Operating cost confusion — Know your numbers because it is a most important factor when you buy a plane.

In my April column, I addressed the dilemma many inexperienced aircraft purchasers encounter when they consider only the purchase price of a used plane but not the associated operating costs that go along with it. The trap, as stated in my article, is that for an arbitrary $50,000 purchase price, a buyer could obtain either a 1977 Cessna 172 or a 1960 Cessna 210. Each would have about the same airframe time, half of the engine time used up since overhaul, and decent but not state-of–the–art avionics. The point was that the purchase price is an attractive lure for the 210, with all its extra room, speed, load carrying ability and climb. But what hurts so many owners is the considerable amount of extra money it takes to run one of these bigger, older, higher performance singles, or even twins.

As a result of that column, I received a very thoughtful letter. Although I have never used my column to respond to a letter before, I am breaking tradition for two reasons. First, cost of operation is the number one subject I am asked about when my advice is requested and second, the writer made some very good points. Those points demonstrated some of the very mindsets that many potential owners of any class of airplane use, often leading to trouble.

First is the letter, then my response follows.

“I just read your article in The Southern Aviator titled “At What Price,” in which dollar comparison of direct operating costs between a C-172 and a C-210 is made. As a present owner of a 1960 C-206 and a previous owner of a 1973 C-172 I can say that your comparisons of dollar figures costs for each are not accurate.

“A $25/hour C-172 direct operating cost is just not realistic. Fuel alone at a real world consumption of 9 gal/hr at a minimum cost of $2.25/gallon plus one oil quart every 10 hours plus an oil change every 50 hours, an engine overhaul at $13,500 plus $2,500 engine mounting/dismounting plus baffles and hose changes will run you an additional $8/hr. Add a couple of hundred dollars a year, each, for unscheduled avionics and maintenance and assuming 50 flying hours a year you will be running very close to $36/hour. Almost a 45% increase from your figures.

“Your listed direct costs for a C-210 at $90/hour is inflated. Total hourly costs are grossly estimated at three times the fuel costs for the accepted range of GA yearly flying hours. My 210 uses no more than 15 gallons/hour when going cross country including climbs to 5K or 8K feet at the previously used economical fuel price of $2.25/gallon.

“At those rates the 172 total costs would be about $61/hr and the 210 would be $101/hr.

“As a further means of comparison, The Seaplane Pilot’s Association lists C-185 on floats, some are amphibs, for rent with an instructor for $165/hr (Wings Inc, St. Paul MN, Trans Carolina Airways, Inc. Lancaster SC, Scotty’s Flying service, Paten ME.). As you know those engines are larger than the one on the 1960 C-210 and maintenance is complicated by the height of the floats, the water and the water damage, yet they are making a profit while renting a larger, more complicated airplane at about $130/hr, therefore your claim of a direct operating cost of a C-210 at $90/hr is just too high and not accurate.

“Of course if all you want to do is punch holes in the air or have the proverbial $100 hamburger, the 172 is much cheaper on a flying hour basis. When you factor in that the 210 is at least 35% faster in speed, can carry more weight and can climb at two to three times the rate of the 172, the hourly comparison rate and the cost per seat-mile starts to look much better.

“Although your article touched briefly on additional costs for older aircraft, other portions of the same article did not make accurate cost comparisons taking into account the points I have raised above. I hope that in a future article you write a more realistic cost comparison, so your readers can make an educated purchase.

Regards,

Jorge P. Dorrbecker”

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First, Mr. Dorrbecker was absolutely correct about my figures for the 172 being too low. In reviewing my notes for the piece, they reflected a nearly $45 per hour direct operating cost and not the $25 reflected in my story. That was totally my typing mistake and I take full responsibility for that.

However, I stand by my numbers for the 210. I did not just arbitrarily peg the direct costs at three times the fuel cost. These numbers are based on sound formulas that I have been using for nearly 30 years in this business.

One point of confusion is that Mr. Dorrbecker states he presently owns a 1960 206, but then later he says it’s a 210. (For those who may not be aware, a 206 and 210 share essentially same airframe, with the 206 sporting fixed gear and the 210 being retractable.)

However, in that the 206 didn’t begin production until 1965, and it’s predecessor, the 205’s, first year was 1963, I will assume his plane is a 210, which did begin production in 1960.

