If a shared airplane ownership lacks adequate engine reserve funds then use caution, because it means you’ll be taxed for the flying cost of other pilots. Inadequate reserve funds indicate the correct cost for operating the plane has not been set aside and that prior cost may be passed on to you. Unless of course – you’re the alpha dog that has flown the most hours or you leave before engine TBO.
Some shared airplane ownerships are like a revolving door. Pilots come into the partnership and then leave after a year or two. If they’re not contributing to a reasonable engine reserve fund then that cost goes to you.
Red Flag: Higher Time Engine & Inadequate Reserve Funds
With higher time engines the music is almost over. Remember playing musical chairs? When the music stops it’s game over. But in this case, you don’t want to be the last one in the seat because a large payment will be due. That TBO bill may be more than ten thousand dollars per member.
Red Flag: “Don’t worry, we’ll all pitch in when it comes time to replace the engine.”
If all members have flown the same number of hours and no pilots have left the membership then splitting the cost of a new engine might be fair. But when the time comes will each member have the money? Will the big bill create issues for the partnership? Will some members see the problem coming and leave?
Want to calculate your hidden partnership flight costs? Add the engine replacement estimate and variable maintenance expenses coming to you, which were not covered by the hourly rate. Divide that cost by the hours you’ve flown. The result is your hidden hourly flight cost.
Red Flag: Double Hidden Costs
Shared airplane ownership may become taxing if variable operating costs are not allocated correctly. How do you know if you’re paying for other pilots’ flight time and what should you look out for? First, as noted above, confirm a reasonable reserve fund is being set aside for the engine TBO.
Second, verify members are not being invoiced for costs that the hourly rate should have covered. A good objective is zero ($0) dollar invoices to members for variable costs associated with the Annual work order and during the year. In other words, the hourly rate should cover the corrective maintenance actions associated with flying the airplane.
Variable operating costs are not necessarily incurred in the same month or year. So adequate funds need to be set aside from the hourly rate for these maintenance expenses. 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 equitable shared ownership.
You can review prior weblogs on cost of ownership for more details.
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