czech republic, Malta and
Italy). If you like some more info for your newsletter, please
let me know.
Best regards,
Note from author:
My article on the cost of operating aircraft was coming from the
viewpoint of the aircraft owner, not a renter. I have watched for
25 years as pilots from other countries have flocked to the US to
receive flight training. It seems that it is less expensive to
travel here, live here and learn to fly here than to just fly in
many other lands. What a country.
In addition, controllers not speaking your language or even
answering at all must make for some very interesting IFR
approaches.
Because of the weather, I'm under the impression European pilots
get more "actual" time. I would like to pass on some material to
my readers about IFR training and flying in other countries.
Subjects like icing, turbulence, ATC problems etc. are always
interesting and helpful.
Classified ads:
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FREE service to my readers: If you would like a "book" appraisal
on an airplane, fill out the info sheet at my web site. Click on
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NEW page at my Web Site. "Cost of Operation" analysis form.
Nothing fancy but it might give you some ideas for planning
purposes. http://aircraft-airplanes.com/cost_of_operation.htm
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