Aircraft Management Budgeting – 2 Options you should Consider!

Learn how to handle the budgeting process for a company aircraft, including developing an annual operating budget, estimating expenses and evaluating cost control systems.
Aircraft Management Cost

We have made it to the 4th and final tip shared in 4 Tips in Choosing the Right Aircraft, the financial aspect of aircraft ownership and Aircraft Management. There are many factors to consider when budgeting for an aircraft, including the cost of purchase/lease, fuel, maintenance, crew salaries & training and much more. There are two main options for aircraft ownership: outright ownership or aircraft management. Both have their own benefits and drawbacks that must be considered when making a decision.

Option 1- Outright Ownership & Budgeting

Outright ownership is often the cheaper option in the short-term, as there are no ongoing management fees. However, it requires more work on the part of the owner in terms of scheduling, crew training and currencies and maintaining the aircraft. In addition, owners are responsible for all costs associated with the aircraft, even if it is not being used.

Option 2- Aircraft Management Companies & Budgeting

Aircraft management companies take on many of the responsibilities of ownership, such as scheduling, maintenance, and crew management. In exchange for these services, they charge a monthly fee. This option can be more expensive in the short-term, but can save money in the long-term as the owner may have the opportunity to offset their cost. Aircraft management companies also have the expertise and resources to ensure that the aircraft is always available when needed. Many aircraft management companies can over solutions to assist in offsetting your ownership cost through offering your aircraft on the charter market.

Sample Budget Considerations

Below we have shared an overview of a budget for consideration when looking at aircraft. This is a sample of what we at Above and Beyond Aviation Services Inc. shares with potential management clients early into discussions. If you would like to discuss this in more detail please complete this form and we will have a member of our team reach out to schedule your initial consultation.

Outright Ownership

Annual Ownership Cost $ 285,767.48
Annual Fixed Cost  $ 779,367.48
Hourly Direct Operating Cost $ 1,299.89
Sample Budgets and should be verified as part of your due diligence

Aircraft Management Option

Annual Ownership Cost$ 285,767.48
Annual Fixed Cost $ 839,367.48
Hourly Direct Operating Cost$ 1,299.89
Sample Budgets and should be verified with your management company
Chart Outright

The Annual Ownership Cost was calculated in this example based on a purchase price of $2,200,000 at 8% over a 12 year period in both examples. This cost will vary depending on the cost of borrowing at the time of purchase.

The Annual Fixed Cost, are the cost that will be incurred whither the aircraft is used or not. This example was based on a King Air 200. Fix cost would include the following: 1. Hangar Rental, 2. Insurance, 3. Management fees( for Aircraft Management Option) and Subscriptions, 4. Crew Salaries and training cost. You will see that the outright ownership option is less costly as there is no aircraft management fee tied included in the annual fixed cost.

The Hourly Direct operating Cost, are cost incurred when the aircraft is in operation. This example was based on a King Air 200. This would include 1. Engine & Prop (on Turboprop) Reserves, 2. Scheduled Maintenance Reserve, 3. Fuel Cost

Conclusion

Corporate aircraft ownership and management can be a great way for businesses to reduce travel costs, increase efficiency, and improve safety. However, there are a number of things to consider when making the decision about whether or not an aircraft is right for your company.

When budgeting for an aircraft, it is important to consider all of the associated costs and decide which ownership option is best meets your needs. Aircraft management can be a great option for those who want to save money in the long-term and don’t mind paying a little extra in the short-term. Whatever option you choose, make sure that you are getting the best value for your money.

Contact us today for more information about corporate aircraft ownership and management options – we would be happy to help you make the best decision for your business!

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