In calculating “direct” operating costs for any airplane, you must consider all those costs which accrue as the result of actually flying the plane. These include fuel, oil, reserve for engine overhaul, reserve for prop overhaul, any repetitive A.D.’s that are based on hourly usage (like a 500 hour magneto inspection), reserve for avionics repair, and reserve for maintenance. They typically DO NOT include hangar or tie-down, insurance, taxes, and interest expense on a loan. These are “fixed” costs and are there whether you fly or not.

We’ve all heard the saying, “figures don’t lie but liars can figure.” Well, to borrow some of that point, anybody can figure a direct cost of operation needed to prove a point. For example, my Cardinal RG’s direct cost of operation is just shy of $68 per hour. The first year I owned it, the DOC was nearly $78 per hour. Know how I reduced my DOC by nearly $10 per hour? I spent $16,000 to overhaul the engine and bring it to zero time. Now my DOC isn’t reflecting the cost of an engine with 900 hours left, it’s reflecting the cost of an engine with 2,000 hours left, but it doesn’t reflect the money I spent to get there.

It’s all in how you account for it, but that doesn’t mean the costs aren’t there. After adjusting for fuel cost increases, my actual direct costs for my RG came to within 95 cents of my projections, made more than three years ago when I bought the plane. Using the same formula and readjusting for Mr. Dorrbecker’s fuel cost model, I recalculated my 210 numbers to be sure, and actually came up with $97.03 per hour DOC. But I also recognized I am more aggressive on maintenance than some owners, and will just let my $90 figure stand for a mid-time engine and prop, older 210.

The writer also fell into the trap of trying to compare rental costs of an airplane that uses a similar engine to my 210 example. There’s no doubt seaplanes command significant maintenance, and that they are available for his stated rental price. However, it’s apples to oranges to compare the price of a plane professionally flown and operated by people who understand these planes and how to take care of them, to a privately flown, old, maintenance-intensive, complex airplane. A quick search of the rental market shows airplanes in the 210 class, if you can find one at all, are renting in the $150 per hour range. A flight school I know operates a nice IFR 1978 172 with good radios for $70 per hour. Both these numbers adequately reflect the reasonable direct operating costs for these planes, plus the fixed costs spread out over the hours they expect to sell on that plane each year, plus a small profit margin of around 10%. Usage also alters the DOC because some costs of use become lower as the hours flown go higher.

This is why it is so important for owners who are buying a plane to lower their flying expenses to take a serious look at how much annual usage they will have, total ALL of the costs, divide them by the number of hours expected to be used, to arrive at TOTAL cost of operation. Often, one realizes that it’s better to just rent, if total cost of flying hour is the primary consideration, especially if you only fly 50 hours per year, as Mr. Dorrbecker stated in his letter. If a buyer has a budget for purchase and an hourly cost of operation that must be held to, then he must be careful not to fall into the trap of thinking that just because you can buy that older 285 HP rocket for the same price as a newer simple single engine, that it won’t eat your lunch and dinner when it comes to operating it. The big machines and the shops that fix them don’t care what you paid for the plane.

I am pleased that Mr. Dorrbecker is having such great success with his operating costs. That’s what we like to hear. Obviously, he is one of those owners who has a good grasp of what his plane is costing him. But, far too often, the story is a sad one of someone who bought to the limit of the purchase budget, never having considered how much of an impact that older, higher performance, complex plane would have on day-to-day flying cash flow. This was the major point of my piece, aimed at warning my readers, so that they could do their research and make that educated purchase Mr. Dorrbecker referred to. That’s why it is imperative that you buy the older, bigger planes only if (1) you’re loaded with cash and don’t care, or (2) you have run the numbers and determined that you can afford the operating expense of a big bird, but just can’t handle the high purchase price of a newer copy. For those who don’t do this homework, the surprise is going to hurt, regardless of whether it’s $70, $90 or $101 per hour.

Guy R. Maher is a business owner and aircraft appraiser with more than 12,000 hours in general aviation airplanes and helicopters. He is an independent buyer’s agent and flight instructor for type specific initial and recurrent training. He can be contacted through the above e-mail address, or by calling 704-287-3475.

Comments

  1. Very true – even in jet operations, many times a prospective owner does not consider the operating costs into the calculations for cost of ownership. The first year of ownership can be an eye-opener with incomplete information.

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