How much does your flying really cost?

FEBRUARY 7, 2016 BY DAN RAMSEY

A good new year’s resolution for a frugal pilot is to determine how much his or her flying habit REALLY costs. No, not the number that you tell your significant-other (or the tax collector), the actual costs of owning or renting and flying an airplane. Calculating those costs annually is a good way to discover whether you’re getting the most for each dollar you spend on flying. Knowing the numbers doesn’t mean that you’re going to dramatically cut back — in fact, it may mean you spend more on some expenses.

However, it does mean that you are focusing on value. Remember, a frugal pilot isn’t cheap. She or he seeks value, safety, and fun. The best place to start is to set up a spreadsheet, either on a computer or a tablet of paper. Electronic spreadsheets are easier as you can tell them to do the calculations for you automatically, and they are easier to update than paper. Once your spreadsheet is set up, future tracking of flying costs will be easier.

Here’s how to break down your Frugal Flying Budget:

Fixed Costs Fixed costs are those expenses that go on whether you fly or not. If you own an aircraft, fixed costs include the cost of an annual inspection and repairs, insurance, ongoing maintenance (such as oil and filter), hangar or tie-down rent, association dues, taxes, and maybe interest on an aircraft loan. If you rent your aircraft, there may be no fixed costs — one of the many advantages of renting. If you’re part of a flying club, your monthly membership dues may be the only fixed cost you have. If you’re in a partnership, the fixed costs will be calculated, then split between the partners as outlined in the partnership agreement (equally, by hours flown, with deductions for service to the partnership, etc.)

Variable Costs Variable costs are the expenses that go up when you do. For aircraft owners, that means the cost of fuel and maybe oil if usage is significant. If you’re renting “wet” (with fuel), the variable costs are included in your rental fee, otherwise, add your fuel purchases in. Partnerships typically pay full variable costs; the fuel you use is the fuel you buy.

Total Costs

The next step is to calculate total fixed and variable costs. This is where an electronic spreadsheet is really handy. For example, you list these costs in columns titled Per Year, Per Month, Per Hour, and Percent of Total. If you’re comfortable with spreadsheets you can include an editable cell that allows you to change the number of hours flown during a year (Hr/Year) to give you total and per-hour costs if you fly 25 hours a year versus 100 hours annually. If you’re really into frugal flying, you’ll add a comparison of owning versus renting based on local rental rates. If oil consumed is an issue, you can calculate a factor for replacement oil based on how many flight hours it takes to burn a quart of oil. You can calculate fuel costs based on current price and burn rate at 65% vs. 75% power. Get creative.

Replacement Costs There is one other cost factor that can be significant in your calculations: Replacement costs. It’s typically a variable cost based on how many hours are flown. The ownership question is: How are you going to pay for something not covered by insurance, such as a lost engine or a major repair? It’s a legitimate question that aircraft owners and partners (not renters, of course) answer in various ways. Some owners say: I’ll deal with it when it happens. Others say: Let’s set aside some money for each flight hour to pay for potentially high repair costs. Partnerships often do this. But no one really knows when a major expense will come along, so some owners and partnerships set up a reserves fund and pay into it for every hour flown. It could be a percentage of variable costs (such as 25%) or it could be calculated based on the difference between tach/Hobbs time and the estimated Time Between Overhaul (TBO) on the most costly items — engine and propeller. Still others simply add an estimated number to their Variable Costs, such as $10 an hour, to help cover major repairs. The decision of how to handle major, often unforseen, expenses is a big one for all aircraft owners — frugal or otherwise. Once your frugal flying budget is set up and populated, you can easily perform what-ifs: What would costs be if I flew twice as many hours a year, if I took on a partner, if I rented instead of owned, if fuel prices (variable costs) went down, if I upgraded avionics (fixed costs), if I paid off a loan or found lower-cost insurance? These and other scenarios can help you get greater value from each dollar you spend as a frugal pilot.

See you in the pattern!

Original Source: http://generalaviationnews.com/2016/02/07/how-much-does-your-flying-really-cost/