Year one is not a typical year
Most cost estimates describe a steady state — an aeroplane that has been owned for a while, with known squawks and a settled maintenance rhythm. The first twelve months of a new partnership look nothing like that, and the gap between expectation and reality is where a lot of new groups get an unpleasant education.
Three things drive it. The pre-buy finds things. The first annual under new ownership finds more, because a new shop is looking with fresh eyes and no history of having signed off on anything. And a group that has just spent its capital on the purchase typically has no reserve at all when both of those bills arrive.
Acquisition costs beyond the price
- Pre-buy inspection — $1,500 to $3,500 for a proper one on a piston single. Do not economise here; this is the cheapest money you will ever spend on the aeroplane.
- Items found at pre-buy — sometimes negotiated off the price, often not. Budget something.
- Ferry costs — fuel, a night in a hotel, possibly a ferry pilot.
- Title search and escrow — a few hundred dollars, and worth it.
- Registration and, in many states, sales or use tax — this one catches people badly. Some states levy several percent of the purchase price. Check before you buy, not after.
- Legal — an operating agreement drawn up or reviewed properly, $500 to $2,000. Also the cheapest money you will spend.
The first annual
Budget double what the seller told you their annuals cost. Not because they lied, but because a new IA looking at an unfamiliar aeroplane finds things the previous one had been watching for years, and because deferred items tend to become due at once.
On a four-seat piston single, a routine annual might be $1,800 to $3,000. A first annual under new ownership landing at $6,000 to $9,000 is entirely ordinary. Groups that budget for the routine figure get a bill they cannot pay from a fund they have not started.
A worked first-year budget
Three partners, Cherokee 180 bought for $85,000, flying 100 hours between them.
One-off:
- Pre-buy inspection — $2,200
- Squawks found and rectified — $3,500
- Title, escrow, registration — $600
- Operating agreement — $1,200
- Ferry and initial checkout — $1,400
- Subtotal: $8,900
Recurring, year one:
- Hangar at $300/mo — $3,600
- Insurance — $2,400
- First annual — $6,500
- Unscheduled maintenance — $2,500
- Fuel, 100 hr at 9.5 gph and $6.75 — $6,413
- Oil, consumables, database subscriptions — $1,200
- Engine and prop reserve at $23/hr — $2,300
- Subtotal: $24,913
Total year one: $33,813, or about $11,270 per partner — roughly $940 a month each, on top of the purchase.
The same aircraft in year three, with squawks cleared and a routine annual, might run $18,000 to $20,000 — around $520 a month each. That difference is why year one deserves its own budget rather than an average.
Start the reserve on day one
The most common year-one mistake is deciding to start reserving "once we're through the initial costs." The initial costs run for about eighteen months, by which time the group has flown 150 hours it has not reserved for, and the habit of not reserving has set.
Reserve from the first flight, even if the rate has to be modest at first. A fund with $2,300 in it after a year is not much, but it exists, everyone can see it, and the pattern is established.
The conversation to have before signing
Agree, in writing, before the purchase completes: what happens if the first annual comes in at three times the estimate. Who funds it, in what proportion, and by when.
Answering that question over a beer while everyone is excited about the aeroplane takes ten minutes. Answering it in February, with a shop holding your aircraft and a $9,000 invoice, takes considerably longer and costs at least one friendship.