This past year, our Annual was completed with a zero dollar invoice to the shared ownership members; even though, the Annual included parts and labor for three new cylinders. How can that be?
Our work order for this year’s Annual listed all variable cost items that were covered in the member’s hourly rate. Funds collected from flying covered the entire bill without reducing the TBO engine reserve.
If you’re in a shared ownership and receive an invoice after the Annual for “variable” operating cost then you’re paying for other pilots to fly the plane. Unless of course – you’re the alpha dog that flew the most hours during the year. And in that case, other members are contributing to your flying expense.
It’s important for a shared ownership to set an hourly rate that covers all variable operating costs including Pre-TBO and TBO engine reserves. Variable operating costs are not necessarily incurred in the same month or year. Adequate funds from the hourly rate need to be set aside for these future corrective maintenance expenses.
Typical Cirrus SR22 Flat Fee Annual Expense
To receive an airworthy acknowledgment under Part 91 the Annual inspection must be completed. The typical flat fee inspection charge at an Authorized Cirrus Service Center is $2,475. This amount covers the basic inspection costs of the engine, propeller and airframe. The inspection fee does not cover the cost of parts and labor for corrective maintenance.
The flat rate Annual inspection fee is a fixed cost in a shared airplane ownership. The fee may be collected from members upfront or included in a monthly invoice. This fixed expense would be divided equally among members, but variable costs should be covered from the hourly rate.
Shared airplane ownership may become taxing if fixed and variable costs are not allocated correctly. A good objective is a zero ($0) dollar invoice to members for variable costs included on the Annual. In other words, the hourly rate should cover the corrective maintenance actions associated with flying the airplane. If that’s not the case, then members should check the hourly rate.
A significant goal in shared airplane ownership is lower cost to general aviation flying. Understanding how to match fixed and variable expenses is an important benefit toward achieving that goal.
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