NAFA member, Brendan Lodge, Advisory Services & Aircraft Specialist at Jet Support Services, Inc. (JSSI), offers tips on how to understand an aircraft’s maintenance costs, and budget accordingly - before buying.
Purchasing the wrong aircraft has potential to be economically and operationally disastrous.
Whether new or used, different models should be considered like knives in a chef’s drawer—they each have different capabilities depending on the budget and mission profile of the buyer.
Once a decision is made to purchase a used aircraft, most buyers start narrowing down the models that will meet their needs. However, many may not focus on how operating costs can vary greatly depending on the aircraft.
The ongoing maintenance costs (scheduled and unscheduled) are the most significant operating cost after fuel and can be a real budget-breaker. A thorough examination is therefore required before buying an aircraft, and appropriate management is necessary thereafter.
Following are five critical areas from a maintenance perspective that should be understood and budgeted adequately for before purchasing a used aircraft.
#1: Advice
Firstly, hire expert advice. Whether it’s a professional broker that you mandate exclusively to work for you without conflict, or a recognized industry consultant to support your Flight Department, you should budget for this expense. The investment will be worth every penny! Crucially, the advice needs to be independent, and entirely unbiased.
There are also helpful software tools available from independent sources that can help you compare aircraft and develop a thorough budget. Input should include an analysis of the maintenance status of the aircraft to evaluate and appraise the maintenance adjusted value, as well as to account for any challenges or costs associated with the potential transfer of registration to another country or state.
#2: Engine Status
Know the condition or status of the engines and their value and be informed of where the engines are in their maintenance cycles.
If the engines are on a “hard-time” inspection program, you need to know how long it is until the next major maintenance event and whether it is a hot section inspection or an overhaul. If the engines are on an “on-condition” inspection program, you need to know when the next borescope inspections are due and account for these in the budget.
Are the engines covered by a maintenance program and, if so, what exactly is covered by that program? These programs vary and it’s best to contact the program provider to understand the details of the coverage. Some programs can be sold with the pre-enrolled aircraft and some cannot.
Sometimes owners want to take the equity in the maintenance program and transfer it to a new aircraft, so those benefits would not be available to the aircraft with the sale.
In addition, you should know what provisions are in place for payment or coverage of loaner engines whenever off-wing maintenance events are required. Most operators do not want the airplane grounded while major engine maintenance is happening.
Accordingly, loaner engines are common practice, but sometimes there is limited availability for specific engine models, which could drive the costs up. It’s always better to plan and budget for these events in advance.
#3: Airframe Inspections
All aircraft will be subject to frequent airframe inspections and, for larger cabin aircraft, the major airframe inspections can easily exceed $1m. It is crucial that you know when the next major inspection is due as part of the due diligence before making an offer on an aircraft.
When significant expenditure is due it will affect the aircraft value.
Other considerations include the time it will take to do the inspections. Unlike engines that can be removed and replaced with loaners, the aircraft is not available while major airframe inspections are in progress and many owners will make plans to charter or contract supplemental lift during this time. This is another item to add to the budget.
Ongoing airworthiness directives (ADs) and service bulletins (SBs) that may be issued for your aircraft can also impact the budget. You must check for these before purchasing a used aircraft. It is always wise to ask if there is an airframe maintenance program enrollment and if it covers any of these costs.
#4: Unscheduled Maintenance
Unexpected maintenance events will happen no matter what type of aircraft you choose and can be a difficult expense to calculate over the lifecycle of the aircraft. Your advisor or trusted consultant will give you a budget estimate based on factors including make, model, and time on the engines and airframe.
Keep in mind that the OEM’s warranties do not cover all the unexpected costly repairs that may be needed in the first 5–10 years of a business jet’s life. Once again, enrolling the aircraft onto a maintenance program could be the best way to budget for such expenses.
#5: Regulatory Requirements
In addition to current airworthiness regulatory requirements, there are future mandates that come along and require upgrades or changes to the aircraft that will impact your budget.
In the US, many aircraft on the market are not yet compliant with the new Automatic Dependent Surveillance-Broadcast (ADS-B) or Future Air Navigation System (FANS) 1/A requirements.
As we approach the January 1, 2020 deadline, slots at maintenance shops are filling up fast and, just like any other supply and demand cycle, the cost of getting this work done rises with each passing week.
It is undoubtedly a good idea to look for an aircraft that is already compliant, or at least budget for a premium cost for any aircraft that is not yet compliant.
Supplemental Type Certificates (STC) are usually required for aftermarket equipment upgrades and these associated costs should also be accounted for, including the acceptability of existing STCs between different aircraft. When an STC is not acceptable to the new register the solution can be very costly in terms of both time and money.
In Summary
There are countless items to consider when purchasing an aircraft but with the right tools and expertise, you can ensure the right aircraft is purchased for your mission profile and budget.
More information from www.jetsupport.com.
This article was originally published in AvBuyer on July 20, 2018.
